The Little Island That Could

At the southern tip of Asia, just off the Malay Peninsula, lies the 227-square-mile island of Singapore, an independent city-state. It has virtually no natural resources (its most important indigenous export is orchids). It was physically and economically devastated by World War II. It is cursed with an abominably hot and humid climate all year. It must import nearly all of its food except pigs, poultry, and the foul-smelling fruit durian.

Yet Singapore has become one of the most impressive economic success stories of the 20th century. A major regional commercial center, it is involved in trading, servicing and warehousing, shipbuilding, petroleum exploration, construction, manufacturing, communications, and tourism. Per capita income in Singapore in 1981 was US $5,240, the second-highest in Asia after Japan. With a population of nearly 2.5 million-about the size of metropolitan Baltimore-it has the world's 23rd-largest gross national product (GNP) and the world's second-busiest port, even busier than New York City and exceeded only by Rotterdam. Singapore's average annual growth rate in real GNP from 1970 to 1980 was 6.7 percent, compared to 2.1 percent in the United States and 3.4 percent in Japan. The little island had an unemployment rate in 1981 of 2.97 percent, considerably better than the United States' 7.6 percent in the same year. In the midst of a world recession, Singapore has so many job opportunities that industry actively seeks guest workers from neighboring countries and as far away as Bangladesh.

About 2,900 miles east of Singapore, between the Philippines and Hawaii, is the 215-square-mile island of Guam, a territory of the United States. Like Singapore, it is nearly devoid of natural resources, it is cursed with a hot and humid climate, it suffered greatly from World War II, and it has a natural port.

But unlike Singapore, Guam has a sputtering, faltering economy with few bright spots and a long list of woes. Its unemployment rate is estimated to be 14-15 percent, and its consumer price index increases regularly at a double-digit rate-23 percent in 1980, 17 percent in 1981. Per capita income was $6,711 in 1982-and it's as high as it is mostly because a quarter of the island's work force is employed by local government and another 15 percent are civilian employees of the US military. And although Guam has one of the finest deepwater ports between Hawaii and the Philippines, only one-twenty-ninth as many cargo-bearing ships docked there in 1981 as in Singapore.

What is the reason for this dramatic disparity? It's no secret why Singapore has succeeded. It enjoys an essentially free market that "would send chills of delight down the spines of Adam Smith and Milton Friedman," in the words of James K. Glassman writing in the New Republic. And why has Guam stagnated? Could it be that Guam hasn't enjoyed a free-market system, in spite of living under the territorial rule of the world's supposedly most-capitalist nation?

There couldn't be a better time to reverse Guam's fortunes. Doubts about the future of Hong Kong, the Far East's bustling international commercial center, are increasing daily as a Chinese takeover looms large. With Guam's strategic location at the edge of the Pacific Rim and the long-term political stability it could offer (in contrast to Korea and the Philippines), the island is poised to fill the gap left by a shaky Hong Kong. But this would require a pretty radical rethinking of Uncle Sam's role in Guam. To see why, it is only necessary to look behind the island's present picture.

When I moved to Guam from Hawaii in early 1978, it represented to me a land of opportunity. I had just been hired by Gannett Corp., one of America's largest media conglomerates, to work as a reporter for its newspaper on Guam, the Pacific Daily News. America's westernmost frontier beckoned to me, so I went.

I learned that this US territory is a small, verdant island at the edge of the Western Pacific and the Philippine Sea, about 30 miles long and no more than 10 miles wide. The northern end of the island is an elevated limestone plateau that drops off sharply at the coast. The south is more hilly and rugged, with volcanic uplands and valleys ranging from 500 to 1,300 feet above sea level.

Its climate is hardly paradise-like. Besides being hot and muggy, Guam is frequently buffeted by rainstorms and typhoons.

I found many of the consumer conveniences enjoyed in the States-cable TV, radio and TV stations, movie theaters, supermarkets, department stores, telephones, a modern airport, modern hotels and office buildings, and most of America's leading fast-food restaurants. But the island's rural tradition still shows itself-a cow and chickens can be found feeding on an overgrown corner lot across from the island's tallest office structure, the 10-story Pacific Daily News Building. Such a scene of uneven development is symptomatic of larger problems.

I'm back in Hawaii now, but when Reason asked me to investigate Guam's predicament and potential, I had a chance to go beyond my impressions from living there and explore why the island's Singapore-like mix of natural advantages and disadvantages has been the backdrop of an economy with none of Singapore's vitality and prosperity. I found that in case after case where Guam is well suited to prosper and compete in world markets, burdensome US federal regulations that are insensitive to Guam's unique situation have served to thwart its potential.

Guam's stifling economic environment has prompted many Guamanians to seek their fortunes elsewhere, which is one reason US military recruiters score big on Guam. It also has prompted a radical shift in the thinking among Guam residents during the past few years. Whereas once Guamanians seemed almost eager to trade federal regulations for federal largesse, now there is a growing desire for the self-reliance and opportunities that only freedom can bring.

That freedom is being sought in a variety of ways, the foremost being an attempt to change the island's political status. Currently Guam is an unincorporated US territory, which means it is subject to only the "fundamental" parts of the US Constitution. In practice, this means that Guam is both an "overseas" and a "domestic" location, to which many but not all federal regulations and laws apply. In a few instances, this has worked for the benefit of Guam, but most Guamanians now believe that the island's political status is one of the major reasons for its economic plight.

Another strategy has been to seek exemption from restrictive federal regulations and taxes through congressional designation of Guam as an "enterprise zone." Meanwhile, Guamanian business and political leaders have been waging an unprecedented lobbying campaign in Washington to obtain regulatory relief for Guam through piecemeal legislative and administrative actions. Guamanians clearly are tired of suffering a stagnant economy.

The southernmost in the Marianas island chain, Guam has been an unincorporated territory of the United States since 1898, when it was ceded by Spain as a result of the Spanish- American War. The island was put under the jurisdiction of the US Navy until 1950-a jurisdiction interrupted only by two years of Japanese occupation during World War II.

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