St Helena was always as aid-dependent as it is today. Between the early 1900s and the mid-1960s the island's major industry was growing flax, or hemp, which was used to make ropes. Although there were ups and downs in the industry as world prices changed, it was the island's largest employer, apart from the government. In 1966 the whole industry suddenly closed down. Legend has it that an official in the British Post Office - which was a major buyer - decided to use synthetic string and thus St Helena's flax industry was killed. The truth is more interesting.
In the mid-1960s some of the flax mills were government-owned and others were private. In 1965, after a government review of wages, a decision was made to nearly double the wages in the government mills. Wages were felt to be too low for workers to live on adequately. The private mills were not able to match these wage increases and closed. Meanwhile, world prices for hemp continued to fall, so the higher production costs of the government-owned mills meant that they were operating at a large loss. Within a few months they too closed. The St Helena Government applied to the British government - its colonial master - for emergency help, to provide employment for all of the former flax workers. The number of "development aid" projects expanded dramatically.
Lesson: government involvement in industries which are price takers on world markets is risky, especially for the private sector. Another lesson: investigating "received facts" can be worthwhile.
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