Haiti is home to a strange monetary phenomenon. Shopkeepers and merchants set
prices in the Haitian dollar, but there is no actual thing as the
Haitian dollar.
I've written before about an exotic type of unit-of-account known as
an abstract
unit of account. A nation's unit of account is the sign used by its
citizens and businesses to advertise and record prices. Here in Canada we use
the $ while in a place like Japan people use the ¥. The national unit of account
almost always corresponds to its national medium of exchange. In both Canada
and Japan, the $ and the ¥ used in shop aisles are embodied by physical
dollar and yen banknotes and coins.
Abstract units of account, on the other hand, don't correspond to anything
that exists. In the UK, for instance, race horse auctions are
priced in guineas, a gold coin that hasn't been minted in over two
centuries. The guinea is a ghost money, an accounting unit that according to
John Munro is "calculated according to the precious metal content of
some famous, once highly favoured coin of the past than no longer
circulated."
Other examples of abstract units of account include include Chile's Unidad de
Fomento, or UF, (which I wrote about here)
and Angolan macutes (see here).
Like the guinea or Chile's UF, the Haitian dollar is an abstract unit of
account. I should warn you that I've never been to Haiti--all of this comes
from what I've read in tourist guides, newspapers, Haitian blogs, and an academic
paper on the topic from Federico Neiburg. But from what I understand, it
is quite common for prices in Haiti to be set in a unit referred to as the
'Haitian dollar.' However, there is no corresponding Haitian dollar banknotes
or coins. The U.S. dollar and the Haitian gourde, a currency managed
by Haiti's central bank, circulate in Haiti
and are used to consummate all payments. But the Haitian gourde is not the
same as the Haitian dollar.
How does this work in practice? Say that a restaurant is selling sandwiches
for fifteen Haitian dollars. Paying with Haitian dollars is impossible--they
don't exist--so some other route must be taken to complete the deal. Haitians
have spontaneously adopted a rule of thumb that the Haitian dollar is equal
to five Haitian gourdes. So to pay for the sandwich, it will be necessary to
hand over 75 gourdes (H$15 x 5$H/HG).
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Here is a sign showing both Haitian dollar and Haitian
gourde (HTG) prices. Source: Pawol
Mwen blog
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A certain degree of mental gymnastics is thus required of Haitians, since
sticker prices must always be multiplied by five (to arrive at the gourde
amount) and banknotes held in a wallet divided by five (to arrive at the
Haitian dollar amount). For foreigners, this can be confusing, but for
Haitians the motley of U.S. dollars, gourdes, and the Haitian dollar unit of
account has become second nature. Says Nieburg:
"The adjective Haitian (aysien), as in dolà
aysien, is only used when one of the participants in a transaction is
foreign. Among Haitians, when people say dolà they always mean dolà
aysien."
Nieburg provides some more colour by describing the
monetary demographics of Port-au-Prince, Haiti's capital:
"...in the urban islands of foreigners scattered
across various regions of the city, the US dollar predominates as a unit of
account and means of payment in sectors such as the housing market, as well
as in restaurants, hotels, night clubs, and supermarkets (which used to
double as currency exchange bureaus) that cater for upper-class Haitians and
the legion of ex-pats, relief workers, and consultants. As we move down the
social scale, the US dollar begins to be used as a means of payment for
transactions calculated in Haitian dollars. Lower down—where the majority of
transactions are to be found—people calculate in Haitian dollars and pay in
gourdes."
Where does the practice of
using the Haitian dollar come from? I wasn't aware of this, but during WWI
the U.S.
invaded Haiti, occupying it till 1934. There was a strong German
mercantile presence in Haiti and apparently the U.S. authorities feared that
Germany might take over.
By 1918 the government's gourdes had become "so worn and torn" that
a
shortage of gourde banknotes arose. As part of a 1919 U.S.-initiated monetary
reform, all previous issues of gourdes were to be replaced by a new issue
by the Banque Nationale de la Republique d'Haiti, which by then was owned
and controlled by New York-based City Bank (and would eventually become
Citigroup). As the BNRH had been granted a monopoly on banknote issuance, the
Haitian government could no longer print its own currency.
The new banknotes were to be convertible into U.S. dollars at a rate of five
gourdes to the dollar, a promise that the BNRH printed on the face of each
bill, as the images below illustrate.
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"This bill issued by the National Bank of the
Republic of Haiti, under its concession contract and conforming with the
agreement of May 2, 1919, is payable to the holder in legal money of the
United States at the rate of five gourdes to the dollar upon presentation
to the bank's office in Port-au-Prince or, after a delay, at its provincial
branches."
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Even after the U.S. occupation ended and City Bank sold
the BNRH back to the Haitian government in 1935, the promise to redeem
gourdes with U.S. dollars continued. This peg stretched right through the
rule of "Papa Doc" Duvalier until the late 1980s when the gourde
was finally untethered.
So several generations of Haitians had become used to a five-to-one ratio
between US dollars and gourdes. Dividing a price by five in order to get the
U.S. dollar price may have become such a standard piece of mental arithmetic
that the practice continued into the 1990s and 21st century, even after the
calculation's answer no longer corresponded to the correct U.S. dollar
amount. The Haitian dollar may simply have been a concept that was invented
in order to provide an answer to the traditional mental gymnastics of
dividing by five.
Since being unpegged, the Haitian gourde has fallen consistently against the
US dollar, possibly contributing to the tradition of using the Haitian dollar
unit. Quoting prices in Haitian dollars could be a non-violent way for
Haitians to show their dissatisfaction with their government's finances. Or
perhaps it is a marketing trick that Haitian merchants use to make their
wares seem less cheap, sort of like how shopkeepers here in Canada often set
prices at $4.99 instead of $5.00.
According to Nieburg, the government has even tried to ban the practice of
pricing in Haitian dollars. Intellectuals supported the measure, condemning
the abstract unit as just "another sign of the country’s
backwardness." But it failed. Units of account are just a part of
language. And language is very difficult to control.
The Haitian dollar is probably the best (and simplest) modern example I've
ever run into of an abstract unit of account. For monetary enthusiasts like
myself, it provides a great illustration of the many different functions
packaged into the things we call "money." These functions needn't
be unified into one object or instrument. They can be split up, so that the
instruments that we pass from hand to hand (or from phone to phone), our
so-called medium-of-exchange, no longer correspond to the symbols used for
pricing, our unit-of-account.
Nobel Prize winning economist Robert Shiller has written enthusiastically
about so-called monetary separation. William Stanley Jevons's tabular
standard, which was never implemented but has been considered by some to
be the ideal monetary system, relies on a split between the
medium-of-exchange and unit-of-account. Rather than being backwards, the sort
of standard that we see in Haiti could one day become the monetary system of
the future.
