A Paradox of Bird Poop, Mismanagement and 10,000 People

The Story of Nauru

Nauru is the third-smallest country in the world, behind only the Vatican and Monaco, and is at least 300 kilometers away from its closest neighbor, Kiribati.

Today, the country is struggling with extreme unemployment, depreciating land area, and few prospects.

Even so, this small island — with only about 8 sq. miles of land, and 10,000 people — was once the richest country in the world for almost a decade, and all its prosperity came only from bird poop.

Nauru is far away, from everything

You see, Nauru is what is known as a phosphate rock island, meaning that its land is composed almost entirely of highly-enriched mineral rock, containing extremely large percentages of phosphate. Such large phosphate deposits are quite rare, and in this case, have formed as a result of thousands of years worth of guano (bird poop!) accumulation on the island.

Birds process phosphates from the environment and pack it all in guano, which then leaches into the natural rock with the rain, after collecting on the island, and enriches its phosphate levels. This phosphate drives the production of many industrial chemicals, fertilizers, animal feed and even cosmetics.

Simply said, phosphate is rare, and it is valuable. And Nauru leveraged that to its fullest, developing a flourishing economy based on the production and export of phosphate minerals. Doing so pushed its growth and income to unprecedented levels, and for many years, in the 70’s and 80’s, Nauru was consistently ranked as the richest country in the world, as per income per capita.

Acting in wisdom, the State nationalized the phosphate production and export, routing it through the Nauru Phosphate Corporation, and depositing its income into the Nauru Phosphate Royalties Trust. This trust, was essentially the only source of income for the government, and was, at one point, generating over $50 million annually.

Forecasting a depreciation in its phosphate supply due to extensive land degradation, overmining and a lack of regulation, the state used the trust fund to make strategic investments, which it believed would cushion the economy in the future.

And that’s where the story of Nauru takes a sharp twist, aided in part by government mismanagement, and in part by ecological destruction.

In the last decade or so, phosphate production in Nauru has become almost completely unviable. More than 80% of the island’s surface area has been mined, and the population has had to settle on a narrow coastal region, which, by the way, is also vanishing quickly owing to rising sea levels.

Most of Nauru’s surface now looks like this

Meanwhile, Nauru’s strategic investments have not panned out. Even though traits of mismanagement were evident even in Nauru’s past — having had a public service that employed over 15% of the island’s population — its consequences are only being realized now.

The trust which has initial success with international real estate investments, quickly spiraled into some very bad choices, like funding Leonardo — The Musical, which is considered one of the biggest disasters of London theater. The fund also financed the operations of Nauru’s national airline, which as you can imagine, had very few economically viable options, and was perhaps only a lavish luxury, and nothing more.

Nauru’s national airline

It is estimated that the total assets of the trust diminished by over 90% in the last two decades, to a point that Nauru can no longer fund even its most basic government functions like the central bank, and has become almost entirely dependent on foreign aid for its survival.

Any recovery in the near future is unlikely, even though the state has attempted to revive phosphate production by mining even deeper into the rock, and is encouraging tourism.

What lies ahead, then, is perhaps a slow demise of what was once the richest countries in the world, which will be proof that we can be greedy for all things after all, including bird poop.