Case Study (c) 2002, Steffen schmidt

Rarely is a coastal area truly devastated. The tiny Pacific island of Nauru located between Hawaii and Australia comes as close as possible to annihilation. (The Bikini Atoll in the Pacific where U.S. nuclear bomb tests were conducted during the cold war, leaving the island and much of the surrounding marine life contaminated with radiation, is another example).

Nauru was originally inhabited by a diverse population and was not "discovered" by westerners until 1798.

Subsequently, whalers introduced firearms to the island and in the 1870's civil war between the roughly 12 tribes of Nauran's reduced the population by as much as 40%. The Germans arrived in 1888 bringing unfamiliar diseases which further decimated the population. The Germans were followed by the British, Australians, New Zealanders, and Japanese all of whom colonized the island. The Japanese during their three year rule during World War II "solved" the widespread problem of leprosy by rounding up the patients, taking them out to sea and sinking the ship.

Unfortunately Nauru is rich in phosphate, an ingredient in fertilizer and a much sought after commodity which was discovered in 1900. This stimulated much of the colonial and commercial interest. Phosphate in Nauru is deposited in narrow rows between tall, cone shaped coral formations. As the phosphate was extracted tall coral spires were left which makes the land that's been mined moon-scape-like and completely unusable.

Since the native population was decimated, foreign workers were brought to the island to provide labor in the Phosphate industry. Today roughly 4,000 of the 12,000 people living on the island are foreigners.

In 1968 Australia declared the island uninhabitable and offered to resettle the Naurans to an deserted island off the coast of Australia. The islanders chose instead to declare independence, borrow heavily to buy out what was left of the phosphate holdings from the British, Australian and New Zealand owners, and decided to go at it alone as an independent country.

By 1981 the island continued exporting phosphate to international buyers and was generating an amazingly high $17,000 per capita (one of the highest incomes in the world!). The government soon was employing 95% of working people, guaranteed health and education, and subsidized all utilities. With this welfare state which practically made working unnecessary, a poor diet of imported fatty foods, and a very sedentary lifestyle, Naurans are among the most overweight people on earth and approximate 50% of them suffer from diabetes.

The substantial revenues from phosphates and the substantial budget surpluses which began to flow after independence were, unfortunately, poorly managed and unwisely invested. In the 1990's bankruptcies and declining revenues from phosphates drove the government to borrow heavily and put the country into deep debt. However, it continued to lavish its citizens with an elaborate welfare state.

To repay its loans the government devised many schemes to raise revenue. It enacted one of the most permissive offshore banking lawn in the world. (We know how attractive offshore banking is from the Enron case. The U.S. Senate in Jan 2002 found $137 billion dollars in offshore corporations and trusts related to U.S. Securities firms. The global funds laundered (or hidden from governments) through such accounts and corporations is, obviously staggering in size). Citizenship in Nauru can also be purchased and the island nation has no extradition treaties for those wishing to evade capture in other countries. It is estimated that over $70 billion dollars from Russia has been laundered through Nauru. This led the Group of Seven (rich) countries to put a ban on banking transactions from the island.

In 2001 the Australians offered to provide Nauru with substantial financial incentives if theyt would agree to become a holding center for the growing number of desperate political and economic refugees who have been making their way to Australia by ship. There have been several incidents since the refugees are often unwilling to be dumped on a place they see as undesireable (since they want to live in Australia). To date over 1,000 refugees have been deposited in Nauru leading the government to become worried about the consequences of such temporary (hopefully) immigration.

Rationing of electricity and water is now in effect, the islands only airplane has been grounded, many of the civil servants employed by government have been fired, spending has been cut, and the infrastructure continues to deteriorate. The situation is so bad that there has been discussion recently about buying another island somewhere and moving the population off Nauru.

Although Nauru is a Pacific island with a coastal area and a reef surrounding it there seems to be almost no fishing or other ocean related activity by Naurans since colonialism. Moreover, there seems to be virtually no tourism since the modern history of the island is one of mining and welfare.

Sources: The Economist Magazine, The New York Times, interviews with local informants, Encyclopedia Brittanica.