to answer kari's request for more about the fsm itself, i'll offer what i know of the history of the federated states of micronesia, and of its ties to the us.
the islands around here have long been inhabited (see my previous post with pictures of the nan madol ruins), and first met europeans around the 1500's. they were claimed by the spanish, and then the germans, before being seized and occupied by the japanese sometime just after the first world war.
during the second world war, the japanese ran a really harsh occupation here, and maintained a sizable navy base in chuuk (one of the other three states of the fsm). towards the end of the war (september 11, 1944) the island was liberated by us forces - as was most of pacific islands.
because the islands had become rather dependent on outside support, the united nations established a trust territory for most of the pacific islands. the states of the fsm, along with many other islands (the marshalls, the samoas, the marianas, etc) were delegated to the united states to administer on behalf of the un.
their status as a "us-administered un trust territory of the pacific" lasted about 30 years, at which point the pacific islands started to make moves towards independent sovereignty. different islands went different ways (forming the republic of palau, the republic of the marshall islands, the northern mariana islands, etc), but four regions got together to create the federated states of micronesia.
the fsm (which consists of pohnpei, kosrae, yap, and chuuk) established their independence from us administration in 1979. in 1986, the fsm agreed to a "free association" status with the united states. essentially, the us assumes responsibility for the defense of fsm, and in return considerably widens its maritime borders. besides defense, the us also provides a lot of services and funds, and allows micronesians to live and work in the united states without any visa or permit requirements.
compact I was not an indefinite agreement, and it ended in the 90's with a signing of compact II. compact II is designed with much more us oversight of grant spending, and with the eventual aim of phasing out fsm dependence. given the maritime advantage that fsm offers the us and the current state of development, however, its not likely that the relationship will be phased out completely.
there are many other governments providing assistance here, as well. there are australian, chinese, and japanese embassies in addition to the united states embassy, as well as representatives of the un and world bank. there is money currently coming in from china and hong kong in large amounts, as they vie for influence.
the fsm appears very tied to the united states culturally, as well. almost everyone has family living in the us (often guam and hawaii, but also oregon and missouri in large numbers), and men joining the us military enjoy the highest respect.
as far as independence from development aid, the fsm has a long way to go. the financing required to participate in the global economy from such an isolated place far outstrips what is produced or provided here now. palau is further along, because of a better developed tourism industry and greater openness to foreign business investment. it will be interesting to see if fsm follows their example.
