Question

In no more than 18 pages complete the following assignment. This is similar to writing a publishable paper. Supplement the discussions with relevant factual information, use insights from macro-economic theory, lectures, refer to relevant journal articles and do economic modelling (if needed). You are free to select the methodology and dataset.

Explain the major forces of economic growth in the small Micronesian economies of the Pacific region. Discuss why we need inclusive and sustainable growth in these economies, and the limits to growth.

Answer 1

The States of Yap, Chuk, Pohnpei and Kosrae—found as small islands in the pacific ocean—which are associated with the USA. They are four island economies divided into many island economies—societies which were no specifically included when Adam Smith or Marshall defined economics—in the sense that the early definitions encompassed only social communities and not isolated economic units.

These four states are further divided numerous small island which are individual economic units in themselves—involved in the regular economic activities like production, distribution, exchange and consumption. They are collectively known as Micronesia and are represented in the United Nations.

The economy is such that the primary sectoral activities like fishing , farming of a more ‘for self’ or subsistence in nature are the chief occupations of theses economies. The dependence on primary sector shows that these economies are largely in the early stages of economic growth with a large contribution of the GDP coming form the primary sectoral activities. The primary sector deals with Agriculture and allied activities include forestry, fishing and so on. Though Geographically , these islands lack the advantage of a huge land area as compared to other island economies and hence they have vey limited resources that they have optimally utilise to achieve continuous growth. The capital city is Palikir

The main occupation is agriculture but the potential industry that could be developed is tourism. Lack of adequate awareness and infrastructure to promote their islands as the exotic and very ‘close to nature’ feeling is pulling the tourism industry behind and is acting as a roadblock to earn the much required ‘foreign exchange inflow.

The major source of economic growth has been the nations continuous dependence on agriculture and fishing,. The rising productivity levels in both theses   occupations followed by a sustained growth has led to a rise in their income levels. The HDI or the human development index, a measure of the literacy rate, the quality of life—health and so on , the standard of living are the parameters to measure the index and these put the Micronesian economies in the medium range   indicating that these economies are not exactly underdeveloped but developing in nature—meaning that their income is actually growing and continuously over a sustained period of time.

The economies are reachable by air and are connected to the United States. Their location is unfortunately not attractive for easy arrival of tourists—tourism as an industry has to therefore be developed only through continuous ‘highlighting’ of the landscapes, the beaches and other beauties of nature.

Else, their main source of occupation for living is fishing and agricultural operations are done mostly on a very limited basis. This is basically due to lack of infrastructure and also lack of revenue needed for developing the required infrastructure. The chief source of revenue being from fishing activities , the rest if from an aid given by their richer neighbour the United States. This being the case development can only be slow and far fetched and hence growth will be a challenging process.

The population growth is high yet the populous is more of a traditional and conservative in nature with societal norms being given more importance and hence this lack of easy adaptability is also a hindrance to long term growth. The most populous of the island states is ‘Chuk’ which has invested considerably in developing education and spread of literacy –since it has a large number of schools.

The State of Chuk has also incidentally a younger composition of population –a very important factor needed for assessing the prospects of long term growth for the Micronesian economies. A younger and skilled work force is an asset to the nation’s sustainable growth prospects. Newer occupations and entrepreneurial activities can be encouraged and the economy’s GDP can be accelerated in a phased and sustained manner. The ‘productivity’ of such a ‘young’ population is always rising and high and given their higher productivity they tend to become more adaptable to newer techniques of production and become more aware of the benefits of technology. The labor force consists of both the male and female population.

Since culturally and economically the four states have common aspects, the inherent cultural and linguistic diversity does not affect the overall structure of the islands. The ‘family bond’ keeps together the families in both cultural way as well as economic way since farming and allied activities are done together as family. Though the communities are realising the need for ‘urbanisation’ yet the inherent ‘agro-based’ society is the reason for slow nature of the rate of ‘urbanistic’ tendencies.

Certain States like ‘Chuk’ and ‘Pohnpei’ have migrants who have gone abroad –possible because of the higher importance given to education in these states and the awareness of the ‘economically’ viable opportunities that are both attractive for personal growth as well as to ‘send a few dollars home’ option. This indeed has increased the ‘inflow’ of foreign income from abroad.

The need to develop these economies is of extreme importance since through the process of ‘globalisation’ , the world has become closer economically, culturally and financially. The ‘Micronesians’ economies are small units that are in need for a help from their other developed and advanced nations to survive and reach to greater heights.’ Inclusive growth ‘, is a part of the inherent merit of globalisation—Employment opportunities and investment can pour in form foreign sources which is very much needed in these economies to develop other sectors like the secondary and tertiary sector. Limited by their ‘natural’ geographical resources these economies will benefit if they are helped to utilise their ‘given ‘ resources efficiently in a manner that promotes ‘sustained growth’.