Variations | Talk the talk

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MANY of us believe that the local economy should be “more robust and not too dependent on tourism.” The NMI, we say, “should have something else to fall back on” in case another disaster  like Covid-19 strikes the islands. 

We’re saying, in other words, what everyone else has been saying about the local economy “since ever since”: it should be diversified. 

Tourism, however, was not the only industry knee-capped by the global measures to prevent the spread of the pandemic. Market experts say aviation, retail, financials, realty and automobiles are among the worst hit industries. And today, when we say “economy” we usually mean the global economy. The economy of the NMI and most, if not almost all, economies of other countries, territories and jurisdictions are interwoven. As American economist Don Boudreaux would put it, the world is “one immense, unfathomably complex, astonishingly productive, globe-spanning web of economic interconnectedness.” Global economic turmoil will, one way or another, affect the NMI even if its “not too dependent” on tourism.

Be that as it may, the NMI must continue to find ways to diversify its economy. A diversified economy means more job opportunities for local residents, and more government revenue for critical public services and programs that benefit local residents.

Perhaps the first crucial step to take toward economic diversification is to know the previous efforts made by past administrations and legislatures toward that goal. What are the current laws that aim to bring in new investments, create new industries and train the needed workforce in the CNMI? How were they implemented? Were they implemented? And if not, why not?

Here’s another fact to consider: the NMI is competing with other jurisdictions and other countries for new investments. What do they have that we don’t have? And what do we have that they don’t have? What kind of investments do the local people want to see in the NMI? How can the NMI “sell” itself to potential investors?

These and other related questions have been raised (and many of them answered) back in the day. And yet here we are, still talking about economic diversification.

Here’s another oldie-but-goodie policy proposal: revive local agriculture and fishery!

“[I]t is curious that agriculture and fishing have become the most neglected and forlorn aspects of our lives. Neglect started soon after the war, and [this neglect continued] until recently when I see new interest occurring, almost amounting to a renaissance in food production…. [T]his is what it will take to bring our…agriculture and our own fisheries up to the point where they will be able to compete with foreign fisheries and foreign markets.”

That’s from a speech delivered by the CNMI’s first governor, in 1979, a year after the  inauguration of the Commonwealth government.

Over 40 years later, amid a pandemic, some officials are (again) talking about “reviving” local agriculture, including large-scale farms geared toward export markets.

Okay. So who will work on those farms?

During the Japanese administration of the islands before World War II, generous Japanese government subsidies and tens of thousands of non-local workers (mostly Okinawans) were the key factors behind the NMI’s flourishing and dominant industry, agriculture, whose main market was Japan itself.

In his indispensable “History of the Northern Mariana Islands,” Don A. Farrell wrote: “The Spaniards and the Germans had failed in their attempts at economic development because of shortage of labor and lack of government support. The Japanese succeeded because they brought in laborers, and the government gave the industry its full support.”

By 1937, the local population of the NMI was over 4,000 (3,148 Chamorros and 997 Carolinians) while the number of Japanese/Okinawans/Koreans (Korea was under Japanese rule at the time) was 42,547. The locals comprised about 9% of their homeland’s population. (According to the Census 20 years ago when the NMI still controlled its immigration, the Commonwealth had a total population of over 69,000 of whom over 25,000 or about 36% were Pacific islanders. Not bad compared to the Japanese-era numbers.)

So again we ask, who will be the workers on the farms which will export their produce? More questions: What are these agricultural products? What about the farm locations? How much will it cost to get these farms up and running? What’s the funding source? Who’s paying? Meantime, while the NMI waits for its revived agriculture industry to come to fruition, how is it going to pay for the Commonwealth’s current obligations?

While we try to answer these and related questions, we should also remind ourselves that as economists have repeatedly pointed out, “exports are the goods and services we have to give up to get imports, which means exports are a cost, not a benefit.” In short, “exports only matter because they let us import.”

Says economics professor T. Norman Van Cott: “People who choose to export while importing as little as possible will find themselves ill-clad, ill-housed, ill-fed, and possibly dead in short order.”

And yet, as Nobel laureate Milton Friedman once said, “in the international trade arena the language is almost always about how we must export, and what’s really good is an industry that produces exports, and if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad, are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use. The gain [benefit] from foreign trade is what we import. What we export [give up] is a cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things so that we get as large a volume of imports as possible, for as small a volume of exports as possible.”


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