New Economy Journal

Is Growth Really the Answer? Australia and the New Pacific Development Agenda

Volume 1, Issue 8

By - Jubilee Australia Research Centre

Piece length: 1,358 words

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Cover image: City Mission Farm, PNG
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This article is adapted from a section of a March 2019 report titled Enter the Dragon: Australia, China, and the New Pacific Development Agenda, a joint report between the Jubilee Australia Research Centre, Caritas Australia and the University of New South Wales.


Contents

[1] Is growth really the answer?
[2] Resilience, ecology, livelihoods

[1] Is growth really the answer?

Effective aid programs in the Pacific have long been seen as elusive. Helen Hughes and John Connell have alluded to the ‘Pacific Paradox’– the phenomenon of high aid volumes to the region, contrasted with poor progress on poverty reduction and prospects for self-reliance.[1] This issue has been attributed to the false premise that developing financialised, export-based and market-based economies on these islands will serve as an impetus for bettering the overall quality of life for people. The ongoing scarcity of a strong, educated population base and strategic natural resources continues to threaten the prospect of specialisation for each Pacific Island economy, which is further exacerbated by the challenge and costs of transporting goods to overseas markets. This does not mean that Pacific economies should be cut off from the world. It does, however, mean that there are inherent limits to the scale and speed by which Pacific nations can develop along traditional capitalist lines and, in so doing, integrate into the global economy.

Though we recognise the importance of developing strong economic institutions within the region, the goal of ‘economic growth’ tends to focus on macroeconomic indicators and economic integration with Western economies, rather than a direct commitment to poverty alleviation through self-sufficiency. This notion has been expressed by programs such as the PACER and Aid for Trade agreements, Pacific Private Sectors Development Initiative (PDSI), and through the numerous Memorandums of Understandings (MOU) that have been signed with corporations such as ANZ, Carnival Australia and Westpac. These all aim towards boosting financialization and greater capital flows in the Pacific. The AIFFP seems to be based on the same presumption: that a single-minded focus on economic growth and integration of these fragile island economies into highly competitive Western markets are the way to go.

The dangers of an overly-aggressive pursuit of economic growth are never clearer than in the cautionary tale of the region’s largest economy, Papua New Guinea. Lured by the promise of a resources-backed development path, since independence, PNG has attempted to work its way up the ladder by the extraction of mineral resources, then through a full-scale exploitation of its accessible forests, and finally and more recently, by tapping the nation’s rich reserves of natural gas and oil. But as work by Paul Flanagan and Jubilee Australia has demonstrated, real per capita GDP has declined just as the resource sector’s contribution to GDP has increased. PNG has the highest rate of any population of the Asia-Pacific living below the poverty line - 39.3 per cent. Other health and social indicators, such as infant mortality, maternal mortality, child malnutrition, and incidence of malaria, are all alarmingly high. Moreover, the LNG boom in recent years, which was backed by Australia’s Efic—the very institution which has been slated to administer the AIFFP—has seen the country decline (relative to where it would have been without the gas boom) on virtually all non-GDP economic indicators even since 2009.[2] Most Pacific nations differ from PNG in terms of size—they are much smaller—and the extent of their natural resources, but this makes them no less vulnerable when it comes to the dangers of trying to fast-track economic growth at all costs.

Recent analysis by Abhijit Bannerjee and Esther Dufflo in their book Poor Economics has unveiled the sobering reality behind the claim that Western countries (and Western economics) has figured out the magic formula to stimulate economic growth in developing countries. They demonstrate in their book how economists (and other experts) actually have very little useful to say about why some countries grow and others do not. There is a lot there is known, however, about how to combat poverty:

Even if all of this is not correct—if social policy has nothing to do with growth-the case for doing everything possible in order to improve the lives of the poor now, and not waiting for the growth spark, remains overwhelming. … To the extent that we know how to remedy poverty, there is no reason to tolerate the waste of lives and talent that poverty brings with it. As this book has shown, although we have no magic bullets to eradicate poverty, no one-shot cure-all, we do know a number of things about how to improve the lives of the poor.[3]

Similar arguments are made by E.F. Schumacher’s in Small is Beautiful, a seminal text that captures the core of the social principle of subsidiarity and a human-centric approach to public economics.[4] For these reasons, the Australian government and its Pacific partners might reconsider their ‘macro’- scale approach, in favour of a proportionate, ‘micro' scale approach.

[2] Resilience, ecology, livelihoods

Given the vulnerabilities that an unbridled commitment to a debt-fuelled infrastructure boom in the Pacific might engender, we should consider the questions of whether there are any alternatives, and what principles should they be based around? For instance, a focus on protecting household-scale economies and the Pacific’s environmental resources, strengthening resilience and implementing policies to further benefit trade opportunities for small scale producers would seem much more pragmatic strategies.

First, one of the obvious alternative pathways is to follow the requests of the Pacific nations themselves for resilience, especially given the challenges arising from our changing climate. Given the increased propensity for storms and cyclones in the Pacific, rising sea levels that lead to the salination of water supplies, and the loss of prime land for food cultivation, and the increasing problem of climate refugees, the need for building more resilient communities has never been more dire. Certainly, as we saw in section 3.2, this seems to be the preferred strategy of the Pacific Islands Forum Secretariat. This strategy has also received strong support from the former Aid and Pacific Minister Concetta Fierravanti Welles, who said that instead of big infrastructure projects, focussing on climate-proofing existing infrastructure and disaster preparedness were more important regional priorities.[5]

Second, most Pacific peoples still live in rural areas and are reliant on local systems of food production. Agriculture is still the main source of livelihoods, cash-employment and food security for them. Gardens and other locally-produced products, supplemented by fishing for coastal communities, are the main source of calories and also are used to trade for other necessities in local markets. Agriculture for cash crops is also important in some areas—for example, around half of PNG’s population is dependent to some extent or other on coffee produced for export, - and copra (a coconut product) -is also an important revenue generator for many other island communities.[6]

As Wesley Morgan has argued, not only is supporting PNG’s agriculture important for maintaining the current health of Pacific communities, but certain cash crops constitute the most promising way for many Pacific nations to sustainably increase their exports. Cash crops will provide employment and money for a bigger slice of the population that the tourism industry. And despite falls in commodity prices for common Pacific exports like copra and sugar, a focus on high-value, low-volume exports like specialised plantation timbers, and other specialty products like fruits, vegetables, cut flowers and nuts (some of which only grow in Pacific locations), represent a great opportunity for further expansion.[7]

Certainly, improving market access by better road and port facilities would be an important part of enhancing this sector. But as Morgan points out, simply building the new infrastructure alone, without it being part of an overall strategy, will not be successful. This includes steps that local governments and even aid donors could help facilitate, such as developing a marketing strategy for selected commodities and a focus on maintaining the quality of supply through training and outreach support. As important, importing countries like Australia could facilitate these sectors by reducing overly restrictive quarantine rules.[8]

Finally, placing ecological concerns at the centre of Pacific policy would be another good start. The most precious resource that the Pacific has is its unparalleled natural resources, which includes coral atolls, beaches, mountains, and forests. Although further development of the tourism sector is likely to be less effective than focussing on agriculture, there are opportunities there. This will not be possible, however, if the places that tourists come to see—pristine beaches, mountains and coral atolls—are ruined by unsustainable mining or logging of native forests.

  • [1]  See Helen Hughes, ‘Aid has failed the Pacific,’ The Center for Independent Studies: Issue Analysis, Volume 7, 7 May 2003 <https://www.cis.org.au/publications/issue-analysis/aid-has-failedthe-pacific/>; John Connell, ‘Islands at Risk? Environments, Economies, and Contemporary Change’, Edward Elgar Publishing Ltd: Cheltenham UK, 2013.
  • [2]  Paul Flanagan and Luke Fletcher, Double or Nothing: The Broken Economic Promises of PNG LNG, Jubilee Australia Research Centre, April 2018 https://www. jubileeaustralia.org/LiteratureRetrieve.aspx?ID=162637.
  • [3] Abhijit Banerjee and Esther Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Public Affairs, 2012), 267-268.
  • [4] E.F. Schumaker, Small Is Beautiful: Economics as if People Mattered (London: Blond & Briggs Ltd, 1973).
  • [5] Katherine Murphy, ‘Concetta Fierravanti-Wells questions Morrison’s approach in Pacific,’ The Guardian AU, 17 November 2018, https://www.theguardian.com/australia-news/2018/nov/17/concettafierravanti-wells-questions-morrisons-approach-in-pacific.
  • [6] See Tim Anderson, Land and Livelihoods and Papua New Guinea (Australian Scholarly Publishing, 2015) and Jubilee Australia Research Centre, Growing Bougainville’s Future: Choices for an Island and its Peoples, September 2018.
  • [7] Wesley Morgan, ‘Growing Island Exports: High Value Crops and the Future of Agriculture in the Pacific, Asia and the Pacific Policy Studies (APPS) Working Paper Series, December 2013.
  • [8] Morgan, ‘Growing Island Exports'.

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