Francis X. Hezel has long been concerned with economic development in the Micronesian Islands that are in association with the United States. In particular, his analysis focuses on the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI). Both countries were part of the U.S. Trust Territory that was established under the United Nations trusteeship system after World War II.

In this report, Hezel reviews the history of development initiatives in the FSM and RMI. In early territorial days, funds were limited and little in the way of development was accomplished. Later, funding was dramatically increased, and conventional approaches were implemented. Investment in human resources was followed by a large push in infrastructure improvements. The overall results were disappointing, and the islands became heavily dependent on the United States.

In 1986, the FSM and RMI became self-governing nations that simultaneously established Compacts of Free Association with the United States. The island governments were provided substantial U.S. financial support for a period of 15 years with the hope that the Micronesians would chart their own course to achieve some measure of self-sustainability. At the end of the time frame, that goal proved as elusive as ever. Interim U.S. funding was provided until the second Compacts were implemented in 2004 for a period of twenty years. Direct assistance will end in 2024. In the likely event that self-sufficiency is not achieved by that date, the United States is establishing trust funds that hopefully will generate income sufficient to replace American subsidies.

Hezel is skeptical about the advice offered by development economists and other outside experts. The track record of conventional approaches to development has not been impressive. Recommendations offered by experts today are often in conflict with traditional cultures that emphasize communal values in the conduct of human relations and the inalienable quality of ancestral land. Drawing upon the work of other researchers in the Pacific, Hezel offers suggestions for alternative courses to development.