Politics
More and More Bad News for the Region
Aid has failed to develop the Pacific, says expert
The Pacific has failed to develop, says prominent Australian economist Professor Helen Hughes. And aid has failed the Pacific despite providing $A100 billion to the region since independence, she adds in a 30-page report.
Hughes, who was director of economic analysis at the World Bank for 15 years before heading the National Centre for Development Studies at the Australian National University for 10 years, has written the paper for the Sydney-based Centre for Independent Studies (CIS).
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Her report comes a month after another CIS paper, 'Papua New Guinea on the Brink', which provoked considerable controversy in Papua New Guinea. One of its authors, Mike Manning, was summoned to appear before the Privileges Committee of Parliament there.
Her position on her former employer - the World Bank‹has become highly critical. The World Bank, the International Monetary Fund and Asian Development Bank "have their own internal agendas that have failed to stimulate growth and have led the Pacific into debt," she says.
Redistribution of wealth
Hughes says redistribution of wealth has taken place within the region since
independence in the 1970s and '80s‹from ordinary Pacific islanders to their
elites.
"Women have always been, and are, the workers of the Pacific, yet they bear the brunt of emerging deprivation and insecurity in villages and towns." She says men are unemployed in towns and underemployed in villages, which causes the deep dissatisfaction that "erupts in a culture of arms and violence".
Population explosion
Hughes warns that Papua New Guinea's population is expected to double to 10
million by 2025. And "unless there is a sharp change of direction in Papua
New Guinea, the prospect not merely of a failed state but of a rogue state
(like those of Amin, Mobutu, Bokassa and Mugabe in Africa) cannot be lightly
dismissed".
The report says: "Economic theory showed, that protection hurts employment...and again, counter-intuitively, that economic rents associated with aid impede the growth of developing countries.
Aid policies
"Aid policies have to counter the negative effects of aid rents if
compassion and economics are not to be in conflict."
Hughes points to 10 studies within a 'Pacific 2010' series produced by the National Centre for Development Studies a decade ago under her directorship, which outlined the high economic and social costs of population exceeding economic growth. But, she says, "Pacific governments and aid agencies did not re-examine their policies".
She insists that all Pacific states are economically viable but adds: "They would be able to reach high living standards like those of Australia and other industrial countries, without aid if they chose economic and political policies appropriate to their size and level of development."
Government in the medium-sized Pacific states should be tailored, she says, to the needs of populations of 100,000 to 500,000 - "the size of a small to medium city in industrial countries", rather than "their present scale of political and bureaucratic structures and inappropriately elevated international representation" that provide high income for elites while rural populations bear the cost. And "corruption is inevitable when politics becomes the principal path to wealth".
Pacific-wide federation
Hughes says the answer is a Pacific-wide federation‹a solution, she says,
which was blocked by the colonial powers. "Modern communications make a
federation with small government technically practicable. But swollen
governments persist because they are funded by aid."
The path to independence for the smaller islands ("not even the size of a suburb in industrial countries," says Hughes) means giving up power illusions and concentrating on good living standards.
Norfolk Island, for example, has a per capita income of almost twice that of Australia, without any aid.
Involvement in international bodies
Hughes also criticises the islands states' involvement in international
bodies. Their main use of United Nations membership, she says, is "to
manoeuvre and beg for aid...Servicing international obligations leads to
travel and stints in New York, but eats up money and scarce manpower," she
says.
Yet Papua New Guinea and the Federated States of Micronesia have among the highest rates in the world of deaths of women in childbirth, "indicating a total absence of health services". Access to primary education‹two to three years for girls and not much more for boys - "ranks among the worst in the world". As a result, in many Pacific villages "people are denied almost all the opportunities that the 21st century offers".
Although starvation is rare, "if growth does not accelerate and the population continues to increase, limits of traditional agriculture will be reached and hunger, as well as other indicators of poverty, will emerge on a broad scale".
Socio-economic infrastructure
Hughes says the Pacific's health indicators are more like those of
sub-Saharan Africa than the developing East Asian countries that had
lower-per-head incomes than the Pacific states in the 1970s. In Papua New
Guinea, she says, the social and economic infrastructure is deteriorating or
collapsing. The great arterial Highlands Highway is now "in many places a
goat track terrorised by robbers". And the capital, Port Moresby, is
isolated from other population centres.
In Fiji, "with its semi-feudal indigenous Fijian society pitting itself against Fiji Indians, the lack of economic progress has made the country susceptible to military coups and uneasy political stand-offs that discourage investment". Nauru, which in the 1970s enjoyed the second highest per capita income in the world after Saudi Arabia, has become "the victim of the shadiest financial, legal and academic operators in the world". By comparison, trust funds have protected the phosphate incomes of neighbouring Kiribati and Tuvalu.
The costs of the change brought by development are only worthwhile, says Hughes, if they are compensated by higher personal security and freedom, better education, health and longevity, and a richer social life.
"The slower the transition and the smaller its rewards, the more are societies likely to cling to idealised traditional ways, despite all their costs. Without evidently rising benefits, the costs of change erupt into violence and crime."
This problem has been compounded because "roseate views of traditional life became dominant and were adopted as realistic and accurate by Pacific leaders. It was a short step to argue that traditional social institutions could be maintained without change and yet deliver the modern education, health, jobs and incomes that Pacific islanders, like people everywhere, want."
Because of the lack of a coherent development culture, she says, "a culture of mendicancy, no less debilitating at the level of the political state than the cargo cult was for individuals, permeates the Pacific.
"Treating aid funds contributed by Australian and other taxpayers as components of national revenues to be spent largely on consumption seems natural to Pacific governments. The notion that Australian taxpayers have the right to oversee how their taxes are spent is regarded as bizarre."
Hughes urges that aid flows be removed from Pacific states' budgets.
Land ownership
She also says that communal land ownership has held back indigenous
entrepreneurship in the Pacific, "as it has everywhere in the world. Clan
loyalty, admirable in traditional societies, is inappropriate for a
high-income modern society. It reduces the costs of unemployment and
underemployment in stagnating Pacific societies by creating an informal
welfare network but at a very high cost", making it impossible for
individuals to save and invest.
The failure to explain the high costs of communal ownership has maintained opposition to land reform, she says. Pacific islanders "have every right" to choose to reject individual property rights. "But there is no reason for Australian taxpayers to underwrite such choices with aid."
Hughes pins substantial blame on colonial legacy: "Welfare-statist policies and institutions that characterised post-World War Two Britain, France, Australia and New Zealand were imposed on the Pacific in the last days of colonialism in the name of equity. Redistribution was put ahead of production."
Soon, "public enterprises became sources of corruption as well as inefficiency". And informal sectors were restricted by "regulations designed to keep the streets clear in London, Canberra and Wellington".
She says that inappropriate trade policies are a core problem in the region, with United Nations advisers having supported protection for import substitutions. And the islands have "adopted the creed of the IMF (International Monetary Fund), World Bank and Asian Development Bank that foreign investment equals development". But such investment is only positive, she says, if it is invested for competitive production for the domestic market or for exports.
"High tariffs have created 20-year-old "infants" that cost the balance of payments more than they save," Hughes says. "Increasing the processing of their raw materials is a Pacific obsession, but processing tends to be highly capital and technology-intensive." And if it is not internationally competitive, it erodes the resource rents earned in the primary stages of mining, timber extraction and fishing.
Expatriate advisers
Hughes blames not only Pacific governments but the spin of "highly
remunerated expatriate advisers". She says: "Only the Pacific peoples can
take charge of their own futures. Even if it means less polished
presentations, they have to start writing their own policy and
administrative papers rather than leaving them to expats."
She concludes from the living standards of sub-Saharan Africa and the Pacific, whose aid inflows have been by far the largest in the world per capita, that "aid appears to be inversely related to growth".
Hughes praises AusAID as "one of the best of the industrial countries' bilateral aid agencies" but says it is crippled by not being allowed to express a policy view on recipient economies, and by being prevented from insisting on effective programmes.
The answer, she says, is not an attempt at recolonisation or more expatriates or cutting aid, but reform of aid policies. "The time for a debate is long overdue."
