 Aloha and welcome to Ehana Kako on Think Tank Hawaii. I'm Joe Kent, Vice President of Research at the Grastry Institute of Hawaii. Filling in for Dr. Kaley Yakina, President of the Grastry Institute of Hawaii. Grastry Institute is Hawaii's only free market, limited government think tank. Island families often wonder why so many Micronesians make the voyage to Hawaii, only to live in a state with the highest cost of living in the nation. But Neil Malin is a Grastry Institute scholar and President of Habalay, a non-profit that helps students in Micronesia. He's just authored a report available on our website at GrastryInstitute.org. And the report is titled, Returning Power to Micronesians in Hawaii. Welcome, Neil. Aloha. Thank you for having me, Joe. Aloha. And your report about returning power to Micronesians in Hawaii. So tell me about returning power. Have Micronesians lost power? Well, first, just to clarify, Micronesia is a really broad term. It's just like the term America. Sometimes it refers to one country, sometimes several, and sometimes to the whole hemisphere. So it's important to understand that the term Micronesia refers to three independent Pacific Island nations, the Republic of Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands. Okay, so these three islands or states are kind of bunched together in the Pacific. We're talking about Palau, the Marshall Islands, and Micronesia. But you're saying that they've lost power. That's right. And it's interesting because these three island nations, they have a very special and very historic alignment and friendship with the United States. They are there in what's called a compact of free association. And that's a series of treaties that provides these island nations with the highest per capita foreign aid from the US government of any countries on the planet. And it also allows them to very easily come to the United States and stay either working or as students. And as you pointed out and as the title suggests, many of those who come particularly to Hawaii have come for very sympathetic, very ambitious reasons to advance themselves. And they face a lot of challenges largely because of the cost of living and some of the public policies in Hawaii that make it tough for someone with lower levels of educational attainment, lower levels of savings, and in some cases, lower levels of English fluency. Okay, so we're talking about to Micronesians that there's a lot of complexities to why they come here. But one of the main points is that there's this agreement out there that maybe a lot of people don't know about called the compact of free association. And that allows the folks from the freely associated states to come here legally. And it also provides sort of an aid and benefits package, is that right? That's exactly right. Micronesia is situated at the strategic crossroads of the Pacific. And so the United States defense policy since World War II has been to maintain very close ties with these islands. And part of the treaties that now exist between those now sovereign nations in the U.S., this compact of free association is large amounts of direct bilateral aid to the governments out there and then ease of entry for Micronesians who come to the United States. They are called, and this is a usual term, they're called qualified or eligible non-citizens. And essentially that means they can come to the United States and live in the United States almost as if they were citizens. Okay, so that sounds like a good thing. We're giving aid and we're giving benefits and we're giving free access into the country. So what's wrong with that? Has this led to problems? Well, the problems unfortunately are back in the islands. So per capita, these islands receive more U.S. foreign aid than any other countries on the planet. In fact, just this year you had about $200 million for a population of close to 200,000. And what has happened is the lack of economic development despite decades of this enormous amount of aid means that reasonable Micronesians who want to advance themselves who are looking to improve themselves in terms of education, employment or even to receive fairly basic healthcare, they are left with the option that is also provided for in the compact to migrate to the United States. Okay, but it doesn't make sense to me. We have so much money, you're saying, more aid money per capita than any country in the world, yet it doesn't seem to be working. Where's the money going? Well, unfortunately, while foreign aid packages for the rest of the world and all the other nations that America has a relationship with, those are administered by the United States State Department. In the case of just Micronesia, Halaou and the Marshall Islands, control is wholly in the hands of the Department of the Interior, an agency that many in Hawaii for a number of reasons have a great deal of familiarity with. And in particular, there is a very small, rarely talked about subset of interior called the Office of Insular Affairs. And that's where a handful of government employees exercise an enormous amount of control over the destinies of these three independent nations by providing them on a year-to-year basis, bilateral aid that accounts for virtually all or a giant share of government revenues. And because that money has never been aggressively invested in building out private sectors, and there has been a deliberate effort not to choose foreign direct investment, and there have been choices not to invest in civil society, the reality is, is for decades we've perpetuated this huge public sector that sort of crowds out other economic activities and has some predictable inefficiencies. And so that aid money, not only is it probably, well it certainly is the highest per capita of anywhere in the world, it probably returns less dollar-for-dollar than any USAID program anywhere. So the money is getting lost in a bureaucracy, it sounds like, and invested in the wrong things. Yeah, the micro-management that occurs at the hands of the Department of Interior in particular its Office of Insular Affairs, as I said, a more balanced approach of foreign direct investment and building out economic soil conditions and investing in nonprofits and civil society could have over the decades put the Micronesian economies in a position where educational attainment, health care, economic opportunity was such that perhaps fewer Micronesians would feel the need to migrate or, more significantly in my eyes, those who chose to migrate would be arriving with the skills and the capacities to move more quickly up the economic chain of opportunity. Okay, so let's talk about some of... we started talking about the power that's been lost by folks in the freely associated states and that again is Micronesia, Palau and the Marshall Islands, but what specifically, what power have they lost? Health care? Certainly, when migrants who have arrived in Hawaii as well as on Guam or in the mainland are interviewed, they consistently give three very powerful explanations of why they chose to leave their home islands and their extended families and those are health care, education and employment. Okay, so let's talk about health care then. What does health care look like where they're from? The sad reality is that while the United States has been investing heavily in health care and health care infrastructure since the end of World War II, it's very crude. The district capitals have very basic, very simple primary care hospitals and the half the population that lives in the outer islands and the more disparate atolls at best have a very simple... Okay, but it just doesn't make sense to me. I know we've already covered this, but we're spending so much money to prop up a health care system there, but it's not working. Why? Well, I think that it was both a poorly designed effort by the United States government and I think it's been a poorly implemented effort by the United States government. I think that that has a lot to do with that lack of balance, what I talked about developing capacity and making investments in the private sector and in the civil sector. I think that for decades there has been a singular preoccupation with bilateral aid, government to government and the frustration when that did not seem to work resulted in officials, both appointees and career bureaucrats at the Department of Interior, choosing to increase the level of micromanagement of which projects they approve and in many cases simply withholding funds that were guaranteed through the Compact of Free Association and other treaties. That sounds like more bureaucracy and political management, but on the ground though, what does it look like if my family is from Micronesia and I need to go to the hospital, maybe it's an emergency, what am I going to see on the ground? I think what's ultimately saddest in what I've seen both while I was a Peace Corps volunteer and in many trips since is that expectations are very low. When you have decades, even generations of unresponsive, very simple, visibly wasteful healthcare education practices, there is no reason for the community members to expect better. And I think that's what's most damaging is that obviously at the point of access, those services are not there, but their lack of availability for such great periods of time has resulted in an assumption that that's just how things are. I see, and I can see why that would inspire some to want to come to Hawaii then. Well, when we come back, we're going to talk about some of the other lost powers, education, employment, and we're going to talk about solutions to this problem with Neil Mellon back in a minute. Hello, I'm Marianne Sasaki. Welcome to Think Tech Hawaii, where some of the most interesting conversations in Honolulu go on. I have a show on Wednesdays from one to two called Life in the Law, where we discuss legal issues, politics, governmental topics, and a whole host of issues. I hope you'll join me. Hello, this is Martin Despingh. I want to get you excited about my new show, which is Humane Architecture for Hawaii and Beyond. We're going to broadcast on Tuesdays, 5 p.m. here on Think Tech Hawaii. Thank you for watching Think Tech. I'm Grace Cheng, the new host for Global Connections. You can find me here live every Thursday at 1 p.m., where we'll be talking to people around the islands or visiting the islands who are connected in various aspects of global affairs. So please tune in, and aloha, and thanks for watching. Aloha, and welcome back to A Hana Kankou. I'm Joe Kent, filling in for Dr. Kelly Ikeena. We work at the Grass Street Institute of Hawaii, Hawaii's only think tank, devoted to individual liberty, the free market, and limited accountable government. And the reason we study those things is to try to help create more prosperity in the world. We see a lot of poverty, and especially in Hawaii. We're seeing the Micronesians coming to Hawaii, and many are in poverty. And we have a guest today. His name is Neil Mellon. He's an expert on these topics. And we just left off talking about the power that has been lost in Micronesia and the freely associated states in healthcare, education, and jobs. And so, Neil, when it comes to the education and the job market in Micronesia, what does that look like? Well, a lot of folks would be surprised to know that the United States government essentially finances nearly all of the educational, public education system in the three nations that we're talking about, and that the national and state governments within those three Micronesian countries are eligible for and receive a lot of special programs from the U.S. Department of Education, whether that's special education funds or other funds that you would imagine only U.S. states and localities were able to draw down. Those are extended to the Micronesian states. That's interesting. So not only are we spending so much in America on education, we're also spending to support other countries' education. And how has it worked? Well, you know, I think investments in human capital are among the highest possible in terms of return. And so I think that investing smartly in educational opportunities in Micronesia is a no-brainer, especially because it's such an important strategic ally and located so centrally in the Pacific. I think that what frustrates me and many who have spent so much time in Micronesia is that these investments are not being made intelligently. And are they paying off? No, unfortunately they're not. When you look at the educational attainment rates, the dropout rates, and the return on investment for per-people expenditures, the heavy hand of the U.S. government, and in particular the Department of Interior, which managed Micronesia directly during the trust territory period, and remains sort of the de facto presence because it has the power of the purse today, has resulted in the build-out of a very top-heavy, very sort of unresponsive educational system. And the Micronesians have very little autonomy to attempt to make that educational system their own. They are sort of stuck in the structure of the essentially suburban American school district that we attempted to provide them, and it's not really what they need or what they want. Okay, and related to this is employment and job prospects. So how is the economy in the freely-associated states? The economy is totally dominated by a very bloated public sector that implements obviously the educational programs but many of these others. And that is totally crowded out, private sector investment, and thanks to the Department of Interior, and in some cases even language in the compact of free association that Congress has put in, it's almost as if we want them to fail. So for example, there is heavy emphasis in the Department of Interior's policies as well as in the language of the compact about limiting the availability of foreign ownership of land or even a robust domestic land accountability system in terms of rule of law and private property. Not surprisingly, if it is very difficult to own land, if it's very difficult to adjudicate land disputes and if it's virtually impossible to use land as an asset in raising capital, you're not going to have folks who can use their land in order to get a loan and start a business. Right, so I mean, at the Gratiot Institute, we are big when it comes to private property rights as a means to economic sustainability for the long-term and to prosperity. And if we don't have property rights, you're saying, in Micronesia, they've kind of deteriorated in a way. That itself is a big problem, but then there's all these other problems stacked on top. So if you don't have a good economy and you see these problems in health care, education, and you are a Peace Corps volunteer in Micronesia, if you were living in that environment, what would you do? Well, the reality is that if you are an ambitious Micronesian, you will quickly come to the conclusion that it is very difficult to start a business. There are very limited avenues for entrepreneurs, largely as the result of the Department of Interior's legacy in creating and shaping a lot of Micronesian laws and policies and sustaining them through the power of the purse. And so if there's very little economic mobility and there are limited educational options and health care is a particularly scary field, I think that the reasonable thing that an ambitious Micronesian would do would be to migrate because that is one thing that the Compact of Free Association provides for, that they can sort of own and do themselves. There's not much the Micronesian on the street or in the village can do about wasted aid or poorly designed bilateral relations. They can get on a plane or a boat and come to the United States. And they are coming on planes and boats and coming to the United States, but where else are they going? Yeah, so they certainly are going to the United States, the States. There's a significant influx in Guam as well, the territory of Guam, as well as the Commonwealth of Northern Marianas, another part of the United States. I heard a quote that says, you can tell the economic success of a state or a nation by whether or not people want to go there. And it looks like in the free associated states, they are flooding out. So what does this mean for Hawaii then? We see a lot of Micronesians coming here and personally, I feel sorry because it's one of the most expensive economies in the world. So what are you seeing from the data of people who come here? So you're exactly right, that from a Micronesian's point of view, it seems like a great destination because of the weather and the lifestyle and obviously the economic opportunities that they're going to find anywhere in the United States. But the specifics of Hawaii are a challenge because of the very high cost of living, in particular the very high cost of housing and some other policies and regulations that disadvantage individuals, whether they're migrants or not, citizens or not, that have lower levels of educational attainment, that have less savings and may have modestly lower proficiency in English. And so the question is, what are the ground conditions for economic mobility in Hawaii? If someone is a low income person, are there avenues for them to advance themselves and obtain the resources that they need? Are they able to get a job and attain enough money to pay for housing or have housing costs artificially through zoning and other regulations been elevated to the point where they're unobtainable? Right, so a lot of the things that the Grass Street Institute talks about just generally when it comes to the free market, you know, minimum wage laws and over-regulation of businesses and all that, it may affect rich people or the middle class, but it also affects the migrants who are coming here to seek a better life as well. Is that what you're saying? It's right, and I guess for me, it's a particularly cruel situation because while the U.S. has invested just an ordinance amount of money in foreign aid since the mid-40s to try to bring these islands to a level of economic advancement and self-sufficiency, the U.S. has failed and so ambitious, rational, Micronesians see their one other opportunity in the U.S. relationship is to come to a place like Hawaii and advance themselves and then when they arrive in Hawaii and encounter some of those things that you were just talking about, it's sort of a second set of barriers, which is just, it's unfortunate. I want to talk about some of the money being spent again. You mentioned that millions of dollars are spent to try to help the situation, but is all that money going where it's supposed to go? And how do we know? Yeah, that's a really tough question. I think that the ultimate answer is, as you pointed out, Micronesians are leaving in mass and that should be a significant indicator that there is something structurally wrong with the enormous investment, the highest per capita of any U.S. foreign aid policy that the U.S. has dumped. And I'm not talking about one or two years. The legacy here began during World War II and it evolved from naval control to trust territory ship and then the Micronesian nations became independent countries and entered into these compacts of free association. And so this is a multi-generational issue where large amounts of U.S. aid are often highly micromanaged and directed almost exclusively at the public sector has resulted in these troubling lacks of educational employment and health care opportunities. Neil, in your paper, which again, the paper is titled A Returning Power to Micronesians in Hawaii, it's available on our website at www.grastreatinstitute.org. But in the paper, you mentioned that $125 million have been spent by the, or were supposed to have been spent by the Office of Insular Affairs to try to improve infrastructure. But we're not really sure if the money has even been spent in the correct way. Is that right? Well, honestly, it's fairly clear the money hasn't even been spent. So the unfortunate reality is that a handful of officials in the Department of Interior have an incredible amount of control. The treaties, the Compact of Free Association, in this case the Compact with the Federated States of Micronesia, specify areas in which money is to be spent and the volumes that are to be spent. And in the case of infrastructure, and this could be everything from hospitals to schools to... That might help, actually. Exactly. The projects need to be approved by a joint panel of Micronesians and Americans, but the numerical voting majority consists of Americans and the majority of that are these officials, these bureaucrats in the Department of Interior. And year after year, they so completely shot down various projects that were presented by the Micronesians that the Micronesians sort of stopped presenting them. Well, Neil, look, it sounds like we've got issues with the bureaucracy and even an opportunity for corruption that is leading to big problems. And if you'd like to read more about it, please go to our website, www.grastreatinstitute.org, and you'll find his paper. Thanks so much for joining us, Neil. My name is Joe Kent. Thanks so much for watching. Aloha.