Potemkin Village, Hawaiian Style?

BY ROBERT THOMAS – The big news in Hawaii this week is the Asia-Pacific Economic Cooperation international summit, currently underway in Honolulu. Waikiki is on lockdown as leaders from 21 Pacific Rim nations, including U.S. President Obama and a lower level functionary from “Chinese Taipei,” come to town for a confab on free trade and economic cooperation in the region.

Plus, they might have to dress up in the national costume of the host country. (Query: is aloha wear the “national costume” of the host United States? Not really, but it is a regional style, and making these stuffed shirts dress up like Elvis or Jack Lord seems like a hoot; we can’t wait to see Australia’s Julia Gillard in a muumuu.) Big stuff.

What do Hawaii’s leaders hope to accomplish by having the eyes of the world turned on us during the summit? In Opportunity comes ashore, the daily paper reports that among other things, they wanted the world to see Hawaii as a good place to do business:

If this week’s Asia-Pacific Economic Cooperation summit is a success, tourism and business leaders hope to get an “APEC affect,” where images of world leaders amid the islands’ scenic splendor will solidify Hawaii as a place for business as well as leisure.”A lot will be gained by demonstrating that Hawaii is more than a place to vacation,” said Randy Tanaka, chief operating officer for the APEC 2011 Hawaii Host Committee. “‘Hawaii is a great place to meet your Asian counterparts’ will be part of the message.”

Besides potentially boosting business tourism, the event also offers Hawaii businesses in industries like renewable energy, health and life science, astronomy and earth and ocean sciences the chance to build relationships with Asia-Pacific partners and consumers, APEC supporters say.

Read the complete story here.

In the run-up to the conference, they really spiffed up the town: various semi-permanent and highly visible homeless encampments were picked up and moved somewhere, new palm trees were planted on the main route from the airport to Waikiki so that the motorcades could see a tropical scene whiz by on an otherwise ghastly industrial stretch of the Nimitz Highway, and it seems like Fortress Honolulu at times since security is tight to insure the situation doesn’t devolve into anarchist-fueled riots like other high-level confabs. Traffic is a mess, and evenDiamond Head is closed.

But are these efforts to portray Hawaii as a “good place to do business,” like the apocryphal Potemkin Villages in czarist Russia, mere window dressing on an otherwise bleak economic climate, the latest incarnation of the tired cliché of Hawaii as “the [blank] of the Pacific” (fill in the blank with crossroads, Geneva, tech hub, health care center, and so forth)? Consider this:

• Hawaii has the most heavily regulated land on the planet. The labrynthine permit requirements are “challenging,” and take years to successfully navigate, if they can be navigated at all.
• Add to that the fact that environmental plaintiffs have an enviable record of success in Hawaii’s courts, and even if the federal, state, and local governments sign off on a development or project, it is subject to third-party challenge.
• “Drawbridge protectionism,” the phenomenon whereby those who come to a locale want to “preserve” it in the form it was when they arrived, is taken to a new level in Hawaii.
• The Hawaii Supreme Court has ruled that “western concepts” of property law and the doctrine of exclusive possession “is not universally applicable in Hawai’i.” The court has also expanded the public trust doctrine to cover more and more.
• The trust/beneficiary model, where supposedly learned experts make decisions for the uninformed, is the reigning mindset both in government and the private sector.
• Local government can throw up ridiculous barriers in the paths of Hawaii’s small businesses, driving them nearly to the point of bankruptcy. CNBC rated Hawaii 48th in “America’s Top States for Business 2010.”
• Hawaii’s tax levels are oppressive: Hawaii does not have a true sales tax, but a general excise tax, which taxes virtually the entire economy, and not just sales to consumers. Under the GET system, “nearly every conceivable type of transaction (including services)” is taxed, and results in what some have described as the equivalent of a tax on everything, including food and medicine.
• The state income tax rate is the highest in the nation, and isgoing up.
• When the voters of Kauai County adopted a Proposition 13-like property tax measure that limited annual increases, county politicians filed a lawsuit in which they were both the plaintiff and the defendant, to invalidate it. The Hawaii Supreme Courtapproved of the collusive lawsuit and struck down the the measure.
• Projects large and small that could make it better for Hawaii consumers and businesses are routinely attacked and often defeated, if not in the entitlement process, then in the courts. Exhibit “A” is the (late) Hawaii Superferry.
• Military spending, tourism, and government are the largest sectors of the Hawaii economy. Virtually nothing gets done without public worker union approval, even the decision aboutwhether Good Friday is a state holiday (it is, and is not unconstitutional according to the Ninth Circuit).
• Could any other state legislature have concocted a plan to keep consumer gasoline prices down by passing a law controlling how much rent gas station owners could charge their tenants?
• Add to the above the cost of living, which equals or exceeds that of an island on the other side of the country, Manhattan, and istied with California for the nation’s highest, and you have a population stretched thin. Consolation prize: Hawaii did win best “quality of life” (if you don’t factor in the taxes, the cost of living, the economy, the lack of real opportunity, etc., …  Other than that Mrs. Lincoln, how was the play?).

It appears that with APEC, the U.S. wants to hitch its economic wagon toAsian growth. The question for Hawaii is if this strategy is successful, whether our local economy will also benefit. Contrast those points withthis story, about how a small business in Montana is leveraging the free trade agreements coming out of APEC to grow a business in the 900-resident town of Harlowton:

Imagine a place that is perhaps the complete opposite of Hawaii. A state that is now covered with snow, where desolate prairies meet high mountains, where numerous rivers flow to the Pacific and the Gulf of Mexico. This state is immense, taking 10 hours to cross it, over 147,046 square miles compared to Hawaii’s 10,931.

The writer omitted one important difference between Montana and Hawaii, the regulatory climate. While Montana certainly is not ranked high in the CNBC summary of top states for business (it is 36), Hawaii fared worse. There are fair questions to ask: would this modest-but-ambitious start-up have even gotten off the ground in Hawaii? Why would an entrepreneur consider Hawaii as a place to open up shop? We’re guessing that until some changes occur in the way we treat businesses and property owners in Hawaii, Asian growth may pass us by and the dreams of an APEC bounce to the economy will be more pipe dreaming, while ignoring the fundamental problems.

This doesn’t mean that you need to pave paradise and put up a parking lot, either. Nor do you need to do away with land use and environmental laws, or the tax system. But in order to build the economy, it seems like changing the regulatory climate to allow people to make reasonable use of their property, harness their entrepreneurial spirit, and not feel like they are being taxed out of their homes would be much better steps than planting palm trees, and hoping for the latest white (or green) knight to ride in and save us.

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