A look back at the economy: How much is enough

By WILLIAM H. STEWART
Special to the Saipan Tribune

I’ve sort of unofficially taken it upon myself to record the military and economic history of the Northern Marianas as transpired in the last century. In reviewing my observations of 17 years ago (1988), I was struck how little some things have changed. In looking over a publication I wrote at the time, entitled “Business Reference and Investment Guide to the CNMI,” and a section therein, “Opposition To Further Development,” I couldn’t resist revisiting that period of unprecedented economic growth and re-examining the reaction of some residents at that time.

At the time I wrote, “It is probably an accurate assessment to state that some people in the Commonwealth are opposed to further development, at least until the infrastructure necessary to accommodate the existing population and business community is in place to meet their basic needs for water, power, roads, etc. Many are confused at the rate of unbridled growth, much of which has been financed by off-island interests, which are neither of Northern Marianas descent or United States citizens; they are concerned at the lack of effective laws and regulatory agencies which might otherwise direct and control such growth; they are confused about the large influx of nonresident workers needed to construct and operate the “new” tourist based economy; they wonder about the erosion of the island’s natural beauty—increasing vehicular traffic, pollution and crime; the decreasing potable water supply and electric power. Some are appalled at the huge amount of land that has been leased to foreign firms and individuals; they are shocked at the rising prices of land for their children’s future homes and dismayed at the erosion of their culture.

“Indeed, many are confused regarding the extent of the relationship with the United States and the degree of autonomy afforded through the Covenant.

“Certainly the tone of the above is pessimistic but such attitudes can be a bellwether for impending change in the direction, pace and character of development in the CNMI in the years to come. The degree of change experienced on Saipan in recent years might be said to be as pronounced as that which took place when changing from the former Japanese administration to that of American following the end of the hostilities on the island.

“Of course there have been positive effects brought about by the development. Personal income and business profits have increased and, of course, government revenues are substantially higher. Commonwealth families have better housing and personal transportation; recreational facilities are more varied and improved; people are better dressed; stores are stocked with a greater variety of food. Many are more widely traveled and better for the exposure of distant places they have experienced. The islands have better health care facilities; an efficient police force and the children have better educational facilities, along with access to television and several dynamic newspapers. Ten years ago (1978), with few exceptions, none of the above was true if measured against today’s quality.

“The Commonwealth appears to be a far more litigious society than was the case 10 years ago. Many of the disputes arising from issues relating to land and its division among family members. Then, too, the population is much larger and the economy more developed, with the result that the propensity for disagreement and misunderstanding is greater than in the past.

“As an economist observing what has taken place, the Commonwealth provides an interesting case study in economic development from both a positive and negative point of view. Prior to my return to the islands after an absence of almost 10 years, my friends who had remained behind told me Saipan had changed but they were unable to tell me how it had changed…other than the obvious physical appearance. It took me awhile to learn what they could not articulate—with all the material gain and ‘presumed’ improved standard of living—the islanders were not as happy as I remembered them to be.”

Up until about 1985-’86 the Commonwealth’s economy was minuscule. During that timeframe the total reported business gross revenue was $318.8 million, a 30.4-percent increase over the $244.4 million reported the previous year, (’85). Also, in 1986 the CNMI’s total internally generated government revenue was only $61 million, with expenditures of $58.5 million.

Then everything changed—almost overnight. The economy exploded and foreign investment flooded in for several years thereafter, primarily from Japanese sources.

At one point between 1986 and ’91 the economy was growing at an annual rate of 16 percent across all sectors. Optimism was in the air—millionaires were being made as a result of long-term land leases. There were probably more millionaires per capita in the CNMI than anywhere in the U. S. of comparable (local) population size. Land was being developed, new homes built, new businesses—mostly foreign owned—were starting up. For the first time many people had two automobiles.

It was a period when the economy was growing so fast and in such an uncontrolled manner that in 1991 the Chamber of Commerce organized an economic conference heralded as “Commonwealth 2000—How Much Is Enough?” It was an attempt to look ahead to the year 2000. The alarm bells set off at the time were based on erroneous projections of visitor growth as it had been anticipated that more than one million visitors would be recorded at Commonwealth ports of entry by that year. At the time, the “Asian crisis” was unforeseen and unanticipated by most observers who failed to keep abreast of conditions in Asia.

The economy rolled along up to the high point in 1997 when the above economic indicators measured annual business gross revenue at $2.6 billion—much of it as a result of the garment industry’s earnings. In that year government revenue was $248 million, with expenditures of $268 million.

Then things changed again but rather than grow, the economy contracted. By the year 2000, business gross revenue was down to $2.2 billion; general fund revenue was recorded at $228.8 million, with expenditures at $222.0 million. A storm was gathering on the economic horizon.

Today the economy is vastly different from that of a few years ago and the halçyon “kingfisher days” of unbridled optimism.

Next: “How it Happened.” To be continued

(William H. Stewart is an economist, historian, and military cartographer.)