When did Alaska get so damn old?
As the rest of the world charges ahead into the 21st Century, Alaska sometimes appears to be trying to hang onto the 20th Century, if not the 19th. As a touchstone, the past is a wonderful place.
As a home it’s a dead-end. Adaptation – evolution if one dare say – is a social, cultural and biological imperative. Alaska once throbbed with its presence.
The air tasted of youth and enthusiasm. Alaska was a place that looked relentlessly forward. The state motto, adopted during the 1967 centennial of the Alaska Purchase, was “North to the Future.”
Today this seems more like a state that wants to retire to yesteryear or go “East to the Past.”
The Alaska Native Claims Settlement Act of 1971 was a good-faith attempt on the part of everyone to avoid the catastrophe of American Indian reservations. Today, there is a push to put Native lands into trust with the Department of the Interior in order to create what are essentially Alaska Indian reservations.
The Permanent Fund came along in 1976, as a more timid version of the late Gov. Jay Hammond’s more forward thinking “Alaska Inc.” But at least Alaskans were looking forward.
Today, they’re hanging on in a state that leads the country in unemployment and job loss while patching the state budget together with savings and going nowhere.
Alaska retirees, a political force because the AARP crowd votes, don’t seem to mind at all. There are plenty of bennies for those 60 and older living in the 49th state: no state income tax, Permanent Fund Dividends, property-tax breaks, no motor vehicle taxes and free registration, free hunting and fishing licenses, and who knows what else.
These are people enjoying Alaska and often, in those short days of winter, a lot of travel.
“It’s here; the annual scramble to book the next year’s adventures. Alaskans love to plan trips, especially trips to warmer weather, and November marks a milestone for many, whether they purchased a PFD airline sale ticket on a whim, or have been plotting a 2018 getaway for months,” Erin Kirkland wrote in the state’s “Senior Voice” newspaper in November.
Life doesn’t get much better than a world split between summers in an Alaska, blessed with midnight sun, and winters, or good parts of them, Outside where the days are longer and the weather warmer.
So the state’s economy is floundering. Who cares?
It wasn’t always like this. Alaskans once had more of a sense they were building something, and they had political leaders with vision.
Hammond wanted to take half of all revenue from Alaska resource revenue and put it into an investment account, the earnings from which would be split between individual Alaskans and the state to “be used for essential government services.
“My rationale for creating such an investment account and making
shareholders of Alaskans was manyfold,” Hammond wrote in “Diapering the Devil.”
The big reason was to “transform oil wells pumping oil for a finite period into money wells pumping money for infinity. It was apparent that unless we did so, politicians would spend every windfall to satisfy insatiable short-term needs and demands, only to find themselves in a world-of-hurt when oil wealth declined. Such had been the experience of virtually every oil-rich state and nation.”
And such has been, in large part, the experience of Alaska, which now faces a budget shortfall of $2 billion to $3 billion per year.
The reason is simple. Alaska became a crude-oil junkie not long after the tap opened on the Trans Alaska Oil Pipeline system in 1977. As the flow of crude increased and the price of oil climbed, state coffers swelled, the state budget grew, and thoughts of diversifying the Alaska economy slowly faded away.
A Hammond administration plan to start a state agriculture industry didn’t help. It was too far ahead of the global-warming curve and turned into a boondoggle that tainted public views on the state trying to further any business activity.
The Alaska Science and Technology Foundation gained some traction in 1988 to develop and promote some forward-looking business ideas. But it was gone by 2003 after the Legislature grabbed its $100 million endowment to spend on other things.
The Legislature grew the University of Alaska budget from $100 million in 1980 (about $320 million in today’s dollars) to almost $900 million by 2012, which could have been a good thing, but little thought was given as to how to translate education into jobs.
Building a state
It’s been a long time since there’s been much public buzz about how to further business growth in the state other than the commercial fishing although a few businesses have managed to break out on their own.
Can you say microbrew?
Still, the state’s biggest job generator today is “local government,” which provides 41,700 jobs, according to the latest report from the Alaska Department of Labor. Behind local government, the job leaders are health care, 37,400 jobs; retail trade, 36,400; leisure and hospitality, 35,100; professional and business services, 27,400; and state government, 23,300.
Everyone of those categories is down but for health care. Thank Medicare and an aging population, the state’s Medicaid expansion and the Affordable Care Act. Alaskans grew the health-care business here all right, but it wasn’t intentional.
And it has been costly. Average state health care costs of $11,000 per person now lead the nation, and the costs are likely to keep going up.
The state’s “Employment Forecast for 2018” says health care is the only thing running against what is described as a three-wave economic collapse starting with oil and state government followed by construction and professional services and finally “industries that rely on people’s spending.”
This is exactly what one would expect to happen to an economy built primarily around one resource – oil – when the value of the resource declined.
Soon to be 67-year-old Gov. Bill Walker thinks the answer to this problem is to build another pipeline – this one to pump gas for export even if the numbers indicate the state will get only a fraction of the money out of gas that it gets out of oil.
So Walker is touting jobs.
“Once construction begins, the Alaska gasline will be one of the largest infrastructure projects on the continent,” he wrote in an op-ed for the Alaska Journal of Commerce, “and it will be the biggest economic boost to the state since construction of TAPS.
“It will generate between 10,000 to 12,000 construction jobs for Alaskans and up to 70,000 total jobs.”
Short version? The pipeline will bring another Alaska boom. If the project happens, it might be a good time to sell out and leave because Alaska booms have historically been followed by busts.
Not to mention the chaos. The TAPs construction project of the 1970s turned good parts of the state into the Wild West.
“I have also been advised from people in the Fairbanks area that the situation in the streets of Fairbanks is becoming serious if not outright dangerous,” Hammond told the New York Times in 1976.
Shootings, stabbings, theft, prostitution, gambling and most other crime shot up during pipeline construction. They went down after construction and a lot of construction workers left the state. And Alaska got eventually got a big payback in the form of more than $180 billion in oil royalties and taxes to date.
America’s last colony
The $1.1 billion per year the gas project is expected to add to state coffers over the 20 years following construction would provide only a fraction of the help needed to bail out a state budget already multiple-billion dollars underwater every year. And there are those skeptical about both the claim to $1.1 billion in revenue and the chances the gas line will actually get built any time soon.
“Under Alaska’s current tax policies, many proposed mega projects that
would perhaps provide enormous benefits to a select few would no doubt cost the rest of Alaskans,” Hammond warned long ago. “They would not generate enough new revenue to offset the costs of state involvement in providing infrastructure,
maintenance, permitting, enforcement, and tax-free state services for the attendant population increases that accompany such projects, as new folks and their families flood up here seeking jobs.”
At the very least, the gasline would probably pencil out in the black in that formula. But as with so many other Alaska resource projects, the real wealth would be extracted elsewhere.
Gunnar Knapp, the former director of the Institute of Social and Economic Research at UAA, later answered the obvious question “why” with eight simple words:
“A lot of people like it that way.”
Not only do a lot of people like it that way, a lot of people make money for it being that way. Much-maligned and heavily taxed oil has been pretty good to Alaska, but other major state resources not so much.
Until it largely faded away, the state’s timber industry was good to Japan, and the state’s fishing industry remains good to Seattle as do many other Alaska businesses. Alaska overall is worth $6.2 billion per year to the Puget Sound area, according to a report from the McDowell Group titled “Ties That Bind.”
“Nearly 24,000 Puget Sound jobs and $1.3 billion in labor earnings are tied to
Alaska’s seafood industry,” the reports said. “Maritime support” adds another 5,3000 jobs and $390 million in earnings.
The Seattle area gets more out of Alaska fish than Alaskans do, but then Seattle does almost as well on Alaska as Alaskans.
“Between 2003 and 2013, Alaska-related jobs in in Puget Sound increased from
103,500 to 113,300, an increase of 9 percent,” the report said. “Labor earnings have also increased, from $4.3 billion to $6.2 billion. While this represents an increase of 44 percent in nominal terms, actual growth was 12 percent after adjusting for inflation.”
The state economic report totals all jobs in Alaska at 151,800 – only about 34 percent more.
Alaska politicians used to spend a lot of time yapping about “Alaska hire,” but now they can’t even get the state-supported Alaska Seafood Marketing Institute out of Seattle. And there is overall very little talk of Alaska hire in the 49th state these days.
There seems to be much more concern about Permanent Fund Dividends and, especially in rural areas, “subsistence,” the opportunity to kill fish and wildlife for food.
Republican gubernatorial candidate Scott Hawkins, an economist, has pushed jobs and “economic opportunities,” as campaign issue, but is short on details. He cites new oil discoveries at Prudhoe Bay, which have started to put more oil in the pipeline as global oil prices creep up; new mines, which face strong public opposition everywhere in the state; and “other industries.”
Mainly, though, his focus seems to be on the same issues as other candidates: crime (it’s up in the Anchorage metropolitan area and people want it down), the state budget (it’s in the red, and everyone wants it in the black), and the PFD (which every Alaskan wants and which every politician wants to figure out to give them in some way no matter the state’s financial problems).
The politicians don’t seem all that concerned about the economy because the citizenry doesn’t seem to care all that much about the economy. Fixing the Alaska economy would inevitably bring change, and a lot of Alaskans of today simply don’t want change.
They’re old and settled and they want to live out there lives in the way they’ve always lived their lives. They don’t seem to understand the world does not work that way.
It’s nice to think that you can be happy standing still as the world evolves around you, and you probably can be if you have a nice retirement or a trust fund.
Everyone else is happier working. Jobs define people’s lives and provide money. Money can’t assure anyone’s happiness, but poverty can do a pretty good job of spawning unhappiness.
When National Geographic rated the “Top 10 Happiest Countries in the World” in 2016, Denmark came in number one. Denmark is a pipsqueak country with fewer than 6 million people and the 39th largest economy in the world.
Denmark has a population about the size of the state of Maryland, and nearly all Danes have good-paying jobs.
Denmark, like Alaska, exports energy. It is a player in the North Sea oil fields. It also exports food. But the big drivers of its economy are exports of manufactured goods.
Among the Danish machinery companies is Uni-food Technic, which produces heading and gutting machines for processing salmon. Alaska doesn’t manufacture much.
Alaska exports crude oil and raw fish to be processed elsewhere. The best-paying jobs in the fishing industry have been limited by state law, and the jobs in the oil industry are limited by the fact there is very little crude handled in state.
Alaska’s involvement is the oil industry is basically to get the crude out of the ground, get it in the pipeline, and get it the hell out of here. The state’s approach to natural gas appears the same even though there is nowhere near the money to be made exporting gas as there is to be made exporting oil.
And there are other uses for the gas instate.
Alaska natural gas is good feedstock for carbon fiber – the steel of the future – and the gas is a cheap way to produce the energy needed to manufacture carbon fiber – an ultralight construction material easily exported on the ships and barges that haul goods to Alaska only to return to Seattle largely empty.
But other than wildman entrepreneur Bernie Karl in the resort outpost of Chena Hot Springs in the wilderness north of Fairbanks in Central Alaska and a handful of folks at the University of Alaska, there aren’t many people in the state talking about carbon fiber, or anything much other than exporting oil and gas for that matter.
The reality of oil and the dream of gas have dominated Alaska thinking for decades now. Thoughts of economic development invariably come back to oil and gas, and state revenues from oil and hopefully gas.
Tourism has slowly and steadily expanded in the state, but that has largely been driven by increases in cruiseship traffic hauled north on cruiseships owned by businesses Outside. The state has done little to assist small, in-state tourism businesses and sometimes has hurt them by managing fisheries largely to satisfy more politically powerful commercial interests.
There isn’t much talk these days about what Alaska could do to strengthen the economy going forward, though a lot of the back-to-the-earth hippies who arrived in Alaska in the environmental excitement of 1970s are still hanging around to offer advice on the idea of going back to living off the land. It’s a tough, tough way to live in Alaska.
Hammond, who came in the first wave of those looking to escape into the Alaska wilderness after World War II, grew to understand that.
“One environmentalist friend not long ago criticized me for emphasizing
economic over environmental concerns when discussing prospective
development projects,” Hammond wrote. “He asked, ‘Why do you no longer emphasize quality of life and vision for the future? Instead, you seem to focus primarily on economics.’
“Unfortunately, some are prone to forget that there is more than one
dimension to the environment. It encompasses not only the physical
environs but also the economic and social. None should be ignored
when evaluating some prospective economic development project.
“When asked if I am an environmentalist my response is, ‘Of course. Isn’t everyone?’ However, my concerns are not confined to just the physical environs; there are
social, economic, and spiritual dimensions to the environment.”
A self-proclaimed Bushrat, Hammond was a smart and forward-looking political leader. Part of his original permanent fund proposal was to provide dividend-earning stock to young Alaskans instead of a cash dividend their parents might well spend for them.
“My hope was to create an annuity account to be dispersed when children reached the age of eighteen,” he wrote.
Such a program might have provided a free or close-to-free college education for a lot of Alaska kids. A bounty of well-educated young people might have helped get the 49th state moving toward what is even more clearly the future of business today than it was yesterday: technology.
A four-letter word
“The world has changed far more in the past 100 years than in any other century in history,” the physicist Steve Hawking observed in 1999. The rate of change has only accelerated since then.
In 1999, this reporter and a colleague were lusting over the first Apple I-Book as the perfect computer for use on the Iditarod Trail. It was clunky, weighed 7 pounds and measured 14-by-12 inches. This story is being written on a Dell XPS that weighs less than 3 pounds, measures 13-by-9 inches yet with a bigger and far better screen than on that first I-Book, and is 10 times more powerful or more.
The successful new business of the times lean more and more on tech.
Instead of shipping salmon to China to be filed and deboned by low paid Chinese workers, possibly slave workers from North Korea, Alaska could have been helping develop the robots destined to take over the fish processing business.
And it’s not a matter of “if” that happens; it’s only a matter of when. The economics of machinery only improve as the volume of seafood to be processed increases, and the volume of seafood is increasing globally because of the steady growth of aquaculture no matter how Alaskans might detest it.
The implications should not be ignored. Fading coastal fishing communities still get an economic boost from seasonal workers, and the number of seasonal workers will fall as the machines arrive. Valuable commercial fishing permits and their money have already been draining away to bigger cities for years.
The future looks rather grim for those parts of the state already struggling with the weakest economies. Maybe the internet will save them. Maybe they can find something to sell online.
Maybe somebody could try to come up with some ideas for a new Alaska economy.
Or maybe the governor will turn out to be right and a big cloud of gas will save us. One can always hope. Hope is cheap.