The Caroline and Marshall Islands extend some 2500 miles across the western Pacific and encompass about a hundred inhabited islands. The inhabitants of these two archipelagoes, the geographical center of the area known since the mid-19th century as "Micronesia," are broken up into perhaps ten cultural-linguistic groups. (Anthropologists and linguists have never agreed completely on the number, since one group often shades into another and boundaries are blurred.) While the Carolines and Marshalls are neither by traditional nor modern geopolitical standards a homogeneous unit, it would be a mistake to regard them as simply a Western artifact. The three modern political entities that make up the area — the Republic of Palau, the Republic of the Marshalls, and the Federated States of Micronesia — have all recently adopted, or are in the process of adopting a status of Free Association with the US. Moreover, they have shared a hundred years of colonial rule under four different powers. Finally, even before the first Western incursions into the area, they exhibited enough common features to be classified in that cultural family that came to be called Micronesia.

The coral atolls of the Marshalls and the high volcanic islands of Kosrae and Pohnpei — all of which have distinct but closely related languages — had relatively stratified societies with paramount chieftainships over extensive sections of these groups (Alkire 1977). Truk and the coral atolls of the central Carolines, whose dialects were part of a single language continuum, had petty chiefs but lacked the strong centralized authority of the east. The high islands of Yap and Palau in the west, which differed considerably from the rest of the area and between themselves in language and culture, showed strong village authority and a ranked network of villages. Despite their relatively rich resource base, these two island groups never developed the degree of stratification that the islands to the east displayed. They may serve as a warning against any overly rigid theory of economic determinism.

All these island societies, like those in other parts of the Pacific, produced all they needed to feed, clothe and shelter themselves; otherwise they would not have survived. They did this by a mode of production and distribution that has come to be termed the "subsistence economy." This is often taken to mean reliance on local resources with a "make-do" technology, but it means a great deal more than that. One feature of the island subsistence economy in the Pacific is its relatively high productivity; families can produce all they need in "3-4 male labor hours a day" (Fisk 1982). This allows plenty of time for people to maintain social relationships within the family and community, and even to develop the elaborate social rituals that some societies practiced. Available land and sea resources were under-utilized — at least by today's standards — to allow them to replenish. There were no incentives to produce a surplus except for the occasional food distributed to the community, under a chief, as an expression of solidarity. The reward for such surplus production as was required was enhanced prestige in the community. On the whole, the "subsistence economy" could be considered as much a mindset as a mode of production. It represents a cluster of attitudes that are inimical to many of those values associated with modern development in a monetized economy.

Micronesians engaged in some inter-island trade, but this was of marginal importance since most places had the same limited resources anyway. Only for atoll-dwellers, exposed to the fury of the typhoons that periodically denuded their islands, were the traditional trading networks essential. Their ties through trade contacts with other islands in the area were an insurance of aid in time of natural disaster (Alkire 1965).

The island societies of Micronesia are usually regarded as having been static prior to Western contact. Indeed, there is good reason for this. They had limited environmental resources with which to work — copper and iron ages demand metals and the means of extracting them. The islands were relatively isolated from one another — sea voyages of even several days brought them to other islands with similar resources and technologies. Furthermore, the societies looked on maintenance of the system as a virtue and disruption as perilous, given the need to maintain harmony in their small communities. This is not to deny the fact of occasional change, even major change at times, usually as an imposition from without. The oral history of Pohnpei, less shadowy than most, records the conquest of the island by a force from across the sea that built the mammoth stone settlement at Nan Madol. The conquerors were presumably also the architects of a similar settlement on Kosrae. Kava and other non-indigenous cultural elements may have been introduced in the same period, which is dated by archaeologists at the 13th century.

Europeans first visited the islands in the early 16th century in the wake of Magellan's voyage. The Spanish stopovers were infrequent, short, and of little lasting impact aside from the introduction of the marvel of iron tools. Even if the Spanish had not bedazzled islanders with nails and iron hoop, however, the latter would have discovered this technological wonder on their own — as they did in fact on drift voyages to the Philippines and the Marianas in the 17th and early 18th centuries. Those islanders fortunate enough to obtain pieces of iron sequestered their treasure under their mats as they slept and sought more "with the same longing that you have for heaven," as a priest was told by one Carolinian castaway (Hezel 1983: 39). The atoll-dwellers of the central Carolines began making yearly voyages to Guam to obtain more of the metal for a time, but these voyages were discontinued when a party failed to return in 1788 and were presumed to have been imprisoned or murdered by the Spanish on Guam (Kotzebue 1821 v 2: 240). The desultory European visits during the late 18th century, after two centuries of Micronesian isolation, produced little more than had early Spanish contacts. Finding a dependable supply of iron was a problem that persisted until the early 19th century when regular European trade contacts were established in the area.

When Ltke and the other naval commanders surveyed the area between 1815 and 1849, they found the atoll-dwellers of the central Carolines and Mortlocks far more cosmopolitan and sophisticated than the inhabitants of the larger volcanic islands of Yap, Truk, Pohnpei and Kosrae (Nozikov 1946; Ltke 1835 v 2). When offered metal fishhooks, Kosraeans inserted them in their earlobes as ornaments; and others were baffled about how to use steel axes. The Mortlockese, on the other hand, scoffed at the iron bars and hoop they were offered and insisted on knives, tinder boxes and bone-handled knives instead. The central Carolinians had tasted strawberry preserves, pat de foie grs, and madeira; and many of them could count to ten in Spanish — a consequence of their visits by earlier sea voyages to Guam and encounters with early whaleships on their islands. The outer-islander remains comparatively cosmopolitan — in English ability and awareness of the rest of the world — even today. Lacking the rich resource base of their neighbors on the high islands, the atoll-dwellers have always been forced to travel and adapt in order to provide for their needs, in times of over-population as well as after typhoons or in famines.

Itinerant trading captains engaged in the three-cornered China trade paid regular visits to several of the islands in Micronesia from the 1830s on. The islanders received much more than the iron-ware they so coveted in exchange for the beche-de-mer, turtle shell and mother-of-pearl that they sold to the traders as a cargo to Canton. They also were treated to calico, denim and serge — the favorite color almost everywhere being turkey red — and most important of all, tobacco, Yet not even tobacco's addictive property was able to revolutionize island production; people worked as they had before, simply allocating some of the surplus for tobacco and such luxury items. The China trade introduced another commodity to a few islands such as Pohnpei, Kosrae and Palau — the white (or sometimes black) beachcomber. The beachcomber was almost always attached to a chief and was as much his "possession" as the axes, dry goods and ironware that made their way into the chief's hands. In Pohnpei and Kosrae the foreign resident was regularly called on to act as the chief's intermediary in trade with ships; in Palau he acted as diplomat to plead his chief's case against rival sections and enlist military support from British naval ships and other foreign vessels (Hezel 1978).

The China trade may have provided a regular supply of such novelties as cloth and tobacco, but otherwise its disruption of island life was minimal. Beachcombers may have done some wild carousing, even killing one another on occasion, but none of that was unknown among islanders at that time. Trading was carried on almost universally through traditional mechanisms and the goods distributed through customary channels. In effect, it reinforced rather than changed the old political system. Even the economic consequences on the islands were not especially significant — at least not yet. Dry goods and ironware were welcome luxuries, but one could not eat them or, for that matter, even wear European clothes on a daily basis. As prestige items they were in constant demand, but the exigencies of daily life were provided, as they always had been, from the land and the sea.

The American whaleship trade that flourished on Pohnpei, Kosrae and a few smaller adjacent islands from 1840 to 1865 brought a substantial increase in both the volume of trade and the number of beachcombers. Between 1840 and 1855 yearly trade on Pohnpei may have doubled to $8000, and the number of Westerners living on the island grew from 30 to 150 (Hezel 1984: 13-14). Islanders were introduced to other, more dubious wonders like firearms and firewater. Pohnpeians and Kosraeans avidly sought both, while Palauans generally shunned liquor. The commoners of Pohnpei and Kosrae, who were without the normal trade commodities, displayed some ingenuity by selling the favors of their wives and daughters to seamen, thus breaking the chiefly monopoly on foreign trade. The reward for this was what was then called "the pox" — venereal disease — which was added to the host of other diseases and maladies afflicting islanders since sustained foreign contact began. All islands suffered a serious population loss, but Kosrae was by far the worst; in 40 years its population declined to one-tenth of what it had been (Ritter 1978). The sudden loss of population cracked the foundation of its elaborate political system, which vanished quickly in subsequent years and was replaced by a quasi-democratic system that retained some of the external forms of older chieftainship (Lewis 1967).

The copra trade, which began in the 1860s, was the final and most perduring step in island commerce. Until a few years ago, copra remained the main export of the Caroline and Marshall Islands; only recently has it been challenged by tourism as the main industry in the area. The large German firms in the Pacific — Godeffroy, Robertson-Hernsheim, DHPG, and the Jaluit Company — were instrumental in establishing trade stations virtually everywhere in the area. Copra production was ideally suited for island life. It utilized a resource found in abundance everywhere, it required no new skills, and it could be done without any change in local work habits. The copra trade brought Micronesians few Western goods that they had not previously seen, but it offered them in greater quantity and in regular supply since foreign traders maintained stations on nearly every island. By the early 1880s, the peak of the early copra trade, foreign firms were exporting a total of one-quarter million dollars worth of copra a year (Hager 1886: 121-3).

The cumulative effects of this and the previous stages of trade in the area produced striking changes in the externals of life in the islands. The people of the eastern half of Micronesia, who had been missionized by the Protestant American Board, now habitually wore Western dress in place of their traditional garb — although some used both, depending on the occasion. Notwithstanding missionary objections, clay pipes and whiskey were common articles of trade. Iron pots had become a standard item in nearly every household, and ordinary tools and fishing gear were now imported. Rifles and muskets had also become commonplace items; by mid-century there were an estimated 1500 guns on Pohnpei, or one for every third person (Shineberg 1971: 190).

The greatest beneficiaries of this new wealth were the chiefs, of course, especially in areas like the Marshalls where the chiefs retained traditional ownership rights to the land. Marshallese chiefs, who retained for themselves a third of all income from copra made on their land, became rich almost overnight and flouted their wealth openly. Several bought small schooners and hired foreigners to captain them as they made the rounds of their island possessions to oversee their estates and collect their tribute. Some chiefs dressed in suits and top hats and bought wardrobes of silk dresses for their wives. One had an income of $8000 a year, more than the German governor of the Marshalls was earning (Firth 1977).

A look beneath these externals — something that foreign residents rarely bothered to do — would reveal that in most important respects life was lived very much as it had been in past centuries. That congeries of traditional values and customs that were intertwined with the "subsistence economy" were very much in force everywhere except in Kosrae. And yet the seeds of a social revolution had been planted. The chiefs had always supervised the land resources and were charged with the responsibility of redistributing surplus products. With the advent of trade goods, however, the old system was being challenged. The producer had, for the first time, an attractive alternative to putting his surplus at the disposal of the community through the chief; he could try to secrete it and trade it for consumer goods. Similarly, the chief was tempted to keep surplus goods for himself — something that would have been senseless if he were not able to parlay perishable produce into storable Western items. There was a point to hoarding, Micronesians learned for perhaps the first time. Not that they actually did — for the ethos and the structures of their old way of life were still too firmly in place to allow this. Nonetheless, this realization loosened, ever so slightly at first, the land tenure system in which the chiefs retained control of the basis of production. It was too early for a revolution just yet; this would come under the buffer of colonial rule in years to come.

Spanish annexation of the Carolines in 1886, although it marked the beginning of a hundred years of colonial rule, was no major watershed in the lives of the islanders. Spanish rule was largely ineffectual in Pohnpei and Yap, the two Spanish administrative centers, and the new government had almost no impact elsewhere in the archipelago. Yapese land tenure, rooted as it was in family estates, had proven resistant to mercantile innovations; and its network of village chiefs was never challenged by the Spanish, whose major concerns were the introduction of the Catholic Faith and the carrying out of public work projects. On Pohnpei Spanish attempts to impose military rule provoked two early armed insurrections, and the Spanish, who suffered heavy losses without redress, thereafter found themselves confined to their small colony in the northern part of the island (Hanlon 1988). The Spanish threat did not even have the effect of uniting the five autonomous kingdoms on the island; they remained as suspicious of one another as ever. Meanwhile, the Trukese who were relatively untouched by 19th century foreign trade, continued to fight their inter-sectional wars with no interference from the Spanish.

Palau by 1886 had already experienced a century of political and military intervention on the part of the British navy. Thanks to its fortunate position near the main port and clever manipulation, Koror repeatedly succeeded in enlisting foreigners to aid it with their ships and guns in its struggle against its age-old rival districts. Foreign support assured Koror of primacy from the late 18th century to the present. It is significant, however, that none of the Koror rulers used these extraordinary opportunities to extend his rule over the entire island group, as Kamehameha did in Hawaii and Pomare in Tahiti. In Palau, where competition on every level had long been a way of life, the fun was in playing the game rather than leaving the table with the pot.

In the meantime, the German government established a protectorate in the Marshalls, which it administered through the Jaluit Company on a business basis. The government's main goal was to promote the copra trade and the other commercial interests of the Jaluit Company. The chiefs, who stood to gain greatly from trade expansion, worked closely with the government and the business interests it represented for the same end. But German industry in the area was even then losing ground to the Japanese traders who entered Micronesia in the last decade of the 19th century. By the time Germany acquired possession of the Carolines in 1899, following Spain's sale of the islands after its defeat by the US, its trading empire was already in decline.

Germany was slow in deciding upon a plan for its new colony. When it finally did settle on a development policy — based on the suppression of all those traditional elements that were thought to impede increased economic productivity — it found itself hard pressed to implement the policy. German reforms included the attempt to limit local feasting, which the government looked on as wasteful, and the imposition of a head tax paid in labor. On Pohnpei land, once held in ownership by paramount chiefs, was deeded to individuals who enjoyed use rights to the land. The heavy-handed way these reforms were implemented triggered a rebellion by one of the five tribes on Pohnpei. The revolt was put down decisively by the Germans some months later when several of the ringleaders were killed and the entire population of the offending tribe sent off in exile to Palau. Land deeds were finally introduced by the government and accepted by Pohnpeians, although not for fear of German military might. Pohnpeian society had been shifting towards individual land ownership for a half century prior to this, ever since one of the most influential chiefs bestowed the land he possessed by virtue of his title on his son. This radical departure from customary inheritance won gradual acceptance by many on Pohnpei, and the German edict on land law offered a convenient excuse for adopting this new practice. Pohnpeians, while still bound to their paramount chiefs by a strong code of respect, had their land freed from chiefly control (Fischer and Fischer 1957).

In Palau the German administration suppressed the last remnants of inter-village warfare and the institutionalized concubinage that was practiced in the village men's houses (Force 1960: 77-84). Both warfare and the raids on other villages to obtain women for the clubhouses had been prime occasions for the transfer of Palauan money and the acquisition of prestige in the society. The prohibition of these customs, together with the suppression of feasting and levying of fines by chiefs, stifled the exchange system and froze the assets of villages. The old channels of competition were choked off and the prestige order of villages, which had always fluctuated, became rigidified. The nativistic religion in Palau, Modekngei, originated at this time as a protest against change under the Germans.

German reforms proved unequal to the monumental task of creating a commercial agriculture in the colonies. They did not even create a desire for one. The government's real success was in the opening of two phosphate mines — one in Nauru, which was then part of the Protectorate of the Marshalls, and the other in Angaur, Palau. By the end of German rule these two mines accounted for 90 percent of the total value of exports from the islands — 9,000,000 Marks yearly (Hezel 1984). The mines also offered Micronesians the first large-scale wage employment opportunities. Several hundred islanders a year were recruited to work on Angaur and Nauru; their total wages amounted to about 200,000 Marks yearly, perhaps one-fifth of the total money income that reached Micronesian hands (Hezel 1984). Moreover, people from all parts of Micronesia lived together in the mining camps and were forced to fraternize. It would be claiming too much to see in this the seeds of a later political unity. Workers from different island groups could not converse with one another, but they did disseminate songs, dances and other art forms — including tattoo designs — during the idle evening hours in the camp. The marching dance, stick dances and other stylized dance forms still performed throughout the area to this day owe their dissemination to this period.

In a pattern that was repeated several times over, the islands changed hands once again during a major international conflict. At the outbreak of World War I, Japanese forces seized Germany's possessions, and for the next thirty years the Japanese flag flew over the Carolines and Marshalls as well as the Northern Marianas. Initially the change in colonial status had little impact on the lives of islanders other than requiring that they learn a new language to deal with their overlords. Japan had long since achieved a commercial conquest in the islands anyway, and the early years of Japanese naval rule were simply a holding operation until a more permanent colonial structure could be erected.

Japan's seizure of the islands was formally recognized in 1920 when the new League of Nations awarded Japan the area as a Mandate; and a civilian government was set up soon afterwards. The colonial administration promptly adopted an enlightened development policy that attempted to boost island productivity, as the Germans had, while offering the local people an opportunity to advance socially and educationally. Japan's economic development during the 1920s focused mainly on its expanding sugar industry in the Marianas, which depended entirely on the Japanese nationals brought in to cultivate the land. Meanwhile, mining operations continued on Angaur with the use of Micronesian labor. The 300-400 work slots each year were filled by local chiefs, according to quotas assigned by the Japanese administration. Nanyo Boeki Kaisha, the government- subsidized firm whose pedigree could be traced back to the Spanish colonial era, ran a network of retail stores employing some 700 Micronesians and controlled the copra trade (Purcell 1967). Copra production doubled to 12,000 tons a year during the first decade of Japanese rule, a level that was maintained up to the present.

The size of Japan's colonial operations, with branch offices in each major island group, permitted it to have a deeper impact on Micronesian life than either Spain or Germany. Japan established the first public education system when schools offering up to five years of primary education were opened on most islands. The main emphasis in the curriculum was instruction in the Japanese language. Hospitals were built and health care extended to outer islanders. The population decline that the area showed during the 19th century was arrested and population was stabilized, although it did not begin expanding significantly until the 1950s. The Japanese also designated island and sectional chiefs, who were paid modest salaries for performing the duties the government imposed on them.

By the early 1930s, a shift in Japan's colonial policies became evident. The push towards economic development during the previous decade had been more successful than Japan had at first envisioned. With sugar as the backbone of its economy, the Mandate was exporting 10 million yen worth of produce annually and was entirely self-supporting (Purcell 1967). The large government subsidy that once paid for the administrative costs of the territory had been discontinued, and all these expenses were now paid by revenue raised from export taxes. Yet the social cost for this development was considerable. By 1930 there were over 20,000 Japanese nationals living in the islands, most of them in the Marianas. Japanese and Okinawan immigration was instrumental in the success of the sugar industry; and even more important from an imperial point of view, it provided relief for Japan's internal economic problems and unemployment pressure. If sugar and phosphate could be so profitable, there must be other resources that could be developed in the Mandate by Japanese immigrants who would have found no work at home.

During the 1930s the colonial government, through its commercial giants Nanyo Boeki Kaisha (NBK) and Nanyo Kohatsu Kaisha (NKK), undertook a program of intensive resource development. Marine industries developed included fishing, katsuobushi manufacture, pearl cultivation, and sponge collection; while agricultural emphasis was on starch production, lumbering, sisal and a variety of food crops. During these years Japanese entered the islands in even larger numbers than before; by 1935 there were 50,000 in the Mandate, and by 1940 the number was 85,000 (Purcell 1967). Such extensive immigration meant that Japanese authorities were increasingly absorbed with providing social services for these new-comers. As it tried to do so, the quality of care for islanders declined.

The most serious effect of this wave of immigration was on land use. The Japanese colonial government had from the beginning claimed title to all land held by chiefs in virtue of their traditional powers. Large tracts of land on Pohnpei, Truk and Palau accordingly passed into government ownership. A survey of landholdings in 1932 revealed that Japanese government had title to 160,000 acres, compared with the 60,000 under private ownership of Micronesians. During the 1930s much of this land was leased to NBK and NKK for production and industry. As immigration continued to grow and land needs became more pressing, the government began to purchase private land. If the war had not intervened, Micronesians would have found themselves land-poor on their own islands.

As it was, the local population was relatively untouched by the economic miracle that was being worked around them. Eighty percent of the total labor force was Japanese. Perhaps about 1500 Micronesians were employed with total yearly earnings of 250,000 yen. This income together with the value of copra they produced at this time would have yielded them a per capita income of less than $35 (in current dollars) a year (Hezel 1989). This was roughly the equivalent of the per capita income during the sluggish post-war period of the 1950s.

Nonetheless, employment opportunities for Micronesians were far more numerous than they ever had been before. In addition to the labor in the phosphate mines of Angaur, Micronesians traveled to Pohnpei to plant tapioca or worked on the interisland vessels as sailors. Others who remained on their own islands found employment as assistant teachers in the local schools, as orderlies in the hospital, or as interpreters for Japanese officials. A new Micronesian elite, consisting of those young islanders who had attained fluency in the Japanese language, was in the making. They were the individuals who rode to work on bicycles and had the income to buy zinc roofing for their houses and rice and tinned food for their meals. Many Micronesians found wage employment an attractive alternative to working the land; but some had little choice, since they had sold their landholdings to the Japanese to pay their annual head tax. Micronesians in ever increasing numbers, the Catholic bishop noted, "were going from being owners to laborers, while the Japanese, who in their own country were workers, became owners" (De Rego 1933).

The Japanese fortification of the islands for war in the early 1940s brought an end to most salaried employment, although work demands on islanders intensified greatly. Micronesians of both sexes and all ages were dragooned into labor brigades to dig out gun emplacements in caves, construct airfields and prepare the island defenses for the war that the Japanese knew was to come. After Pearl Harbor large numbers of Micronesians were evicted from their island and relocated in other areas to make room for the Japanese military forces. Many others chose to take refuge inland after 1943 as Allied bombing raids became more frequent. Local people suffered greatly as American submarines cut off Japanese shipping and supplies became ever more scarce. The additional pressure put on local resources by the tens of thousands of Japanese civilians and troops resulted in near famine on many islands by the end of the war.

Once again the spoils of war, Micronesia passed into American hands after the surrender of Japan in August 1945. The US, like Japan thirty years earlier, occupied the islands first and only later was ceded title to its conquest as the trustee of an international body. In 1947 the United Nations recognized the US as the administering authority over what was now known as the Trust Territory of the Pacific Islands. The US, again like Japan, put its new acquisition under military rule for a time while it groped for a development policy for the islands.

Whatever the US did in Micronesia, it was determined to avoid the "indiscriminate exploitation of the meager resources of the island" that it felt typified Japanese rule (Richard 1957 v 2: 518). Thousands of Japanese were promptly repatriated, including many who had married Micronesians. With this hundreds of Micronesian women lost their husbands and the island communities lost the skilled labor on which past economic success had been built. US policy-makers also decided that there would be no large development projects funded by outside capital. Any economic development that occurred was to benefit the Micronesian people and be subject to their control. This decision would set the pattern for the islands during their first two decades under American rule.

The isolationist policies governing Micronesia also served another important purpose. They protected the territory from the prying eyes of unfriendly powers as the US carried out a series of nuclear tests in the northern Marshalls from 1946 on. The populations of Bikini and Enewetak were relocated and were subsequently shuffled from one spot to another. Today, forty years later, they still remain exiles from their homeland. In 1951, as US naval rule was replaced by civilian administration, the US established a military base on Kwajalein that has been maintained until the present day. The nearby island of Ebeye, to which Marshallese from Kwajalein were removed, housed the ever-growing Marshallese workforce employed on the base. The population of this tiny island grew to 8000 as people from other islands moved in to benefit from the employment opportunities there (Johnson 1984).

During the early years of American administration, the US attempted to keep the pace of development slow enough to ensure full local participation. Copra, handicraft and trochus — and for a short time phosphate — were exported for a total value of 2 million annually. Experimentation with small-scale production of such other crops as coffee, ramie and cacao soon proved unsuccessful. The most significant achievement of this period was the establishment of small retail stores; by 1951 there were over 300 of them, many owned by Micronesians (Hezel 1984). For almost a century islanders had been the clientele in small businesses; now for the first time they were the entrepreneurs. From the humble beginnings of their "Mom and Pop" stores, several went on to become prosperous businessmen and eventually rose to the top of the moneyed elite that emerged during the 1960s and 1970s.

One of the surest means of upward mobility for islanders was knowledge of English. From among those few who were able to converse in English after the war, US naval officers selected health aides and teachers to work with the new administration. These individuals advanced quickly and many of them went on to become the first island doctors and elected officials. The lesson was not lost on their compatriots, who enrolled in the schools started by the navy and continued by the civilian administration during the 1950s. The most capable of those who finished at the village elementary schools were brought into the district center to attend intermediate school, with some going on to teacher training school. Afterwards they obtained jobs as teachers, which they held until new mid-level positions in the government bureaucracy were opened to Micronesians. Teaching was the low rung on the ladder of advancement in government service then as today.

Even with the administration's slow-paced approach towards development and the small US budgets during those years, the cadre of Micronesian government employees grew quickly. By the mid-1950s there were already 3000 Micronesians working for the government bureaucracy — twice as many as the number employed in the heyday of Japanese production two decades earlier. During these years the total income from government employment surpassed the total value of exports, and the gap between them has widened every year since then. Eighty percent of the population continued to support itself from the land and the sea, as it had always done, but the cash economy was gradually becoming more widespread. Palauans, who were among the first to sense the importance of education, began slipping off to Guam and the US in search of better-paying jobs. By 1970 there were an estimated 1000 Palauans on Guam, and ten years later the figure grew to 1500 or 2000 (Hezel and Levin, 1989).

Although unwilling to impose economic changes in the name of development, the US administration showed no such hesitation at promoting Western political practices from the very outset. With its usual zeal, the US attempted to set up democratic forms of government on every level of island society. In 1948 municipalities — corresponding to indigenous political units — were established throughout the Trust Territory and elections were held for magistrates. At first the people chose their local chiefs for office in elections that were a mere formality. Later, as it became clear that the magistrates would be expected to deal with American government officials, some of the chiefs chose surrogates whom they supported in the elections. In such cases, the magistrate was the equivalent of the chief's deputy or the "secretary of state," and his responsibility was to represent the island chief in all dealings with the US administration. Those chosen to serve as magistrates tended to be younger and more acculturated men — in contrast to the older and more traditional-minded chiefs. Given the magistrates' access to American authorities and the prestige this represented, tension was bound to occur between chiefs and magistrates. In time magistrates began to carve out a leadership role for themselves that was more independent of the chiefs. The early successful integration of the two parallel systems eventually broke down and the two became coexisting rivals for political power.

The changes that early American rule had produced seemed far from dramatic. Chiefly authority, although diminished, was still honored publicly. The traditional extended family continued to be the basic unit of social organization, even if smaller residential units were becoming more common. Nonetheless, the islands were poised for a leap towards modernization. The people had tasted education, wage employment, mobility within and beyond Micronesia, entrepreneurship and democratization of their institutions. Most Micronesians, then, applauded the reversal of direction that the US took during the Kennedy Administration in the early 1960s.

Long criticized for the shoddy state of development in what the press sometimes called "The Rust Territory," the US decided to abandon its earlier "go slow" policy and move towards rapid modernization. Such a step would not only silence the critics but also, it was hoped, persuade the Micronesian people to opt for permanent affiliation with the US when they eventually made their choice of political status. If any rationale for such a policy shift were needed, it could be found in the development theory of the day that supported investment in social services as the key to modernization.

The Trust Territory budget was doubled in 1964 to $13 million and escalated each year thereafter, reaching $60 million in 1970 (US Department of State 1981). New village school buildings were built and high schools opened in each district, with American contract personnel and later Peace Corps volunteers recruited to teach in the new schools. New hospitals and dispensaries were constructed and health services personnel expanded. There was little emphasis on economic development as such; the main target was administration and social services, in addition to the infrastructure projects such as roads, docks and runways. Overall, one of the most visible effects of the increase in budgets was to offer hundreds of new government jobs to Micronesians who had previously been unemployed. Powered by this rapid expansion in government employment, new retail stores, restaurants and movie theaters opened, creating still more jobs. Between 1962 and 1965, employment doubled from 3000 to 6000 jobs, and in the next ten years it doubled again to 12,000. While exports remained at the level of $3 million a year, cash earnings from wage employment reached ten times that amount by the mid-1970s (Hezel 1984).

The US change in policy also resulted in an education explosion throughout the territory. In 1960 there were barely 100 Micronesians graduating from the few Trust Territory high schools each year. By the end of the decade nearly 1000 graduates a year were being turned out (Hezel 1974). After US Federal assistance grants were extended to Micronesians in 1973, large numbers of these high school graduates poured into stateside colleges to seek the college degree that they saw as the passkey to later wage employment. At the height of the college boom, in 1979, there were over 2000 young Micronesians enrolled in college abroad. All expected to return to find jobs awaiting them, since government was a very high growth industry during the 1960s and 1970s.

Even as the US administration was initiating the policies that would convert the islands to a wage-and-consumption economy, it took steps to push the territory towards political maturation. In 1965 the first territorial legislature was begun when the Congress of Micronesia was created. Representatives from all parts of Micronesia gathered for the first time ever to participate in a law-making body. The congress contributed to a growing sense of nationalism and awakened a spirit of unity among Micronesians. This was enhanced when, three years later, the congress began to explore the question of the islands' political future following trusteeship. After nearly a hundred years of colonial rule, the islands were preparing for self-government — not as a scattered group of chiefdoms with different cultures, but as a single political entity.

The unity proved to be short-lived, however. Hardly had Micronesian leaders begun their negotiations with the US on the political status question when the fragile political unity began to crumble. In 1971 the Northern Marianas voted to go its separate way and conduct its own negotiations for a commonwealth status. Meanwhile, the remainder of the Trust Territory continued to define a status that would give it control over its own land and laws, while providing the financial assistance from the US that it saw as necessary for its survival. As negotiations with the US dragged on, further rifts appeared between the districts. These were only deepened when the US announced its future military interests in Palau and the Marshalls and assured these groups of financial compensation for the proposed base on Babeldaob and the existing facility on Kwajalein. By 1977 Palau and the Marshalls had both decided to form their own governments and negotiate separately for Free Association with the US. This left the remaining four districts — Yap, Truk, Pohnpei and Kosrae — to form the loose political entity that was to be known as the Federated States of Micronesia. In 1978 all the newly formed political units were granted self-government by the US under chief executives elected by the populace rather than appointed by US authorities.

As the newly formed entities moved towards termination of the trusteeship, they faced a troublesome dilemma. How could the aspirations for full political sovereignty, which had been enkindled since the mid-1960s, be satisfied without surrendering the relative prosperity that the islands had achieved in recent years? Micronesians had turned a critical corner during the 1960s and early 1970s. They had come to rely on wage employment that depended on a large government bureacracy and, rhetorical assertions notwithstanding, they could not easily return to a semi-subsistence economy. Indeed, the shape of their very families was being altered to accommodate the reality of a regular cash income, just as their chieftainships had been changed in an earlier age to allow for modern political apparatus. Education, the most expensive of the social services provided by the government, was regarded as a necessity. People had come to expect not six or eight years of schooling, as the administration provided in the 1950s, but twelve or sixteen years. The population had acquired an expensive taste for modernity, but it was unclear just how nation-states that lacked a substantial resource base would support these tastes under their own government.

The attempt to boost production for export has not met with very much success. The real value of exports has probably decreased in the last 40 years; the only significant addition to the list is the "invisible export" of tourism, which brought in perhaps $3 million a year by the mid-1980s (Hezel 1984). In recent years the new governments have turned to the sale of rights as a source of income. The Compact of Free Association itself is viewed by some as a sale of defense rights to the US in exchange for the yearly subsidy provided by the agreement. According to the terms of the Compact, the nation-states may not allow unfriendly powers access to their land or waters. The new governments have also been leasing to Japan, Taiwan and other maritime nations fishing rights in their economic resource zone. This brings in a total of perhaps $10 million yearly for the three freely associated states. The Republic of the Marshalls has gone further than the other island states in the sale of rights. It has recently begun chartering vessels under its flag; and there are proposals at present to sell Marshallese passports for a quarter million dollars apiece and to lease certain islands to other nations for the dumping of trash.

Free Association was formally initiated in the Federated States of Micronesia and the Republic of the Marshalls in late 1986. Only Palau remains under trusteeship status, since the conflicts between its constitution and the Compact of Free Association are still unresolved. Even under the new status, however, much has remained unchanged. The government and the subsidy that supports it continue to be the base on which the entire economy rests. There continues as well the hitherto fruitless search for an industry that will generate the income needed to support the nation states in the future. In the meantime, an increasingly educated populace that seeks wage employment is faced with a stagnant island economy. After the rapid increase in the number of jobs during the 1970s, people are disturbed by the lack of expansion in employment during the present decade. In their dissatisfaction with the lack of opportunities in their own islands, many Micronesians are emigrating to Guam and the Northern Marianas, where jobs can be found in ready supply. Over 2000 FSM citizens have moved out in the two years since 1986, and there is every reason to believe that the outflow will continue (Hezel and McGrath, 1989).

Acculturation in the islands has been a drama played out for the past 200 years, with the greatest changes occurring in the last 20. Micronesians have traveled a long way since they first bartered for fishhooks and iron hoop. They now enjoy a material standard of living higher than at any time in the past, but this has altered their traditional cultural forms beyond all possibility of recovery. Having committed themselves to a semi-Western lifestyle, they face the problem of ensuring that it will continue.

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