Economic decline and corruption in the Northern Mariana Islands

This is the fourth essay in my series on the Caribbean and the US territories. You can read part one here. I’d recommend looking at it first. While the Northern Marianas are not part of the Caribbean, many of the issues plaguing the territory will be familiar to people who understand the situation in the Caribbean.

The Mariana Islands are a chain of islands in the Pacific Ocean, consisting of Guam and the Commonwealth of the Northern Mariana Islands (CNMI). The original natives were known as Chamorros. Europeans first discovered the area in the 1500s, with Ferdinand Magellan claiming the area for Spain. The islands changed hands, and the Northern portion ended up in the possession on the Japanese in the early 20th century, and became an exporter of sugarcane. The southern portion of the Mariana Islands is Guam, which I will focus on in another essay. The Marianas, particularly Saipan, became the site of several major battles in the Pacific theater of World War II.

The US formally took possession of the islands in 1947, and the Northern Marianas were administered as part of a UN-designated unit called the Trust Territory of the Pacific Islands per a resolution of the UN Security Council. In 1978, after planning and referendums, the Northern Marianas became a Commonwealth of the United States. Today, the territory has a population of 52,344. There are three main islands: Saipan, Tinian, and Rota. The rest of the islands are only sparsely populated. The territory is governed from the village of Capital Hill in Saipan. The GDP in 2013 was estimated to be $682 million.

Prior to the crisis that engulfed most of the territories last decade, the CNMI’s economy was centered primarily around tourism from Japan and the garment manufacturing industry. In the late 1980s, the region experienced an unprecedented economic boom, with annual growth reaching 16%. The CNMI was an ideal location for manufacturing of clothing, as the country had several special exemptions from regular US labor laws.  One of these exemptions was the minimum wage, which was significantly lower in the CNMI than in the mainland USA. The islands had also benefited from trade quotas for years that had allowed them preferential access to US markets, but in 2005 all trade quotas in garment manufacturing came down worldwide, a situation which greatly favored China.

Readers may recall my discussion of the minimum wage bill which devastated the economy of American Samoa. This same bill also imposed minimum wage hikes on the Northern Marianas as well. Part of the reason the Northern Marianas kept their prized exemptions from US labor laws was due to the lobbying efforts of one Jack Abramoff, whom many may remember having been involved in a major scandal in the late period Bush administation. Once Abramoff went to prison, the CNMI lost its protector. The islands had already come under criticism in the past and had faced accusations in the US that their garment factories were sweatshops, along with other accusations of forced prostitution and other claims of worker abuse. This led to the Democrats moving to exert more control over the territory by “federalizing” its labor laws. The minimum wage hike bill was passed in 2006.

Allowing China to flood the US markets with cheap exports, combined with the minimum wage hikes, quickly bankrupted the garment manufacturing industry. The last factory in the islands closed in 2009. The Daily Caller surveyed the damage in 2011:

Employment fell 35 percent in the CNMI from 2006 to 2009. Most of the phased wage increases are still yet to come; additional job losses are inevitable as the march to $7.25 continues. While much of the CNMI job loss resulted from the demise of the garment industry — which ultimately would have occurred anyway because of changes in international trade rules — virtually every other sector of the economy has been devastated as well.

The employees of the Northern Marianas’ garment industry were primarily young Chinese women. The Northern Mariana Islands had brought in thousands of guest workers who became de facto permanent residents to manage their private sector, while most of the country’s citizens worked in the public sector. What happened to these guest workers after the federal government took over the territory’s immigration policy? Deportation:

We recognized, however, that the CNMI’s economy could not quickly wean itself from its dependence on foreign labor. We devised a “flexible federalization” policy that would enable foreign workers to stay in the CNMI — especially the many long-term workers who had put down roots.

As implemented by Obama’s Department of Homeland Security, “flexible federalization” has been anything but flexible. The guest workers who fueled the CNMI’s boom now find themselves stranded by its bust. By November 27, each of the CNMI’s remaining 16,000 guest workers — admitted legally under CNMI law — will become illegal unless sponsored by an employer for a federal visa. Many have recently lost their jobs and cannot be sponsored. Thousands of others cobble together a living by working part-time for several employers. Cash-strapped employers, however, are balking at incurring sponsorship costs for part-time workers.

The Daily Caller article cited above was published in 2011. The Washington Times had a more recent look at the Northern Mariana Islands’ economy in 2014:

From 2006 to 2012, the gross domestic product in the Northern Mariana Islands plummeted by 36 percent and the employment rate fell by 45 percent. Average earnings increased by 29 percent, but local prices rose by 31 percent. The wage increases have left the islands’ economies dependent on tourism from Russia and China.

If this wasn’t enough for you, the government was (and perhaps still is) seriously corrupt. A website known as “Saipan Sucks!” created back in 2001 alleged that most politics in the islands was centered around family relationships, nepotism, and corruption. These allegations seem to have been true, as the now-former governor, Benigno Fitial, was impeached in 2013:

Gov. Benigno Fitial (R) was hit with 13 articles of impeachment last week, connected to allegations of corruption. The proceeding follows an unsuccessful attempt to impeach Fitial several years ago. Fitial is an ally of former lobbyist Jack Abramoff, who went to prison on corruption charges following lobbying efforts he made on behalf of the Northern Mariana Islands and tribal gaming issues.

Among the charges, Fitial is accused of having his private masseuse released without permission from a federal prison in 2010 in order to give him a massage. The Saipan Tribune reports that Fitial said that he did not know about the masseuse’s incarceration until he called her to relieve back pain that he said only she could cure.

Other charges against Fitial include neglect of duty and corruption.

Fitial only narrowly avoided prison.

I have generally been unimpressed with Washington’s stewardship of the US territories, but even more so than in American Samoa, the US government has demonstrated epic levels of incompetence in the Northern Mariana Islands, driving out their once-thriving garment industry, reducing employment opportunities with repeated minimum wage hikes, and forcing a deep depression on the territory.


Written by Doomberg

I am Doomberg, one of the original founding members of Sparta Report, and have been here since the beginning. I am an insatiable news junkie and enjoy reading and writing about the US territories, the Caribbean, video games, smartphones, and of course conservative politics in general.

I also really like pictures of gas stations and claim full responsibility for the silly gas station motif. I'm presently trapped behind enemy lines in a blue state with no hope of escape! The ride never ends.


Which presidential candidates does the Federal Reserve like?

Morgan Stanley warns of possible global recession