The First 25 Years of Searching for Development
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THE FIRST 25 YEARS OF SEARCHING FOR DEVELOPMENT The first 25 years of searching for development Ross Garnaut Professor of Economics, Asia Pacific School of Economics and Management and the Research School of Pacific and Asian Studies, The Australian National University Two countries’ Independence countries into disintegration of the state, or chronic failure of development. September 16, 2000 marks two important To a considerable extent Papua New anniversaries. It is the 25th anniversary of Guinea’s problems are Australia’s Papua New Guinea’s formal independence problems. These are long-term challenges: from Australia, and it is the 25th anniversary the building of a viable, effective state and of Australia’s formal independence from national economy in Papua New Guinea is Papua New Guinea. and was always going to be the task of I say ‘formal’ for the obvious reason that generations. there has been in these past 25 years, and There were good reasons why Papua always will be, great inter-dependence New Guinea was not one of the early places between the two countries—well beyond the of development of the modern economy and normal interdependence of states in an era state. The geographic desiccation of the land of ‘globalisation’. Australian decisions on area, and the associated linguistic development assistance, on military fragmentation, make Papua New Guinea an cooperation, on trade and investment, and unusually expensive and difficult location on foreign policy determine Papua New for economic development. By the time that Guinea development outcomes and policy British Governments began to acknowledge choices in fundamental ways. And the ‘Winds of Change’ blowing through the developments in Papua New Guinea play colonies, there was no indigenous capacity back powerfully into Australian national life. for a political response in Papua New Guinea The differences in population size and levels to the new conditions. Australian Prime of development dull awareness of the Minister Sir Robert Menzies, after a Prime influence of Papua New Guinea Ministers’ conference in London in 1960, developments on Australia; but only until remarked that it would be better for self political crisis reminds Australians of what determination to come too soon, than for it to they would have at stake if Papua New come after the accumulation of hostility Guinea followed many other developing against Australia. 29 PACIFIC ECONOMIC BULLETIN Australian leaders accelerated movement several decades (World Bank 1965:61). towards self government and independence Among adult indigenes, the paucity of from the mid 1960s, to a considerable extent educated persons is extreme, under because they judged it to be in Australia’s 1 per cent having received a full primary education and probably less interests to be independent of Papua New than 100 having completed a Guinea. The Australian Prime Minister from secondary course, while the first December 1972, Gough Whitlam, made it university graduate was expected at the clear that Australia was no longer willing end of 1964 (World Bank 1965:287–8). to be a colonial power. A tiny, brave The crash program of educational, leadership group in Papua New Guinea political, administrative and economic thought that Independence was also in development over the next decade made a Papua New Guinea’s interests, and took up difference. The University of Papua New the challenge of making Australian Guinea took its first students into degree intentions work. programs in 1967, with several of the first graduates still in their mid-twenties when An awesome challenge they accepted high responsibilities as heads of the main departments of state between self It was only in the decade before 1975, and government in 1973 and Independence. only partially then, that the colonial The experiment in Westminster administration adverted to the likelihood of democracy in what to many seemed an early Independence. In the mid 1960s, unlikely setting, with the election of the responsible officials measured the period House of Assembly in 1964, led to the needed for adequate preparation in decades, emergence of a political leadership willing and usually thought that even decades to take over responsibility for government would be inadequate. The long-standing from the rapidly departing colonial power. Minister for Territories explained in a Whatever the fundamental merits of the valedictory statement in 1964 Westminster system in Papua New Guinea, I am quite certain in my own mind that there was some inevitability about its the form of self government will come entrenchment in Australia’s shadow, and a to [Papua New Guinea] before the debate over constitutional development led country is economically viable and at least, in contrast to Australia, and before it is fully equipped either to importantly to political stability, to the finance or to staff the various limitation and codification of the role of the departments and agencies of Head of State (the Governor General) in the government. Someone other than the formation of governments. people of [Papua New Guinea] will have to underwrite self government In the economy, a huge expansion of (Hasluck 1976:423). public expenditure, funded overwhelmingly from the Australian budget, generated the Or as the World Bank put it in its first Report first, and broken, threads of a national on the economy of Papua New Guinea transport and communications infrastructure. [t]he ultimate aim of (the program) A rushed attempt to diversify a tiny, sleepy should be to bring the Territory to a colonial monetary economy led to the stage of economic viability with self- sustaining economic growth…by any emergence of many of the service and reckoning, and even on the basis of the processing industries that in Australian most favorable assumptions, however, would be present in a large country town. the development phase will take The facilitation of mining development on 30 THE FIRST 25 YEARS OF SEARCHING FOR DEVELOPMENT Bougainville more than trebled the value of Economic policy and performance exports, supported a brief period of extraordinarily rapid growth, socialised a Any reasonable assessment of economic and large number of Papua New Guineans into political performance since Independence the ways and skills of a modern economy, notes the difficulty of the starting point and and set the scene for tragedy. There wasn’t the substantial progress over the first one much of a Papua New Guinea monetary and a half decades. It notes as well the economy in 1975—a public sector funded instability and decline over most of the past overwhelmingly from Australia, a mine that decade, and the focused efforts at was large by world standards, small service rehabilitation under the new Morauta and processing activities to supply the government since July 1999. public sector and the mine, and a small The rapid transition to political export-oriented agriculture—but the decade independence forced a similarly rapid of accelerated effort had made it formation of national economic institutions. substantially bigger than it had been. A financial and economic policy capacity in the Department of Finance was established Trial balance for the first time in 1972, and an independent currency was phased in between April and 2 How has Papua New Guineans managed December 1975. the challenge of these past 25 years? The defence force, civil aviation The expectations of thoughtful friends infrastructure, and some public works and detractors of Papua New Guinea were capacity were administered and funded not high. A widely discussed dichotomy directly from the Australian Commonwealth was captured in the title of Hank Nelson’s budget until mid 1975. The largest bank and book of the mid 1970s, Black Unity or Black airline had been part of Australian Chaos. The countries that were discussed as government-owned businesses, and were being similarly poorly endowed with transferred to Papua New Guinea indigenous education and administrative government ownership between self experience at the time of Independence were government and Independence. Australian unhappy comparators. By these most basic businesses operating in Papua New Guinea standards, the continued constitutional were able to deduct some expenditures in government, the vibrant democracy, the Papua New Guinea (for example, mineral assertive press and civil society, the survival exploration) from Australian income until, of national unity, are all considerable but not after, Independence. Papua New achievements.1 Guinea government borrowing from Obviously there are other tests, by which international agencies was guaranteed by the political development in Papua New Guinea Australian government until but not after scores badly: the money politics and the September 1975. Huge change in all these primacy of personal enrichment amongst the economic institutional arrangements was goals of many holders of high public office; compressed into the couple of years of Bougainville; the violence and disorder of constitutional transition. urban and some highlands village life. But The political imperatives of transition even these dark sides are lightened by the within a democratic constitution seemed at opportunity that the survival of first to argue for a movement back to the constitutional democracy provides for emphasis on broadly based development of correction without national convulsion. the Hasluck years (1951–63), and away from 31 PACIFIC ECONOMIC BULLETIN the concentration of effort in areas of highest minimum wage adjustment. The government return that had characterised the World Bank after Independence placed submissions for Report of 1964 and the rush to Independence. moderation before successive Minimum ‘Equitable distribution’ was a theme of the Wages Boards. From the time of Independence, first national government’s Eight Point Plan there was not a single Minimum Wages in 1972, and of the Constitution’s National Board decision to increase the real level of Goals and Directive Principles. The awful urban minimum wages, and on several reality was that, with the gradual reduction occasions there were decisions to achieve a in the real value of Australian aid which the small reduction.