“This year, they gave up.”
That’s how The New York Times reporter Binyamin Applebaum summed up last week’s annual Economic Policy Symposium in Jackson Hole, Wyoming. What the world’s top central bankers and monetary policy makers gave up on was debating “the best ways to return to faster economic growth.”
Alaskans should give up, too. Because a few decades after oil began flowing down the pipeline, production of real wealth in America’s economy gave way to the rising attraction of an imagined facsimile.
In 1776, Adam Smith’s “The Wealth of Nations” laid much of the groundwork for understanding our free market economy. He believed real wealth was generated by “the annual produce of the land and labour of the society.” From the land came our food and the natural resources for manufacturing tangible products. Upon it were constructed improvements such as buildings and roads.
By that definition, farmers, miners, fishers and construction workers were the first-tier producers of American wealth.
Behind them, Smith put manufacturing and its labor force. Wholesalers and the workers who distributed the goods to the market were next. Retail business owners took up the rear. But in America’s early days, most owners, plants and labor of these three elements resided in Britain. So, it’s fair to say the country’s original wealth was generated almost entirely from the land and labor that worked it.
That’s a loose description of Alaska today. Very little manufacturing occurs here. And our biggest retailers are headquartered down south.
One major difference is the production of wealth from our natural resources. Specifically, most oil and mining businesses operating in the state aren’t Alaskan. And compared to Smith’s characterization of labor’s contribution, now extraction relies on heavy equipment built in faraway manufacturing plants. Thus, the greatest share of the wealth created from those industries ultimately resides somewhere else.
Sen. Mike Dunleavy, R-Wasilla, as a candidate for governor, still believes the solution to the state’s fiscal crisis is unleashing new wealth through responsible resource development. Everyone knows Alaska is stuck on the wrong side of oil’s boom and bust cycle. But Dunleavy’s idea is a retread of Murkowski’s 2002 campaign promise that delivered nothing.
There are other small holes in Dunleavy’s vision. U.S. demand for forest products is the lowest it’s been since the mid-1980s. And even though minerals such as silver, nickel and copper are holding their own, like timber, they’ve become much smaller players in the overall economy.
That’s true of the entire land sector, especially in relation to Smith’s classical inquiry. It’s been displaced by phantoms he never recognized as wealth producers.
When World War II ended, products of the land and its labor were three times larger than the financial sector of banking, insurance and real estate. These businesses create no tangible wealth. They merely transfer it from one entity to another. Today these redistributing enterprises move almost twice as much money as that being produced on the land.
Another is the information stream entering our lives. Aided by the growth of television, pop culture and the internet, mass media went from being one-tenth of the land sector after World War II to almost half its size.
Paralleling this is the declining role of manufacturing. In 1947, it put out five times the volume of the finance sector. It peaked in the mid-70s, stabilized for two decades, then trade agreements nudged it into a precipitous nosedive. But even before that, in relation to America’s population growth, the portion of consumer dollars going to manufactured products had been steadily shrinking. Now finance is its economic equal.
Consider this data compiled by a Federal Communication Commission economist. In 1950, advertisers in all sectors spent about $40 per American annually when adjusted for inflation. Today it exceeds $900. Some might say that’s because there’s so much competition. I’d argue that it cost more to convince people to spend their hard-earned money on products that add little lasting value to their lives.
The modern concept of economic growth might make sense to economic policy experts. But it produces little to improve the lives of the working class. We’d be better off finding ways to take care of each other than transferring anymore of our wealth to the financiers and merchants peddling information we can’t eat, drive, or live in.
• Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector. He contributes a regular column to the Juneau Empire.
