Nauru

Nauru is a cautionary tale written in guano—a 21-square-kilometer coral atoll that went from second-richest nation on Earth to near-bankruptcy in a single generation, then found a new commodity: refugees.

Thirty-five million years ago, a submarine volcano erupted over a Pacific hotspot, building a basalt seamount that coral eventually colonized. The atoll rose above sea level, and over millennia, seabirds roosting on this remote rock deposited layers of phosphate-rich guano that mineralized into one of the world's purest deposits. Micronesians settled the island at least 3,000 years ago, organizing into twelve clans—still represented by the twelve-pointed star on Nauru's flag. European contact came late: whalers and traders in the 1830s. By the time Germany annexed it in 1888, the population had declined from 1,400 to 900 after a decade of tribal war ignited by imported firearms and alcohol. The true transformation began in 1900 when prospector Albert Fuller Ellis discovered the phosphate. By 1906, extraction had begun—but not for Nauru's benefit.

For sixty years, colonial powers—Germany, then Australia, New Zealand, and Britain under League of Nations and UN mandates—stripped millions of tons of phosphate, paying Nauruans a pittance while subsidizing farmers across the developed world. After Japanese occupation during WWII (which deported 1,200 Nauruans, killing 463), the UN trustee relationship continued until independence in 1968. Then came the windfall. In 1970, the new government purchased full phosphate rights for A$21 million. Within five years, the Phosphate Royalties Trust held over A$1 billion, returning 14% annually. Per capita GDP reached $27,000 in 1980s terms—over $88,000 in today's dollars, second only to Saudi Arabia. The island's 11,000 citizens owned the world's richest sovereign wealth fund per capita. They bought hotels in Hawaii, a London musical about Leonardo da Vinci (which flopped), cruise ships, aircraft.

By the 1990s, the phosphate was nearly gone. Poor investments, corruption, and failed ventures in offshore banking had gutted the trust. The A$1 billion was effectively worthless. Today 80% of Nauru is mined-out moonscape—limestone pinnacles rising from where phosphate once lay, utterly unusable. The remaining population clusters along a narrow coastal strip. Per capita GDP has fallen from $50,000 (1975) to roughly $13,400 (2024). The replacement commodity arrived in 2001: Australia began paying Nauru to host offshore detention centers for asylum seekers. The latest deal (2025) commits $1.6 billion over three decades for refugee resettlement. Australia effectively rents Nauru's sovereignty to maintain immigration deterrence, paying more than phosphate ever did but creating a different kind of dependency.

Nauru's 2026 economy depends almost entirely on Australian detention payments. Deep-sea mining of polymetallic nodules represents a potential next chapter—Nauru sponsored the company seeking to extract minerals from the Pacific seabed. Whether this offers genuine renewal or another extractive trap remains the island's central question.