FIRST QUARTER 2016
Economic Uncertainty, Possible Recession, Silver Linings
The buzzwords spoken in our city and state regard the current budget crisis, which is surrounded by oil speculations and government downsizing in our great state. There have been several propositions, which have included creating new revenue resources, taping into Alaska’s savings, and to cut spending. Our state’s leadership has a lot of work to do to help our residents and business people secure Alaska’s future.
In the meantime, one researcher at Mercatus Institute of George Mason University has complied data to demonstrate how ‘recession proof’ each state is and how well we are prepared to weather any possible storm. Can you guess how Alaska ranked? Yes, we ranked number #1 in our ability to weather the storm with our flexibility and cash savings, ready for any sort of rainy day. Even as businesses and people re- main cautiously optimistic about this year, please remember this study and what many others have be- lieved; Alaska has been very resilient to economic crisis.
Also, I remain optimistic through all of challenges 2016 will present for us and for the Nation because of the fol- lowing: we Alaskans are a resilient bunch. As we let the politicians put up their thoughts on straightening out the budget, hard working Alaskans, entre- preneurs, and businesses are working on their own new projects to help stimulate new business or oil projects to combat the contraction in oil and government jobs/revenues. We’ve
experienced modest increases in the number of jobs in Anchorage through the last decade and some have predicted an approximate 2% decrease in jobs in the state in 2016 and 2017. I will have more accurate predictions after the Anchorage Economic Development Forecast luncheon in a few weeks. Stay tuned.
Remember when “smart” phones first came out? Remember when tablets and synching were relatively unknown concept? Remember when pushing paper to get business done took days instead of minutes? Well, what if technology innovation continued to grow exponentially as it has in the last ten years?
It’s not a “what if”, it’s a “when”! In his book, The Inevitable, Kevin Kelly unveils some immerging technologies that will dramatically change the way we live, shop, work, and communicate. As if that hasn’t already changed a lot, Kelly encourages us to embrace the change so we don’t get rolled over the wave of technologies coming in the next few years. Some of the biggest changes I am interested in reading about are an on-demand economy, artificial intelligence in everything we buy, as well as virtual reality in our homes. Kelly’s book comes out June 2016.
THIRD QUARTER 2015
Is it geography or economics? Environment, culture, or law that make one prosperous?
There are popular ideas out there about how geography plays a role in the economics of nations, states, and local governments. There are many scholars out there who debate this. In a recent TEDTalks video titled “The Six Killer Apps of Prosperity”, Niall Fergusson shares his theory on why the laws and institutions are what make nations or states like Alaska so prosperous. I highly recommend it! Instead of calling ‘laws’ or ‘institutions’ what they are, Ferguson cleverly translates these complex points in commerce into 21st century language, calling them ‘apps’. These ‘apps’ set U.S. and Western economics apart from the rest of the world by way of these six:
1. Competition – corporations and governing bodies created an environment for businesses and entrepreneurs to thrive. No environment existed like it before the U.S. did it.
2. The Scientific Revolution – science and utilizing the experimental method helped human develop modern methods of manufacturing with precision.
3. Property Rights – Fergusons posits that having the right to personal and business property is the foundation of economic development in the U.S. Freedom is rooted in private property rights, democracy, and representative governments.
4. Modern Medicine – major diseases that would kill a lot of people where soon eradicated in the U.S., which stimulated the labor force, thrusting economic achievement up through the 1900s.
5.The Consumer Society – there would be no point to the modern entrepreneurial revolution without consumers to buy products.
6. The Work Ethic – U.S. laborers are experiencing a fall in the number of hours worked vs. other nations who exponentially work more hours a day. Consider the education scores children in China have over U.S. students may be an indication of educational work ethic, but it is clearly an indication of technological advances as well. Eastern countries are submitting a staggering larger number of patents than the U.S.
Ferguson shows how geography couldn’t possibly be the explanation for U.S. prosperity because we have excellent examples of how that doesn’t work (i.e. West/East Germany, North/South Korea). Now these ‘killer apps’ are established, tested, and proved and are ‘downloadable’ to any nation, state, or local government. What the U.S. did to prove these apps work took hundreds of years. Now, nations can establish them faster, which is creating a shift in economic powers and prosperity. Which isn’t a bad thing, there is a shrinking gap between national prosperity, growing consumer disposable income in other countries, which leads to opportunities for U.S. businesses.
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