Thirty years after enjoying the world's second highest per capita GDP after Saudi Arabia, Nauru is on the verge of bankruptcy and was declared one of the first states listed under the US Patriot Act. Professor Hughes shows that Nauru's parlous state has been brought about by a complete disregard for basic economics and inappropriate political institutions and policies that have led to gross waste, corruption and mismanagement. With appropriate policy reforms, Nauru can become 'modestly prosperous' and recover its health and self-respect.