One leg, or two?

Would you rather stand on one leg or two?

The CNMI economy is up against this question, as a total wipe-out of the local garment industry is the aim of some (not all, but some) politicians in the United States. This aim is a function of two factors: one, a misunderstanding of the situation here, largely rooted in the disinformation campaign waged by unions and the media, and, two, politicians who are bought by union money and who will do union dirty work.

And, in this case, the dirty work is to shut down CNMI factories and send Chinese workers back to certain peasanthood in their oppressive homeland, all in the incorrect assumption that this will somehow enable white trash union flunkies in the U.S. to get rich quick and afford new Winnebagos every year.

The Commonwealth’s business community (what’s left of it, anyway) isn’t too thrilled at the prospect of the CNMI’s strongest economic leg facing a hack amputation job in Washington. Our other leg, tourism, is still shaky, due to a combination of Asia’s economic woes and the Commonwealth’s ineffective approach to tourism promotions.

Certain elements in Washington aren’t the only threat to the CNMI’s economy, though. Many voices here at home are opposed to the business community, and if Washington doesn’t sink the Commonwealth, then it’s likely that the Commonwealth will just sink itself.

The CNMI is getting backed into a third-world economic corner, in which anyone brave enough to invest here will require a juicy “risk premium” for taking the chance. Risk premium is a fancy word for requiring higher returns for riskier investments. And, for a lot of reasons, the CNMI is regarded as a risky place to invest.

Of course, an investment will only be made if the environment is productive enough to carry that risk premium. This is the big squeeze, the big hurdle that separates successful economies from the failures. A project in Kenya must generate far higher returns than a project in Los Angeles in order to find funding–in other words, Kenya must be more productive. But productivity in Kenya is far lower. There’s the squeeze: Messed up economies are held to a higher standard of productivity in order to gain investment, and yet are less productive than the better economies are.

The CNMI is going to wind up learning this lesson the hard way. In the meantime, putting aside concerns about future investors, the issue is whether or not the current investors are going to stay. Washington is a factor in that. Local policy is a factor in that.

Hopefully the CNMI will dodge the federalization bullet and can remain with two economic legs to stand on. But the victory will be short-lived if the Commonwealth decides to cripple itself.