Hell in the Pacific
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Hell in the Pacific
Lessons from the brokest country on Earth.
By Mark Gimein
Posted Thursday, April 30, 2009 - 11:43am
The island nation of Nauru ranks as one of the more obscure world destinations. You have some sense of just how obscure from the CIA's World Factbook. Although the Factbook is normally a fairly authoritative source for information on countries, it lists Nauru's population at around 14,000. This is wrong: The latest census, from the end of 2006, counted 9,275 Nauruans. The Central Intelligence Agency doesn't know how many people live in Nauru. And, frankly, almost certainly doesn't care. Nauru is that out of the way.
If you're one of the small number who've been following the Pacific island's history over the last years—though unless you are journalist Jack Hitt, it's highly unlikely you have been—you'll know it hasn't always been this way for Nauru. At one time, Nauruans had one of the world's highest per capita incomes, with at least one importing a Lamborghini to an island on which there is basically no place to go. Then things went very wrong.
There are some good economic lessons in this. Though not necessarily the ones that you expect.
The key to Nauru's brief period of financial greatness was phosphate, an important resource for the production of fertilizer that is derived from the accretion of thousands of years of bird droppings. Nauru's coral reef, located 1,500 miles from Papua New Guinea, attracted vast flocks of birds who left millions of tons of phosphate. This has been mined since the turn of the century. It supported the population of the island, as well as workers from other Pacific nations, from 1968, when Nauru secured its independence from Australia and nationalized the mines, until the 1990s.
Then the phosphate ran out. This has to count as one of the longest anticipated depletions of natural resources in history. As far back as the 1920s, scientists had noted that changes in migratory patterns had left Nauru with fewer birds than would account for all that phosphate. And the destruction of their habitat by mining meant fewer birds still. Not that they ever stood a chance: People can mine phosphate a lot faster than any number of birds can make droppings.
(Satellite picture by ARM Image Library/Wikipedia)
Comments
I found lots of interesting
I found lots of interesting information here. The post was professionally written and I feel like the author has extensive knowledge in the subject. Keep it that way.
Ideology over Discovery
Gimein uses Nauru merely as an excuse to trumpet a popular economic ideology. This is the same kind of intellectual laziness that leads to the current crisis: application of a conventional wisdom rather than analysis. In what are the people of Nauru to reinvest to produce economic growth? Fisheries? Tourism? Agriculture? Web hosting? They've all been tried by pretty much all small Pacific island nations, with little success. Yes, Fiji can support a tourist industry and some agriculture - but it is a high island, operating on an entirely different scale than a coral island. And even there, transfer payments from outside provide substantial support. Bertram and Waters characterized the islands as "MIRAB" (MIgration, Remittances, Aid, and Bureaucracies) in which remittances and aid money provide essential income which is redistributed through families and government salaries. (There is much to criticize in the details of their analysis, but the broad overview captures something essential to understanding pacific island economies.) These are fragile and small-scale environments. A large part of economic growth in continental economies comes simply from population growth. Growth can be a recipie for disaster in the islands. Sure, an island might be able to support double the population for awhile - but when the next drought or typhoon comes, reserves are quickly exhausted, and all can starve. Island societies frequently practiced infanticide; one for instance required that any baby beyond the third be place on a small raft and floated out to sea. Current populations are larger than historically sustainable ones because resource transfers from outside support it. Yes, trade plays a part, but mostly because of cash infusions. I studied a fisheries development project on one coral atoll. The project designers realized the operations couldn't provide sufficient return to cover depreciation - so they invested a fund in overseas capital markets where the returns were higher than in fishing. Surprise! Developed economies, favored with economies of scale, sophisticated institutions, and deep markets, can provide a higher rate of return. A trust fund for Nauru is likely to offer higher potential returns than any re-investment scheme. The problem with Nauru's prior fund was likely that it was insufficiently insulated from the redistributive logic of local family and political relationships, and left in the hands of unsophisticated managers open to carpetbagger's blandishments. Other Pacific Islands trust funds have been successfully managed - the trust fund in the Marshalls providing compensation for damages from nuclear testing, the trust funds of Palau and Kitibati. In the 18th century European explorer in the Pacific projected onto the islanders their own preconceptions: fallen humankind, savages unredeemed by Christian faith, or innocents living in harmony in a state of nature. Gimein is only the latest in a long line.
Malthus
'There is no substitute for economic growth'. This is the ideology of a cancer, to paraphrase the late great Ed Abbey.
There is a clear substitute for economic 'growth' and that is sustainability. In this impoverished island nation, they could have simply estimated the amount of phosphate the amount birds 'deposit' every year, S, the number of people, N.
You can only utilize up to S every year (give or take if you are a Keynesian) but there is no substitute for simple only using what is renewed every year. The income of the island is, per capita, S / N.
callous author
"he right lesson to take isn't about corruption or mismanagement. Those will always be with us." Gimein - you're what's wrong with society today. Firstly, throwing our hands up and saying that there's nothing we can do about corruption is kind of like saying there's nothing we can do about diseases, so best to just let it run it's course. I would argue that corruption is not inevitable. Just as there are ways to prevent disease, there are ways to prevent and cure corruption, eg sunshine laws, well developed regulation and standardization, democracy... Furthermore, a society's future prosperity IS directly linked to the effort and thought they exert in eradicating Corruption. Corruption is a broken rudder, you can have all the good intentions in the world, but you're not going anywhere until you create integrity in the system. I would also just add something that's missing from this article. Societies that have strong cultures, e.g. their own cities, literature, architecture etc... they tend to be the ones that last the longest. The Nauruans should have invested in their own culture, not the Brit's.