Hawai‘i Becalmed

Hawai‘i Becalmed: Economic Lessons of the 1990s

Christopher Grandy
Copyright Date: 2002
https://www.jstor.org/stable/j.ctt6wqc9t
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    Hawai‘i Becalmed
    Book Description:

    "At the annual average rate of growth Hawaii experienced between 1959 and 1990, the size of the economy would double every 14 years. At the rate of growth experienced between 1991 and 1998, it would take 93 years for Hawaii's economy to double in size."--from the Introduction What happened during the decade of the 1990s that caused Hawaii's once full economic sails to deflate, leaving the economy in the doldrums? What can Hawaii's leaders do to revive economic growth-or can anything be done? What lessons does this period of prolonged economic stagnation hold for those who care about Hawaii's future? The author recounts many of the external and internal events that affected Hawaii during the 1990s, their long-term economic impact, and the issues our elected policymakers must address to restart our economy. After a period of denial, Hawaii's leaders began exploring a wide variety of policies designed to remove perceived competitive barriers and to stimulate the economy. These efforts culminated in policy initiatives that may have assured Governor Ben Cayetano's re-election in 1998. Subsequent economic recovery permitted the pursuit of more questionable economic policies, but the tragic events of 9-11 remind us of the tenuous nature of Hawaii's economic recovery. This highly readable book will challenge students, businesspeople, social scientists, and government leaders to think about the significant issues associated with a near zero-growth economy, and ways to revitalize our economy. A fundamental understanding of Hawaii's position in the global economy-and the challenges it poses for public policy-is essential for all citizens before effective decisions can be made on how to move Hawaii's economy forward.

    eISBN: 978-0-8248-6277-0
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-x)
  4. Acronyms
    (pp. xi-xii)
  5. 1 Introduction
    (pp. 1-8)

    In the 1990s, after years of excitement and prosperity, the economic winds suddenly dropped from Hawai‘i’s sails, and the state found itself perplexingly and unhappily becalmed for seven years. This was unprecedented in the state’s economic history—perhaps unprecedented since Captain James Cook’s arrival in 1778. To put this in perspective, the annual average rate of growth Hawai‘i experienced between 1959 and 1990 meant the economy doubled every 14 years. At the rate of growth experienced between 1991 and 1998, it would take Hawai‘i’s economy 93 years to double in size.

    The economic slowdown significantly changed how Hawai‘i’s people think...

  6. 2 The Bubble
    (pp. 9-22)

    From the perspective of the early twenty-first century, the 1980s seem like a golden period in Hawai‘i’s economic history: Nearly everyone was working, property values soared, and personal incomes grew. On the other hand, the supply of affordable housing dwindled, the cost of living accelerated, and many worried about the rapid changes in Hawai‘i. Japan’s economic ascent drove Hawai‘i’s performance during the 1980s, clearly illustrating the potential benefits of engaging the global economy. Yet, in hindsight, some of Hawai‘i’s economic success was an aberration built on an unsustainable Japanese bubble.

    The 1980s boom, generated by increased Japanese demand, was actually...

  7. 3 Three Pinpricks
    (pp. 23-33)

    The curtain came down on Hawai‘i’s strong economic performance in the late 1980s relatively quickly. The early 1990s were particularly cruel to Hawai‘i. First came the Gulf War, which frightened overseas travelers and raised Hawai‘i’s oil-dominated energy costs. At virtually the same time, the U.S. economy slipped into recession, which ushered in a break in west-bound visitor demand. Finally, the Japanese economy followed the U.S. downturn, thereby threatening the heart of the 1980s economic boom. Together, these three pinpricks burst Hawai‘i’s economic bubble. As if to add insult to injury, Mother Nature contributed to Hawai‘i’s woes as Hurricane Iniki flattened...

  8. 4 A Change in Fortune
    (pp. 34-44)

    Hawai‘i initially met the blows to its economy with denial. Since statehood, Hawai‘i had never suffered two consecutive years of recession. For most of its history, the economy had grown at rates of at least 4% per year. It was simply implausible that Hawai‘i’s economy would enter a period of sustained, nonpositive growth. Yet as time passed and the economy failed to improve, as state budget ink turned from black to red, as job growth fell and unemployment rose, it became increasingly clear that this was something different. People had to face the fact that the 1980s party was over....

  9. 5 A Change in Administration
    (pp. 45-58)

    The period of slow growth in Hawai‘i had become uncomfortably long. By election time in 1994, Hawai‘i’s residents were ready for change. Lieutenant Governor Benjamin Cayetano managed to win the gubernatorial election in part by consciously putting some distance between himself and Governor John Waihe‘e. On assuming office, Cayetano learned that the state’s fiscal condition was much worse than anticipated, and his sober state-of-the-state address set the tone for a period of retrenchment and reevaluation. In general, the change in governors, combined with fiscal constraints, provided the opportunity to identify and begin to address some of the underlying economic problems...

  10. 6 COR, ERTF, and Crisis
    (pp. 59-75)

    The years 1997 and 1998 proved tumultuous in both Hawai‘i and the rest of the world. In Hawai‘i, an unprecedented challenge to the Council on Revenues’ forecasting function by the Department of Business, Economic Development, and Tourism highlighted the COR’s important political, rather than fiscal, functions. Through the second half of 1997 and the first half of 1998, Hawai‘i wrestled with some of the most far-reaching proposals for change in decades, initiated by the Economic Revitalization Task Force. At the same time, the financial crisis spread from one Asian country to another. In the summer of 1998 Japan was back...

  11. 7 The Election
    (pp. 76-85)

    By November 3, 1998—election day—Hawai‘i’s economy had been stuck in an economic quagmire for seven years. The Democrats had held political power in the state for more than 30 years. And yet a young, energetic challenger could not convince voters to elect her over an older, traditional, incumbent governor. Amazingly, the challenger simply could not offer a significant economic policy alternative. Cayetano proved unassailable on economic grounds because he had tried or considered virtually everything, regardless of political provenance.

    After seven years of near-zero economic growth, one would think that the 35-year Democratic dynasty in Hawai‘i was near...

  12. 8 Second-Term Agenda
    (pp. 86-103)

    Having won the 1998 election, Governor Cayetano could act with a freer hand. Second-term governors must feel a certain sense of freedom knowing that a third election is not possible. They can pursue policies in which they truly believe with no worry about positioning themselves for the next election. They need not consider as carefully distasteful policies that citizens find attractive. Of course the pressure to leave a legacy, and the possibility of other office, presumably limit reckless and irresponsible actions.

    In particular, after 1998 Cayetano could pursue policies he felt more comfortable: hotel tax breaks, inducements for high-tech firms,...

  13. 9 Lessons and Conclusions
    (pp. 104-114)

    Hawai‘i’s economic history over the 1990s demonstrated that high post-statehood growth was not destiny. External events could take the wind out of Hawai‘i’s sails, and the accumulated policies that injected inefficiencies into Hawai‘i’s economy would come to matter when growth rates hovered near zero. In retrospect, Hawai‘i’s economic lessons over the last decade suggest a fundamental asymmetry in our policy options: On the one hand, Hawai‘i policy makers can do little to substantially improve our economic fortunes. On the other hand, they can do much to significantly impair those fortunes. This chapter briefly reviews the economic history of the 1990s,...

  14. Appendix 1: Economic Revitalization Task Force Proposals
    (pp. 115-118)
  15. Appendix 2: The Lingle Plan and Detailed Potential Response
    (pp. 119-122)
  16. References
    (pp. 123-126)
  17. Index
    (pp. 127-132)