Pacific Islands Development in Long-run Perspective development in the long run.pdf · Pacific Islands Development in Long-run Perspective Geoff Bertram Institute of Policy Studies

Pacific Islands Development in Long-run Perspective

Geoff Bertram

Institute of Policy Studies

February 2011

1

Top-down versus bottom-up

• Seen from above, ‘resilience’ is a set of qualities that aid donors want island economies and societies to exhibit – outcomes to be purchased.

• Seen from below, ‘resilience’ (including adaptability, flexibility, opportunism) has always been the fundamental long-run characteristic of Pacific Island communities, from way back before European contact.

• Quite a few metropolitan policymakers are still preoccupied with – blocking some of the consequences of bottom-up resilience,

– denying elements of its economic logic, and

– imposing preconceived (top-down) views of what resilience looks like or should look like

• A recurrent failing of aid agencies and metropolitan governments is to impose a particular top-down conception of what it means to “develop”, and to make aid conditional upon a shadow-play of compliance with this vision by the recipients.

2

To get a sense of how bottom-up resilience works, evidence-based analysis is a good place to start

• Rather than telling island peoples or states how to “develop sustainably”, or what to develop, watch what they have actually done within the limits of the external constraints placed upon them

• One early casualty would be the degree of emphasis and expectations placed by large-country analysts on commodity trade and trade agreements. Export-led growth has had a bad century in the Pacific, and the next century’s prospects hinge more on regulatory capacity than free-trade treaties

• Another casualty would be simplistic claims about the benefits of shifting resources from the public sector to the private sector (getting the public sector working more effectively is another matter)

• Another would be several core assumptions in mainstream development thinking about decolonisation and the virtues of sovereign statehood

• My own work has tended to focus on gathering comparative numbers and using them to chart the big trends in islander development – not only in the Pacific but worldwide.

3

“Sustainable development” is a term badly in need of careful unpacking.

• Whenever anyone recommends it or appeals to it they should be asked to explain what exactly is “developing”, what it means to “develop”, what mechanism is to do the “sustaining”, whether this mechanism is politically acceptable or not, and which structural options are being ruled out by use of the term.

• Unless very specific content is added, the words are mere rhetoric which confuse and conceal.

• From my perspective, what is to be developed is the material welfare, life chances and cultural identity of each people, seen holistically as a people without regard to national borders unless and until those borders clearly have become effective dividing lines within the people.

• Development is sustainable so long as material welfare, life chances and cultural cohesion are maintained or enhanced through time without running up large collective balance-sheet liabilities that at some later stage are apt to prove destructive.

• This means that certain indicators often appealed to in the name of “sustainability” are in fact often irrelevant – especially “trade imbalance”, “capital outflow”, “brain drain”, and that ugly expression, “aid dependence”. 4

Conceptually one ought to be thinking of “viability” and “sustainability” in terms of socioeconomic units – often

transnational units - rather than “national” ones.

• Much of the ‘modern sector’ of any Pacific island people with migration outlets will lie offshore, inhabited by the diaspora of entrepreneurs and wage-workers which controls a large share of the financial and human capital of the people as a whole.

• Remittances form a direct cashflow link between the diaspora and the home population, but other links are equally important for long-run growth – especially patterns of return migration, back-and-forth visiting, communication via media channels, and accumulation of financial assets in metropolitan banks and share registers.

• National-accounts aggregates prepared for the home-resident population in isolation not only ignore much of the actual (but offshore) modern sector; they also miss the degree of success in preserving non-material wealth in the form of culture and human capital while raising material welfare.

5

• Living standards need not depend upon production in the same locality; they can be fully “sustained” from sources that look “external” to the national-accounts statistician, so long as those sources are firmly internal to the transnational ethnic unit.

• The home-resident pole’s living standards become unsustainable only if national borders are used to blockade and divide the people as a whole. The ethnic unit should be accounted on the same P&L and balance-sheet basis as any transnational enterprise.

• The most obvious gap in the Stiglitz-Sen report on revising the traditional national-accounting framework is that they focus on measuring happiness within geographically-bounded territories rather than for peoples located across multiple territories.

6

A paradox for Adam Smith and Karl Marx: “Unproductive” Capital is Productive; “Productive” Capital is Unproductive

• Infrastructure provided direct use values: schools, hospitals, roads, reef passages, ports, airports, water supply, radio links, government buildings …..

• Development-project-related capital was moribund, loss-making, often idle…

• The large weight of the public sector in onshore economies is therefore logical, as is the tendency for the private sector to be located offshore in the diaspora, hence off-the-radar in traditional national accounts

7

Migration-adjusted national income accounting (bringing diasporas into the statistics) is in its infancy and is a rich area

for empirical macroeconomic research

• Kenichi Ueda, Kenichi, 2002, Implications of Migration on Income and Welfare of Nationals, International Monetary Fund Working Paper No. 02/215

• Roberto Cardarelli and Kenichi Ueda, “Domestic and Global Perspectives of Migration to the United States”, in United States: Selected Issues, IMF Country Report 04/228, July 2004, pp.16-29.

• Michael Clemens and Lant Pritchett, “Income per Natural: Measuring Development for People Rather than Places”, Population and Development Review 34(3): 395-434, September 2008

8

Outline of the rest of the paper

• How imports are funded (more or less sustainably….)

• Importance of remittances

• How population (including labour, human capital, and entrepreneurship) is allocated across geographic space => island peoples, their societies and economies, are transnational in scope

• Sovereignty is like a tax which places a deadweight burden on prosperity => some sacrifices of sovereignty can have economic and social payoffs

• Ignoring or downplaying the development experience and performance of sub-national jurisdictions is a big analytical mistake

• Some long-run charts on New Zealand’s relationships with the Pacific

9

In terms of the traditional national-accounts approach, imports rule

• The ability to fund imports of goods and services is the key means to the end of sustaining private and public consumption, and hence material welfare, within the geographical territory of an island ‘state’ (including SNJs)

• Getting the imports at least cost (in terms of leisure and social capital) is the strategic game. There are several ways to work on getting the constraint relaxed in practice. Commodity exports are way down the list, for good reason

• The place to start is with the relationship of imports to well-being, and the identification of the components of well-being that are not sustainable by imports.

• Much of the latter has to do with “the village”, its way of life and

the problem of how important it is to hold young people in the village economy, and for players in the village to have cash opportunities for sale of products outside.

10

Imports and GNI per capita

1

10

100

1,000

10,000

100,000

1.0 10.0 100.0 1,000.0 10,000.0 100,000.0

Imports of goods and services per capita

GN

I/G

DP

pe

r c

ap

ita

US Virgin Islands

Imports are fundamental to onshore living standards but have to be paid for:

Asserted direction of

causality

80 small islands worldwide

11

Back in 1984 Ray Watters and I discovered the “jaws effect” in some small Pacific islands

Imports had become disconnected from

merchandise exports as the colonial era came to an end

12

Cook Islands trade balance

Source: Geoff Bertram, ‘Sustainability, Aid, and Material Welfare in Small Pacific Island Economies, 1900-1990’, World Development, 21,2 (February 1993), p.250..

13

Niue trade balance

Source: Geoff Bertram, ‘Sustainability, Aid, and Material Welfare in Small Pacific Island Economies, 1900-1990’, World Development, 21,2 (February 1993), p.250.. 14

Tokelau trade balance


Tuvalu trade balance


Kiribati trade balance


For us the question this raised was: how was the observed gap being funded

• Not by overseas borrowing – the Pacific has not been a debt-crisis-prone region (the Cook Islands 1988-1996 was the exception to prove the rule)

• Only in a few cases did services exports pick up the funding burden

• In the Pacific, a strong “commercial balance” signals either extreme poverty (PNG, Vanuatu) or special cases (Fiji, American Samoa)

18

How could the trade “jaws” be sustainable without borrowing to fill the gaps?

• Our answer in 1984 was MIRAB

• Two stock-flow relationships were the locomotives of these economies:

– MIR: Stock of overseas migrants => flow of remittances

– AB: Flow of aid => stock of public sector employees (“bureaucrats”)

19

Goods and

Services

Balances of

Seventeen

Pacific Island

Economies

1975-2004

FijiFiji

Fiji

Fiji

Fiji

Fiji

PNG

PNG

PNG

PNG

PNG

PNG

Solomons Solomons

Solomons

Solomons

Solomons

Solomons

Tonga

Tonga

Tonga

Tonga

Tonga

Tonga

Samoa Samoa

Samoa

Samoa

Samoa Samoa

Vanuatu

Vanuatu

Vanuatu

Vanuatu

Vanuatu

Kiribati Kiribati

Kiribati

Kiribati

Marshall Islands

Marshall Islands

Marshall Islands

Marshall Islands

FSM

FSM

FSM FSM

Tuvalu

Tuvalu

Tuvalu

Tuvalu

Tuvalu

Hawaii Hawaii

American Samoa

American SamoaAmerican Samoa

American SamoaAmerican Samoa

Fr PolynesiaFr Polynesia

Fr Polynesia

Fr Polynesia

Guam

Guam GuamGuam

Cook IslandsCook Islands

Cook Islands

Cook Islands

Cook Islands

Cook Islands

Palau

Palau

Fr Polynesia

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

1975-79 1980-84 1985-89 1990-94 1995-99 2000-04

% o

f im

po

rts

Source: Geoff Bertram, “Economy”, in Rapaport, M. (ed) The Pacific Islands: Environment and Society, 2nd ed 2011.

20

• Rule 1: don’t get hypnotised by the trade balance (this is the mistake most outside analysts instantly fall into).

• Commercial trade deficits are common and sustained, therefore (to date at least) sustainable.

• None of the countries in that diagram has run up unsustainable international debt – instead, they have sustained their import capacity by means other than conventional exports.

• But it’s true there is a funding constraint driving the market solutions we observe

21

There’s a solid number of MIRAB cases identified in the literature now

• Cook and Kirkpatrick (1998): FSM

• Poirine (1998): French Polynesia, US Virgin Is, Guadeloupe, Martinique, St Perre et Miquelon, Mayotte

• Bertram (1999): Samoa, Tonga, Easter Island, Palau, Marianas

• Royle (2001): St Helena, St Kitts, and the Marshall Islands

• McElroy & Morris (2002): Cape Verde, Comoros, Sao Tome & Principe

22

But MIRAB is only one of a rich menu of strategic options: sustainable, but optimal in only a few cases

• Two dramatic success stories of transition out of MIRAB status are the Cayman Islands and the Cook Islands

• Consider the Cook Islands case by extending my earlier jaws chart:

23

0.0

50.0

100.0

150.0

200.0

250.01

89

2

18

96

19

00

19

04

19

08

19

12

19

16

19

20

19

24

19

28

19

32

19

36

19

40

19

44

19

48

19

52

19

56

19

60

19

64

19

68

19

72

19

76

19

80

19

84

19

88

19

92

19

96

20

00

20

04

20

08

NZD

mill

ion

de

flat

ed

to

20

00

pri

ces

Cook Islands merchandise trade, real values at 2000 NZ prices

Merchandise imports

Merchandise exports

24

0.0

50.0

100.0

150.0

200.0

250.01

89

2

18

96

19

00

19

04

19

08

19

12

19

16

19

20

19

24

19

28

19

32

19

36

19

40

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44

19

48

19

52

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56

19

60

19

64

19

68

19

72

19

76

19

80

19

84

19

88

19

92

19

96

20

00

20

04

20

08

NZD

mill

ion

de

flat

ed

to

20

00

pri

ces

Cook Islands: Financing of imports

Tourism

Remittances

Aid

Merchandise imports

Merchandise exports

25

0.0

50.0

100.0

150.0

200.0

250.01

89

2

18

96

19

00

19

04

19

08

19

12

19

16

19

20

19

24

19

28

19

32

19

36

19

40

19

44

19

48

19

52

19

56

19

60

19

64

19

68

19

72

19

76

19

80

19

84

19

88

19

92

19

96

20

00

20

04

20

08

NZD

mill

ion

de

flat

ed

to

20

00

pri

ces


Tourism

Remittances

Aid

Merchandise imports

Merchandise exports

26

0.0

50.0

100.0

150.0

200.0

250.01

89

2

18

96

19

00

19

04

19

08

19

12

19

16

19

20

19

24

19

28

19

32

19

36

19

40

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44

19

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19

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19

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92

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20

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NZD

mill

ion

de

flat

ed

to

20

00

pri

ces


Tourism

Remittances

Aid

Merchandise imports

Merchandise exports

27

Looking around the world there are numerous case studies of island economies which do not exhibit MIRAB characteristics.

• Baldacchino (2004) and PROFIT. Five dimensions of local jurisdictional autonomy: – P (people considerations): powers over movement of persons

(including issues of citizenship, residence and employment rights); – R (Resource management): powers over environmental policy,

especially regarding natural resources; – O (overseas engagement and ultra-national recognition):the exercise

of “para-diplomacy” by sub-national governments acting as though they are sovereign states

– FI : finance, insurance and taxation; – T (transportation): powers over access by air and sea.

• McElroy (2004) and SITEs: “small, tourist-dependent islands represent *an analytically+ useful cluster or special case of island development.”

28

By 2009 Godfrey Baldacchino and I had the following map of the world’s islands in terms of how they paid their way*:

* From G. Baldacchino and G. Bertram, ‘The beak of the finch: insights into the economic development of small economies’, The Round Table, 98, 401 (April 2009), pp.141–160.

29

MIRAB:

Cape Verde

Comoros

Dominica

Haiti

Kiribati

Marshall Islands

Mayotte

Micronesia

Montserrat

Samoa

Sao Tome & Principe

St Pierre et Miquelon

Tokelau

Tonga

Tuvalu

Wallis & Futuna

SITE:

Bali, Bonaire, Canary Islands,

Cook Islands, Curacao, Guam,

Hawaii, St Maarten,

Turks & Caicos

PROFITAmerican Samoa, Bahrain, Falkland Islands,

Faroe Islands, Guernsey, Iceland, Isle of Man,

Jersey, Mauritius

PROFITs

MIRAB/SITE:

French Polynesia, Guadeloupe, Martinique,

Palau, Pitcairn, Reunion

SITE/PROFIT

Anguilla

Antigua & Barbuda

Aruba

Bahamas

Barbados

Bermuda

British Virgin Islands

Cayman Islands

Cyprus

Fiji

Grenada

Maldives

Malta

Marianas

Seychelles

St Kitts & Nevis

St Lucia

St Vincent & Grenadines

US Virgin Islands

Vanuatu

MIRAB/PROFIT:

Greenland

Nauru

New Caledonia

Solomon Islands

St Helena

MIR

ABS

SIT

ES

30

• What’s special about small-island speciation is that islands make evolutionary switches around the diagram

• Niches are partly exogenous and partly endogenous (created by strategic behaviour)

• Selection is partly by chance, but largely by collective response to incentives

31

Sustaining imports requires some source of funding, but not necessarily “trade balance” with exports ramped up to equal

imports.

• Balance-of-payments current account equilibrium and reasonable living standards can be sustained with very low commodity exports, as Tuvalu dramatically illustrates.

• Diagnosis requires that the funding flows be identified, quantified, and viewed from a dynamic long-run perspective. A recent attempt at doing this is Bertram and Poirine (2007)

32

Bernard Poirine and I did a number-crunching exercise for 71 island economies to produce a more detailed

story*

Conclusion: there are many ways to play the game depending what hand has been dealt….

(arrows in each diagram identify Pacific economies)

‘Island Political Economy’, Chapter 10 in Baldacchino, G. (ed.) A World of Islands, Institute of Island Studies, University of Prince Edward Island, 2007, pp.325-377.

33

-200-150-100-50

050

100150200250300

Nort

her

n M

aria

nas

Bah

rain

US

Vir

gin

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ands

Mal

ta

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ba

Fal

kla

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as

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ru

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slan

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Icel

and

Am

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an S

amoa

% o

f to

tal im

port

s

Residual

Aid

Remittances

Tourism

Merchandise exports

Small Island Export Economies at 2000

34

-300

-200

-100

0

100

200

300

400

Tu

rks

an

d C

aic

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Isla

nd

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% o

f to

tal

imp

ort

s

Residual

Aid

Remittances

Merchandise

exports

Tourism

Small-island SITEs at 2000

35

-20

0

20

40

60

80

100

120

Tonga

Sam

oa

Com

oro

s

Tuval

u

Cap

e V

erde

% o

f to

tal im

port

s

Residual

Merchandise exports

Tourism

Aid

Remittances

Fully evolved MIRABs at 2000

36

Small Aid-led island economies at 2000

-800

-600

-400

-200

0

200

400

600

800

To

kela

u

Niu

e

Tim

or

L'E

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Mart

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ue

Gu

ad

elo

up

e

% o

f to

tal

imp

orts

Residual

Remittances

Tourism

Merchandise exports

Aid

37

-40

-20

0

20

40

60

80

100

120

140

Berm

ud

a

Kir

ibati

Sain

t K

itts

an

d

Nev

is

Cy

pru

s

Van

uatu

% o

f to

tal

imp

orts

Remittances

Merchandise exports

Aid

Tourism

Residual

‘Residual-led” (= offshore finance) cases at 2000

38

BERCAY

BVI

CYP

NTA

ANG

ANTSTK

STVBAH

VAN

HAW

GUM

TURBAR

NAU

TRI

BAH

PUEMLTUSVNZLARU

SINICE

GRN

NCA

FALFAR

MAR

FRP

SPM

REU

NIU

FSM

TOK

MAY

RMI

GUA

CAN

STLPALCKI

GRE

MAL

CUB

JAMFIJ

MAUSEY

NMI

KIR

HAI

DOMSTP

TUV

TGA

WAL

SAM

COM

MON

MDGSOL

SRI

DMR

AMS

STH

0.00

0.20

0.40

0.60

0.80

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1.20

1.40

1.60

1.80

2.00In

dex

of

inco

me

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ife

exp

ecta

ncy

High-

value

exports

Moderate-

impact

tourism

Offshore

finance

plus

tourism

High-

impact

tourism

Geostrategic

rent with

exports

Geostrategic

aidTourism

plus

exports

Primary

exports

with aid

and/or

remittance

support

Non-

geostr-

ategic

MIRABs

TUV

Bertram and Poirine 2007: 361

Nine strategic orientations: welfare outcomes

39

Remittances are not everything, but they’re fundamental to some Pacific economies

• Samoa: – the flow of remittances captured by the official statistical agencies is currently around US$50

million (NZ$80 million) a year. – Allowing for informal remittances not appearing in the statistics, the true total flow from New

Zealand to Samoa probably lies between $100 million and $150 million a year – Compare this with New Zealand imports from Samoa of $3-4 million and bilateral aid of $8-9

million a year. Trade and aid, in other words, play only a trivial role in economic relationships between New Zealand and Samoa, while Samoans themselves operate the really important linkage.

• Tonga:

– Estimated formal remittances from Tongans in New Zealand are over US$30 million (NZ$50 million), suggesting that the total (including unrecorded transfers) is likely to be in the range $80-100 million a year,

– Compare this with New Zealand’s imports from Tonga of around $2 million and aid of $17 million in 2008. Like Samoa, Tonga’s main economic link with New Zealand currently is via remittances.

• New Zealand’s balance of payments statistics provide no estimates of remittance flows! (The Asian Development Bank has called attention to the gap.)

40

How population (including labour, human capital, and entrepreneurship) is allocated across geographic space

• Island peoples form unified entities spanning transnational space

• Diasporas are integral parts of many island economies - hence “modern sectors”, “private sectors”, “skilled employment”, etc, occur within the community-defined economy but outside the territorially-delimited “nation”.

• The geographic allocation of resources represents a dynamic equilibrium

• In the labour market, a fundamental piece of information is the income level of the diaspora relative to the income level of the home population. Once corrections have been made for frictional variables, age, level of education and so on, the income relativity between the diaspora and the home labour force should exhibit a threshold differential at which migration accelerates/decelerates.

• In a migratory equilibrium, the income relativity sits exactly on this threshold. So we should be in a position to estimate income levels of people from a uniform ethnic group across transnational space, and hence to characterise the equilibrium. [For methodological pointers see the work of George Borjas – e.g. Imperfect Substitution between Immigrants and Natives: A Reappraisal George J. Borjas, Jeffrey Grogger, and Gordon H. Hanson NBER Working Paper No. 13887, March 2008]

41

• In the labour market, a fundamental piece of information is the income level of the diaspora relative to the income level of the home population.

• Once corrections have been made for frictional variables, age, level of education and so on, the income relativity between the diaspora and the home labour force should exhibit a threshold differential at which migration accelerates/decelerates.

• In a migratory equilibrium, the income relativity sits exactly on this threshold. We should now be in a position to estimate income levels of people from a uniform ethnic group across transnational space, and hence to characterise the equilibrium.

• For some methodological pointers see the work of Borjas - e.g. Imperfect Substitution between Immigrants and Natives: A Reappraisal George J. Borjas, Jeffrey Grogger, and Gordon H. Hanson NBER Working Paper No. 13887, March 2008

42

Figure 1 Samoan Community by Place of Residence

0

100,000

200,000

300,000

400,000

500,000

600,000

1906

1911

1916

1921

1926

1936

1941

1945

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

Samoans resident elsewhere in

the world

Other/no detailed data, making

up the New Zealand-resident

total

EthnicSamoan residents of New

Zealand born in New Zealand

Ethnic Samoan residents of

New Zealand born in Pacific

Islands

Resident population in Samoa

43

Figure 2 Cook Islands Maori Community by Place of Residence

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,0001906

1911

1916

1921

1926

1936

1941

1945

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

Cook Islands migrants

elsewhere in the world



total

Ethnic Cook Island Maori

residents of New Zealand born

in New Zealand

Ethnic Cook Island Maori

residents of New Zealand born

in Pacific Islands

Resident population in the Cook

Islands

44

Figure 3: Tongan Community by Place of Residence

0

50,000

100,000

150,000

200,000

250,000

19

06

19

11

19

16

19

21

19

26

19

36

19

41

19

45

19

51

19

56

19

61

19

66

19

71

19

76

19

81

19

86

19

91

19

96

20

01

20

06

Tongan migrants elsewhere in

the world



total

Ethnic Tongan residents of

New Zealand born in New

Zealand

Ethnic Tongan residents of


Islands

Resident population in Tonga

Hypothesised “missing migrants”

45

Figure 4: Niuean Community by Place of Residence

0

5,000

10,000

15,000

20,000

25,000

30,000

1906

1911

1916

1921

1926

1936

1941

1945

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

Niuean migrants elsewhere in

the world



total

Ethnic Niuean residents of


Zealand

Ethnic Niuean residents of


Islands

Resident population in Niue

46

Figure 5: Tokelauan Community by Place of Residence

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1906

1911

1916

1921

1926

1936

1941

1945

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

Tokelauan migrants elsewhere

in the world



total

EthnicTokelauan residents of


Zealand

Ethnic Tokelauan residents of


Islands

Resident population in Tokelau

47

Figure 6: Tuvaluan Community by Place of Residence

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

19

06

19

11

19

16

19

21

19

26

19

36

19

41

19

45

19

51

19

56

19

61

19

66

19

71

19

76

19

81

19

86

19

91

19

96

20

01

20

06

Tuvalu-born migrants

elsewhere in the world



total

Ethnic Tuvaluan residents of


Zealand

Ethnic Tuvaluan residents of


Islands

Temporary migrants: seafarers,

students, phsophate workers

Resident population in Tuvalu

48

Host Countries of the Pacific-Born Diaspora

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Others

GUM

ASM

PHL

NCL

CAN

AUS

NZL

USA

USA 196,838

Australia 99,211

Other countries

185,290

New Zealand 117,156

49

Figure 17: The Migration Transition in Seven Island Communities

Proportion of Total Community Living in Home Island(s)

0

10

20

30

40

50

60

70

80

90

1001

90

6

19

16

19

26

19

41

19

51

19

61

19

71

19

81

19

91

20

01

% o

f to

tal

Samoa

Tonga

Cook Islands

Niue

Tokelau

Fiji

Tuvalu

50

Proportion of Total Community Living in New Zealand

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.01

90

6

19

16

19

26

19

41

19

51

19

61

19

71

19

81

19

91

20

01

% o

f to

tal

Samoa

Tonga

Cook Islands

Niue

Tokelau

Fiji

Tuvalu

51

“Carrying capacity” limits are psychological rather than physical but appear genuine.

• So long as there is a migration outlet available, Pacific islands’ home population has levelled off at roughly the pre-contact level (mid-eighteenth century) and population growth has been exported.

• Niue and Tokelau have depopulated in response mainly to ill-advised New Zealand policies and attitudes regarding security of citizenship and unwillingness to work on political/constitutional integration. *The ‘Realm of NZ’ is at last getting a better press…+

• The urgency of out-migration grew rapidly in Tuvalu from the 1980s as pre-contact population was re-established.

• Kiribati now faces an even worse Malthusian cul-de-sac, but the barriers may be beginning to break. [Here is perhaps a case for the UK to extend the boundaries of ‘citizenship’?+

• Smaller countries are better able to do “bottom-up globalisation” (John Connell’s phrase) – see Figures 8 and 9:

52

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

0

200,0

00

400,0

00

600,0

00

800,0

00

1,0

00,0

00

1,2

00,0

00

1,4

00,0

00

1,6

00,0

00

1,8

00,0

00

2,0

00,0

00

Per

cen

t in

dia

spora

Total Population Including Diaspora

Propensity to migrate in 74 microstates with total home-born

population under 1.8 million (Botswana and less)

Luxembourg

Guyana Timor L'Este

Trinidad and Tobago

Montserrat

Pitcairn Niue

Tokelau

Cook Islands

Suriname

Botswana

American Samoa

Netherlands Antilles

Cyprus

Fiji

Cape Verde Malta

Barbados

Mauritius

Comoros (!!!)

Samoa Guam

Size matters

53

Sovereignty is a tax on material living standards

• Small island countries that are sovereign, independent nation states tend to be less well-off than sub-national island jurisdictions (SNIJs)

• GDP per Capita in the Pacific by Political Status, US dollars, PPP adjusted,

c2000

GDP $

per

capita

Sovereign 2,897

Associated 4,665

Integrated 26,650

Region average 7,84154

Relationship of Real Per Capita Income of Islands and their

Metropolitan Patrons, Panel Data at Five-Yearly Intervals, Log Data

5

6

7

8

9

10

11

12

8.8 9 9.2 9.4 9.6 9.8 10 10.2 10.4 10.6

Log of Metropolitan Real GDP per capita

Lo

g o

f Is

lan

d R

ea

l G

DP

per c

ap

ita

Integrated

Associated

Sovereign

Source: Geoff Bertram, “On the Convergence of Small Island Economies with their Metropolitan Patrons”, World Development 32, 2 (February 2004) pp.343-364.

55



5

6

7

8

9

10

11

12

8.8 9 9.2 9.4 9.6 9.8 10 10.2 10.4 10.6


Lo

g o

f Is

lan

d R

ea

l G

DP

per c

ap

ita

Integrated

Associated

Sovereign


56



5

6

7

8

9

10

11

12

8.8 9 9.2 9.4 9.6 9.8 10 10.2 10.4 10.6


Lo

g o

f Is

lan

d R

ea

l G

DP

per c

ap

ita

Integrated

Associated

Sovereign


57

Some recent academic work on sovereignty and development

• Geoff Bertram, “On the Convergence of Small Island Economies with their Metropolitan Patrons”, World Development 32, 2 (February 2004) pp.343-364.

• J.L. McElroy and K.B. Pearce, “The Advantages of Political Afiliation: Dependent and Independent Small-Island Profiles”, The Round Table 95(386): 529-539, September 2006.

• G. Baldacchino, Island Enclaves 2010; and G. Baldacchino & D. Milne, The Case for Non-sovereignty, Routledge 2009)

• Feyrer, J. & Sacerdote, B. (2009) ‘Colonialism and Modern Income: Islands as Natural Experiments’, Review of Economics and Statistics 91(2): 245-262, May.

58

Exports and Imports, New Zealand and the Pacific Islands, 1895-2005

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995

% o

f N

ew

Zeala

nd

GD

P

Exports to Pacific FOB Imports from Pacific CDV/VFD59

Proportions of New Zealand’s Export and Import Trade Accounted for by Pacific Islands as Trading Partners

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1895

1905

1915

1925

1935

1945

1955

1965

1975

1985

1995

2005

% o

f N

Z to

tal

Pacific share of total NZ

exports

Pacific share of total NZ

imports

60

New Zealand’s Trade Balance with the Pacific Islands, 1895-2007

-1.20

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1890 1910 1930 1950 1970 1990 2010

% o

f N

Z G

DP

61

New Zealand Imports from the Pacific Islands

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

18

95

-99

19

00

-04

19

05

-09

19

10

-14

19

15

-19

19

20

-24

19

25

-29

19

30

-34

19

35

-39

19

40

-44

19

45

-49

19

50

-54

19

55

-59

19

60

-64

19

65

-69

19

70

-74

19

75

-79

19

80

-84

19

85

-89

19

90

-94

19

95

-99

20

00

-04

20

05

-07

Sh

are o

f to

tal

Other Pacific

PNG

Samoa

Cook Islands, Niue & Tokelau

Nauru, Banaba and Makatea

Fiji

62

New Zealand Aid to Pacific and Elsewhere, 1920-2008

0

0.1

0.2

0.3

0.4

0.5

0.6

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

% o

f N

Z G

DP

Rest of world and multilateral

Pacific

63

Distribution of New Zealand Aid within the Pacific

0%

20%

40%

60%

80%

100%

19

25

19

30

19

35

19

40

19

45

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

% o

f N

Z A

id t

o P

aci

fic

Polynesia Melanesia Micronesia Regional organisations, shipping, etc64

• Overall, from an islander perspective their historical relationships with New Zealand have been economically beneficial though marred by occasional tensions over palagi conceptions of political and economic development.

• Infrastructure and services were developed to a reasonably good standard under New Zealand rule, and have been sort-of sustained since by ongoing aid commitments.

• By opening its doors to island migrants from its territories in the 1950s and 1960s New Zealand gained a source of cheap labour while enabling islanders to access cash incomes at levels that could not have been secured at home, a genuine win-win outcome.

• By extending migration access over subsequent decades to a widening range of Pacific islanders – Tongans, Tuvaluans, and most recently Melanesians, New Zealand has cemented its role both as a good neighbour and as a development hub for the peoples of the region.

65

• The interpenetration of small-island economies with metropolitan national economies such as New Zealand means that conventional national-accounts statistics conceal rather than reveal the true developmental performance of the islander communities, dispersed as they are across several different national economies.

• Pacific islanders resident in New Zealand produce output which is simultaneously part of both New Zealand’s GDP and a key component of the collective income of their transnational ethnic groups. Pacific migrants pay income taxes and GST in New Zealand, and probably comprise 3 - 5% of the New Zealand tax base, an amount well in excess of the total value of aid and other grants from New Zealand to the islands.

• The modern sector of any Pacific island people with migration outlets will lie offshore, inhabited by the diaspora of entrepreneurs and wage-workers which controls a large share of the financial and human capital of the ethnic community as a whole.

66

• Remittances form a direct cashflow link between the diaspora and the

home population, but other links are equally important for long-run growth – especially patterns of return migration, back-and-forth visiting, communication via media channels, and accumulation of financial assets in metropolitan banks and share registers.

• Migration-adjusted national income accounting is in its infancy and is a rich area for empirical macroeconomic research. National-accounts aggregates prepared for the home population in isolation not only ignore much of the actual (but offshore) modern sector; they also miss the degree of success in preserving non-material wealth in the form of culture and human capital while raising material welfare.

• Thus the time is ripe for a re-thinking of New Zealand’s policy stance towards the small islands of the region, based on acknowledgement that “sustainable development” need not mean either strong trading performance or large-scale industrial development in the islands, but can be secured by other forms of economic activity, many of which point towards an informal process of regional economic and social integration that transcends the narrow categories of national sovereignty and domestic product.

67

Documents

Pacific Islands Development in Long-run Perspective development in the long run.pdf · Pacific Islands Development in Long-run Perspective Geoff Bertram Institute of Policy Studies