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#3235: Push to Free Markets Has Local Costs (fwd)


Push to Free Markets Has Local Costs -------- By Michael Dobbs
Washington Post Foreign Service Thursday, April 13, 2000; Page A01 

PONT-SONDE, HaitióLast month, several dozen impoverished
rice-growers and their families decided they could bear life in Haiti no
longer. They pooled their meager savings, bought a rickety boat and
headed northward to the British-administered Turks and Caicos
Islands. Halfway into the 150-mile trip, the vessel capsized, killing
all 60 on board. "We are mourning now, because we lost so many members
of our  families," said Emince Bernard, one of the villagers who
remained  behind, and who heard about the disaster on the radio. "But
the same thing is going to happen over and over again, because the
people here  no longer have any hope."The plight of Haitian rice farmers
provides a human dimension to the  debate over the costs and benefits of
globalization as Washington  gears up for protests to coincide with the
annual meetings of the International Monetary Fund and World Bank.
Organizers of this weekend's demonstrations have cited the rice growers'
struggle for survival as a prime example of the failure of free-market
policies advocated by the IMF with the strong backing of the United
States. "The IMF forced Haiti to open its market to imported, highly
 subsidized U.S. rice at the same time it prohibited Haiti from         
subsidizing its own farmers," declares the Web site of Global     
Exchange, one of the Third World advocacy groups organizing the        
Washington protests. "Haitian farmers have been forced off their land  
to seek work in sweatshops, and people are poorer than ever."Over the
past two decades, a period of growing IMF tutelage over the Haitian
economy, exports of American rice to Haiti have grown from virtually
zero to more than 200,000 tons a year, making the poverty-stricken
country of 7 million people the fourth-largest market for American rice
in the world after Japan, Mexico and Canada.According to U.S. and
Haitian economists, the result has been a  massive shift in local
consumption habits, with many Haitians now choosing cheap imported rice
at the expense of domestically grown staples, including rice, corn and
millet.While IMF officials acknowledge that the transition to a market
economy has caused wrenching social disruption for Haiti and other   
developing countries, they argue that it will prove beneficial in the 
long run, provided governments stay the course. Officials accuse their
 opponents of exaggerating the influence of lending organizations,     
oversimplifying and distorting the issues, and playing down systemic  
problems such as corruption, political instability and insecurity.    
"It is naive to suggest that the IMF has had a dominant role in the
development of Haiti," argued Patricia Brenner, the IMF's mission     
chief to Haiti. She noted that Haiti had "an average of one government a
year" in the 10 years following the collapse of the brutal. "The
economic situation must be seen against the background of political
chaos, military takeovers and governments being formed and replaced
before they have time to establish a real economic program."          
>From a grass-roots perspective in Haiti, the poorest country in the    
Western Hemisphere, it seems undeniable that millions of people        
have been left behind in the rush to globalization. That much is        
evident from the distended stomachs of children in villages like      
Pont-Sonde, the throngs of women seeking jobs at 30 cents an hour in    
sweatshops owned by U.S. clothing manufacturers and the daily street  
demonstrations through the slums of Port-au-Prince by laid-off
government employees.According to the IMF's figures, roughly 50 percent
of Haitian children younger than 5 suffer from malnutrition. Billions of
dollars in international assistance have done little to improve
conditions in the countryside, where two out of three Haitians live. Per
capita income has dropped from around $600 in 1980 to $369 today. But
the real question, say IMF supporters, is not whether a majority of    
Haitians are worse off than they were 15 or 20 years ago, but whether  
there is a realistic alternative to free-market policies. "Globalization
is a fact, not a project," said Richard Coles, president of the      
Manufacturers' Association of Haiti. "The world has shown it works in  
a certain way. Why should we Haitians think we can invent the wheel    
all over again?"As a leading rice grower in Haiti's fertile Artibonite
valley, Charles Suffrard has a vivid memory of what happened after 1986
when the country began opening its markets to foreign imports at the
behest of the IMF and other international lenders. Jean-Claude Duvalier,
the son of Haiti's longtime dictator, Francois "Papa Doc" Duvalier, had
just fled the country for a gilded exile in France, to be replaced by
the first of several military leaders supported by Haitian business
interests. "American rice invaded the country," he recalled. "It was
sold for so little that we could not compete. There was a very serious
struggle.When they brought the [American] rice up from Port-au-Prince,
they had to escort it in military convoys, to prevent us from seizing
it. By 1987 and 1988, there was so much rice coming into the country
that many of us stopped working the land."Although the IMF was not
directly involved in sending cheap American rice to Haiti, its policies
accelerated the breakdown of the old subsistence economy, and its
replacement by a cash economy.Through a series of structural adjustment
programs, beginning in the late 1980s, the IMF encouraged Haiti to adopt
some of the lowest tariffs in the Caribbean. The IMF's influence was
magnified by its role as the gatekeeper to funds from other
international organizations, including the World Bank and the European
Union. IMF officials insist that many Haitians, particularly those
living in cities, have benefited from lower tariffs. Because of the
influx of cheap American rice, food prices have remained fairly stable.
Maintaining a relatively low inflation rate has been the IMF's main
 achievement in Haiti over the last few years.According to free market
theory, nations should specialize in areas where they have a comparative
economic advantage. Poor countries should be able to take advantage of
the abundance of cheap labor to increase their exports of manufactured
goods, as well as certain agricultural items like mangoes and coffee, to
markets including the  United States. But there is a gap between
free-market theory and Haitian reality, as the rice conflict
demonstrates. Development economists point out that  the competition
between Haitian and American rice growers was hardly fair, since U.S.
rice production is subsidized through a wide variety of mechanisms.
Furthermore, most of the American exports were handled by a single U.S.
corporation--American Rice Inc.--which has enjoyed an almost
monopolistic position in Haiti.
The prospect of dynamic, export-driven growth seems distant, to say
the least. Although wage levels are lower in Haiti than elsewhere in
the Caribbean, manufacturers have been scared away by the unstable
political climate. At present, there are only 25,000 jobs in the
light-manufacturing sector, compared with a peak of 60,000 jobs prior
to the 1991 military coup.At the Caribbean Apparel Factory on the
northern outskirts of Port-au-Prince, women line up every day,
desperately hoping to be hired to sew T-shirts for the American market.
Home to several dozen American manufacturers, the industrial zone is
virtually autonomous from the rest of the Haitian economy. "I come here
every day in the hope that one day there will be work,but there never
is," said Caroline Ezebeie, 33, who left her village as a teenager,
lured by the promise of a better life in the city. "When I leave the
house, my children hope that I will earn enough money to  come back with
food. But very often, I have to walk home because I don't have enough
money for a bus."        "We are waiting for our deaths," yelled someone
else in the crowd.     "We are starving. There is no work for us
here."For the anti-IMF protesters and Third World advocates now
gathering in Washington, the answer to Haiti's problems, and the
problems of  many other developing countries, resides in measures such
as debt  relief, land reform, small-scale projects specifically geared
to the needs of the rural population and selective tariff protection for
agriculture and fledgling industry. "You can't expect a country like
Haiti to compete on world markets immediately," said Mark Weisbrot,
co-director of the Center for
 Economic and Policy Research in Washington. "If you look at those    
countries that have succeeded in dramatically increasing their per  
capita incomes--countries like Japan, South Korea and Taiwan--you     
will find they all did it under some kind of protection."This country is
not Korea," retorted Eric Verreydt, the IMF representative in
Port-au-Prince, pointing out that Haiti's greatest  single economic
advantage is its close proximity to the huge American market. "Haiti
desperately needs investment, and the only people who are likely to
invest here are foreigners and rich Haitians living in the United
States. That is a fact of life."Since the reestablishment of democracy
in 1995 following a U.S.military intervention, Haiti has been receiving
around $125 million a year in international assistance, much of it
contingent on an IMF seal of approval. But because of instability--the
country has been without a parliament for the last year--IMF attention
to Haiti has been sporadic.
The last structural adjustment program petered out in 1997 because of
a domestic political crisis following the disbursement of only $21
million of a planned $120 million loan. The IMF has since persuaded
the government to implement an informal "staff" program, focusing on
macroeconomic goals such as a balanced budget, tight monetary
policies and low inflation. Even left-wing Haitian politicians
acknowledge that the country can hardly survive without the support of
international lendingorganizations."We don't take the position that we
don't need the IMF and the World Bank, and that IMF policies are
diabolical," said Yvon Neptune, a spokesman for former president
Jean-Bertrand Aristide, who has described capitalism as "evil." "We are
saying we want to sit down and negotiate with the IMF, and adjust their
policies to the reality of  Haiti."
Attempts to promote alternative models of development in Haiti in
recent years have run aground from political infighting, lack of funds
and impracticality. A pilot land reform project in the Artibonite valley
has failed to increase rice yields, and in some ways even made
 matters worse, leading to the breakup of relatively efficient farms and
the decay of irrigation systems.Unable to produce enough rice to satisfy
domestic demand, or even feed their own families, the rice growers of
the Artibonite are close to  despair, and caught in a seemingly
unresolvable contradiction."The introduction of American rice has hurt
us terribly," said Claudes Derilus, a 29-year-old rice farmer in
Pont-Sonde. "But if it wasn't for this rice, Haitians would die of