Aviation

How a Bad Musical (Plus a Whole Bunch of Really Bad Ideas) Bankrupted the World’s Wealthiest Country

Whenever the elements of government corruption, shady characters, monumental stupidity, mind-numbing monetary mismanagement, and poop all come together, it’s a safe bet that it is a story that will make it into Commonplace Fun Facts. It’s as if someone has been sneaking a peek at our Christmas list or something.

All of these tantalizing topics converge over the island nation of Nauru. For such a tiny place, it is a veritable goldmine of forehead-smacking examples of stupidity. Make yourself comfortable and learn the sad story of a country that went from being the world’s richest to one of the poorest because of some really, really bad ideas.

A 1982 article in the New York Times Magazine proclaimed Nauru as the “World’s Richest Little Isle.” Located 26 miles (42 km) south of the Equator, about halfway between Hawaii and Australia, the tiny nation seems to have little that would give it that honor. In terms of land area, it has only 8.1 square miles (21 km2), making it the third smallest country in the world, exceeding only Vatican City and Monaco. With 10,670 inhabitants on the island, only Vatican City has a smaller population.

The thing that earned Nauru’s title as the world’s richest little island — at least in the 1960s through the 1980s — was poop. More specifically, bird poop, or “guano” if you want to be a bit more polite. Thousands of years’ worth of bird droppings made Nauru a rich source of phosphate deposits. Upon gaining its independence in 1968, Nauru threw itself whole-hog into phosphate mining, sending its economy into the stratosphere. The profits from the mining activities raised Nauru’s per capita income to the highest of any nation on earth, topping in 1975 at $50,000 ($241,000 in 2020 dollars) for every man, woman, and child.

Nauru was so flush with funds that it began to offer public services for free and didn’t even worry about such trivialities as taxes. Many people stopped working, relying on the government to take care of everything. At its peak the Nauru government employed more than 1,500 to oversee distribution of government largess. Remember that the whole population of the country was less than 10,000 at the time.

If having lots of money and little work seems a bit unhealthy, it was. Frozen and fast food sales skyrocketed, as did obesity. Soon, Nauru was known not only for having the highest per capita income in the world but also having the highest rates of obesity and diabetes. The International Diabetes Federation identified 31% of Nauruans as diabetic, while the World Health Organization put the country’s obesity rate at 71.7%.

With so much money available, the government decided to establish a national air carrier. Nauru Airlines was established in 1969 and grew to have a fleet of seven aircraft by 1983. Since the population of Nauru at that time was about 8,000, the airline could fly 10% of the nation’s people at one time, assuming 800 people actually wanted to fly. It turns out they didn’t.

Developing such an extensive airline infrastructure suggests that Nauru had a burgeoning tourism industry. Alas, that, too, would be an incorrect assumption. Nauru remains one of the least-visited nations in the world, bringing in, on average, 200 tourists each year. With very few people seeking to enter the country and with the limited size of Nauru’s population, Nauru Airlines tended to operate with a lot of empty seats. Its average flights were filled to only 20% of plane capacity. By way of comparison, United Airlines’ average flight is filled to 83% capacity.

The airline became notorious for unreliable flight schedules. In 1988 it lost its commercial airline certification for six months. During this time, flights on Nauru Airlines were completely free, thus qualifying the flights as private jets, rather than commercial.

If you are wondering how the airline managed to stay solvent, look no further than the government. Just as the citizens were subsidized by the phosphate funds regardless of productivity, so was Nauru Airlines. It had no incentive to develop sound business practices since money was never a concern.

The wastefulness of the Nauru Airlines business plan was symptomatic of what was going on throughout the country. No one seemed to be particularly concerned about running out of money, however. The mined phosphate was selling for hundreds of dollars per ton, bringing as much as $100 million per year into the country’s coffers. In 1975, the peak year of phosphate trade, Nauru saw profits that were equal to $2.5 billion in 2020 values.

Outside of Nauru, there were those who looked on with understandable concern. Long before Nauru threw itself full-steam into the spend-money-like-water theory of economics, a United Nations report warned:

The problem of Nauru presents a paradox. The striking contrast is between a superficially happy state of affairs and an uncertain and indeed alarming future… But this picture of peace and well-being and security is deceptive. Indeed it is a false paradise. For these gentle people are dominated by the knowledge that the present happy state of affairs cannot continue.

These words proved to be prescient. In the span of 15 years, Nauru went from unbelievable prosperity to bankruptcy. What happened? Why did the money well dry up, and where did all of the surplus go?

As for the question about what happened to the cash cow, it was a matter of natural resources. More specifically, it had to do with the limited nature of them. Phosphate trading was extremely lucrative because of a fundamental law of economics: supply and demand. The global availability of phosphates is limited and cannot easily be replicated. Nauru’s phosphates brought in so much money precisely because it was a limited commodity.

Land remaining after phosphate mining.

No one seemed to give much attention to that “limited” bit. By the end of the 1980s, the country’s phosphate deposits were all but exhausted. As if that weren’t bad enough, the mining process left approximately 80% of the country’s already-limited land area stripped down to barren, jagged rocks. What remained was completely unsuitable for agriculture or most forms of real estate development.

Almost all of Nauru’s population lives on the coast. This is not simply because they really like beach-front property. When viewed from above, it is easy to see that the choice was thrust upon them. Very little of the country, aside from the coastal land, is habitable.

By the early 1990s, the government and people of Nauru were beginning to wake up to an uncomfortable reality: their way of life was changing in a big way. For all of its history since independence, Nauru could buy anything it needed without having to do very much to earn it. The mining industry employed a lot of people, but most of them were laborers from China and neighboring islands. Nauruans had, essentially, forgotten how to work.

An aerial view of Nauru, showing the devastation of most of the country’s surface area.

Options for work in Nauru were severely limited. Because of the state of the land, agriculture was out of the picture. The country lacked sufficient farmable real estate to provide enough food for the population. Suddenly, the national epidemic of obesity and diabetes seemed to be headed toward an unwelcome resolution.

One possible stream of revenue would be to recreate Nauru as a tax haven for the world’s wealthy. The country sold banking licenses and passports and conferred diplomatic status on people with no connection to the country for the right price, thus granting diplomatic immunity to some shady characters. This quickly earned Nauru another unwelcome reputation when the United States and the Organization for Economic Cooperation and Development classified Nauru as a rogue nation that was abetting Russian gangsters, Al Qaida, and other nefarious miscreants through money laundering. In 1998 alone, an estimated $70 billion in Russian mafia money went through Nauru’s banks. What started out as a plan to generate income resulted in the United States slapping some of its harshest economic sanctions against the country.

With unemployment rates reaching 30% and no streams of revenue on the horizon, the country started tapping into the Nauru Phosphates Royalty Trust (NPRT).

Established in 1962, six years before Nauru’s independence, the NPRT was funded with a portion of the profits from the phosphate trade. The NPRT grew to be worth in excess of $1 billion at its peak. It invested in hotels, skyscrapers, and businesses all around the world. The income from this trust was supposed to go toward rehabilitation of the stripped land, economic development, and other measures that would prepare Nauru for the day when phosphate mining was no longer viable. In other words, it was designed to prevent Nauru from finding itself in the situation in which it now found itself.

The problem, of course, was that the NPRT was not used for its intended purpose. No significant efforts toward land reclamation or economic development were made until it was too late to avoid the crisis. By that point, the funds of the trust were needed just to keep the ship of state afloat.

We started this article mentioning mind-numbing financial mismanagement. If you think what you have read up to this point is what we were referring to, buckle up. All of this is just the preface to the chapter in the Nauru Economics 101 textbook that is entitled, “What On Earth Were They Thinking?”

The phosphates had already run out, and now the NPRT was drying up. Sober-minded government officials realized it was time to get serious about fixing Nauru’s economic sorrows.

Enter Duke Minks.

Any time you have the economic strategy of an entire nation centered around someone with a name like Duke Minks, you can guess it probably isn’t going to end well. This fact eluded those in charge of the NPRT, who bought into Minks’ vision for jump-starting the Nauruan economy: a musical.

Before embarking on his career as the the premier financial advisor of the nation, Minks served as a roadie for an obscure British pop band called Unit 4 +2. This arguably qualified him to co-write a co-produce a musical loosely based on the life of Leonardo da Vinci. It did not, however, necessarily qualify him to be the economic architect for a country that was already in desperate financial straights.

Minks convinced the leadership of the Nauru government and the trustees of the NPRT that Leonardo the Musical: A Portrait of Love was a surefire way to jumpstart the economy. What Minks lacked in financial acumen, he made up for as a salesman. Nauruan leadership bought into the project to the tune of $5 million ($7 million in 2020 dollars).

To say that the rest of the country was not persuaded might be inferred by the fact that a mob showed up at the airport to try to keep the delegation of more than 100 dignitaries from flying to London for the premiere. The delegation, which included President Bernard Dowiyogo, managed to take off, despite unhappy citizens clinging to the aircraft as it taxied down the runway.

Under the headline, “Fertiliser island scents musical success,” a British critic wrote about opening night:

ART HISTORIANS in the audience may have felt queasy midway through Act One when Leonardo da Vinci slapped the Mona Lisa on the bum, and asked her to ‘help me with my research’.

But His Excellency President Bernard Dowiyogo of the Republic of Nauru and First Lady, Madam Christina Dowiyogo, beamed. The chief secretary to the government hummed along, and the chief justice shot warning glances at the critics.

How many times do you have a West End musical financed by an eight-mile square South Pacific island whose wealth comes from the export of fertiliser?

At the gala reception afterwards, hosted by the President of Nauru at the Waldorf Hotel, it became evident that this might be the first musical which attracts more charter flights than coach parties. About 40 Nauruans had made the journey halfway round the world for last night’s performance; not that the cost would have been off-putting for a population thought to have the highest per capita income in the world. The president said: ‘I am really excited. I am trying to be objective, but I have my fingers crossed that this show will tour the world.

… They might find they are better informed about the enriching powers of fertiliser than of a West End musical.

Another review offered this summation:

“To celebrate the 25th anniversary of their independence, the people of the Pacific island of Nauru — who have become stinking rich from phosphate yielding bird droppings — have invested in the West End musical, Leonardo. Regrettably, they bought a heap. Leonardo is a dodo…”

The production opened at the Strand Theatre on June 3, 1993. It included such memorable tunes as “Who the Hell Are You?” and “Goodbye and No One Said a Word.” The latter is a good summation of the reaction of the audience. By the end of the 4-hour performance, most of the audience had departed. The show closed five weeks later on July 10. The NPRT lost almost all of its $5 million investment.

Despite our exhaustive research efforts (which consisted of about five minutes of looking through YouTube), we have found only one morsel from this cultural phenomenon. The following is the song “Let Me Be a Part of Your Life.” Its title probably seems like mockery for those who let Duke Minks be a part of Nauru’s life.

Leonardo was just one of the many nails of mismanagement in Nauru’s financial coffin. With the NPRT in bankruptcy and no other form of revenue presenting itself, Nauru went from a per capita GDP of $50,000 ($241,000 in 2020 dollars) to $8,999 in 2020. Its dismal unemployment rate of 30% in 1990 is now regarded as “the good old days,” since the current unemployment rate is closer to 90%. In 2017, it was rated as one of the 5 poorest nations on earth.

Nauru’s fortunes do not appear to be headed toward a reversal any time soon. The nation that does not have enough fertile land to sustain its own population and has to import almost all of its food (resulting in skyrocketing prices, such as $61 for one watermelon) now gets its primary revenue by taking in refugees from Australia. Since 2013, Australia has been providing about two-thirds of Nauru’s GDP by way of direct aid, visa fees and payments to the government for hosting the refugees.

In other words, the country that can’t provide enough food for its own citizens is propping up its economy by bringing in more mouths to feed.

What more can we say? Truthfully, this article has already gone on to be about five times longer than we thought it would be when we started writing it. Every bad idea we uncover seems to unearth three or four more that beg to be proclaimed. This prompts us to propose an idea to bolster Nauru’s economy. We think a movie about all of this — or even a television series — could be the answer. Granted, it wouldn’t help Nauru’s public relations efforts, but we would definitely pay to see it.


1 reply »

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.