Nauru's Phosphate Collapse
Nauru sued Australia at the International Court of Justice in 1989 over the mining that had destroyed four-fifths of its territory. The island is twenty-one square kilometres in the central Pacific, and its interior was a plateau of phosphate rock — the accumulated guano of seabirds over millennia, among the purest deposits ever found and enormously valuable as fertiliser. It was annexed by Germany in 1888, taken by Australia in 1914, and administered afterwards under a League of Nations and then a UN trusteeship by Australia, New Zealand and Britain jointly, through a company they owned that sold the phosphate to their own farmers below world prices. Nauru became independent in 1968 and bought the operation outright the following year. The revenue that followed was extraordinary. By the early 1980s Nauru had, on some measures, the highest income per head in the world — free healthcare and education, no taxes, government-funded travel, and a sovereign trust fund intended to support the country when the rock ran out. The fund was spent. It was invested in Melbourne property at the wrong moment, in hotels, in an airline, and famously in a London musical about Leonardo da Vinci that closed in weeks, and much of it disappeared through advisers and outright fraud. The mining left a landscape of limestone pinnacles where the topsoil had been. Australia settled the case in 1993 for A$107 million. Nauru has since lived on offshore banking, selling diplomatic recognition, and hosting Australia's offshore detention centre. Secondary mining of the remaining rock has resumed, and the country is a standing example of what a resource windfall does to a state too small to absorb it.
- Year: 1989 CE
- Category: Economic
