Agriculture employs about one third of the people. Fruits and vegetables are grown, and pigs and poultry are raised. Food processing, tourism, and fishing are the major industries. Black pearls, copra, papayas, citrus fruits and juices, coffee, fish, clothing, and handicrafts are the principal exports. Foodstuffs, textiles, fuels, timber, and capital goods are imported. Beginning in the 1980s the islands also became a popular tax haven and offshore banking center, but in 2003 the government moved to increase regulation of offshore banks as a result of international pressure. Large numbers of workers emigrate to New Zealand and their remittances are also an important source of income. Government spending is important to the economy, and more than 60% of the labor force work in the public sector. The Maoris generally work their own land.

The Cook Islands are governed under the constitution of 1965. The monarch of Great Britain and Northern Island is the head of state and appoints a British representative. The prime minister heads the government. There is a bicameral parliament. Members of the 25-seat Legislative Assembly are elected by popular vote for five-year terms. The 15-member House of Ariki (hereditary chiefs) is a purely consultative body that advises on traditional matters. New Zealand, represented by a high commissioner, is responsible for foreign affairs and defense in consultation with the Cook Islands government.

The southern islands were probably occupied by the Polynesians c.1,500 years ago. Spaniards visited the islands in the late 16th and early 17th cent. Capt. James Cook sighted some of the islands in 1773; others were not discovered until the 1820s. The London Missionary Society was a powerful influence in the southern islands during the 19th cent. The islands were proclaimed a British protectorate in 1888 and were annexed by New Zealand in 1901. The Cook Islands achieved internal self-government in 1965 and are free to unilaterally declare their complete independence. An economic crisis in the mid-1990s led to outmigration and a significant drop in the islands population.