by Francis X. Hezel, SJ
1987 (MC #) Economics
Is there something that legislators, magistrates and other elected officials in Micronesia see that the rest of us are missing? This may explain why many of those charged with overseeing development funds under the Compact are busily appropriating this money for seawall, community houses, docks and other pork barrel projects as if these were still the TT days of the 70s. Perhaps they are reading the economic surveys of the Pacific written by Australians who declare that all of the Pacific island nations, with the exception of Nauru and one or two other mineral-rich countries, are doomed to be economic "basket cases" without continuing substantial foreign aid. Possibly these leaders have simply abandoned any hope of any real economic productivity and have resigned themselves (and their people) to perpetual dependence on a Western power.
For years now the charge has been repeated that the US has left the economy of the Micronesian states in miserable shape despite that nation's mandate under the Trusteeship Agreement to provide for the economic development of the islands. The condition in which the US left the economy at the termination of trusteeship, some critics maintain, is even worse than it was when the US first took over the war-crippled islands. Then at least the islands fed themselves and provided for most of their basic needs, even if the lifestyle was frugal, while today each of the island nations that formerly comprised the Trust Territory is living well beyond its means and is burdened with a whopping debt. I know of no one who would dispute the charge that the US has done a poor job of developing the economy, but times change and the responsibility for economic development now lies in the hands of the new nations themselves.
There was a point in history, not too many years ago, when Micronesian and US negotiators seemed to genuinely believe that it was possible to build a sound economy on the resource base that the small islands and the seas surrounding them held. They agreed on a Compact funding plan that would provide not only governmental operation costs but large sums of capital that could be invested in development projects to stimulate productivity in the Micronesian economies. US assistance might be required to supplement their resource base for some years, but in gradually decreasing amounts as the local economies grew stronger. The hope was that in time the island nations would generate Dost of the money required to support their own governments.
But time and lassitude and old habits have a way of eroding such ideals. The money originally earmarked for development under the Compact came to be regarded as a continuation of the Capital Improvement Projects funding of the 70s with its emphasis on roads, electrification, docks and the usual monuments to progress, regardless of their real impact on the economy. Some leaders, no doubt, believed that when the day finally arrived that the infrastructure was in place, a line of potential investors from overseas with money in hand would form to provide the businesses ideas and capital needed to fuel the long anticipated economic turn-around. But has this really happened anywhere in the world? Isn't it more often the case that the infrastructure once grandly thought to be the necessary condition of economic productivity instead becomes just another consumer item raising the costs of government and popular expectations for services?
The original concept of the development fund was swept still further downstream as funds were parceled out to municipalities for allocation. After all, most magistrates had been habituated during the 1960s snd 70s to look to government funds for seawalls and community houses, benjoes and water catchment systems.
In some areas, political expediency seems to have required that at least a portion of the development money be distributed to the municipalities for their use. Municipal authorities argued that for too long now the states have monopolized development money for their own centralized use. The towns usually benefit from the improvements, they maintain, while the outlying areas have nothing to show for the funds. "Share the wealth" is the cry of those in the villages now that development money has become available in generous amounts on a year by year basis. In response to the political demands of magistrates and other local officials, therefore, the money has been allocated to municipalities. Now a municipal area with a population of a few hundred people finds itself with over $100,000 each year in development projects.
The results are predictable. Although guidelines for the use of this development money are elaborated by state-level planners, the sum allocated to a municipality may well exceed its ability to absorb this money within a year's time. After all, how uany medium-size agricultural projects and fishing operations can a small population sustain? When the money for real basic development is allocated, there often remains a generous sum still to be spent. The temptation is to distribute this for tools, animal feed, and other incidentals that effectively inflate the start-up cost of the project even as they provide fringes for those employed. The net effect, like that of the old CETA programs, is to make projects so costly that others are inhibited from emulating what might otherwise have been a for village development. Moreover, the municipal authorities have priorities of their own, often only marginally related to what the development money is intended to do. Their concern is often the establishment of water catchments, sanitation facilities, passenger boats, roads and docks–projects that will enhance the short-term quality of life in the village and provide the trappings of modernization that villagers feel they have been denied in the past. These concerns often eclipse the higher-level but much less immediately felt need to increase production so as to create a viable economy in the future.
Then there is the concern for jobs. Why should the people simply relinquish their windfall in favor of long-range development projects when there is much rampant unemployment in the villages today? Why not take the money and convert it into salary income for at least some of the subsistence-level villagers? In other words, why go to the trouble of developing a fishing industry when the people need fish (perhaps even store-bought fish) right away? And so, in lieu of salaried jobs, a hundred families are given outright grants of $1500 apiece from funds that are ear-arked for "commercial fishing development" The money is spent and the village remains no better off in the end than it ever was. Thus, people reverse the hallowed old maxim of development and accept the meal today rather than the fishing industry that they might have had tomorrow. In so doing, of course, they take still another step away from the economic development that their Compact envisioned and their planners call for.
The obstacles to furthering economic development on the municipal level seem to be almost insurmountable. What is harder to understand, however, is how congressmen and legislators, who should know better, can continue to dispense much-needed funds as they used to in the TT days a decade ago for seawalls, community houses and other pork-barrel projects that contribute little or nothing to the economy. Worse still, they do this at a time when the governments are struggling with large debts even as they try to gain the confidence of their own people and the world at large.
Yet it really should not be too shocking to discover that our legislators have seawalls and community houses and roads on the brain. After all, we in Micronesia have lived so long in an upside-down economy that standing on our heads has become almost normal. For years US subsidies have underwritten the essential services of the governments in Micronesia, and local revenue could be squandered on seawalls that crumbled two years after they were built or on hiring employees for political patronage purposes. Government spending, funded from overseas, has always supported such private sector economic activity as may occur, and after a while it is hard to remember that in the rest of the world the relationship between private and public sectors is reversed. "What's wrong with all this?" island leaders might well ask, for the only economic world they have ever known has always operated this way. They can be pardoned for ignoring long-term developmental concerns in favor of docks, passenger boats and other conveniences, since they have come to believe that there will always be someone around to catch us when we fall before we come to financial disaster.
Whether or not we realize it, times have changed. The US seems to have taken a firmer stance on Micronesian matters, as is clear in its dealings with Palau on the anti-nuclear provision in the Palau Constitution and its persistence in withdrawing federal grants for college education. Many Micronesian officials, hoping for last-minute concessions from the US, were taken by surprise when the US insisted on the provisions that had been negotiated. It could be argued that a future, more liberal administration in Washington will soften in its handling of financial matters in Micronesia, but this is a chancey hope. Washington, it might be expected, has learned a few things in the course of its dealings with these islands. One of its foremost lessons must have been that fiscal responsibility and good management can only be learned when nation states are held to the consequences of thelr financial decisions. It is in the long-term interests of neither the US nor the new nations of Micronesia for Washington to continue to bail out the island governments.
The clock is now running and the Micronesian government have 14 years to make something of these economies. In that time they will have to produce a greater measure of what people need to live, or the money to pay for it, or else they will have to strike a new and possibly less favorable deal with the US to increase the subsidy. That would almost certainly entail a surrender of some of the political autonomy that the islands now possess. Political autonomy can seem an abstraction unless we link it to the realities of local control over land, immigration and other critical issues that even now rankle some of our less autonomous neighbors to the north.
It's high time that the Micronesian states got out of the dreamworld that we've all inhabited for years and concentrate seriously on moving tho economy forward–at least if we haven't despaired altogether of real economic development. It may be that the US did very little by way of economic development in these islands for the last forty years, but the local record doesn't look too impressive either at this point.