(Interviewed by Louis James, Editor, International Speculator)

Editor’s Note: Dear Readers, I wish you could have heard Doug when we spoke about Haiti. His words may seem cold-hearted – discussing adoption in terms of misallocated capital! – but he was passionate indeed in this conversation. When he spoke of the Haitians having nothing, not even shovels and crowbars to dig their loved ones out of the rubble, his feelings about the men who’ve made Haiti the place it is were very clear. Perhaps we should do one of these live at our next conference. L

L: So, a big thing on people’s minds is the earthquake disaster in Haiti. David Galland mentioned in a recent edition of our free Daily Dispatch that you have friends helping orphans in Haiti. Can you tell us more about that and the situation in Haiti in general? You’ve been there, you’ve studied the place, and now it’s been leveled. Let’s talk about Haiti.

Doug: Sure. I first went to Haiti in about 1970, back in the days of Papa Doc, before he shed this mortal coil, then again a few years later when his son, Baby Doc Duvalier, had taken over, and most recently, when I went down in 2003 with the friend David mentioned, Susie Krabacher. (There’s a write-up of my 2001 visit in the June 2001 issue of the International Speculator, for those who are subscribers.) Susie is the wife of my attorney. She runs the Mercy and Sharing Foundation in Haiti. I’ve visited the orphanages and everything she’s put together.

But I’ve got to say that Haiti now is not the same Haiti I first visited 40 years ago.

L: What’s the difference?

Doug: Well, there are many differences, actually. For one thing, while no one knows what the population of Haiti really is, it’s probably close to triple what it was in 1970. So, people are much more evident – that’s number one. Number two, people are much more centered in Port-au-Prince. It was a much more rural, as well as less populated, country back then. Three, there were actually trees on Haiti’s part of the Island of Hispaniola, which it shares with the Dominican Republic.

L: There still are, on the Dominican side.

Doug: Yes. When you fly over, you can actually see the difference.

L: I’ve done that. It’s the only place in the world I’ve been to that actually looks like a map: where I was, it was green on the Dominican side of the border and brown on the Haitian side.

Doug: Yes, it’s incredible. It was actually rather nice, back in the old days. I drove all around the country in the 1970s, even though you had to get special permission from the police – which took most of a morning – and there were army checkpoints along the way.  Last time, I just went to Port-au-Prince. And that’s where you see a really big difference. Port-au-Prince was a much smaller, mellower city in those days that seemed to be totally crime-free. By that I mean that you could wander back to your hotel in the middle of Port-au-Prince, totally inebriated, with hundred-dollar-bills hanging out of your pockets, and no one would touch you. I’m convinced they wouldn’t even dream of it – or if they did dream of it, it would turn into a nightmare.

I suppose, if you’re so inclined, you could think of this as one of the advantages of having a dictatorship with secret police. In the days of Doc Duvalier, they were known as the Tontons Macoutes. But they weren’t so secret; they were all basically thugs who affected dark glasses. At any rate, one thing Papa Doc knew, and Baby Doc understood as well, was that tourists were of major importance to the economy. There’s no question that if anyone touched a tourist…

L: It didn’t go well for them.

Doug: No. He’d live just long enough to sincerely regret it. So there just wasn’t much street crime. It was a little like Russia before the collapse of the Soviet Union. A tourist was very safe there as well, because the place was full of secret police who made everyone afraid to do anything bad to them.

L: I’ve seen that in Belarus, which still has a KGB (and it’s called that). A college co-ed is not free to start whatever business she wants, but she will walk down a dark street in some forgotten part of Minsk with no fear at all. And there are uniforms everywhere…  olive drab or midnight black.

Doug: My opinion has long been that the number of sociopaths in a society follows a bell-shaped curve. Most Haitians, Russians, Americans, what-have-you, are basically decent human beings. But following Pareto’s Law, if 80% of them are decent, then 20% of them are, let’s say, “problematical.” Take 20% of that 20%, and now you’re dealing with the real Bad Boys. Those people were kept at bay back in the days of Papa and Baby Doc, if only by recruiting them to the Tontons Macoutes, where their depredations were focused on the people other than casual tourists. But now they’ve come out of the woodwork.

So now the whole bell curve has shifted higher on the sociopath scale. Port-au-Prince is not a nice place anymore. When I was down there last, there were four foreigners kidnapped in separate incidents, just in that week, just in that city. That’s really an incredible number, when you think about it – it’s just not the sort of place many tourists go, so there are hardly any foreigners there.

L: So where does that leave Haiti now, earthquakes aside?

Doug: Haiti, I’m sorry to say, is a total basket-case country. There is just no hope for it.

L: None at all? Why?

Doug: The primary reason is because of the governmental structures they have set up there. There are no property rights. It’s a highly bureaucratized place. Nobody knows for sure who owns what, in terms of land, which is a problem in itself. Worse, it’s estimated that the state owns at least half of the land, which no one takes care of, so it’s the first to have all its trees cut down. But you can’t be sure who owns what. It’s all “dead capital.”

L: Tragedy of the Commons.

Doug: It’s a perfect example of it. Things that “everybody” owns are really things that nobody owns. In Haiti, it’s impossible to start a real business, because in order to do so, you have to get approvals, pay fees and bribes, jump through ridiculous hoops, and wait forever – we’re not just talking about having to go to a dozen agencies to get your papers stamped; we’re talking about going to 50, or even 100, to get your papers stamped. It’s unbelievably byzantine. And it’s not going to happen unless you pay bribes along the way. So, there’s no capital. It’s almost hopeless to think of any domestic business being generated.

L: It’s certainly not an environment that attracts many investors I know.

Doug: The only foreign businesses I know are some clothing manufacturers taking advantage of cheap labor. They used to make baseballs there…

L: Baseballs?

Doug: Yes. Most major league baseballs were sewn in Haiti. But the government drove the baseball business out of the country by making them crazy with regulations, restrictions, and revenuers. Think about that. Baseballs are a rather specialized product. When you’ve got a labor force that’s trained in a specialized skill like sewing a baseball properly, the last thing you want to do is pick up and leave. You’d have to find new facilities, train a new labor force, all kinds of new aggravations. So the government really must have driven them to their wits’ end, to force them to pick up a specialized business like that and leave. Especially as cheap as labor costs are in Haiti – almost free.

L: It must have been pretty bad. I always wonder, when I travel to a real hell-hole and see a nice hotel, or restaurant, how on earth anyone could run a business in such a place. I figure they must be the president’s brother or something along those lines, or they’d never get all the permits and papers, and the bribes needed to stay open would kill them if the taxes didn’t.

Doug: Well, I can tell you that back in the 1970s, there were some very nice hotels in Port-au-Prince. I stayed in downtown Port-au-Prince, which is inconceivable today – and I’m not talking about just since the earthquake. Even before the quake, no one who went there in recent years would even think about staying anywhere downtown. Back in the ‘70s, though, I stayed in a rather nice hotel downtown, including two meals a day (which were truly excellent, because of the French influence on the cooking), and it was only $10 a day. It was like staying for free – fantastic.

There were other nice hotels up in Petionville, which is on a little mountain overlooking Port-au-Prince. They were nice because you got the breezes and the views. This is where a number of old hotels, which I’ve been to, collapsed burying scores of people. And those weren’t high-rises, so it really was a severe quake.

But now, or when I was there the last time, the electricity was only working a few hours a day… if you had it in hotels, it was because they ran diesel generators. There was nobody in the restaurants because everyone was really afraid to go out. Anyone who had any money had bodyguards. It was really just an unpleasant environment.

That’s not because the Haitians are any different from other people in the world; it’s because the government structure there has devolved so far.

L: Into simple, blatant thuggery.

Doug: Absolutely. I met with a government minister on my last visit – I believe he’s now Haiti’s ambassador to the United Nations. As you know, one of my hobbies for the last 30 years has been to go around to these places – hell-holes, generally – and try to sell them on a plan to totally reform their country. It would change the place instantaneously from a hell-hole into a garden spot – which is entirely possible.

I’d usually meet with the head of state – which is not as hard as you might think – and I’d tell him I could do three things for him. One: I could put him on the cover of every major news magazine in the world in a favorable light, which is the opposite of how he’d usually appear at the time. Two: I could make him legitimately very rich. (It’s impossible to get rich the way the likes of Mobutu and Marcos did anymore.) And three: I could set things up so the people would love him, so he wouldn’t have to worry about every guy he meets being the one who would pull out a .45 and put a bullet in his head.

The means for achieving these three things was to basically privatize the whole government, 100% of their assets, issuing shares to the people, and making them owners of their country. With, of course, a whack of cheap founder’s stock going to the retiring dictator and his pals to make them go away – what corporate types call a “golden parachute.”

Of course, it never went anywhere. Generally speaking, the guy would listen with some interest, but all the guys below him would talk him out of it. Ending corrupt government control of the economy and shifting it to a free market would break their rice bowls. All of these places are kleptocracies. The power of the state is the most effective means man has ever devised for stealing. So, in Haiti, just like in the U.S. or anywhere else, government doesn’t attract the best and the brightest; you get the worst, the most sociopathic. It’s absolutely perverse.

L: You mentioned before the 20% of the 20% who are the Bad Boys in society at large. I think government attracts the 20% of the 20% of the 20% who aren’t just bad but smart enough to see the enormous power to plunder the state offers them, and are ruthless enough to knowingly embrace crime on that level. To knowingly enact measures that will increase the misery of the masses for your own gain, you have to be way out on the far end of the bell curve in lacking simple human decency and compassion for others. If I believed in hell, the deepest, hottest circle in it would be reserved for such people.

Doug: That’s absolutely right. Government everywhere in the world draws that type of person – regardless of the type of government. And if a decent person, a misguided idealist perhaps, gets into government, he’ll almost certainly be co-opted and corrupted after a while. It reflects poorly on the level of spiritual evolution among humans. But that’s another story…

L: And Haiti had a really bad case of “governmentitis,” even before the quake hit.

Doug: Yes. I’d put the blame for the magnitude of Haiti’s problems 100% at the feet of its government. It’s not the geology, nor that this earthquake was the strongest ever, nor a lack of building codes. The devastation is due to the government having kept the place so dirt poor for so long, they simply have nothing to help them cope with the event.

If the same thing happened in a wealthier society, there would be a lot of damage, lots of problems, a great deal of inconvenience – but it wouldn’t have killed hundreds of thousands of people. These Haitians are so poor, they don’t even have shovels to dig people out. They don’t even have crowbars to pry apart collapsed walls; they have to do it with their own bare hands – and they don’t even have gloves. They’ve got nothing.

So, of course there was widespread devastation. There were no savings. No food set aside. No water set aside. These people are living, literally, hand-to-mouth. So, if there’s a natural disaster, the impact is magnified by several orders of magnitude because of the poverty – and that’s due entirely to the government. And, idiotically, people you see on TV are looking to the government to solve the problem… the stupidity of the chattering classes leaves me thunderstruck.

I mean, the Dominican Republic next door is hardly any glowing beacon of freedom, but it’s vastly better than Haiti, and it’s got the same geography, climate, and so forth, so it’s all a matter of government. That’s illustrated equally well with the differences between East and West Germany, North and South Korea… there are many examples throughout time and across space. And now they’re looking to the Haitian government to be in charge of rebuilding the place… the concept is literally insane.

L: I was thinking about that… The big China quake a couple years ago was a 7.9, and it killed fewer people than this one in Haiti, which was only 7.0. That’s pretty bad, but it’s a log scale, so the China one was nine times more powerful. The Mexico earthquake of 1985 was clocked in at 8.1 and only killed 10,000 people – and Mexico was not the richest country at the time.

Doug: In spite of that, the usual idiots are saying it’s all because they didn’t have adequate building codes in Haiti. The reality is, it doesn’t matter what kind of building codes they have. They could make the building codes so strict that every building has to be built on giant hydraulic shock absorbers. But no buildings would be built, because no one could afford to comply. Safe, high-quality buildings aren’t the result of regulations. They’re the product of capital, wealth, and technology – Haiti has none of these things.

And, I’m sorry to say, that it doesn’t matter how much aid you send to Haiti, the situation will not improve at all. You may assuage their pain for a while, but it won’t change anything. Those pitiful lives won’t be any better – and most of the aid won’t even get to the people. Most of what even gets there will be siphoned off by the people on top – they’re experts at that, and completely ruthless.

L: Is there no chance that whatever is rebuilt from the rubble of Haiti might be better than what existed before? It looks like the earthquake pretty much took the government out.

Doug: Well, thank God for small favors, I guess. Anything is possible, I suppose – maybe the place has gone downhill so far that the quake has helped them hit absolute bottom, and now they will somehow organize themselves in a new way. But where would they get the understanding of economics that would prompt them to build a system that doesn’t allow government thugs to stop them from building and producing and so on? I promise you, it won’t be from all the aid workers driving around in Range Rovers.

Look, Haiti has a lot of possible advantages. It’s got hundreds and hundreds of miles of nice beaches and oceanfront property – actually, when I first went down there in the 1970s, one thing I thought about doing was starting a diving business. Strip away the dysfunctional society, and it’s a very nice place. It used to have some excellent art markets and artists – but they’ve all moved abroad.

L: It’s got great rocks too. The geology just on the other side of the border is highly prospective for gold and copper, among other things. Nickel mining was a big business on the island, and the Pueblo Viejo mine, owned by Barrick/Goldcorp, is one of the biggest copper-gold mines in the world. The whole island is basically one giant gold anomaly. There’s every reason to think there’s great wealth waiting to enrich the Haitian people, if they could just create a healthy business environment on their side of the island. I know of only one junior exploration company there now, but I think there could be a real gold rush, if it were safe to invest there.

Doug: Right, but no one wants to go there now, because even if you got a concession, it would be impossible to work through the legal system, and if you do it illegally, paying bribes, you get into other trouble…

L: That’s what I’m saying. The gold and other metals are probably there. As you say, there’s lots of beautiful oceanfront property. It’s a tropical island, so food can grow year round. There’s no reason for Haitians to be poor, other than their form of social organization. So, if the earthquake just pushed the reset button on that, maybe there’s a chance for something better to emerge?

Doug: A counter-example that dovetails with that is Hong Kong, which has no natural resources, and after World War II, it was full of poor and uneducated Chinese. In a couple generations, it became one of the wealthiest places on the planet. The only advantage it had turned out to be the one that mattered most: it had one of the freest economies on earth.

And look at Japan. Essentially no resources. But when they abandoned their medieval ways, in the 19th century, they became a world power in short order. And again, after World War II, when the place was totally, totally destroyed, they opened up for business and within only 20 years became the third largest economy in the world. That, in spite of having to import most natural resources. So, yes, it’s a matter of the social system.

In fact, having natural resources is usually a negative, as Venezuela and Saudi Arabia, among others, have shown. Without a free market, those resources serve only to make the state more powerful and put the people at greater risk. It’s totally perverse – a real pity.

L: So, you say anything’s possible, but you don’t sound convinced. I don’t think the U.S. government and international busybody groups, like the IMF, can teach anyone anything about real free enterprise, but the nearest thing to a government in Haiti right now is the U.S. military – again. Isn’t it possible that they might leave something better behind than what was there before the quake tore it all down?

Doug: Well, even if the U.S. government and the IMF and other agencies involved in the rescue effort decided to build something, it would be done with money extracted from people elsewhere, not by investors, who have to give people what they want, if they’re going to make money. And there’s no guarantee that anything they’d build, physically or institutionally, would be what the Haitians need, or that would work for them. That’s not the solution at all.

In fact, all the free food that will pour into the country may ultimately be counterproductive. Sure, it will feed people during the crisis. But they’ll keep sending it for years, and it will drive down local prices, making it unprofitable for local farmers – of whom there are few enough as it is – to grow anything for sale. So it will ultimately worsen the situation. At best it’s just keeping people subsisting until the next disaster, or disease, or entropy, takes them out. It’s a bad situation.

The only solution is for the people of Haiti to rise up and abolish their totally counterproductive government, privatize absolutely everything – which would give the average Haitian some capital – and create an environment in which people are allowed to work and keep what they earn. Even if people are completely poor and ignorant, allowing them to work and keep what they make gives them a chance to build something. They’ve got to get as close to the way Hong Kong was as possible.

L: But they aren’t going to do that.

Doug: No. Precisely the contrary. They’re going to try to set up a new government, living on foreign aid, which will be the same as the old government. For years, Haiti has barely even produced on a level of subsistence farming. That’s because these people are so poor, they don’t have equipment, they don’t have seeds – it’s almost like the whole country is grubbing for roots and berries with their bare hands. Close to 100% of the income in the country is from the million Haitians who work overseas, and foreign aid. Almost nothing is produced in Haiti. And everything in stores is much more expensive than in the U.S., because it’s all imported -- and taxed. I’d say almost all the foreign aid that’s not stolen is wasted.

I remember back in the day, I drove from Port-au-Prince out to Cap-Haïtien. I drove past a city called Duvalier Ville that was apparently built with foreign aid money. They’d fantasized about making it the new capital. But when I drove by, it was deserted and already a ruin – though it had only been built ten years before.

That’s what’s going to happen to the aid money. It’s totally destructive; it impoverishes both the givers and the recipients. (See our conversation on charity.)

L: So, they are not going to do what they should do, the aid isn’t going to achieve what it should do… what should anyone moved by the suffering of all those poor people do to help?

Doug: First off, you’ve got to be very careful giving money to these NGOs. Most of these NGOs are corrupt, wasting the money on salaries and public relations. With what’s left over, they employ young collectivists to drive around in Range Rovers with clipboards and cameras, making notes and writing worthless reports that nobody reads. That’s where the money you give them goes – what doesn’t get siphoned off to Washington to keep their lobbying offices on K St. open.

As a matter of course, I’m very suspicious of most large organizations. Any organization, when it gets old and large enough, becomes concrete-bound and corrupt.

L: The organization’s own existence, and the benefit of those who live off it, becomes the top priority, not the organization’s initial mission.

Doug: Right. If you feel compelled to try to help the Haitians, recognizing that it’s not going to do any good over the long term, but will at best only alleviate some short-term suffering, the only one I know personally that does good work is Susie Krabacher’s foundation. I know them well, and they have no overhead. All the money goes into actually helping children. Even though I don’t think they change anything for Haiti, they do good for some needy children, and I do endorse them. If you want to give money, this is one I know works.

L: What about my idea, wanting to adopt an orphan? It might not change the country’s future, but it sure would change that child’s future.

Doug: That’s a thought. But as you know, I hold the Roman view (see CWC on Rome); if you’re going to adopt a kid, you should wait until they’re at least 10 or 12 years old, so you at least have an idea of what you’re getting. To me, it makes more sense to focus your effort on helping the able to become more able than to put a band-aid on someone who will never truly heal. It’s a misallocation of capital.

The other thing is that, bureaucracies being what they are, the expense, time, and aggravation required to leap all the legal hurdles to adopt is huge. So much money would go to lawyers and anything but the kid… As nice an idea as that is, it just seems like you’re trying to swim upstream with it.

L: That’s my big concern. I don’t want to subject my existing family to all the inspections, detections, infections, neglections, and selections we’d have to go through in order to be able to adopt. And, being divorced, I’m not sure they’d even let me – I suspect letting a needy child die of neglect in a government orphanage is better in a bureaucrat’s eyes than taking a chance on an imperfect man who hangs out with radicals like Doug Casey.

Doug: Yes, and I hate to say this, but you have to remember that most of those children have suffered from diseases and malnutrition from an early age. So even if you give a kid like that all the best breaks, the odds are against them even achieving at a normal level in life.

L: So there’s nothing that can be done to help?

Doug: I’m afraid the only solution for Haiti is internally driven change. It can’t be helped from outside.

L: Wow… Tough Medicine.

Doug: That’s the way I see it.

L: I don’t see any investment implications here…

Doug: Well, there would be, if the Haitians totally – and I mean totally – cleared away their government. I’d invest in Haiti then.

L: It’d be at a bottom.

Doug: It’d be at a bottom, it’s beautiful, its people will work very hard for little pay. It could be a great investment. But that’s a pipe dream. The rescuers are going to make it impossible for anyone to make money investing in Haiti, so no one will invest in Haiti. Things could change, but the odds are overwhelming that Haiti will remain a welfare bum and even get worse.

L: So what would constitute evidence, to you, as an international speculator, that Haiti has hit bottom and has cleared a path for moving upwards?

Doug: Well, as you know, I think there should be only two laws: do all that you say you are going to do, and do not aggress upon others or their property. If they wrote a constitution and those were the only two laws in it, the place could have a chance. But that’s not going to happen. Haiti is one of those places that writes a new, complex, and ever more cockamamie constitution every few years. Which doesn’t really matter, in that they completely disregard it anyway.

L: What about new anti-earthquake technologies? Could an event like this thing push more money into that field and create opportunities for speculators?

Doug: That could be – it’s the sort of trend Alex Daley, our technology guru and editor of Casey’s Extraordinary Technology, is good at spotting. But it’s not going to help Haiti so much as places like California.

L: Right. Another sobering talk – we should go to the movies next week and talk about the entertainment business.

Doug: Yes, I’m planning on seeing Avatar tomorrow night. Until next week, then.

L: Thanks, Doug. Next week.

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