Aiding Haiti's Earthquake Victims and Growth

I was sent via e-mail a copy of an article by Brian Concannon writing for Counter Punch in "Working with the Haitian Government." Concannon is a human rights lawyer working in Haiti, a laudable career and I wish him well, but I believe that he has made several errors that have characterized developmental aid in the past that we should avoid in the future.  He writes 

Haiti’s lack of infrastructure and history of corruption should be considered in shaping the international response to Tuesday’s earthquake. But these factors should be a reason for investing in infrastructure and good governance, not for bypassing Haiti’s government.

Arnold and Schulz (From Poverty to Prosperity) use the "resource curse" to explain why it might be bad to funnel foreign aid through a government.

Economists have coined the phrase "the resource curse" to describe countries whose wealth consists primarily of diamonds or oil.  The problem is that resource wealth is more characteristically stolen than earned.  Natural resources do not reward work, capital accumulation, or innovation.  They reward those who can establish and maintain control over the resource.

Some economists believe that foreign aid, because it is unearned, can be a similar curse.  When aid is channeled through the recipient government, it gives the leaders an incentive to remain in power, in order to control the wealth represented by the aid.  Just as the owner of a diamond mine tries to hang on his franchise, the leader of an aid-dependent nation tries to exclude others from power.

Thus, unearned income serves to undermine the work of ethic and the public service ethic.  Resources and government aid offer rewards to those skilled at taking things rather than those skilled at creating or improving things.  Unearned income makes corruption relatively easy and profitable.  

Concannon continues

Haiti’s devastation exposed the disadvantages of an extremely limited government. The earthquake itself was a natural phenomenon, but its horrible toll was largely the product of manmade factors like the failure to prevent shoddy construction on precarious slopes (or provide safer housing) and a health care system already stretched to the breaking point. Sixteen months ago, and five years ago, similar factors produced high death tolls from tropical storms that hit neighboring countries harder but less lethally.

As a defender of limited government, I would substitute "ineffective" for "limited" in the above paragraph.  Nor is the prevention of shoddy construction simple a function of government regulations or a strained health care system the result of governmental neglect.  Markets have something to do with the provision of goods and services.  Rather than blame shoddy construction for damage, I would blame extreme poverty.  People working through markets recognize Haitian poverty and produce a market driven construction code.  Imagine the rise in building expenses and homelessness if the government could effectively impose Los Angeles' building code on Haiti.  How many Haitians could afford our health care or even Mexico's health care?  The issue is how to bring economic growth not how to provide better goods and services which are a byproduct of growth.

Concannon concludes

An effective international response to the earthquake will minimize the damage of the next stress in Haiti, by including both short- and long-term measures to develop the government’s capacity to provide basic, honest services to its citizens.

Accepting Concannon's belief that is the role of the international community to "develop the government's capacity to provide basic, honest services to its citizens" I would ask if this is the right goal and do we have the capacity to achieve it?  Substitute "Haitian's" for "government's" in the above paragraph and you might be headed in a better direction for growth.  As North, Wallis, and Weingast point out in Violence and Social Orders countries that advance in wealth and prosperity do so by developing more private and local governmental organizations.  The authors suggest that this growth is organic.  Perhaps foreign efforts to encourage the growth of organizations outside the federal level will fail as have past efforts to work through them. As William Easterly observes ("Interview with William Easterly," in From Poverty to Prosperity)

There's been $2.3 trillion spent over the last fifty years in foreign aid.  And that's in today's dollars. And really, there's surprisingly little to show for it.  The main objective of foreign aid, of course was the permanent reduction of poverty; the main objective was to promote economic growth.  And unfortunately, there's no connection at all between aid and economic growth according to the empirical evidence that we have.