Cost-Benefit Analysis of President Boyer's Decision to Sign the 1825 Indemnity

 Cost-Benefit Analysis of President Boyer's Decision to Sign the 1825 Indemnity

By Patrick Prézeau Stephenson

Context and Assumptions

• Historical Situation: In 1825, under the threat of 14 heavily armed French warships, Jean-Pierre Boyer agreed to pay an indemnity of 60 million francs or to France to secure recognition of Haiti’s independence and avoid military devastation.

• Assumptions:

o Haiti's GDP in 1825: 6 million francs or.

o Cost of Total War:

 Total devastation of Port-au-Prince and major coastal cities.

 Disruption of all economic activity.

 Population losses, destroyed infrastructure, famine.

o Duration of War: 10 years (analogous to the Napoleonic Wars or other prolonged conflicts of the era).

o GDP Decline during War: Assume GDP falls by 80% due to destruction and famine (common historical benchmark during wartime occupation).

o Recovery Period: Assume that after the war, Haiti would need another 15 years to return to pre-war GDP levels (conservative given the destruction).

• Discount Rate: Assume a 5% real discount rate, typical for long-term historical analysis.

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Calculations

Scenario 1: Cost of Indemnity

• Immediate cost: 60 million francs or over 30 years (in reality, it stretched even longer, but we simplify here).

• Annual burden: 2 million francs or per year, or about 33% of 1825 GDP.

• Economic impact: Very heavy taxation, economic slowdown, debt accumulation, but physical survival of infrastructure and population.

Net Impact:

• Severe economic strangulation, dependency on French bankers (which happened), but no destruction of human capital or infrastructure.

Scenario 2: Cost of Total War

• GDP during war: 20% of 6 million = 1.2 million francs or per year.

• GDP Loss per year: 4.8 million francs or.

• Total GDP loss over 10 years:

→ 4.8 million francs x 10 years = 48 million francs lost output.

• Post-war recovery: 15 years of gradual rebuilding. Assume linear recovery from 1.2 million back to 6 million francs.

• Average GDP during recovery: (1.2M + 6M)/2 = 3.6 million francs per year.

• GDP loss compared to full output (6M) during recovery:

→ 2.4 million francs loss per year x 15 years = 36 million francs additional lost output.

• Total GDP Loss (War + Recovery):

→ 48 million + 36 million = 84 million francs or (undiscounted).

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Summary Table

Scenario Total Cost (francs or, undiscounted)

Indemnity (Payment to France) 60 million

Total War (destruction + recovery) 84 million

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Discounted Values

Applying a 5% discount rate:

• Indemnity (assuming linear payments over 30 years):

The present value of 2M francs/year over 30 years at 5% ≈ 33.2 million francs.

• Total War:

Present value of 84 million spread over 25 years is much higher; roughly approximated, discounted present value ≈ 55–58 million francs.

Thus, even discounted, the cost of total war is almost twice the cost of paying the indemnity.

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Conclusion

From a purely economic cost-benefit analysis:

• Boyer's decision to pay the indemnity, although politically humiliating and economically suffocating, was economically rational under the existential threat posed by the French fleet.

• The alternative—total war—would have been catastrophic, resulting in a far greater loss of human life, infrastructure, and long-term economic capacity.

• Boyer's fatal mistake was in how the indemnity was financed (reliance on French banks at ruinous terms) rather than in accepting the principle of payment to avoid annihilation.

In short: Boyer chose survival at an unsustainable cost — but the alternative was likely extinction.