Though not about oil itself, this column from April 7, 1988 wonders how Alaska got lost
in the twilight zone of bail-outs, subsidies and giveaways that the oil wealth introduced to Juneau.


Alaska’s economic Twilight Zone

You'd think Alaska's recent economic experience would be enough to warn us off of more government subsidies, state-sponsored entrepreneurism or plain, old fashioned bail-outs.

You would think so. But you would be wrong.

Three items reflected in recent headlines make that point painfully plain.

In Juneau, where run-of-the-mill bad ideas tend to get magnified by galloping self-interest, this has been taken to new heights. Specifically, consider Sen. Jack Coghill's recent proposal that the state somehow owes Delta barley farmers loan forgiveness because their market collapsed.

He says farmers were "sold a bill of goods" when the state launched the program. State officials believed there would be a world market for the crops. There wasn't. Now the state owes the farmers a break, Sen. Coghill says.

That's wrong. If the state had promised to build a grain terminal and then failed, it might have some liability. But the fact is that the scheme simply collapsed because a lot of people made bad assumptions.

I was once part owner of a small newspaper. We assumed that a lot of people would buy copies. They didn't. We shut it down, paid the bills and moved on to the next job. Life's like that, unless you have friends in the senate.

On another economic front, seine fishermen in Sitka have come up with a novel approach to their industry, as well. They have decided not to compete for the harvest, but simply split the take evenly.

This is possible because they have what amounts to a collective monopoly on the resource. They are all limited entry permit holders, and nobody except these 52 people is allowed to fish for herring there. Thus an agreement between the permit holders amounts to about the same deal OPEC nations have been trying to enforce for oil: a monopoly cartel.

They have done this for decent, honorable reasons, according to all involved. Their peculiar fishery is in trouble because herring roe conditions are so poor that only controlled (non-competitive) harvesting is likely to allow an acceptable catch this year. Fish and Game officials like the approach. Everybody's happy.

Still, it is an unusual economic theory. It would certainly be more efficient and orderly for the Anchorage Times and Daily News to agree on a non-competitive pricing structure. We could eliminate a lot of messy details, streamline ad sales forces and maximize the return from our resource. This would be especially efficient if we could get the government to guarantee that nobody else could start a newspaper. But in our business, that would be an anti-trust violation.

To round out our tour of Alaska's economic twilight zone, let's look at the plan Alaska banks have advanced to get a government agency to make their world less risky and more profitable.

At issue here is a proposal that could be described as "Banks want more money, less risk." As proposed in the Alaska State Senate, it would make the Alaska Industrial Development and Export Authority guarantee loans made by banks instead of being a lending agency itself.

As things work now, AIDEA makes loans itself, and uses the interest gained on good loans to make up for defaults resulting from bad ones. The new plan would let banks collect on good loans and have AIDEA pay for bad ones.

There is more detail to it, of course, but it is not difficult to see why bankers like it. It is hard to see why the rest of us would.

But you can't blame the bankers for trying. The plan's obviously in their interest, and in Alaska's economic fun house, anything can happen.

There was one bright spot of economic rationality in the news last week. It turns out that the Anchorage School Board won't be forced to spend $2 million it didn't want to spend. But in keeping with our state's financial traditions, the district had to go to court to avoid it.

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