How do i industry sign banking alaska word fast
So thank you to
everybody for coming to our first non-Foley
related lecture here in the lecture hall
through the State Library. I really appreciate you coming. Speaking with us
today Clive Thomas. And he's taught
political science at UAS in Juneau for 30 years
and ran the university's statewide legislative
internship program. And over the years,
has also done a lot of consulting and
dealing with Alaska state government for a variety
of local organizations. He's put together
an amazing book. It's a thick tome, but it's
filled with great information. And I'm sure he'll show it to
you during his presentation at some point. We also have a copy back
on the back desk if you'd like to take a look at it. So I'm sure you'd rather
hear him speak than me. So without further ado, I'll
say a quick welcome to the folks not here at the Andrew
P. Kashevaroff building. And please join me in
welcoming Clive Thomas. [APPLAUSE] Well, thank you, Freya. I really appreciate the
opportunity to be here today. Let me say a little
bit about why I'm here. And then I will get
to do my talk here. I don't like to
call it a lecture. It sounds extremely boring. And I did that for
30 years at UAS. Desk Anyway, as Freya
said, I've worked here at UAS for 30 years. I left in 2011. And I now am associated
with the Foley Institute of Public Service
and Public Policy at Washington State
University in Pullman. And I do a little bit
of teaching for them and mainly graduate stuff. And I work on PhD committees. But that's basically what I do. I'm back in town
here for a week. And then I'll be in
Fairbanks and Anchorage to promote this book that the
University of Alaska Press has just published. And so that's the
reason I'm here. I've done quite a few little
stints here this week. I was on K2. I did a 360 North last
night, which I think is going to be broadcast
in about a week or so. I'm doing an evening at
Egan tomorrow night at UAS, from 7:00 until 8:00. And also I'm doing
a book signing at the Nugget Mall
Hearthside Books on Saturday between
3:00 and 5:00. And then at 5:10
on Sunday morning I'm going to be
leaving, I think. I'm not sure I can get up
that early, but I'll try. Let me say a little bit
about the book first, then I'll go into my talk. I'll get it over here,
if I could lift it up. It's kind of heavy. This is the book. It took six and
1/2 years to do it. It's about Alaska politics
and public policy. Its subtitle is The Dynamics
of Beliefs, Institutions, Personalities, and Power. And it's 30 chapters,
so it's very extensive. And it covers almost
everything you'd want to know about
Alaska politics and probably some things
you'd prefer not to know. It's an edited book in the
sense that there were 67 people contributed towards this book. 32 of them wrote chapters
or coauthored chapters. And the rest did inserts. I don't want to go
through all the names of the people involved, but
many of them you'll know. Three governors-- Governor
Knowles, Governor Hickel-- before he died-- and
Governor Sheffield. Several legislators--
Mike Doogan, of course also a journalist-- Harry Crawford-- who
may be coming back, because he's running against
Lance Pruitt, I guess-- and Senator Green--
who's also retired. Journalists-- David Donaldson,
probably my best friend in the state, who used to be at
APR, and then many other people like that. It's not just an academic book. It's written for
everything from AP-- advanced placement
in high school-- right through to
graduate school and also for the average reader. You say, well, how can you do
all that in a book like this? Well, the University
of Alaska Press, when they first approached
me about this in 2009, wanted a book that could
cover all those areas. Because Alaska, being a
small state population-wise-- even today less than 740,000-- there's not enough market
for a separate book on high school, and
college, and so on, like there would
be in California. There are actually 15 books on
California politics and stuff. I closely follow state
politics in that regard. So that's the reason for it. The information about the
book-- on the back table there there's a copy of
the book, as Freya said. And also there's some
hand outs about the book, which tells you about
the chapters in the book, and so on. And there's also a
website on the book there. This is the most expensive
book, from what I understand, the University of Alaska
Press has ever published. I've got probably five
times more of my own money into this book than
I'll ever get out of it. The index alone in
this book cost $4,700. So you can see, it
wasn't a cheap operation. But I enjoyed doing it. It was a real experience. I'm a Alaska political junkie,
so I was happy to do that. But I figured it this way,
that all the permanent funds I made in 33 years in Alaska
have gone back into this book. So that's my contribution
to Alaska, you might say. OK, so what am I going
to talk about today? I'm going to talk about
the Alaska economy, what I refer to as wishful thinking
and the actual realities. In other words, looking
at Alaska's economy in a general sense
and looking at the way that people like
to think about it or think what might be able
to be achieved versus what the reality of the
Alaska economy really is. So I divided my talk
into five parts. First of all, I'm going to
make some introductory comments about things. Secondly, I'm going to talk
about the economic environment in which Alaska finds itself. Thirdly, I'm going to talk about
some suggestions that people have made about how to deal
with the state's economy, how to boost it, how to
make it better, whatever. Fourthly, I'm going to look
at some of the possibilities. What are some of the options
that Alaska can pursue. And then finally,
just some concluding comments about some things here. So let me start. OK, probably in Alaska
politics no other issue is more significant
or constantly recurs than how do we deal
with Alaska's economy and its instability because of
its dependence on oil revenues? It's probably the central
issue in Alaska politics. It has been for many years. It's less important when
oil prices are high, as you all know, but it's
certainly a significant issue all the time. And so politicians constantly
deal with this issue and are seeking solutions. And you get many suggestions. People-- particularly people
who are running for office, as opposed to those
who are in office-- well, these people
don't know what they're doing down there in Juneau. And they need to start
thinking outside the box. I never figured out
what that means, but people talk about it. They need to start
thinking outside the box, because there's a way we
can deal with this issue. It's not a problem, really. It's just those people
down there in Juneau don't know what they're doing. They're self serving. They're just there for
their salaries and so on. Well, it might be one way
of looking at it, but OK. But let's look at
some of the realities. Alaska has, by far, the
most unbalanced economy in the United States. What do we mean by that? We mean that in a
normal-- those of you who know a little bit of econ,
don't want to insult you, but basically a
balanced economy might would be one where
there was a relationship between manufacturing, between
agriculture or agribusiness services, and also government. A lot of people say,
well, government's not legitimate-- it is. It pumps money into the economy,
particularly in this state. So let's take the extreme
example, California, or shall we say Massachusetts, or Texas. Those are very
balanced economies. When you come out west and you
come to the mountain states-- like New Mexico, Montana
particularly, Idaho-- they're much less balanced. A place like Montana has
mining, not much manufacturing, and has oil and gas
of course, which has become quite controversial
recently with the pipeline. These are not very
balanced economies, but they're nothing
compared with Alaska. Alaska has no manufacturing
worth talking about. Agriculture has
never been important. People from the Mat-Su
will say, well, it is. But it's not, really. It's insignificant. It doesn't even come up as
1/2 of 1% of Alaska's Gross Domestic Product. So you've got a very unbalanced
economy, based largely, of course, upon
natural resources, which feeds government. There are two basic
economic drivers in Alaska. One of them is oil. And the second one is
the federal government. Now a lot of you will
be surprised by that. But the federal government
is a major source of income in Alaska
for all sorts of ways. And I can talk about that more
later if we get the chance. I just want to mention
that, because I'll show you some ways in
which that works later on. So you've got those. Now of course, oil
feeds state government. And state government,
obviously, is a major employer in this state and
also, of course, a major source of income. So those two things
are very important. And of course, Alaska is largely
based upon natural resources, a natural resource economy,
just like Wyoming is, just like to a large
extent Montana is. And that's been the reality ever
since statehood-- first of all, of course, salmon, timber
or lumber, and of course since the late '60s,
early '70s, oil. Next point to make-- Alaska is subject to
the boom bust economy. In other words--
and you know this-- it goes through these cycles,
the ups and downs, due largely of course to the price
of oil, upon which the state is so dependent. And a state like
Texas or California-- and of course, Texas
is a big oil state. California is a small oil state. But even when oil prices
are down in those states, you've got so much other
aspects of the economy-- manufacturing, services,
and so on-- that it doesn't have the effect that it
would have in Alaska, for obvious reasons. There have been many
schemes suggested to how to deal with this issue. And there are, of
course, as I say, people running for
office often and that are people have all these
suggestions about how we can deal with this issue. And if we only got the right
solution it would all be fine. And we'll go into
some of those later. But this is a common thing. You hear from people all the
time about how to do things. But my final point
in terms of my intro is this, that many
schemes have been tried. Many schemes have
been suggested. But there has been no
answer that has come up. There is no answer
that's come up. And the question
is, why is that? My final point is this,
in terms of my intro, politicians in this state
have virtually no influence on the Alaska economy in terms
of affecting it in any way. They can minorly tweak it. They can maybe do
some encouraging. But they really have very
little influence on the economy. Now, politicians won't tell you
that because no politician's going to say, well, I'm going
to go down there to Juneau, and I don't really have any
influence on the economy, but please elect me. They're going to say,
yeah, I've got this plan. And I'm going to do this. And we're going to do this. And we're going to do
that, some of which I'll talk to you
about in a moment. And we're going to
get things right. Well let's turn to my
second section now. Let's talk about
the environment, the economic environment,
in which Alaska operates. What are the major elements that
influence the Alaska economy and what Alaska can and
cannot do economically? Well, there are three
of these elements, which are very significant. And the first one
of these is not even an economics 101 principle. It's really a remedial
economics point. And that is this-- Alaska operates in a free
enterprise or capitalist system, where people produce
at the lowest possible cost and they sell at the
highest possible cost. It's the basic
principle of capitalism, the basic principle
of what are-- you can call it the free
enterprise system. It sounds very simple,
but it's fundamental. And this is at the
root of several of Alaska's economic problems
and provide hurdles, which are difficult to overcome. Secondly, Alaska
lives and operates within a national and an
international free trade economy. There has always, of
course, been free trade within the 50 states. It's part of the
US Constitution. No barriers can be
put up between states. The Commerce Clause says that. So there's never been
barriers between the states. There was, of course, in the
old Articles of Confederation. And that's why one reason
for the founding fathers met in Philadelphia, was
to change the Constitution. But also internationally,
the last 25 or 30 years
particularly, there has been negotiations, particularly
with major world economies-- European Union, East
Asia, and so on-- so that there's virtually free
trade between the countries of the world now-- essentially. Some Latin American countries,
like Brazil and so on, still have barriers. But basically, we're talking
more or less free trade. So what this means, for those
who know a bit of economics, is that you get the principle of
comparative advantage settling in. When you have free trade,
certain places that produce certain
things efficiently, which means that the
lowest possible cost-- those places will
concentrate on those issues-- like oranges in
Florida, for example, high tech in Silicon
Valley and in the Boston region of Massachusetts. And you'll get other
places producing things-- obviously wheat in Iowa
and corn in Kansas, and not that sort of production
in New England, which has not got the soil or the terrain. So you get comparative
advantage set in. That's what happens. And you produce things at
the lowest possible cost in those areas. OK, the third point,
fundamentally, is this-- it is unlikely,
extremely unlikely, that a government, or
a state government, or people working
in state government will be able to root
out the best investments and to be able to provide
the wherewithal to do those. The free enterprise
system and people who pursue investments
for a living-- those are the people
that probably-- not probably, but will--
determine where the best investments are to be made. And if there is
money to be made, they will invest in that place. That's just the
nature of capitalism. Now I'm not saying capitalism
good thing or a bad thing. But I have very strong
opinions on parts of that, but that's not why
you're here today. But it does tend to distribute
resources based upon cost. And investors don't
invest in horseshoes, because very few people
use horses anymore. So that's important. So let's look at some of
the schemes that have been, or some ideas that
have been, proposed for dealing with
the Alaska economy. The first one I
would say is this. You've probably
heard it many times, or at least you've
[INAUDIBLE] it. Is what I call the
"if only" syndrome. If only the feds would
get off our backs. It's only the
environmentalists-- you know, we could get them under control. If only people
would realize that we could start a
high tech industry in Anchorage, and so
on, and the rest of it. This syndrome is what you
might call the victim syndrome. We in Alaska been victimized. And we're hunkered
down sort of thing, which is one of
the things actually that governors tend to do. Particularly Wally
Hickel-- you all remember Wally,
probably-- who saw Alaska as being beleaguered by
the federal government, and he saw it as this gladiator,
David against Goliath. But in this case,
Goliath won-- probably will always win in that case--
as the federal government. So there is that. There's that thing. The second thing is
what I would call, to be rather nasty about
it, harebrained schemes. There are many
harebrained schemes-- get people go down to Juneau,
where they think, and they say, hey, I've got an idea, OK? The idea is, why don't we bring
in old used cars from the Bush, mow them down in Anchorage,
and start making steel? Although he's dead now,
but we can say this-- Wally Hickel's plan-- some
of you may remember this-- to have a giant hose
pipe all the way from southeast Alaska down
to Southern California to take water down there. There are other schemes. I won't go into any more, but
there are other schemes, which obviously are-- they are harebrained. They're ridiculous. It's somebody
suggesting something that's not going to work. The third thing, you might
say, are the state subsidizing certain types of things. And to a certain
extent, this can work. For example, some of you may-- probably most of you have
heard of the Red Dog Mine up in northwest Alaska. The state helped develop that
road to the Red Dog Mine. It helped that. And [INAUDIBLE] who was
the Canadian company that came in-- it encouraged
them to come in. It encouraged them to come
in, to a certain extent. Sean Parnell, before he got
defeated here two years ago, he had this idea of roads to
resource places and so on. Now this sounds
like a good idea. And to a certain
extent, it might work. But it's hard to
know to what extent this actually
encourages business. Another example is the
oil company credits, which was a big issue
last session in terms of the governor
proposing reducing them considerably and the
legislation not wanting to. But let me go back
to one of my points about the fundamentals
of the Alaska economy. If those places, those
mines, those developments were viable economically,
investors would be here. And they would be developing
those things, most likely. Now we're not saying that a
little bit of a helping hand doesn't help a certain amount. But generally speaking, if
people see money in them, they will develop them. A good example is the Pebble
Mine southwest Alaska. Now Pebble will
probably never open, because of the power of the
environmental community. But basically, the
investors in Pebble believed it would be viable. It doesn't have any
state aid, but they believed it would be viable. And I guess without
the environmentalists, it probably would be. It would be open now. The same with the Kensington
Mine here and gold. It's true. So generally speaking,
subsidies can work, but they're very limited
in what they can do. And sometimes I completely
a waste the money. I don't know how many of
you were here in the '80s. I got here in 1980. Alaska tried to
subsidize agriculture. They built a grain
elevator in Valdez. They opened a thing called
the Mat Maid Dairy and so on. These things went
bankrupt, because they just weren't viable economically. The Mat Maid dairy
was very nice, and the milk was
pretty good, but if you could get a gallon of milk
for $5 less shipped up from Seattle, people
didn't buy Mat Maid milk. Because the competition-- back
to the competition thing-- is that Alaska couldn't
produce it to that extent. And then another element in
trying to deal with the economy is trying to encourage-- not by subsidy, but
trying to encourage-- the development of certain
industries or certain things. And I'm going to hit
three things here. One of them is the Arctic. The second one is the
Pacific Rim syndrome that people talk about. And the other one, the
one I'll start with, is the idea of attracting
industry to Alaska. I did a talk show in Anchorage
about three weeks ago, a call-in talk show. And a guy called in. And he said, why don't we have-- I don't think politicians really
know what they're doing here. He said, we could have a high
tech industry in Anchorage. We could get things going. We could really
get industry going. We could have
people come up here and do all sorts of things. And we could really
got the economy going. But there isn't a
high tech industry in Alaska and in Anchorage,
and probably never will be. Simple-- one, it
would be much more expensive to produce
things in Anchorage. There's no-- with all due
respect to the University of Alaska, which I
taught for 30 years-- it doesn't have the
sorts of programs that Stanford, and Berkeley,
and UC Santa Cruz have, producing engineers
that employers can go out and get immediately. It doesn't have that. Secondly, it doesn't have
the infrastructure necessary. And to ship things out of there,
even if it's software stuff, it's going to be expensive. But most important of all,
although you and I love Alaska, most people don't want
to move to Alaska. If you were living
in the Bay Area, making $250,000 a year and
can actually afford to buy an apartment-- which even at
that price might be tough, but you could-- and your family was there, why
would you move to Anchorage? I like Anchorage. And it's a lot different than
when I first came here in 1980. Most people-- you know this. Almost every American
outside of this state wants to come to Alaska. Oh, yeah. They never say, I want
to go to Iowa one day or I want to go to Kansas. But they say, hey, I
want to go to Alaska. But they only want to come
for a visit and then go home. They don't want to stay. And most people who come
to Alaska, of course, come for a job,
but it's unlikely that you're going to
get that industry here. Let's move quickly
to the Arctic. How are we doing for time? Not too bad. The Arctic-- this is seen to
be the panacea for Alaska, the Arctic. Well, what does that mean? Well it meant drilling oil
in the Chukchi Sea and so on. And of course, Shell spent $8
billion drilling in the Chukchi and they couldn't
come up with anything. Why? Because it wasn't
economically viable. They gave it a shot. It didn't work, so
they pulled out. And so did Statoil, which was
a Norwegian oil company that was doing similar work. The Corps of Engineers then
canceled the development of the deep water port in Nome. And the US Department of the
Interior cancelled the lease sales in the Chukchi, because
no one was applying for them. Why? Because it wasn't economical. So quite frankly,
and sadly I guess for Governor Walker and
[INAUDIBLE] particularly, the Arctic is really not
much of a viable opportunity. Probably we won't see more
development in the Arctic for many years to come. So there's [INAUDIBLE] here. Let's quickly talk
about the Pacific Rim. And then I want to talk about
this idea of a value added, which is another big thing
that people talk about. The Pacific Rim-- people
say well, you know, Alaska is right up in the
northern part of the United States, right near the Arctic. And of course, its proximity
to the Asian Far East, to Japan, to South Korea, and
some other places is right. So it should be able to develop
trade with the Far East. But once again, it doesn't
have the infrastructure or the economic development
entities that need it. If you go down to
San Francisco, which is a major financial
center in the West Coast, or we go down to Seattle,
which has all sorts of industry and services with the internet
these days and other things, why would you set up
something in Alaska just because it's
geographically closer? It doesn't make sense. And in fact, many ventures that
Alaska has had with the Far East have not worked out. Now Governor Walker,
of course, has a plan to build a pipeline from the
North Slope down to the Kenai and send liquefied natural
gas to the Far East. But that's at least
10 years away. If the pipeline started
to be built tomorrow, it wouldn't come
online till 2027, 2028. So really, the Far East thing is
not really very viable either, although it sounds good. They sound intuitively
good, but when you get down to the actual
fact of seeing them work-- just a final point
here, and then I'll talk a bit about what we
can do, or what can be done. Value added-- this is a thing
people always talk about. We have a lot of
fish in the state. You bring fish in. Why can't we make fish sticks? Why don't we have lots and lots
of shellfish that are more, or shrimp that are
more-- why can't we package those up
and ship those out so we have a
manufacturing business? Well once again, let's
come back to the basics that we talked about
in the beginning. One, competition. Secondly, the free trade idea. If it were a good
idea and economically feasible to produce
fish sticks-- should we say down in Unalaska
or somewhere like that-- investors would have jumped at
it, and it would be being done. Why isn't it being done? Because it's not
economically viable. It's much cheaper to ship the
fish someplace in Seattle, or maybe down to one of
the fish processing plants on the Oregon coast, and produce
it there and ship it back as fish sticks. And this is one of
the things that people don't seem to understand. It's like why do we
ship our oil all the way down to down to
Southern California. They turn it into gas and
we buy the gas back here. Why don't we do it in Alaska? Well, we have had a
couple of process plants, but they're just not
viable economically. And once again,
we have to go back to the basics of the
things we talked about, the environment in
which Alaska lives. So let me just say
a few things about-- I've got about
another 10 minutes-- what actually can be done? Well let me I'll preface
this by saying this-- human beings are extremely
resourceful animals and they figure out
things best they can. And they do amazing things-- put a man on the moon. Develop the internet. So if there were a solution
to this problem of Alaska's economy, someone would have
figured it out a long time ago. It would be figured out and
we'd be pursuing that today. But there isn't
a solution to it. Now a lot of politicians-- maybe some listen to
this-- oh, that Thomas. He doesn't know what
he's talking about. I've got all these plans. Tell me. Tell me what they are. Show us how it's going to be
viable economically, given the Alaska environment
we talked about. Show me. I'll be very happy to see them. In fact, if you told me, I'd
make some money out of them. I'd invest. Even though I lost my permanent
fund writing this book, I can probably find
some other money. OK so what are
the possibilities? Well, the first thing that
Alaska ought to do if it's-- and I don't want to sound
like Bill Walker here. I'm not necessarily
a Bill Walker fan. I wasn't in the state
to vote for Bill Walker. I don't know whether Bill
Walker's doing a good-- I have my opinion--
doing a good or bad job. I'm not here to represent
Governor Walker. But I am saying some things
that he's come up with, OK? Because I happen to think that
he started a conversation that should have been started
30 years ago in the state, really should have been. The first thing we've
got to do is sever-- and I mean, sever, separate-- the Alaskan economy and its
future from oil revenues. Because what that
connection, that apparently inseparable
connection, is behind the boom bust cycle
in Alaska and the economy. And its effects
can be devastating. Once you lose-- you fire
people from the state, or people who were working
in a business in Anchorage lose their jobs because
the place closes, you can't get that back. Plus, the people that
leave the state-- and not the old people like me
or the young kids that can't-- if they're teachers graduating
from college at UAA or UAF and they don't see
many opportunities. They move to Washington. They move back to DC, or
back East, or something. And those are the people we
should be keeping in Alaska. Because those are the people
that the future of the state, not the old guys like
me, and the people about to take their
retirement from the state. So we've got to do that. That's the first
thing we've got to do. Secondly, Alaska has the
wherewithal to do that. It has the wherewithal
to do that. It has a permanent fund
of $55 billion dollars-- $55 billion. And in fact, the only way
to deal with this economy is in some way to
combine natural resource revenues with some restructuring
of the permanent fund. Now once again, I'm
not arguing for Walker. But if you look at the-- some of you may have heard about
ISER, the Institute of Social and Economic Research. And there are a couple
of economists out there. One is Scott Goldsmith, who
is a very respected guy, and Governor Knapp,
both of whom retired, but that's what they say. It's not their opinions. It's just the only way
that things will work. Alaska has the wherewithal
to do those things. Now let's maybe look at a
couple of other possibilities that might-- well,
what about taxes? Well, let's increase taxes. If there were a state income
tax, which of course there was until 1980-- let's say there was a state
income tax, and it was-- shall we say-- 10% of federal, which is
common across the states, and it wasn't a separate tax,
like in Oregon or somewhere. And if you had a 5%
state sales tax-- we're not saying you
could, because it would be problematical,
because some places have sales taxes already, and
it would be outrageous, but say you could. You'd bring in only
about 25% to 28% of what oil revenues bring
in at the $80 a barrel thing, which gives
the state budget what it was three years ago, which
is a fairly sustainable state budget. So even that alone-- it's not going to work. So the only thing
you can do is you've got to do something
with the permanent fund and meld that with
natural resource revenues. But of course, as we all know,
politics gets in the way. And of course, people don't
look upon it that way. Because everybody in the
legislature, every legislator, has a particular
agenda of some type. And obviously the last session
that was not the agenda that the governor had. And of course, I
think there's probably also a wishful
thinking syndrome, that if we only
wait a year or two, oil prices will go back up. They'll go up to $80 or
$100 or $110 a barrel. And that could happen. It happened before. Those of you were
here in '86, we had a couple of years
of pretty bad prices. Then we had the Gulf War and
prices went back up again. Then it went down in
Knowles's administration. And it got pretty low. And then Frank
Murkowski came along. And he was going to cut
the budget by 5% a year for three years. And then oil prices went
back up and everybody phew, don't have to do
any planning now. It's good. We can just go on as we did. So that could happen. But in terms of the long
term, the state probably needs to do something to
give it this annual income that it can, in fact,
use to insulate itself from oil prices. Now Alaska is always going to
be a natural resource extraction economy for the reasons I
think I've argued today. And you can come back
and argue against me. I'm not saying that I
have the answer to this. But the basic economics
says that Alaska is always going to be a natural
resource economy. And whether or not the
gas pipeline can be built is another factor. But even if it did, as I
said, it's 10 years away. And who knows what the price
of natural gas will be then. And why do you think that
the three major producers on the North Slope are
very happily backing off being partners in this pipeline? If there were a lot of money to
be made, or thought they could, they'd be doing it. But of course, 10
years time, they don't know what the
price of natural gas-- but more important
to them, they don't know what the tax
is going to be, which is why they wanted
a constitutional amendment to give them a
predictable tax level. Which, of course, probably most
Alaskans would never agree. I don't know. I'm just guessing
what would happen. So I think that you've
got to consider that. And as I said, if there
was a solution to it, someone would have figured out. So anyway, I'm just
going to conclude here. So back to what I
said at the beginning, most politicians-- all
politicians-- really have very little influence
on the Alaska economy, because it's subject to
these world forces because of competition,
because of free trade. And of course, as
we said, if there were opportunities
to invest here, investors would be
here right away. They would actually be here. But there's not. So that's the problem. So what is Alaska going to do? It could lurch from
crisis to crisis. That's what's happened in
the last 35 or 40 years. You try to bear out
the bad times hoping that things will change. And they have changed. That's the unfortunate
thing in many ways, that the prices do go back up. And so people say, well-- and I don't know for
certain, but I've talked to several former
students of mine who work in the legislature
and a couple of legislators who are friends of mine. And they sort of hint, well,
maybe prices will go back up, and we won't have
to do anything. Because it's very
difficult politically to deal with things-- obviously, they couldn't
deal with the Permanent Fund Dividend this year as a group. The governor had to deal with
it, with reducing it to $1,000. So that's the hard thing. How do you get consensus there? So you're going to lurch from
crisis to crisis, basically. So there's is that. But my final point is this. The Alaska economy's
not going to change. And so what you've got to do-- I'll use this terrible
phrase that I hate. You've got to think
outside the box, OK? So you can't look at traditional
ways of dealing with the Alaska economy. The only way to deal with
it is in fact standing outside the box for most states. And that is this permanent
fund, this $55 billion that you have in
the bank that you can use in some way
or another to deal with this constant
economic cycle of boom bust to be able to insulate
it against that. So anyway, that's my spiel
today about those things. It's not exactly the most
complicated or advanced presentation. But I think, or I hope, that
I've raised your awareness about some things
that maybe dispel some of the wishful thinking,
which is we should be positive about things. But this is not a situation
where you can put things off. It's a reality. And I think that the state
should face up to this. But politically,
it's another matter. So anyway, anybody
have any questions? I'd be happy to answer
questions if you have any. If you don't, that's fine too. Yes? I have a question about your
discussion on the Arctic. Yeah. And I know you say
historically it's-- my understanding of
some of your arguments is that if we haven't
solved it up till now, if some things haven't
worked up till now, it's probably not likely
going to work going forward. But with the Arctic, do
you see that the climate change and the opening up
of the Northeast Passage indicates some sort of
shift or new conditions that are going to maybe have
an impact on whether or not we should be building
infrastructure that positions Alaska as a player
in the Arctic? It might be. I think that climate change-- and you probably heard
about this boat that went through that way and went
to New York for only $55,000 a person, which is, I think,
a pretty good deal, don't you? It's like Hillary Clinton making
$210,000 for dinner speeches. It's kind of expensive. But anyway, yeah, I don't know-- I really can't
answer your question. In terms of shipping, it
may improve some shipping. But I don't know-- what are
you talking about in terms of infrastructure? Obviously the deep water port
that the Corps of Engineers were going to build in Nome-- they obviously don't
think that's viable. It would have been if
Shell had struck oil and was going to continue that
and other companies do that. But the other thing
about it is too, it costs about six
times as much to produce a barrel of oil
out of the Arctic than it does in Saudi Arabia. So you've got to have
a good oil price. I don't know exactly what it
was, but it's about over $50 a barrel to make it
viable to tap that oil. Whereas oil at $6 a barrel will
be fine out of Saudi Arabia. So there are so many
unknowns about it. And it really is a crap
shoot in many ways. So I can't really
answer your question. But I think the Arctic is one of
these hopeful things out there, and we should deal
with this thing. And I'm not sure
how viable it is. Our best bet, quite frankly,
is if we can do it-- although it takes some years--
is to build the gas pipeline, but to do the things
we've talked about here, and what Governor
Walker is talking about, about somehow using
the permanent fund. It's the only answer to
this question, this problem. There's nothing else out there. Look, the constitutional
budget reserve is being gradually drained
as you don't make decisions about restructuring
the permanent fund, so I don't know. It sounds depressing. And it is. But in times of high oil prices,
people don't think about it. It's like everything else. Human beings don't
tend to do things in advance unless they're
compulsive planners. They wait till something needs
to be done and then they do it. It's just a human thing. And I think it's
true in politics too. Yes? Yeah, sorry? Yeah, you talked
about fish sticks? We talked about fish
sticks and the idea that we would be making
the fish sticks here if we could make them here. If it made sense it would
already be happening. If it made economic sense. Yeah, if it made economic sense. But I think at
things like fracking in North Dakota, where
technology changes what makes sense. What do you think about
forward-looking technologies that might impact Alaska? Oh, I think it probably could. I don't know what they would be. You've got to do two things. If you're shipping
something physical, you've got to be able to
compete with shipping costs of those goods in other places. In other words, if you're going
to ship something from even out of Ketchikan, say for example,
let alone out of Anchorage, if you're going to ship
something to the lower 48-- whether it be Seattle, or
whether it be Long Beach, California, or whatever-- it's got to be cheaper than
shipping it from another place, because otherwise
it won't happen. Now there are some things
in Alaska, obviously, that are unique-- the scenery, salmon and so
on, and all sorts of things. But there's only up to a point
that people will pay for those, because they can get similar
experiences in the Alps. They can buy pen-raised salmon
from Canada, or from Chile, and so on. So there's only a certain
amount of things there. I think technology
may affect that. I'm not quite sure
what it would be. But it could happen. I don't know what it will be. It hasn't happened so far. If you look at the Alaska
economy today, in 2016, it's not that much different
in terms of competition. Obviously, we have oil now
we didn't have in 1959. But it really isn't
that much different in terms of its
composition, its viability. We just have a different natural
resource that we rely upon, which is oil versus timber,
and salmon, and so on. Although fishing
is still important, and so is timber, but nothing-- oil just dwarfs everything. Nothing comes close to oil. It just doesn't. Once again, like the question
about the Arctic, I'm not sure, but it could happen. But I can't personally
see what it would be. But on the other hand, who
could see the internet in 1980? Who could see cell
phones in 1976? Who could see social
media in 2005? So I don't know. But it could. It could make that difference. The only problem is if Alaska
has that technology, so many other places. You know what I mean? I don't know. Somebody else? Yes, ma'am? Yes, so I'm curious, with
Norway and the lessons we can learn from them-- You mean their permanent fund? Their permanent
fund, their oil-- Oh yeah, yeah. --how they're handling
all that and how we can benefit from
some of their ideas. I'm not sure. I know a fair bit
about the-- there's this thing called the Government
Pension Fund in Norway. It's a very amazing thing. Let me just give you a quick
bit of background about it. The Alaska Permanent
Fund began in 1976. It's now worth 55-- and went I on the website this
morning so I'd be up to date. It's just under $55 billion now. It's the 25th largest what
we call sovereign wealth fund in the world, just at 25, by
far the largest in the United States. Texas has one. New Mexico has one. North Dakota started
once several years ago. Norway actually has two funds,
but the one that they have, which is called the
Government Pension Fund, is worth today $890 billion. It will be the first
sovereign wealth fund to hit a trillion dollars. Now that, of course, comes
all from North Sea oil. But you see, the
interesting thing is the Norwegians don't pay
a permanent fund dividend. They just use that
money and they invest it for the very reasons that
we talked about here to try to balance out their economy. And interestingly
enough, they use it to make their country greener. They will give you a $10,000
subsidy to buy electric car. But interestingly
enough, they invest in oil industries and natural
gas pipelines, which of course makes an even bigger footprint. So there's a little bit
of inconsistency there. To get back to your
question ma'am, I'm not sure what we
could learn from them in terms of the
development of their fund. They've just been
very fortunate, because they've put
larger amounts away. And I think that they've
gone about using it in the right way. But you see-- I don't want to
get too deep here-- but they have a
parliamentary system. In a parliamentary system,
some of you may know, the executive is drawn
from the legislature. And so the executive,
in the part, is basically can dictate
things, which I know make American flinch and so on. But we have a separation
of power system here, where the president,
the Congress, the governor, the legislature are
pretty much co-equal. In a parliamentary
system, you decide to do something, the
parties in power-- the party in the legislature
goes along with the executive, because that's what
happens, and they do things. 95% of legislation in
Britain, or Germany, or Norway that's
proposed gets passed. It's less than 20%
in the United States. And I'm not saying that's
good or bad because they're both different systems. But I'm saying that you can
do more in a place like Norway than you could in
the United States. If this were England,
or if this were Norway, or if this were
Australia, we wouldn't have this problem in
Alaska, because somebody would have figured out
and say, hey, we've got to do something about this. And you'd have a party
come in and do this. And I'm not saying
that's good or bad. I'm just saying it's
just different, you see, in that regard. Anyway, but what about
one more question? Because I think we're
probably out of time. Yes? I've got to go out of
here with some hope. OK, I know. Yeah, really. Well, move to Washington state. It's doing very well. But when I worked at
Commerce, about 15 years ago we did a survey of some
major business corporations around the country. And the top two reasons--
we were trying to understand disincentives for
investing in Alaska. This was in the era of Science
and Technology Foundation and a lot-- I remember that, yeah, sure. --going on. And the top two reasons
that employers gave us were one, transportation costs
and two, a viable workforce. And so I'm just wondering, what
kind of factors of production or changes could
be in place that would give some hope that may-- I mean, if we ended up
with top notch workforce-- there's a movement
in Juneau right now to invest in pre-K education
so kids have a good foundation and we start growing
the best workforce. If we had carbon tax
that maybe equalize some of the
transportation costs, what are some influences on
those factors of production that could put us
back in the ballgame? OK, we don't have an hour,
but I'll try and sum it up in a minute. First of all, let's take
the transportation thing. You can say, well,
transportation costs are-- they're much lower now to
Alaska than they used to be. But they're also much
lower for other places. So once again, the
competition thing. My own personal opinion,
which is not to do with this, I think the two things
that Alaska's got going for it are natural
resources and education. Exactly what you're saying-- you've got to
produce a workforce that people want to employ. The problem is,
with all due respect to the University of Alaska,
and to the new president, Jim Johnson, who was one of
my students in past here, or one of my colleagues when
he first came to Alaska, the university is
cutting itself back. It's never been a
world class university, except for in some very minor
areas, like arctic biology and so on. They're cutting programs out. You're not going to have the
people coming out of there that employers would want to-- I mean, they might
want to hire some. But you're not going to get
the very first class-- what you do in the Bay
Area, for example, or you do in the
Boston area, or you do in say, Dallas Fort Worth,
or you do in the Chicago area. Your meeting
