The Link Between Political Stability and Business Growth: A Glimpse into Haiti’s Economic History

Craig Palsson

Societies that effectively manage and control violence tend to experience enhanced economic progress. This premise, supported by various studies such as North et al. (2009), demonstrates the adverse effects of political upheaval on the business landscape of low-capacity states. This connection is demonstrated by Haiti and the American occupation.

Historically, Haiti’s political landscape has been tumultuous. From 1911 to 1915, seven different presidents took office. However, the US Marines’ intervention in July 1915 marked the onset of a more stabilized political era. This intervention, motivated by America’s political interests to keep Germans out of the region, significantly reduced Haiti’s political instability.

To examine the US intervention’s economic impact, I analyzed data on foreign-operated businesses in Haiti between 1905 and 1927. Interestingly, by 1927, foreign business licenses had doubled in comparison to the pre-occupation period. Although American businesses did play a role in this surge, the predominant increase came from other nationalities.

Increasing Foreign Businesses by Decreasing Uncertainty

I argue that the main mechanism behind increasing foreign businesses in Haiti was the reduction in uncertainty from the occupation. Rather than having to worry about whether the economy would halt due to a political crisis, investors were confident the Americans had the situation under control.

One piece of evidence for the reduction in perceived uncertainty comes from news coverage in foreign papers. New York Times articles covering Haiti went to frequent headlines of political turmoil to infrequent coverage that was less likely to discuss violence or instability. This decline signified to investors a more stabilized, less uncertain business environment in Haiti.

Foreign business owners also saw less uncertainty in policy. An analysis of laws and decrees passed after the sudden changes in executive office reveals that a new president quickly enacted policies that favored him. These policies included new appropriations from the budget and pardons for those involved in coups. While the American occupation did not limit the executive powers, it put them under the authority of a group aligned with foreign business owners’ interests.

Implications & Broader Understanding

Haiti serves as a compelling case study as its political instability was primarily driven by individual actors rather than broader ideological or civil unrest. Furthermore, the American intervention marked a rare exogenous shift in political stability.

Haiti’s economic history remains a significant puzzle, especially considering its transition from a prosperous colony to a struggling nation. Recently, the New York Times featured a series of articles on Haiti’s poverty, placing the US occupation as a central player in its underdevelopment. This research, however, presents fresh data that suggests that while the US intervention had short-term benefits for Haiti’s business environment, underdevelopment was more likely driven by other factors, such as its complicated land tenure system or the tumultuous political situation after the occupation ended.