The Commonwealth’s Recent Economic History

The Commonwealth’s Recent Economic History

For long after the Pacific war the economy of the Northern Marianas remained stagnant and by the early seventies the administrative headquarters of the Trust Territory of the Pacific Islands on Saipan dominated the island economy as the principal employer with only twenty-two percent of the work force employed in the private sector.

Prior to 1973 there was little hope for a tourist industry as the Japanese Government, preoccupied with their own recovery, had imposed currency restrictions on foreign exchange which limited the amount of money a Japanese citizen or firm could take out of the country to the equivalent of only U. S. $742. per year. By 1981, with the exception of a small but growing tourism sector, the economy had experienced little development. In the years immediately following the conclusion of World War Two the destroyed economies of the former belligerents, and those of the territories on which the war was fought, were reconstructed. By the early sixties many had become virtual cornucopias producing wide varieties of goods and services. The reconstruction of the economy of Saipan, however, was long in occurring with the result that the area was the last of the former battlefields to recover from the devastation. This process did not really start until around 1978 some 33 years after the termination of World War Two. Indeed, it was the introduction in 1969 of jet aircraft to Saipan, and Continental Air Micronesia in particular, that was probably the single most important factor in the future development of what were once remote and isolated islands in the Pacific. The CNMI's fascinating history is largely unknown to many otherwise knowledgeable people in the United States and elsewhere.

The islands' history in many instances is far more interesting and intriguing that the history of some states in the Union as the islands have played a significantly more prominent role in world affairs and geopolitics than many individual states. As the 50th anniversary commemorating the entry of the United States into World War Two came to a close in November, 1995, one is struck by a strange irony – United States Government expenditures within the Northern Marianas aside – large private American investment is somewhat conspicuous by its absence in the islands. It is something of a paradox that it has been largely private capital from a former defeated adversary rather than the wealth from the victor that has resulted in the reconstruction of Saipan's economy. Considering that the Japanese presence in the islands extended for a period of only 30 years as compared to almost one half century for that of America, it is surprising that the geographic and economic ties between these islands and Japan were reforged in the seventies. On any given day in the Commonwealth there are more Japanese present than non-indigenous Americans. It must be said, however, that it is the stability assured by the American Flag and the U.S. rule of law that provided the safe business environment for Japanese and other foreign investment to flourish in the Commonwealth.

The great boom period in Japan from 1985 to 1991 fueled Saipan's economic growth. Throughout the last half of the '80's, Japan registered huge annual trade surpluses, had an ever strengthening currency and one of the lowest interest rates in the industrialized world. Japanese banks overflowed with money, much more than they could accommodate by relending in Japan itself. It was this money that went abroad and around the world to finance a myriad of projects. Millions were invested in the Northern Marianas to launch the islands on the road to a thriving tourism industry. By the early nineteen nineties America's economic slowdown and Japan's growing financial problems acted to discourage Japanese investment at previous levels in both the continental United States and the various affiliated Pacific islands. By the end of 1995 Japan faced tighten credit, sagging real estate values and a plunging stock market. The decline in the stock market, combined with the property "bust" in Japan, significantly eroded capital and reduced Japanese bank's ability to lend at previous levels and terms.

Today, the Commonwealth's economy functions between two economic forces – as a political entity affiliated with the United States a thriving U. S. economy and a strong dollar is desired – but the reverse is true with respect to the area's tourism based economy since a strong dollar erodes the competitiveness of the area's Japanese based tourist industry there-by making the Commonwealth more expensive for the visitor when an increasing amount of Yen is required to purchase the dollar.