Posted on 07/02/2003 12:33:44 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
Two years ago I spent three months in Honiara, the capital of Solomon Islands, trying to rescue a struggling non-government organisation. After some progress, the New Zealand aid funding was withdrawn, so the project was closed down.
I had previously worked in Honiara 27 years ago, so I noticed a few changes. For example, there were more people around - 167,000 in 1974 and 460,000 now. The "permanent and pensionable officer of the Colonial Service" was a key person in 1974 before independence; now ministerial advisers and consultants are the key people.
The Solomons were peaceful until about five years ago, when serious ethnic tension between two groups on the main island of Guadalcanal culminated in a coup. The Prime Minister was held hostage in his residence until Parliament agreed to a new government. The aftermath of the instability has led to the planned military intervention.
The Solomons had a well-established oil palm industry, a fishing industry in partnership with Taiyo, of Japan, and a goldmine. All these closed when the tension erupted and the foreign investors returned home, leaving behind a country nearly bankrupt.
Interestingly, a report published while I was there indicated that the Solomons-Japan joint fishing venture had not contributed substantially to the local economy during its 25-year operation.
Now we have a country that could only hold its general election in December 2001 because the total budget for the poll came from overseas, mainly Australia and New Zealand.
The Solomons are regarded by the United Nations as one of the "least developed countries", as are some other small nations in the South Pacific with fragile economies.
What happens to a country when it has nothing to export, where the "free market" means freedom for the larger countries to send their goods into a country that cannot really afford to buy them without borrowing or begging from some "development partner" overseas?
Where the whole economy depends on development aid from Taiwan, the European Union or Australia and New Zealand? Where the biggest spenders are not tourists but the consultants or advisers from the UN or the World Bank?
The countries of the Pacific Islands Forum, which include nations from Papua New Guinea in the west through to the Cooks in the east, are under pressure to open up their markets, not only to each other but to the more developed countries on their borders.
What will this mean? It could well mean, for example, that the Solomon Islands Brewery, employing about 100 people and producing enough for internal consumption, will be forced to lay off staff because beer brewed in Papua New Guinea by Australian brewers will be imported at a price it cannot match.
It means the country will not be able to develop its own industries and will be dependent on aid from its "development partners" from overseas. This economic dependence is equally true for the non-government organisations, which both Australia and New Zealand see as having an important role in the recovery of the country.
No non-government organisation is able to support itself from internal resources. They are all funded from overseas. And that includes the churches. The Anglican Church is dependent on the Melanesian Trust here in Auckland.
These least-developed nations are caught in a downward spiral of increasing dependency. It is all very depressing. It amazed me that the people were still able to laugh, play football, fill the churches and survive.
What then is the future of places such as the Solomons, Niue, Tuvalu and Kiribati? Do we let them die? Who was it that spelled out the lifeboat theory in regard to small and poor nations? You can only fit a certain number of people into a lifeboat - and you have to let the others go.
Surely there must be a different kind of development by which people are able to live off the land and the sea and where, with the right kind of help, they can improve their standard of living.
We have not found it yet in spite of all the reports written by World Bank and International Monetary Fund advisers, UN staff and NGOs.
The West continues to tell these least-developed countries that "in order to grow your economy you have to open up your markets to improve your lives and receive the benefits that we, in the more developed countries, have to offer".
Free trade really helps the poor, said President George W. Bush in Genoa not long ago. Go to any small nation in the South Pacific and you will see this is just not true. The level of dependency is increasing rapidly and there is no bright future in sight.
Economic activity in the Solomons is no greater than it was 27 years ago. In fact, with the ethnic tension it has become a whole lot worse. This deteriorating situation enables the economic gurus to say it is the islanders' own fault - if they were not fighting among themselves, they would be alright.
The gurus choose to forget that ethnic tension began when the country was a British protectorate, where divide and rule was the easiest way to keep the peace.
So is there hope for the Solomons? The people are still able to laugh and play and the churches are full. It must be said that the churches have played a positive role in the difficult times of the past few years. They managed to get people to stop pillaging villages, played an important part in the peace agreement, and are still doing great work to help people to live in harmony.
There are a few signs of hope but overall the situation does not look good. Probably the best thing we can do is to press for a different kind of development - a development that will give ordinary people in the villages prospects of improving their way of life without destroying it.
That would allow the Solomons people to choose the kind of economy they want, rather than having the free-market model imposed upon them by the World Bank-IMF or some "development partner".
That would recognise and build on the ethnic diversity that exists in a multilingual society and would use, in a sustainable way, the natural resources. It would be a development that did not a rely on a foreign investor who would take all the profits out of the country, and it would not require the Solomons to beg yet again for overseas loans or aid.
Is all that possible? I hope so. But it does need more than a military solution.
I still don't have a handle on why freedom (in this instance freedom to trade absent government interference) is 'blamed' when the problem is governments making loans that reality doesn't support. Govt. credit distortions have the pernicious effect of crowding out what, absent the government interference in the market, would be profitable businesses. They go bankrupt while the government supported enterprises flourish, until the governments put money elsewhere, as this article illustrates. Undoubtably, people will still blame the freedom of individuals living on the Solomons to trade the product of their labor with other individuals throughout the world for catastrophe instead of placing the blame where it belongs, on meddling third party government officials who operate absent any market signals that let us know what people really want...
I don't see anybody blaming "the freedom of individuals living on the Solomons."
The "blame" seems more directed at foreign investors who extracted their profits and left.
Perhaps the citizens of the Solomons would have been better off without foreign investment "partners", retaining their earnings for reinvestment in their own nation.
Who is providing the foreign 'investment'? Sounds like government organizations from article. Yet the article is titled "Free markets add to woes..." Nonsense. Freedom to trade isn't hurting those people, governments distorting the credit market and thereby the business environment is what woes the Solomons. Why isn't THAT in the title? Freedom to trade and thereby profit both parties is the only hope for the people of the Solomons. We could start by ending the government distortions of their markets.
We can start by taking care of our own market first and letting them free to determine what they want to do with their own.
OPIC – A US Govt. agency exporting capital
Export Illusions: Most International Trade Agreements are about Investment, Not Exports
So let's see, they were doing well and then screwed the pooch. What next?
where the "free market" means freedom for the larger countries to send their goods into a country that cannot really afford to buy them without borrowing or begging from some "development partner" overseas?
Okay, so they can't afford to buy cheaper imported goods, so instead they should stick with more expensive domestically-made goods?
So let's see, the people of the Solomons destabilized their country, drove out foreign investment, ruined their economy, and now this guy thinks that protectionism is they're salvation?
Talk about living in DENIAL!
Yes, they are actually better off retaining the funds within their domestic economy to be reinvested in their own domestic businesses rather than having the cash bled away by foreign investors.
Seems to me like the free market was working, until a change in the government prompted the investors to pack up and leave. Without the foreign investment, it looks like the Solomons cannot even make previously established industries profitable. That sounds like internal mismanagement rather than a free-market disaster...
If they can't afford cheap imports, how are they supposed to afford expensive domestic goods? Unless they focus on the areas they can be competitive in (THOSE goods won't be more expensive locally), that's a losing deal, and a downward spiral!
"Cheap" imports aren't cheap if the local population winds up unemployed and can't afford anything whatsoever.
With the limited natural resources of an island economy, the Solomon islanders are best off diversifying their economy in whatever limited way they are capable of, and building "sweat equity" in their own domestic private sector rather than having the profits of their labor being extracted from their economy by foreign investors.
It could well mean, for example, that the Solomon Islands Brewery, employing about 100 people and producing enough for internal consumption, will be forced to lay off staff because beer brewed in Papua New Guinea by Australian brewers will be imported at a price it cannot match.Yeah, Australian beer might be "cheaper", but the money flows OUT of the Solomon Islands to Australia, leaving 100 Solomon Islanders unemployed, unable to buy anything. The Solomon beer might be slightly more expensive, but it keeps 100 people employed, and the money they earn can be used to buy other local goods and services produced by their neighbors. It's best for ALL Solomon Islanders to retain the cash within their local economy as best they can!
I'm all for it. I just hate seeing IMF (etc.) bureaucrats involve local governments in unsupportable and unsustainable loans, and then read about how the woes are caused by the free market, and further read that the cure is more government interference in the markett (via additional credit infusions, or myopically restricting the rights of people to trade).
Trade is the mechanism globalists use to make people interdependent and less free.
True freedom, OTOH, will always remain with those who can retain some degree of independence and self-reliance.
This is exceptionally difficult for smaller nations with limited resources such as the Solomon Islands. But they are better off in the long run if they can protect those sectors they are capable of performing themselves, and trading only for that which they need.
But that's not the whole picture. Now there are 100 Solomon Islanders whose labor is free to satisfy other wants that people have. The other 460,000 residents of the Solomon's now have the beer they want, and with their savings can buy something additional. The 100 displaced brewery employees find work providing something else the people want. What you propose is that 460,000 people pay more for a good, so that the economy can stagnate. By trying to lock in the existing production structures by imposing additional costs on trade (nevermind what the politicians do with the tariff money they suck from the productive sectors of the economy). How do things improve? If a company is shielded from competition to the benefit of 100 workers, why is that more important than 460,000 consumers? Who has a 'right' to produce and sell overpriced beer?
Maybe I need to hire someone else for my business, which is growing by leaps and bounds as people demand my new service, but can't because the labor is tied up by politicians trying to protect the local brewery. Those hoping to 'save' the economy by replacing the liberty of the free market with the diktats of the apparatchiks can always point to the good they imagine they're doing (in this instance 'protecting' 100 jobs), but no mention is made of the nearly half a million people this government intervention would rip off...
I had no idea how 'enslaved' I was using this computer I could never hope to make on my own... Trade is quite the menace, eh?
True freedom, OTOH, will always remain with those who can retain some degree of independence and self-reliance.
You're free to be a self reliant cave man if you wish. Quit advocating using the government to turn me into one too.
This is exceptionally difficult for smaller nations with limited resources such as the Solomon Islands.
Yeah, free trade really demolished the economy of resource rich Hong Kong. Oh wait, they had free trade and no resources. How'd they get wealth? It must boggle your mind.
Any one of those 100 were already free to engage in other domestic enterprise. One must assume that they found the brewing industry to be most suitable alternative available. No sense tossing them out on the street, making them compete with other Solomon Islanders to depress other domestic markets just to enhance the profitablility of Australian investors. That doesn't do the Solomons any good whatsoever.
I'm glad you used the past tense of the verb. They indeed 'found' that to be most suitable, but it no longer is. Trade has introduced new efficiencies, and lowered the price of goods for their particular product. Instead of letting them find whatever else it is their neighbors want, you want to use the police power of the state to artificially raise the prices of goods (negatively impacting the living standards of 460,000 people) in order to stagnate the economy in the existing, less efficient, allocation of labor.
No sense tossing them out on the street, making them compete with other Solomon Islanders to depress other domestic markets
Competition compels greater productivity and lower prices. These benefit all. You don't benefit the people of the Solomons by denying them the production efficiencies achieved elsewhere in the world. Do you think Hong Kong would be better off trying to make everything it wanted instead of trading for it? Would you, as an individual, be better off trying to make everything you wanted instead of trading for it? Assuming you see the folly in that, it's odd you think such a situation would benefit the Solomons. Government manipulation of credit (and thereby industry) coupled with civil/political unrest that has frightened capital is what is hurting the Solomons, not free markets.
Solomon Islanders have already been pitted against each other in a downward spiral toward poverty and anarchy. Their economic requirements are stability and the opportunity to develop equity in their own economy without exploitation by foreign interests.
Their problem isn't foreigners offering goods for prices below what they could produce domestically. The problem isn't 'foreign interests' providing the capital to increase the productivity of domestic businesses. The problem is govt. bureaucrats making loans that they force the people of the Solomons repay, and using those loans to foster businesses that squander the capital they are entrusted with, in addition to driving out the ventures that would be profitable absent the government intervention. These problems are not ameliorated when an ingorant reporter shows up and blames the situation on 'free markets'. Curtailing free trade would only exacerbate the problems the politicians are creating for the people of the Solomons.
Yes, those are precisely the problem.
Between the two, foreign entities extract the bulk of the profits from the Solomon Islanders labors.
The people would be better served if the government adopted policies favoring domestic private sector development without foreign "assistance". The Solomon Islanders should develop equity in their own domestic market quicker, and trade only for those items they cannot produce themselves.
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