3

Harder than expected

The system of centralised wage fixing that Papua New Guinea inherited … is totally inappropriate for a country at Papua New Guinea’s level of development. The Government might well consider scrapping the system and starting again. (Goodman, Lepani and Morawetz 1985, 67)

Being or becoming a politician has [become] an attraction to many Papua New Guineans from all walks of life. (Pokawin 1986, 136)

3.1 Economic policies

We discussed macroeconomic policies in the previous chapter. In this chapter we focus on microeconomic or structural (growth) policies. Assumptions of growth at independence were optimistic, and policy statements at the time placed all the emphasis on equity. That changed as economic growth in fact proved difficult to achieve, but the period was characterised more by policy stasis than reform. The economy suffered from high costs and over-regulation. Rural development was a major focus of the period, but not a successful one. Land policy reform was largely deferred, not for the last time.

3.1.1 Economic policy at independence

Most striking about the various policy statements from the time of independence is their lack of any mention of economic growth. In the decade prior to independence, following an influential 1964 World Bank report and a change in ministerial responsibility in Australia for its colony, economic policy had shifted from protecting smallholders to also emphasising economic growth or ‘accelerated development’ as it was called (MacWilliam 2013). In the run-up to independence, growth was de-emphasised by PNG’s emerging leaders not due to strong anti-growth sentiment, but rather to signal a new approach, and on the basis of the optimistic assumption that growth, which had been rapid in the immediate pre-independence period, would be the easy part of the post-independence journey.¹

In 1972, a group of UK consultants commissioned by the United Nations Development Program wrote the Faber Report that argued that ‘the emphasis of the next plan should be on localisation/indigenisation, rather than growth’ (Faber et al. 1973, 4).² PNG was entering into a period of self-rule in preparation for independence. Chief Minister Michael Somare immediately converted the Faber Report into an Eight-Point Plan that emphasised equality, the decentralisation of economic activity, self-reliance and national ownership.³ A similar manifesto of five ‘national goals and directive principles’ became the preamble to PNG’s constitution. Some two pages of (non-justiciable) prescriptions were bundled together at the start of the constitution under five headings: integral human development, equality and participation, national sovereignty and self-reliance, (protection of) natural resources and the environment, and (reliance on) PNG ways.

Although the five goals, like the eight points, avoided any mention of economic growth, they contained aspirations that could only be supported by its occurrence, such as increased revenue and better health, nutrition and education. Much of the content of the five goals is compelling and has maintained its relevance, most notably the calls for a rapid move towards gender equality. Other parts made less sense—even at the time, given PNG’s aspirations to develop its mineral and petroleum resources. There is a wariness in the constitutional preamble in relation to globalisation, with calls for ‘strict control of foreign investment’, for the PNG economy to be ‘basically self-reliant’ and for the state to ‘control major enterprises engaged in the exploitation of natural resources’, as well as a warning against ‘dependence [on] imported skills’.

Parts of the constitutional preamble and Eight-Point Plan were taken seriously. There was rapid localisation of the civil service (3.2.2), and plans were adopted shortly after independence to buy out plantations (2.2.2) and other foreign businesses.

Other parts of official economic policy at independence, in particular the emphasis on equality, were honoured more in the breach than the observance. It is difficult to think of a more extreme form of policy incoherence than the priority given in the Eight-Point Plan to agriculture and rural development, and the doubling of the minimum urban wage over the years immediately preceding independence. No point was more emphasised by the Faber Report than the importance of not increasing urban wages. If the PNG government ‘has the welfare of the rural majority at heart’, the Faber Report cautioned, it will have to ‘adopt a tough line to all sections of the urban workforce’ (Faber et al. 1973, 31).

This was a big ask. PNG’s first major and then dominant party, Pangu, had made increasing wages for national civil servants a major policy plank in the sixties (Kiki 1968). Industrial relations in the private sector were governed by a central system of wage setting, transplanted from Australia. PNG’s Minimum Wages Board sided with the trade unions in the pre-independence years and the urban minimum wage was doubled after inflation between 1972 and 1975 (Figure B18). The PNG government did nothing to prevent or even oppose the large increases awarded by the board in 1972 and 1974, making submissions to neither and ignoring its own income policy that it developed in 1974 and which urged wage restraint (Somare 1974). Indeed, in 1974, the minister for labour sacked the board for not increasing wages enough, and put in place one more sympathetic to union demands (Conroy 2020, 349–53; Langmore and Berry 1978; Gupta 1992).⁴

If support for equality was a reflection of the emerging elite’s idealism, the sharp growth in urban wages was a product of its urban base (indeed, union base, in the case of Pangu). The fusion of, and unreconciled tension between, the two was captured early on by university students who, in 1974, went on strike both to demand higher allowances for themselves and to urge the government to do more to promote an egalitarian society (Howie-Willis 1980, 228–9).

Some, including the Wages Board itself, made the argument that increasing urban wages was consistent with equity because workers would redistribute their higher wages to their rural kin or wantok (Lepani 2014).⁵ However, this ignored the logic central to the government’s income policy, namely that increases in the minimum wage would shift government revenue to the payment of salaries and away from rural development. The high minimum wage would also make future economic expansion more difficult. PNG’s wages became very high by international standards (3.1.3).

In any case, at the political level, talk of redistribution, while useful as a rhetorical device, was far from a shared ideology. Some aspects of PNG culture were egalitarian, but others were not. According to one observer, in the PNG Highlands what was valued was ‘power and wealth and the ostentatious display of both’ (Connolly 2005, 94). Few villagers were even aware of the Eight-Point Plan and it had little ownership among the elite either (Allen 1983, 227–9). PNG’s politicians had growing links to business, and were more pragmatists than ideologues (Voutas 1981, 46–7).⁶ Consistent with this, Pangu’s 1972 election platform, while ‘calling for rural improvement, came down heavily in favour of improved wages and houses for urban workers, and avoided reconciling the competing demands for urban and rural areas’ (Voutas 1981, 34).

To the extent that there was a firm ideological commitment, it was to economic nationalism rather than equality.⁷ Hence the emphasis on localisation, the first of the Eight-Point Plan’s goals, and one of only two to which the adjective ‘rapid’ was attached—the other, ironically, was gender equality (Garnaut 1981). From a nationalistic point of view, urban wage increases could easily be, and were, supported as shifting income from foreign capitalists to national workers. The support for redistribution from richer to poorer was much more muted. In 1978, Hegarty (1998e, 327) commented that ‘the rhetoric of redistribution is still current but the essentially accommodative political and governmental style ultimately works in the interests of those with the most economic and political clout’.

Apart from the selective way in which they were implemented, the other problem with the Eight-Point Plan and the Faber Report on which it was based is that they were too optimistic. While the latter argued that GDP growth should not be maximised, it nevertheless assumed GDP growth in excess of 7–9 per cent a year and national employment growth of 5–6 per cent a year, which is rapid by any standards (Faber et al. 1973, 4, 18, 19).

It is true that the economy had been growing rapidly in the years prior to independence: gross national product was estimated to have grown by more than 10 per cent on average between 1963 and 1973 (Goodman, Lepani and Morawetz 1985, 28). Growth in the early seventies had been especially rapid with the construction of the Panguna mine in 1971 and 1972, followed by high copper prices in 1973 and 1974 (Chowdhury 2018, 95). If it had been reasonable to assume that high growth would continue, then trading off some of that growth for greater equity would have made good sense. But the rapid pre-independence growth was an unrealistic benchmark. Apart from the risks of deeper disruptions to do with such a fundamental change as decolonisation, the pre-independence growth in plantation output and mineral production was in any case not sustainable, and the withdrawal of the Australian administration and the departure of many expatriates was always going to be a drag on growth. Moreover, a temporary plunge or a longer-term decline in commodity prices (the latter as per the popular Prebisch-Singer hypothesis) was an ever-present risk for a commodity exporter such as PNG. Finally, the risks of low growth were underestimated. The belief expressed at independence that even ‘no growth at all’ could lead to ‘an increase in human welfare and happiness’ (Somare 1975, 108) was naive.

In hindsight, the underlying weakness of economic policy in the seventies and eighties was an underestimation of how important achieving growth was and how difficult it would be to achieve. There were a few warnings that it might not be that easy, but these came more from political scientists and historians (such as Nelson 1972, quoted at the opening of Part I) than economists, and related more to threats of disunity and secession than to economic risks.⁸

3.1.2 Economic policy through the eighties

It did not take long for the realisation to dawn that things were not going to plan. Finance Minister John Kaputin (1982, 57) said that he was:

quite worried about the future non-mining growth rate of the Papua New Guinea economy. A lack of agriculture replanting, land problems, government inefficiency and a general attitude of wanting to get something for nothing are problems that must be tackled.

However, absent a crisis, there was inadequate impetus to change course.

Economic policy was therefore characterised more by stability than by change through the eighties. The emphasis on economic growth increased due to slow growth. This change was particularly marked from 1985 to 1988 under PNG’s third prime minister, Paias Wingti, who talked about ‘the imperative for economic growth’ and said he would ‘not repeat the mistakes of previous governments by compromising its growth objectives to the achievement of subsidiary social goals’.⁹ The 1985 National Development Plan had as its first aim ‘economic growth’ (Yala and Sanida 2010, 50). Then, when Rabbie Namaliu took over as prime minister after a vote of no confidence in 1988, his government tried to switch the focus to education.¹⁰ However, fiscal constraints throughout the whole period, political instability from the eighties onwards and the absence of an economic crisis that necessitated a tough response limited the influence of these largely rhetorical policy shifts.

The early years of independence were a period in which radical thinking and experimentation were popular. The ‘Melanesian way’ continued to be promoted, reminding audiences of the constitution’s five directives and emphasising distribution and grassroots community engagement rather than accumulation and foreign investment (Narokobi 1986; Samana 1988).¹¹ An appropriate technology centre was established in Lae. Tanzania and China were role models for many, and radical ideas were often espoused at the annual academic–policymaker confab, the Waigani Seminar, which started in 1967 and ran (with some breaks) until 1997. However, in most respects, economic policy was, in fact, relatively orthodox. Governments were not against private enterprise but saw a role for themselves as well. A mixed economy developed:

By 1982, the Government had equity holdings in mineral, palm oil, sugar and logging projects and responsibility for 37 statutory bodies engaged in commercial activities. The State owned the Papua New Guinea Banking Corporation, the largest commercial bank, which controlled around half of the banking business in the financial sector. Two government financial institutions, the Investment Corporation and the Development Bank, had shareholdings in approximately 80 businesses, while most provincial governments had established development corporations. (BPNG 2007, 36).

Foreign investment was welcome in principle, but approvals and regulations were cumbersome (Goodman, Lepani and Morawetz 1985). A large number of sectors were reserved for local investors (Daniel and Sims 1986, 31). Even where allowed, foreign investors were tightly regulated by the National Investment Development Authority (NIDA), a product of the thinking at independence of the need to ‘control and restrict all the foreign capital’, as per the quote from Prime Minister Somare with which the previous chapter began.¹² For such enterprises, ‘all overseas marketing, loan, management, royalty, etc. agreements require[d] prior NIDA approval’ (Daniel and Sims 1986, 32). There were long delays in granting those approvals. Having to deal with provincial governments as well only added to the process, as did the stringent rules placed around the hiring of foreign workers.

Price controls were widespread—covering some 56 per cent of the typical urban consumption bundle—but not implemented in a way that kept prices artificially low (World Bank 1991, 95–6; 1993, 36).

Tariffs were not high at independence but were increased over time. A uniform tariff at independence of 4 per cent was increased to 10 per cent and, starting in 1979, supplemented by higher tariffs (at first, 17.5 but then 30 per cent) for all goods for which there was domestic production (Gupta 1992, 168–9). From the eighties to the mid-nineties:

increasing use was made of protective tariff rates and ad hoc bans and quotas to protect a range of both primary and manufactured goods such as sugar, animal feed, plywood, matches, canned meat and soap. (BPNG 2007, 42)

Industrial policy was, and has remained, an area of contention. Daniel and Sims (1986) provide an account of the debate between the ‘production’, ‘valuation’ and ‘nationalist’ schools of thought. The first group wanted more domestic production, the third more national ownership and the second group (the economists) wanted the best value proposition, regardless of location or ownership. Over time, the first and the third group combined to make trade policy more protectionist.

Hardly anything was done to tackle the problem of high wages, despite the repeated warnings from the economic reports of the time. The government acknowledged the need for action but put it in the too-hard basket. Finance Minister Kaputin (1982, 55) said that a reduction in real wages ‘would clearly be desirable as our basic cost structure is too high’, but went on to excuse inaction on the grounds that, ‘in our Melanesian society, a degree of consensus is required’.

Indeed, there was not only protection for real wages by indexation to inflation, but also a further increase in real wages with the introduction of superannuation in the eighties (Garnaut 2000). Economic reports called for real wages to be cut by 25–30 per cent (Garnaut et al. 1984, 234) and for the system of centralised wage setting to be scrapped (Goodman, Lepani and Morawetz 1985, 67; see the quotation at the start of this chapter). The only nod in these directions was the introduction of partial indexation over the course of the eighties.¹³ This saw a modest 9 per cent real reduction in the urban minimum wage between 1982 and 1992 (Figure B18), about enough to offset the superannuation impost.

It is not easy to give an overall verdict on the economic development policy stance of the eighties. It is surely an exaggeration to say that ‘the founding fathers of Papua New Guinea were followers of the Dependency Theory approach to economic management’ (BPNG 2007, 238). This is no more convincing than the opposite argument, put forward by dependency theorists shortly after independence, that the PNG government was implementing a ‘neo-colonialist strategy’ (Mortimer 1979, 239) and that PNG was being ‘integrated into the world capitalist system’ (236) without opposition or resistance via a ruling class of ‘politician[s], bureaucrats and foreign interests’ (232).

Somewhere in between pro- and anti-market (including pro- and anti-foreign investment) would be one way to describe economic policy in the post-independence years; complacent would be another.

The only area where there was deregulation in the eighties was in the financial sector. PNG’s financial system has always been dominated by a small number of banks. The biggest in this period was the state-owned Papua New Guinea Banking Corporation; three others were subsidiaries of Australian banks (Westpac, ANZ and National). In 1983, two other foreign banks were given licenses to establish local subsidiaries: Indosuez and Lloyds. Until 1984, interest rates were regulated by the central bank, but lending rates were deregulated that year, and deposit rates the following year. Sectoral lending targets, and targets for loans to nationals, were also done away with over the course of the decade. This was a move that had profound implications in the following decades, unexpectedly increasing interest spreads as the financial sector became less competitive (4.3.3).

By and large, however, the eighties was a period of policy stasis. Systemic reforms—privatisation, trade liberalisation and wage deregulation—were talked about, but were a feature of the crisis-prone nineties, not the stable eighties.

3.1.3 High costs and the investment climate

World Bank Chief Economist Nicholas Stern popularised the term the ‘investment climate’, by which he meant the ‘policy, institutional, and behavioural environment, both present and expected, that influences the returns and risks associated with investment’ (Stern 2002, 88). With its high costs and long delays, PNG’s investment climate was weak at independence, and weakened further during the eighties.

Daniel and Sims (1986, 27–30) were perhaps the first to emphasise the structural constraints hindering PNG’s economic development:

Papua New Guinea provides a small domestic market for local production … Urban wages in Papua New Guinea are higher than those in comparable countries. In terms of human resources Papua New Guinea was one of the world’s least developed countries at Independence¹⁴ … Virtually all land (97 per cent) is under customary ownership where title is determined by historical occupation and is not effectively registered, making commercial loan finance impossible … Most land-based activity … faces long delays. Papua New Guinea is vastly over-regulated … The main regulations facing land, labour and capital … provide a barrier to entry … and expansion … and raise costs and prices.

It is not surprising, given the rapid wage increases in the run-up to independence described earlier in this chapter, that PNG became a high wage country. In the mid-1980s, Goodman, Lepani and Morawetz (1985, 61) showed that the country’s ‘urban minimum wages are between 2 and 10 times greater than those in neighbouring competing countries’—for example, almost double the minimum wage in Malaysia. But it was not only wages. PNG became a high-cost country in which electricity, land and transport were all expensive. The figures below come from a World Bank 1993 report. By then PNG had the highest, sometimes by far the highest, labour, electricity, rental and sea freight costs of the nine comparator countries shown.¹⁵

Table 3.1: International comparison of costs (1993)

Country	Labour (USD/hour)	Electricity (USD/kwh)	Rental (USD/sq ft/yr)	Sea freight (USD/20 ft container)
Papua New Guinea	2.00	0.19	4.24	2,500
Indonesia	0.42	0.06	0.42	2,250
Philippines	0.55	0.07	0.77	2,185
Thailand	0.58	0.07	1.72	2,050
Dominican Republic	0.72	0.07	2.40	1,730
Jamaica	0.88	0.10	3.10	1,685
Colombia	0.94	0.09	3.30	1,920
Costa Rica	1.15	0.08	3.50	1,700
Cameroon	1.56	0.06	3.65	1,625

Source: World Bank (1993, Table 4.6).

To what extent these costs were high due to geography, regulation, land tenure, governance, the Australian legacy and/or the resource sector can be debated. It is likely a product of them all. Costs were already high at independence because PNG inherited ‘Australian standards of investment, consumption and incomes’ (World Bank 1978, 29). They grew over time. For example, as crime worsened (3.2.5), security costs became another burden.

3.1.4 Rural development

There are significant and persistent geographical differences in development across PNG, and, consistent with the emphasis on equality, helping rural areas in general and backward areas in particular were priorities for the early independence period. ‘Increasing rural welfare’ and ‘Helping less developed areas’ were the first two of the eight objectives in the National Public Expenditure Plan of the seventies and early eighties (2.3.1) (Conroy 1980, Appendix A).¹⁶

Between 1976 and 1986, the government funded integrated rural development projects (IRDPs) in five of the country’s least developed provinces: East and West Sepik, Southern Highlands (which then included Hela), Enga and Simbu. IRDPs were a type of project being promoted by the World Bank around the world, and the PNG IRDPs had financial backing from both the World Bank and the Asian Development Bank. They included a mix of income generation, infrastructure and social welfare investments. In PNG, as globally, integrated rural development delivered a lot less than it promised. Connell (1997, 117) provides a good summary, writing that ‘though the IRDPs contributed to rural welfare gains, they failed to provide and develop opportunities where villagers could raise their economic productivity and increase their incomes over time’.

This is a problem that remains to this day. Allen, Bourke and Gibson (2005, 13) provide compelling evidence that the patterns of geographical disadvantage in PNG stretch back to before independence, and that poor areas are those that face ‘a number of severe environmental constraints: very high altitude, high rainfall, steep slopes, flooding and poor soils’. These constraints make it difficult for disadvantaged areas to engage with the market and keep them poor.

More broadly, government support for rural development was a victim to forced expenditure restraint (2.3.1) and the rapid civil service localisation policy (3.2.2). On the former, Conroy and Curtain’s (1978, 47) early reflection holds good for the entire period: ‘notwithstanding a good deal of rhetoric to the contrary, little has been done to tilt the balance … towards rural life’. On the latter, Allen (1983, 228) observed that:

field positions were immediately affected [by localisation], and overseas officers were replaced by young Papua New Guineans. Many were inadequately trained and lacking in experience and confidence. Sent to isolated posts as administrators, agricultural or health extension officers, they faced immediate suspicion from villagers. With some outstanding exceptions, very few of these officers succeeded in delivering services.

3.1.5 Land policy

Nearly all of PNG’s land is under customary ownership. This has long been seen as a barrier to development. The 2005–10 Medium Term Development Strategy put it this way:

PNG’s customary land tenure system is firmly entrenched in the nation’s culture, and it is recognised under the country’s legal system. It underpins PNG’s robust village farming system and provides a welfare safety-net for the vast majority of the people. Customary owned land, however, is also widely viewed as a major constraint to economic development.

As a general rule, customary land cannot be used as collateral by landowners seeking investment funds due to the absence of secure legal title. As well, individual landowners have little incentive to improve the land if the resulting benefits accrue to a large number of people who did not contribute to the improvement effort. Mobilising customary land for large-scale economic projects is also viewed as costly, time-consuming and is characterised by ongoing uncertainty. (GoPNG 2004, 10)

And it is not only customary land that is problematic. The small (about 3 per cent), but high-value share of land that has been alienated can also be subject to challenge, including from customary owners, who might reclaim ownership of the land and/or claim additional compensation for it (3.2.5). As early as 1982, one commentator noted the ‘preoccupation with land issues in the life of the country’, and gave a list of news reports such as the following:

After the National Government had recently allocated government land by way of a lease to a ready-mixed concrete company for development of a cement bulk-handling facility on the Lae waterfront, 700 squatters moved on to the land and constructed traditional houses, following a dispute with other customary landowners from whom they previously rented land, and have defied all legal and other efforts to induce them to move; the K3-4 million project is in abeyance. (Trebilcock 1983, 193)

Land reform was a priority at, and indeed before, independence, but follow-through was limited. Although the ‘[colonial] administration’s ultimate objective was to introduce a single system of individual registered titles to land’ (Fingleton 1981, 213), it took few steps to realise that objective. Only a small amount (i.e. that 3 per cent) of customary land was alienated by the state, and there was hardly any registration of customary land, or conversion to individual ownership. (In rural PNG, individual households traditionally have exclusive use rights to the land they farm, but not ownership.) An attempt was made by the colonial administration to introduce a framework for customary land dispute resolution and registration, but this was blocked by the new home rule government that, in 1973, instead set up a Commission of Inquiry into Land Matters.

The priorities of the commission and of the government at this time were legislation to support the plantation redistribution scheme (2.2.2), and customary land dispute resolution to help prevent tribal violence (3.2.5). To deal with the latter, the Land Disputes Settlement Act was passed in 1975. The Act relied on mediation, but, in the face of constrained resources and deep-seated disputes, had only limited success. In 1981 the World Bank (1982, 2) noted that disputes over landownership were ‘a major constraint on development’.

Another legislative milestone was the 1974 Land Groups Incorporation Act that, as its name suggested, aimed to give groups of landowners the ability to form a company to negotiate with and receive benefits from developers, such as in forestry. There are now some 20,000 Incorporated Land Groups registered in PNG (Allen and Monson 2014, 4), but hardly any of them are based on registered land. Rather, they are largely used as vehicles for the distribution of benefits from resource or forestry projects, and are often plagued by governance problems (Koyama 2004; Antonio, Wagi and Kari 2010).

Commercial transactions in customary land were banned, but an exception was made for the government, and this was used to get round the commercial ban. Customary landowners could lease their land to the government, who would then lease it back to the customary landowners who, since they were now themselves lessees of the land, could do whatever they wanted with it, including leasing it to developers. This was called the lease-leaseback scheme, ‘a very unusual—probably unique—legal institution’ (Filer 2017, 169). At one time, it was thought it could provide the basis for widespread commercial use of land. Amendments to the pre-independence Land Act were made in 1984 and again in 1996 (5.1.2) to further define this approach to land mobilisation, but the state could not keep up with the demand. The 1983 Taskforce on Customary Land Issues estimated the backlog to be between 8,000 and 10,000 applications (Cooter 1991, 776).

The same taskforce recommended, as had the pre-independence commission of inquiry, that customary owners be able to lease their land without the intermediation of government following a process of formal registration (Antonio, Wagi and Kari 2010). Some provinces took matters into their own hands: the East Sepik government initiated a registration scheme in 1982 (Filer, Dubash and Kalit 2000, 33). The national government approved the drafting of legislation, but it never got to parliament. ‘Land law reform drifted into the wings’ (Fingleton 1981, 235). It was not until the 2000s that the national government finally implemented a direct customary land leasing scheme and, unfortunately, it met with little success (9.1.5).

In the absence of channels to bring customary land into the formal sector, there was rapid growth in informal and often non-customary dealings in customary land:

including clan land usage agreements permitting an individual member of a clan exclusive use of given land for agricultural production for a certain period of time; group projects involving inter-clan agreements as to common working and development of both groups’ lands; [and] leasing and outright sale of land, often to migrants. (Ward cited in Trebilcock 1983, 210)

3.2 Politics and governance

The early post-independence era is one in which many of the features of PNG governance, as we know it today, were bedded down. The seventies and eighties saw the development of a distinctive style of politics, a decline in the quality of public services and a losing battle against corruption. It also saw a decisive though troubled shift to decentralisation, and the emergence of crime as a serious problem.

3.2.1 Politics

Papua New Guinea is often called the land of the unexpected, but one predictable thing is that elections will be held every five years. Given the high rate of turnover, incumbent MPs are united in wanting to avoid an early election. The first post-independence general elections were held in 1977, five years after the 1972 elections that had ushered in home rule. The surprise pro-independence coalition that the 1972 election had produced between the more left-wing and larger Pangu (Papua and New Guinea Union) Party and the smaller, pro-business People’s Progress Party (PPP) was returned to power in 1977 under Pangu Party leader Michael Somare, who had been chief minister from 1972 and prime minister from 1975. This coalition gave PNG almost a decade of political stability, but started showing signs of strain in the late seventies, especially over a disagreement on anti-corruption policy (3.2.3). PPP ended its alliance with Pangu in 1978, and, after the country’s first successful vote of no confidence, Julius Chan, the PPP leader, became prime minister in 1980, with the support of the United Party, which had its base in the Highlands and had been the main opposition.

Pangu bounced back in 1982 with an emphatic election victory—the most successful performance by any single party in PNG before or since (Table A2)—and Somare again became prime minister. However, the party itself then started to fracture, as younger leaders jostled to take power from Somare, who had intimated that he was contemplating retirement. He eventually decided against retirement but was unable to retain authority over the party he had helped to found. He lost the leadership of it in 1988 and left the following year over a dispute relating to the ownership of the Pangu business arm, Damai (Callick 1997, 111). Before that, Paias Wingti, who had first entered parliament in 1977 in his final year of tertiary economics studies, broke away from Pangu in 1985 to form his own party. He came to power in the same year, again via a parliamentary vote of no confidence. The 1987 elections delivered another shake-up and, after some wild jostling and a brief extension of the Wingti reign, Rabbie Namaliu, who had succeeded Somare as Pangu leader in May 1988, became prime minister a month later, and served in that role until the elections of July 1992.

Through this period, the shape of PNG’s politics was taking form. PNG’s first House of Assembly had been established in 1964. Democracy suited PNG, a country whose traditional, tribal organisation was ‘distinguished by a lack of inherited status’ (Allen, Bourke and Gibson 2005, 203) and where ‘political manoeuvring was a constant all-pervading activity’ (Allen 1983, 215).¹⁷ The Melanesian ‘big man’, the archetypal Papua New Guinean leader, was focused on ‘prestige, power and wealth’, above all, some argued, the first of these three (Conroy 1976, 14–15).¹⁸ The distinguished academic and politician Stephen Pokawin (1986, 136) commented that even before independence ‘it became obvious … that the short cut to prestige and wealth was by becoming a political leader’. The growing primacy of politics can be seen most clearly in the increasing numbers of candidates who stood for election, from an average of eight per seat in 1977 to 10 in 1982 and 14 in 1987 (Table A2). While the numbers were to double again in subsequent decades, these levels of political interest and competition were already high by global standards. The creation of provincial assemblies provided further opportunities for aspiring politicians to enter the field. Pokawin (1986, 134) wrote that ‘the ratio of salaried political leaders per person [in PNG] should be one of the highest anywhere’.

The pull of politics was irresistible even, or especially, for those who had already proven themselves as leaders in other fields. Membership of parliament became PNG’s most valuable prize. In the mid-seventies, people spoke of a ‘Gang of Four’—a group of talented, young and powerful bureaucrats. Two of the four became MPs in the eighties, a third followed in the nineties and the fourth attempted to become one.¹⁹ PNG’s first head of the armed forces, Ted Diro, subsequently became an MP, as did the country’s first governor-general, John Guise.

Such transitions strengthened democratic traditions, as they confirmed that the path to power lay through the ballot box. However, they were also representative of a politicisation of society that was hardly helpful for development. ‘This is a country where politics permeates society at all levels’ (Clifford, Morauta and Stuart 1984, 101). According to Pokawin (1986, 136):

Even simple decisions are highly politicised. Any decision or action taken by an incumbent leader is questioned by the prospective leaders, who are considering how it would affect their own chances in the next election. Thus, even if a decision is in the best interests of the community, they would not support it if its success would strengthen their chance of the incumbent and weaken their own in the next election.

The primacy of the political class was reinforced by the merging of business and political interests. Several commentators noted this. Finney (1973, 118) wrote of ‘the prominence of businessmen-politicians in the first House of Assembly [1964–68]’. Lapani (cited in Fitzpatrick 1980, 206) commented in 1976 that, ‘at the political level, most leaders are involved in business ventures’. Not long after, Hegarty and King (1998, 356) wrote of the creation of a ‘politician-businessman ruling class’.²⁰ With no government funding, politicians and their parties had to self-fund their election campaigns. Politicians therefore either had to be in business themselves or have a link to business. As first national army chief turned disgraced minister Ted Diro admitted: ‘It is common in PNG for politicians to use the returns from business to secure votes’ (Saffu 1998d, 443). Parties also got in the act, establishing business arms.

If business was a way to cover political costs, politics was a route to business wealth. Hegarty (1998b, 288; 1998c, 306) commented just after independence that many politicians ‘have rapidly moved into business and are maximising their opportunity to enhance their private wealth’, and that ‘politicians have come to power not from a distinct class base but in search of economic power’.

Political parties emerged in the run-up to, and were a critical part of, the political scene at independence (Woolford 1976). Pangu’s success in 1982 with 30 per cent of the vote and almost half the seats (50 out of 109) made it look like political parties were becoming more important (Jackson and Hegarty 1983), but its subsequent disintegration—and moves against Somare as party leader, despite his electoral success—gave a different perspective. Parties were not coherent enough to discipline and unite competing interests and ambitions. The tendency was to more parties and fewer differences between them, as politicians began to ‘party hop’ and create their own. In 1987, Pangu was again the most successful of the 10 parties that won seats in that election, but this time it won only 15 per cent of the votes and 24 per cent of seats (Table A2)—never again has a party come close to getting half the seats on offer, as Pangu did in 1982.

The fragmentation and weakening of the party system in PNG is the flipside to the clientelism and localism of the country’s politics (Hegarty 1998c; Wood 2018). In the 1977 elections, ‘neither parties nor national issues were of concern to the voters’ (Hegarty 1983, 12–13).²¹ Over time, politics became even more local as, with more candidates, it became easier to win with fewer votes. The mean winner vote share fell from 35 per cent in 1977 to 26 per cent in 1987 (Table A2).

The political class was growing in importance, but not in stability. In the 1977 elections, only 39 per cent of sitting MPs were returned; this ratio increased only slightly in 1982 and 1987 to just above 50 per cent (Table A2), and it has largely remained there ever since.

At first, notwithstanding this micro-level churning, political stability prevailed at the macro level. But the first and loyal opposition leader Tei Abel was deposed in 1977, and politics quickly became more combative. PNG’s first vote of no confidence occurred in 1978. Such votes could be held at any time from six months after an election to a year before the next one.²² Somare survived three votes of no confidence before losing the fourth in 1980 (Pokawin 1998, 331). Many more were to follow. From 1977 to 2002, no government survived a full term.

Unconstrained by differences in ideology or by party allegiances, PNG politics became increasingly a game in which the most important objective of politicians, once elected, was to accumulate power. General elections were only for electing MPs; the choice of the prime minister and, more broadly, the government was a matter for those MPs, and never a settled one. Opposition leaders openly declared that their aim was to change the government not at the ballot box, but within the current term of parliament—to ‘expose, oppose and depose’ in the words of Highlands leader Iambakey Okuk (cited in Pokawin 1998, 331) who orchestrated one vote of no confidence after another against Somare until he succeeded in replacing him, not by himself, but by the more acceptable Julius Chan; Okuk became his deputy.²³

Even if a prime minister was able to survive a vote of no confidence, the fight took a lot of their effort and attention. Ministers had an even more fragile hold on power as they were reshuffled between portfolios and in and out of cabinet in response to the latest power struggle (Ivarature 2022).

Reforms to enhance stability and bolster the party system were attempted from as early as 1982, when the Pangu Party took to the election a number of related proposals: to give the prime minister the right to dissolve parliament, thereby reducing the incentive for backbenchers to bring on a vote of no confidence; to force members who left their party to face a by-election; and to introduce preferential voting at elections. Bills were drafted, but did not even make it to the floor of the parliament (Dorney 1991, 78). MPs did not want to be restrained, and political, like economic, reform was put on the backburner until the nineties.

The creation of a political system in which participation was highly prized has ensured the stability of PNG’s political (Westminster) regime. This itself has been supportive of development: PNG has not been plagued by coups and periods of one-party rule. Beyond that, however, the political culture that became entrenched in this first period has not provided the foundations needed for the sort of long-term planning and national decision-making essential for development.

First, politicians inevitably developed short time horizons. The hard kina policy was often defended on the grounds that it involved ‘facing up to the difficult choices before, rather than after we get ourselves into big trouble’, to use the words of PNG’s first finance minister, Julius Chan (cited in Garnaut, Baxter and Krueger 1984, 10). However, if time horizons were short, the risk of later getting into trouble would be heavily discounted: it would likely be someone else’s problem.

Second, party systems discipline political elites through electoral accountability to take into account broader social interests. As one political leader from the time wrote: ‘due to the absence of an ideological framework … the country’s leaders are succumbing to the temptations of power and privilege for themselves, to the detriment of the people’ (Samana 1988, 96).²⁴

Third, politicians were distracted. As Dorney (1991, 78) commented, ‘smooth, steady government [was] practically impossible’. Or, as Saffu (1998f, 491) put it:

The impact of the MPs’ gamesmanship, the ferment and the turmoil, on government efficiency and performance was manifested in many ways, not least in the strong impression … that nobody seemed to be really in charge, and that vital decisions were not being made.

Fourth, the intermingling of business and political interests had pernicious effects. MacWilliam (2013) argues that politicians represented bourgeois rather than national interests. But perhaps they did a good job of neither. In an article reflecting on PNG’s early independence, Garnaut (1980, 451) wrote:

There is no doubt that the opportunities for personal gain provided by contact with the international economy can turn the minds of the controllers of a new state, where internal and external constrains on the use of public office for private gain are weak … No-one who has been close to the controllers of the new Papua New Guinea state can doubt the strength of these pressures.

… The first casualty of the passion for increased ownership of business assets by the controllers of a new state is devotion to public duty; there is simply less nervous energy, and time, for solving the complex problems of a new state. The second casualty is the gradual loosing of constraints on the exercise of state power in ways that are favourable to particular business interest, that is, the drift into conflict of interest in policy-making, and corruption.

3.2.2 Public services

Shortly after independence, a World Bank report commented that ‘an effective set of institutions for economic and financial management had been developed’. It noted that ‘education and health care and some of the country’s infrastructure—harbors, electricity supply, telecommunications and air services—are comparatively advanced’, and praised the country’s well-designed ‘network of rural health care’ (World Bank 1978, 4–5, 18).

Post-independence, there was some expansion of services, especially more schools. However, by the late seventies and early eighties, commentators were noting serious service delivery problems. Allen (1983) wrote that ‘people everywhere complain of a deterioration of services’ (228) and about the ‘general breakdown in government services which followed independence’ (235). ‘Port Moresby hospital—to name but one—seemed on the point of collapse several times early in the year’, commented Hegarty and King (1998, 355–6). Trebilcock (1982b, 114) surveyed PNG’s state-owned enterprises and concluded that their performance was ‘weak by almost any measure of performance that might be applied’. The same author, in another report, spoke to the:

widespread concern that in many areas of government policy-making and administration, [policy-making] proceeds by way of individualised, high-level, case-by-case review or decision that has resulted in a bureaucratically intensive, delay-ridden, often highly politicised treatment of individual cases. (Trebilcock 1983, 133)

The primary explanation for this decline in government effectiveness is the consolidation of the political culture described in the previous section. The increasingly powerful political class, increasingly preoccupied with jostling for power and their own business and local interests, failed to provide developmental leadership.

The judiciary weathered the rise of the political class well. In the late 1970s, a government minister, Nahau Rooney (PNG’s first female minister and one of only 10 female MPs since independence), was jailed for contempt of court, but then immediately pardoned by the prime minister. There was a mass resignation of (largely expatriate) senior judges to protest this challenge to judicial authority. But judicial independence in the long run was little affected, and, in fact, the courts have carved out a very broad role for themselves as PNG has become an extremely litigious society (9.2.2).

The rise of the political class was much more at the expense of the bureaucracy. There was nothing intrinsically wrong with this. The interests of the bureaucracy and the broader population were not necessarily any more aligned than the interests of the politicians with the latter.²⁵ However, politicians and bureaucrats found it difficult to build an effective modus operandi. In an environment of ‘mutual suspicion’ (Standish 1981, 304) and ‘basic distrust’ (Ballard 1981, 84), politicians increasingly saw bureaucrats as non-responsive and expensive, and bureaucrats increasingly saw politicians as corrupt and self-interested. Politicians asserted themselves and took into their hands decisions previously left to bureaucrats. A bureaucratic expenditure prioritisation committee that was powerful in the early years of independence was dismantled. Iambukey Okuk (1982, 237), as deputy prime minister, said of the 1982 budget that for the first time it had been ensured that ‘Cabinet decides the final budget, not the non-elected, non-accountable bureaucracy’. Pieper (2004, 3) summarises the views of early senior bureaucrats about politicians:

There was an increasing feeling amongst politicians that the bureaucracy was too powerful and independent, and not astute to political needs … [B]y the mid-eighties they were generally much better educated, and a belief grew that they ‘knew it all’ and did not need to rely on the advice of public servants. Public resources increasingly became controlled by politics rather than public policy, and politicians began involving themselves in administration, project management, and senior appointments.

As early as 1979, the government established a high-level committee ‘to investigate the poor performance of the public service’ (Allen 1983, 228). In 1985 the Public Services Commission (PSC), a constitutional and extremely powerful body controlling public service appointments and promotions, was sidelined via amendments to the constitution. The changes to the constitution and associated new legislation, introduced on the advice of the World Bank and consistent with new public sector management thinking, delegated the responsibilities of the PSC to departmental heads (Cochrane 1986). While a well-intentioned move to increase government efficiency and responsiveness, this reform also opened up the public service to political interference and nepotism. Factors other than merit quickly came to be salient for recruitment and promotion. In fact, as early as 1980, it was commented that ‘ethnicity is an influential factor in the advance of officials within the public bureaucracy’ (Fitzpatrick 1980, 208).

There were other problems as well. It was inevitable that there would be some decline in service delivery following independence. The pre-colonial model ‘cost too much and depended on a highly educated [expatriate] workforce’ (Firth, cited in Denoon 2005, 145). Expatriates dominated, especially at the senior level. Indeed, until 1955 there had been no indigenous civil servants at all (Gupta 1992, 28). By 1972, there were only four senior nationals in the civil service (Ballard 1981, 79). It is not surprising that localisation was the new government’s top priority (3.1.1), but the pace was excessive. The Public Service Board (forerunner to the PSC), impervious to the mood of the time, put out a statement in 1972 that the number of expatriate civil servants that would be needed in 1976 would be 7,000, not much less than the 7,800 then employed. Somare took exception to this and said that the target for 1976 should be 3,000. This shocked many in the expatriate workforce into leaving, and the 15 per cent annual reduction targets put in place following Somare’s announcement were more than exceeded (Ballard 1981, 80–1). The number of expatriate public servants continued to fall, reaching 1,700 by 1988 (Turner 1990, 44). While some excellent national public servant leaders emerged, the outcome of localisation was ‘a sharp decline in effective performance and responsiveness to policy objectives in the field’ (Ballard 1981, 92–3). Section 3.1.4 highlights the cost of localisation in the context of rural development. Nelson (1982, 208) gives the example of a nursing tutor who, four months after qualifying for that job, was appointed as principal of the nursing school.

The controversy and, at times, chaos around provincial governments (3.2.4) was another influence on government effectiveness. Moreover, there were shortages in most provinces of ‘the trained, experienced, competent and confident staff required for coherent policy formulation, advice and implementation’ (Standish 1981, 303).

Finally, the controls on civil service numbers due to low revenue growth meant there could be no increase in frontline workers despite rapid population growth. Significant pay increases to national public servants in the run-up to independence worsened inherited problems of affordability. Fiscal stringency meant there was virtually no growth in the civil service, with employment of 46,000 public servants in 1975, 55,000 in 1981 and only 49,000 in 1988 (Figure B16).

3.2.3 Corruption

Its framers, anticipating problems with corruption, included a Leadership Code in the constitution to be administered by an Ombudsman Commission and a Leadership Tribunal. The code is broad in scope and covers not only politicians but also senior bureaucrats. The Ombudsman Commission was very active: Dorney (1991, 217) observed that there was ‘no other country in the South Pacific or Asia where such a proportion of those occupying positions of power and privilege have had to face the criminal courts’.

In 1978, corruption in PNG was judged to be ‘still low by world standards’ (Mortimer 1979, 233). But things quickly got worse. ‘National concerns about corruption arose … during the late 1970s and in the early eighties’ (Payani 2003, 91). Somare put forward a proposal, when he was returned to office after the 1977 elections, to strengthen the Leadership Code to require MPs to sell all business interests (and not to relatives) in return for a substantial pay rise. (The business activity of ministers was already constrained by the code, though it is not clear whether this has ever been seriously enforced.) Somare justified this radical move as necessary to prevent the entrenchment in power of ‘the interests of a small elite’ (Hegarty 1998d, 317).

Perhaps he was right, but the reform flew in the face of the substantial business interests even then of many of PNG’s political leaders and parties. If there was a ‘politician-businessman ruling class’ (3.2.1), Somare’s proposal was an existential risk to it, and it was opposed and doomed from the start. Julius Chan quit the ruling coalition partly on account of this issue and went on to briefly replace Somare as prime minister in 1980.²⁶

Other anti-corruption efforts were made in the eighties, including the strengthening of the police fraud squad. In 1988, Prime Minister Namaliu put forward the first proposal for an anti-corruption agency (Oliver 1998, 458). One was finally legislated for 32 years later (9.2.3). As this long delay itself suggests, the anti-corruption battle was a losing one, in the eighties and, indeed, in subsequent decades, for a range of reasons.

First, as Somare recognised, the growing business interests of MPs were an intrinsic risk to integrity. Second, ministries and chairs of boards were handed out as inducements to join and stay with a ruling coalition. This might not in itself have been corrupt, but it created an environment in which rules governing accountability and conflicts of interest got short shrift. Politicisation breeds corruption. Third, the efforts of the Ombudsman notwithstanding, a number of prominent scandals went unpunished or lightly punished. Ted Diro, mentioned earlier, was forced to resign twice as a result of corruption allegations, once as a minister, once as an MP, and in both cases bounced back. Over time the perceived balance between risk and reward led to the normalisation of corruption.

3.2.4 Decentralisation

It is an exaggeration to say that decentralisation was foisted on PNG at independence because of Bougainville, but not a huge one (Howes, Sause and Ugyel 2022). Given PNG’s demographic and cultural diversity, it is hard to imagine that its governance structure would not, at least to some extent, involve decentralised government. Decentralisation was also consistent with the ethos of self-determination that prevailed at this time, and MacWilliam (2016) argues that it was part of a drive to transform political power into commercial opportunities. Nevertheless, it was Bougainville that forced the pace and type of decentralisation. The fact that this remote province—that happened to contain the country’s one, massive mine—was threatening to secede in the pre-independence years (and, at one point, did, if briefly and ineffectually, declare its independence) meant that the national government had to counter with an offer of autonomy. At that time, there was no reason to give Bougainville special treatment, so autonomy for one meant autonomy for all.

The process was not a smooth one: there was no national movement for regional autonomy, there was no obvious ‘right’ level of autonomy to aim at, decentralisation was a threat to national politicians and whatever was agreed had to be acceptable to Bougainville. A sign of the sensitivity and difficulty of the issue is that decentralisation and provincial governments are not even mentioned in PNG’s original constitution. Despite the heavy emphasis on the subject by the Constitutional Planning Committee (tasked with drafting the constitution), it was simply not possible to reach agreement in time. However, the issue could not be assigned to the too-hard basket for long. In 1976, agreement was reached on arrangements for Bougainville, and in 1977 PNG passed the Organic Law on Provincial Governments, which extended those arrangements to all of PNG’s then 20 provinces, or districts as they had been called. (An organic law in PNG is one that amends the constitution; it requires a two-thirds majority in parliament, twice.)

Wide-ranging responsibilities—including for health, education, agriculture and transport—were given to the provinces, initially on a selective basis (to those that wanted more autonomy), but, over time, to all. Bureaucrats were still formally regarded as belonging to the national government, but those working in a province were subject to the authority of the top provincial bureaucrat. Modest equalisation grants were provided.

However, the emphasis was not on fiscal or administrative decentralisation, but on political participation and mobilisation. Provincial assemblies (parliaments) were created. These had elected representatives and were headed by a premier (normally indirectly elected, but in a few cases directly) and a cabinet.

It soon became clear that the system adopted did not provide a stable basis for governance or development. In some cases, decentralisation worked well, at least initially (Kolma 2021, 2022 on Morobe); in others it failed from the start (Standish 1981 on Simbu). In most provinces, provincial assemblies had little public support and tended to replicate the problems seen at the national level: ‘instability of coalitions and political alliances; the over subscription of elections and the super-rapid circulation of elites; the weakness of financial controls’ (Saffu 1998c, 424).

Given the local nature of PNG politics, provincial premiers, ministers and assembly members were often seen as a threat to the national members of parliament. ‘With the establishment of provincial governments, national politicians lost considerable influence in their home areas and personal jealousies became inflamed’ (Allen 1983, 230). In 1983, the national government passed an amendment to allow for the suspension of provincial governments for non-performance, and, over the next decade, most were suspended. But this simply led to increased conflict and confusion. Sean Dorney (1991, 166) provides an example of the sort of problem that arose:

The Western Highlands provincial government had been suspended early in 1987 by Prime Minister Wingti [from the same province]. Prior to the lifting of the suspension, Mr Wingti appointed Gabriel Waipek to the job [of provincial secretary, the top provincial bureaucrat]. Then the reinstated premier, Philip Kapal, reappointed his former provincial secretary, Peter Wama. Both Wama and Waipek claimed legitimacy, and each issued orders suspending the other from duty. The farcical situation dragged on for months, with the public service in the Western Highlands cleaving down the middle, half supporting and taking directions from one man and half from the other.

By the mid-eighties, national leaders were talking about the need for major decentralisation reforms.²⁷ These were finally implemented in 1995, when provincial assemblies and elections were abolished (5.2.4).

Meanwhile, national MPs were reasserting their fiscal influence with decisions in the early eighties to allocate sectoral funds for roads, health and agriculture to MPs rather than provincial governments (King 1998, 348). They were also developing a completely different model of decentralisation, based on discretionary funds under their control. The antecedents were funds created in the 1970s, such as the Village Economic Development Fund and the Prime Minister’s Discretionary Fund, which provided resources for local projects. As time went on, these funds came to be allocated per MP. The Electoral Development Fund was created, and, in 1984, MPs were given funding of PGK20,000 each (Connell 1997, 278). This increased to PGK100,000 by 1990 (Dorney 1991, 223) and MPs manage millions of kina in discretionary electorate funding today (Figure A1). Through these funds, national MPs would come to challenge both provincial politicians and national departments.

3.2.5 Law and order

Tribal violence and urban crime were problems before and at independence, but they and other law and order problems became much more serious and widespread over the seventies and eighties.

Even before independence, in parts of the Highlands ‘traditional warfare, suppressed for a generation, was breaking out’ (Nelson 2009, 267). Saffu (1998b, 415) succinctly enumerates the causes of tribal violence as ‘tradition, absence of trusted and effective state institutions, pressures of the modern economy on land and customary relations, [and] alcohol’. Urban violence, and perhaps tribal as well, was exacerbated by low employment growth, and by low conviction rates (Clifford, Morauta and Stuart 1984).

Crime was not only a matter of urban gangs and fighting between tribes. The stealing of coffee and other cash crops became widespread as did hold-ups on the country’s main road, the Highlands Highway (Good 1986, 59–60). During this period, landowners increasingly used coercion to claim resources and to protest. By the late seventies, there was an ‘increasing tendency for the people to demand high compensation for work done on their land’ (Pokawin 1998, 336). Various groups threatened to close roads, stop water supply and interrupt electrical services if their demands for increased compensation were not adhered to (Saffu 1998e, 475).²⁸ One of the daily newspapers said that promoting compensation claims was the ‘biggest growth industry in the country’ (Trebilcock 1983, 193).

Election violence also worsened. Of the 1987 elections, Saffu (1998d, 436) commented:

in terms of violence, the Highlands region was the worst, with ballot boxes being burnt in the Kandep area of Enga, and officials being assaulted and rivals being axed. Worse violence often followed the declaration of results.

More generally, Saffu (1998d, 436) noted: ‘The tendency for aggrieved groups to take the law into their own hands and unleash their own brand of justice is a familiar problem in Papua New Guinea.’

The widespread public dissatisfaction with the law and order situation was as much with the unsatisfactory response to criminality as with growing criminality itself (Dorney 1991). As early as 1980, the police were ‘accused of widespread indiscipline and ineffective performance’ (Pokawin 1998, 334). The army, too, started to have ‘significant problems with indiscipline’ in the eighties, with army riots in February 1989 in the nation’s capital (Dorney 1998, 70). ‘Renewed fighting in the Highlands [after independence] represented a return to forms of violent self-help in the absence of effective government alternatives for managing disputes’ (Walton and Dinnen 2022, 90). Some argued that rising crime was a response to ‘the crumbling of integrity in the structure of the state itself’ (Clifford, Morauta and Stuart 1984, 103).

As early as 1982, a survey of businesses found law and order to be the private sector’s biggest concern ‘by a substantial margin’ (Trebilcock 1982a, 75). Saffu (1998a, 394–5) described ‘lawlessness and lack of order’ as PNG’s Achilles’ heel, and commented that crime had become a national obsession, with large protests (25,000 people) in Port Moresby in October 1985. Writing at the end of the eighties, another commentator, Sean Dorney (1991, 333), nominated law and order as the biggest problem the country would face in the coming decade. The eighties also saw a ‘mushrooming of security companies’ (Saffu 1998b, 402), and they are now, collectively, the country’s biggest private sector employer (9.2.5).

Policy responses emerged even before independence, with a Committee to Investigate Tribal Fighting and a Peace and Good Order Committee both established by the chief minister in the early seventies (Fingleton 1981, 225; Clifford, Morauta and Stuart 1984, 114). In 1977, two new Acts were passed: the Inter-Group Fighting Act made it illegal to participate in any sort of tribal violence; and the Vagrancy Act made it unlawful to be in an urban area without lawful means of support, as it had been in colonial days. The former has been ineffectual (witnesses fear payback). The latter was ruled unconstitutional on the grounds that it restricted freedom of movement. Calls for its reintroduction have been a constant refrain from politicians ever since.

More committees were established and reports commissioned in the eighties: one on law and order in 1981, another to review the police force in 1982 and one on the justice system in 1984. The last resulted in the Clifford Report, which called for an emphasis on ‘informal and community institutions in the maintenance of order’ (Clifford, Morauta and Stuart 1984, v). However, the government preferred a get-tough approach. In 1979, tribal violence led to a state of emergency being declared in the Highlands, and, in 1985, urban crime precipitated a state of emergency for Port Moresby. The Curfew Act of 1987 made it possible to implement curfews without a state of emergency. Minimum sentence laws and mobile squads were introduced. Some of these responses helped to contain the problem temporarily, but all failed to have a sustained impact.

3.3 Conclusion

In an interview that is part of the audio history series PNG Speaks, prominent PNG trade unionist Lawrence Titmur tells the story of when, in 1976, just after independence, he, a 20-year-old public servant, was sent by government to negotiate a pay dispute with a group of mosquito sprayers in Maprik in the Sepik. (Malaria control was a major pre-independence priority [Nelson 1982].) The sprayers had expected independence to bring increased wealth for the PNG government and, therefore, had expected a pay increase. ‘We’ve got independence … We know you have the money … We want some of it’, Titmur recalls them saying. When they did not get the massive pay increases they demanded, the workers started sharpening their knives, blockaded the road and took Titmur hostage, relenting only when they had won a pay increase, albeit much smaller than the one they were demanding.

The sprayers, like many in PNG, had high expectations from independence: consider Somare’s (1975, 144) remark used to open Chapter 2 that it was up to PNG to ‘determine how much development we want’. But the reality was much less favourable. To its credit, the government was fiscally responsible, as in this instance, but the fiscal stringency required by low commodity prices and declining aid together with a poor and worsening investment climate put rapid or even modest growth out of reach. For the period as a whole, GDP (and, to the extent we have the data, non-resource GDP) per person fell, as did the formal sector workforce relative to population.

If this period had laid the foundations on which more rapid growth could subsequently be built, it could be looked back on as a successful start in difficult circumstances (Garnaut 2000, 31). The early years of independence did, in the main, deliver macroeconomic stability, but, even on this front, the reduction in foreign exchange reserves was a sign that macroeconomic problems were being stored up for the future. A number of other problems also emerged in this first period that only intensified over subsequent decades. These included the growing primacy of a political class with short time horizons, focused on local issues and increasingly preoccupied with achieving power and with their business interests; a significant reduction in the quality of public services; deepening corruption; and increasing insecurity.

Kurer (2006) argues that the adoption of the redistributive recommendations of the Faber Report is to blame for PNG’s subsequent governance problems. This is too harsh, because the government was not actually that serious about redistribution; the drag on growth from low commodity prices and declining aid would have remained whatever policies were in place; and many of PNG’s governance problems would have likely emerged in any case. Nevertheless, slow growth must surely have made the law and order situation worse, and perhaps weakened the party system, since no party in power was able to deliver development. The bottom line is that PNG’s development strategy at independence was both founded on the assumption of rapid growth and undermined by its absence. In hindsight, much greater attention should have been given from the start to the very real risk that rapid growth would not be realised. If it had been, more might have been done sooner to improve PNG’s investment climate and tackle its high cost structure.

There were attempts at reform over the eighties, but not successful ones. Political reforms—to promote political stability, to combat corruption—were proposed but failed to garner support from MPs. Economic policy changes, except for financial sector reform, remained largely rhetorical. Absent a crisis, even as the optimism inherited from independence faded, the distractions caused by the (by now) never-ending struggles for political power and the focus of politicians on local issues and their business interests made it too difficult to execute major changes to the political and economic rules of the game the country had taken to independence.

The nineties changed all that and became a decade of reform precisely because it was a decade of crisis. This is the story of the next two chapters.

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1. 1 Langmore (1973, 198) notes that ‘in the period 1965–71, Australia’s objectives for Papua New Guinea emphasized maximisation of the current rate of growth of national income’. Garnaut (1981, 166) writes about ‘the confidence about growth [at the time]: a feeling that growth would come, and that what mattered was the form it would take and the distribution of the resulting benefits’.

2. 2 The team led by British economist Mike Faber visited in 1972 and delivered its report in August. Somare released his Eight-Point Plan in December 1972 (Langmore 1973, 198). The report was officially authored by the Overseas Development Group, University of East Anglia, where Faber worked, but is better known as the Faber Report.

3. 3 The Faber Report was even more radical than the Eight-Point Plan. Several of its recommendations were included in the Eight-Point Plan only in watered-down form or not at all, namely: ‘Elite creation is inimical to the welfare of the majority. The advantages of the highly educated and of the urban population in general must therefore be diminished’; ‘An equitable distribution of employment and income opportunities should have priority over supply of high level manpower to manage the state bureaucracy’; ‘The main emphasis in infrastructure development should be in rural areas’ (Faber et al. 1973, 21). These three points were watered down in the Eight-Point Plan to calls for a ‘more equal distribution of economic benefits including a move toward equalising incomes’ and ‘decentralised economic activity, planning and government spending with emphasis on agricultural development and village industry’. See also Conroy (2020, 353), who notes the call by Keith Hart, one of the authors of the Faber Report, for the PNG elite to ‘accept reduced living standards and look at policies which are inspired by local needs and availability’. Conroy rightly refers to this as a counsel of perfection.

4. 4 In later years, ministers would refer to this as the ‘disastrous experience in the early 1970s’ (Kaputin 1984, 7).

5. 5 In this, the board was supported by UPNG and then ANU anthropologist and Marxist economist Chris Gregory, whose famous 1982 book Gifts and Commodities was a critique of neo-classical economics in the context of colonial Papua New Guinea.

6. 6 ‘The pseudo-socialist overtones of the aims were acceptable at the level of public rhetoric. They even appeared to be related to the traditional restraints that existed in village societies. But for some ministers I believe that repressed entrepreneurial ambition whispered: “I don’t want redistribution applied to me personally; I would rather be a millionaire businessman.” The most cynical interpretation that can be made of the general philosophy announced by the Coalition government in the Eight Aims and elaborated in the Constitution is that it reflected an intellectual trend of the late sixties and seventies keenly felt by the expatriate Western liberals and by the Papua New Guinean graduates and undergraduates. The politicians, however, merely clothed themselves with these ideas because other political purposes were served in doing so’ (Voutas 1981, 46).

7. 7 In the words of one radical critic: ‘The issues most important to the members of the Bully Beef Club, later to become Pangu Party, were to improve salaries, and to localise. These were more important than anything else. Of course a marked injustice was supported by colonial policy at that time. Housing conditions for workers also became mobilising issues. The workers were more conscious of this discrimination than villagers and provided a base for the development of unionism, which was itself used by the educated elites as a political wheel and a stepping stone in the higher echelons of state positions’ (Samana 1988, 99).

8. 8 Woolford (1976, 257) was also prescient: ‘From whatever perspective one looks at Papua New Guinea, the future appears difficult. It is politically unstable, with party alignments volatile; there is a serious danger that part of the country will break away; some important institutions are inappropriate; self-reliance, whether economic or psychological, exists only at the level of political rhetoric; and everywhere there is a gulf between promise and performance.’

9. 9 From the Wingti government strategic plan (Dorney 1991, 90).

10. 10 In his first speech as prime minister, Namaliu (1988) decried his predecessor’s spending on wasteful commercial projects and said that what Papua New Guineans wanted was ‘a government that will attack the nation’s law and order problems head on … a government that will give new hope of improved education and health opportunities to the underprivileged masses’.

11. 11 Many years later, Gewertz and Errington (1999, 119) wryly commented: ‘Bernard Narokobi, after writing The Melanesian Way, was widely rumored to have acquired considerable wealth in the course of his long political career … We met him at a meeting in Wewak where, as Wewak’s Member of the National Parliament, he was explaining new government policies (including the ‘structural adjustments’ imposed by the World Bank and IMF). In describing forthcoming stringencies, he said that villages should no longer aspire to Toyota Land Cruisers; instead of holding these unreasonable expectations, they should be content with “appropriate technology” such as water buffalo. Following the meeting, he was driven away in a new Land Cruiser.’

12. 12 The Constitutional Reform Commission wanted controls on foreign investment written into the constitution, but this was rejected except in relation to the (non-justiciable) five goals. One prominent businessman talked about NIDA (‘which has probably had to do more in the past seven years with deterring investment rather than encouraging it’) as ‘a body to control overseas investment already in Papua New Guinea and to promote further investment from overseas, while warning potential investors in the strongest possible terms of the dire consequences should they fail to toe the line’ (Corden 1982, 134).

13. 13 In 1976, there was no adjustment of minimum wages; in 1977, they were increased in line with inflation; in 1980, a cap of 8 per cent on wage increases was introduced; in 1983, that cap was lowered to 5 per cent; in 1986, half-indexation was allowed for inflation above 10 per cent; and in 1989 the cap was adjusted to 6 per cent (BPNG 2007, Appendix B).

14. 14 The World Bank commented a decade before independence that ‘among adult indigenes, the paucity of educated persons is extreme, under 1 per cent having received a full primary education and probably less than 100 having completed a secondary course, while the first university graduate was expected at the end of 1964’ (cited in Garnaut 2000, 30).

15. 15 Booth (1995, 209) looked at data from the United Nations International Comparisons Program and concluded that ‘over the past fifteen years, PNG has emerged as a high-cost economy in comparison with most of its neighbours in Asia and the Pacific’.

16. 16 Urban management was the seventh and environmental management the last of the eight objectives (Conroy 1980, Appendix A).

17. 17 In his memoir, one of PNG’s first politicians Albert Maori Kiki (1968, 185) said: ‘I think we have democracy in our blood’.

18. 18 ‘Our culture has an ancient entrepreneurial tradition … Material wealth was not an end in itself, but a means to gain renown, the esteem of one’s people’ (Bougainville and national leader John Momis, cited in Denoon 2000, 195).

19. 19 Two became prime ministers (Mekere Morauta and Rabbie Namilau); a third became a minister (Anthony Siagaru); the fourth (Charles Lepani) ran unsuccessfully as a candidate in the 1982 and 2022 elections.

20. 20 Hegarty (1998c, 299) also wrote of the 1977 elections that they ‘saw the demise of the older style big-men and the rise of the “new men” drawn from the rural and urban elites. The bulk of candidates tended to be “businessmen” of some sort or to have had a corporation or a salaried income as a base.’ He quoted the ombudsman as saying in 1980 that ‘many leaders have got themselves involved in private businesses’ (Hegarty 1998f, 344). See also MacWilliam (2013).

21. 21 ‘The linkages or relationship between politicians and constituents is based not on mass mobilization but on patronage and clientelism’ (Hegarty 1998c, 306–7).

22. 22 The length of time after an election during which votes of no confidence are prohibited was increased to 18 months in the nineties (5.2.1). If a vote of no confidence is successful within a year of when the next election is due, that election is brought forward, a scenario no MPs want.

23. 23 Okuk is also quoted as telling his fellow MPs: ‘If you are not hungry for power then you should be working for the missions and reading the Bible all the day’ (Hegarty 1998e, 323).

24. 24 Bill Standish (1981, 303) found in relation to his case study of Simbu province that, absent party disciplines, the interests of politicians ‘as members of a tiny elite are not the same as those of the mass’.

25. 25 In an early radical critique, Good (1979, 158) labelled the bureaucracy a ‘parasitic group’ because it ‘acts as if the control of the state for administrative purposes was an end in itself’.

26. 26 Ironically, in hindsight, the Australian High Commission lobbied against the proposal on the grounds that it had ‘socialist implications’ (Hegarty and King 1998, 317).

27. 27 In 1985, reflecting on a decade of independence, ‘Somare put decentralisation at the top of his list of mistakes he believed the country had made’ (Saffu 1998b, 412).

28. 28 ‘Where the people felt their claims had gone unheard, they did not hesitate to blockade towns and companies’ (King 1998, 353).