What happened to the Last Frontier? Reflections on Alaska, Part 1

Looking back on my 57-year love affair with Alaska, I’m coming to think that the devastating 1964 earthquake did a great service to Alaska’s people, which in recent decades has been lost. The 9.2 magnitude quake killed 131 Alaskans and destroyed $2.3 billion in property in a year when Alaska’s annual GDP was only $1 billion.

But a great resurgence occurred. A spirit of common struggle and innovation in the decade following the quake generated the most dynamic socio-economic progress of a state in all of American history. And the lack of that cooperative spirit in the last few decades is, in my view, the major cause of Alaska’s current economic decline.

I know this story better than most because I was there, playing a small but strategic part in it. In August, 1964, I traveled from New York City to Bethel to teach English to Yupik-speaking Alaska Eskimos. Two years later, I was City Manager of Bethel appealing for funds from Washington’s War on Poverty, an effort that failed almost everywhere in America, except Alaska, which did it on its own.

In 1968, I moved to Anchorage to manage the 1968 US Senate campaign of Mike Gravel, a Democrat, and in 1969 became his Legislative Assistant in the US Senate, which subsequently passed the Alaska Pipeline bill and the Alaska Native Land Claims Act. In 1974, as an independent, international political strategist, I was back in Alaska assisting Jay Hammond, a Republican, to win the governorship and two years later to pass the referendum – by a vote of 76% in favor — creating the Alaska Permanent Fund.

These three cooperative, innovative and trusted acts of government – the pipeline permit, the Native land claims settlement, and the Permanent Fund – became the building blocks that put the whole Alaska population including urban and rural, White and Native, Democrat and Republican, management and labor, on a shared trajectory of mutual success. The Big Data tells a unique story:

From 1960 to 2000 Alaska’s nominal GDP multiplied by 50 times, from $1 billion to over $50 billion per year, while its population increased by only 2.5 times, from 236,000 to 600,000. But spectacular GDP growth shows only how total wealth increased; it doesn’t show what happened at the bottom of the economy, and this is where Alaska’s story is both spectacular and unique.

In 1960, 67% of Alaska’s Native population lived in poverty, but in 1990, only 18% did, even while the Native population had doubled in size, along with a huge increase in Native life expectancy. A 49% drop in the poverty rate in one generation is unprecedented in US history for any population group, no less indigenous people living in remote villages far removed from modern life and technology.

Government designed that innovative result by sharing the tools of wealth creation historically denied to the poor, namely: enterprises, land, capital and education. While most of the improvements in jobs and family income derived from transactions in the private sector, the partnership with government was strategic.

Fast forward to 2021: Oil revenues and state spending have gradually declined over the last twenty years. New investments did not take the place of oil. Alaska’s economy did not diversify and innovate. And Alaska’s unemployment rate trended higher and family incomes lower.

Nevertheless, Alaska is still wealthy and strong. The Native Corporations are estimated to produce 74% of the revenue of Alaska’s 49 top corporations, and more significantly, 64% of the total jobs in Alaska. Past innovations are keeping Alaska alive.

The total revenues of all the Native village and regional corporations from creation in the 1970s to the present has been estimated at $155 billion, much of which went directly into Native household accounts as wages, dividends or grants to Native employees and shareholders, who spent that money in Alaska.

The Permanent Fund also contributed mightily to Alaska’s prosperity, providing an average of over $1,000 per capita every year since 1977. These annual payments made a huge difference to Natives, lifting many of them from poverty.

Altogether, the Permanent Fund, the Native Corporations and State spending generated a solution to the two economic issues that are tearing the modern world apart: inequality and poverty. Inequality measures the gap between the top and bottom of an economy. Worldwide, the top 1% own from 35% to over 50% of country wealth, while poverty still plagues the bottom billion people on the planet.

In 1970, the Census found the State of Alaska to be one of the poorest and unequal of the 50 states. But by 2000 in an astounding turnaround, the State of Alaska was one of the richest states in the union, and it led all states in income-equality. By 2000, Alaska had the smallest gap between the rich and poor in the USA, and still does in 2020, although the margins are reducing.

Historically, what I call “The Alaska Solution” rocketed Alaska from the bottom to the top in reducing poverty and inequality in the second half of the 20th century.

Alaska is the only state that has integrated its private and public sectors by creating “a rising tide that lifts all boats” as JFK liked to say. And Alaska did so via free market processes and not by government mandate. That is a great lesson for America. And one that Alaska should remember today, when it is so divided.

The creeping decline in Alaska’s wealth, income and jobs since the turn of the century has slowly soured Alaska’s mood. Alaskans are polarized over the role of government. The public-private-partnership of the pipeline days is gone. Nevertheless, Alaskans are more than capable of innovating again. It’s in their blood. It’s part of their history as frontiersmen.

So, in the next articles of this series, I will address how Alaska can apply the lessons of its past to the problems of its present. That means opening minds to today’s digital economy just as minds were opened 50 years ago to the land claims, pipeline permit, and permanent fund.

Alaska can recapture the “can-do” resurgence following the 1964 earthquake. All she needs is to innovate again for herself, and let the digitized but polarized world watch with awe.

Michael Rowan is the co-founder of Climate Prosperity Enterprise Solutions, an international development consultancy, with the architect and former US Ambassador and US Representative, Richard N. Swett; Tim Bradner, editor of the Alaska Economic Report, contributed to this article.