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Rags To Riches
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Helen
Hughes
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In August, Australian
academic Helen Hughes released a paper examining the economic history
of Nauru, and suggesting options now available to the debt-ridden
country. Pacific Magazine publishes extracts from that paper, with
the permission of The Centre For Independent Studies.
Thirty years
after enjoying the world's second highest per capita GDP after Saudi
Arabia, Nauru is on the verge of insolvency, has appalling health
problems and was declared one of the first "rogue" states under
the United States Patriot Act. Some Nauruans, however, have accumulated
private wealth.
Nauru's misfortunes
have been primarily brought about by a disregard for basic economics
and by inappropriate political institutions and policies, but it
has also been the victim of predators that prey on the Pacific.
Nauru urgently
needs to reform its public finances. It has to assess its financial
position, ascertaining its assets and paying off all legal debts,
but disregarding the illegal claims of predators. Whatever funds
remain should be divided among Nauruan families to re-establish
private property rights. Future phosphate and other revenues should
also be paid to individuals. Public expenditures should henceforth
be funded by an income tax on all residents, flushing out private
fortunes.
Nauru needs
to reshape its institutions to match its size and political needs.
It needs to return to the pro bono Local Government Council of the
1950s to manage its affairs. Given the effect that a presidential
title has exercised, a rotating chairman would seem preferable to
a long term Chief. The public service needs to shrink to a small
core of paid professionals headed by an experienced operating officer.
Nauruans have
emigrated to Australia and elsewhere. They can continue to emigrate
to Australia provided they meet Australia's worldwide non-discriminatory
immigration rules. Working abroad would bring remittances.
If Nauru undertakes
basic reforms, it can attain modestly comfortable living standards
from household gardens and palm trees, fishing, the continued sale
of deep sea fishing rights to Japan, South Korea, Taiwan and the
United States, income from its domain name and geostationary satellite
rights and from stamp sales. Joining with other Pacific islands
to attract tourists to its "moonscape" and reef diving could add
income if simple, traditional attractive tourist facilities were
provided.
Nauru's principle
asset is the ocean zone around the island. At present its main value
lies in fishing rights, but it has potential marine mineral possibilities
and the island has a strategic and security value. Nauru could parlay
its ownership of the island and marine zone into varying degrees
of association with Australia, New Zealand, Fiji or another country.
Nauru could
go further and seek complete integration with Australia, New Zealand
or another country, to gain high living standards with full immigration
rights. Nauruan families could then choose where to reside or maintain
homes in two or more locations. This would mean ceding all rights
to the island of Nauru-selling Nauru's principle remaining asset
in return for citizenship-to the country with which Nauru would
integrate.
If Nauru does
not adopt the economic, political and social reforms that will give
it a decent and healthy standard of living, aid cannot help it.
Donors that succumb to pleas for aid will be taking money out of
their taxpayers' pockets and throwing it away. If Nauru persists
in the policies that have led to its present dire situation, it
can only expect grudging and limited aid.
Helen Hughes
is a Senior Fellow at The Centre For Independent Studies, and Emeritus
Professor with The Australian National University. She has a long
association with Nauru. The full text of "From Riches To Rags" can
be found at www.cis.org.au/IssueAnalysis/ia50/IA50.pdf.
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