Seward’s Folly paid off

Alaskans observed Seward’s Day on March 25, commemorating the 1867 purchase of the Alaska territory from the Russian Empire. The $7.2 million price tag, or approximately two cents per acre, was a bargain as far as then-Secretary of State William Seward was concerned. The expansionist diplomat saw Alaska as an enormous extension of the United States, as well as a point of strategic leverage over the Pacific. Although the sale was approved, much of the American press at the time ridiculed the deal as “Seward’s Folly,” “Seward’s Icebox” or the “Polar Bear Garden.” It was difficult for many to predict how a frozen wasteland up north could be advantageous for a country that seemed to possess plenty of land and resources already.

Doubts about Alaska persist to this day. David Barker, an economist at the University of Iowa, wrote a provocative essay arguing that Alaska has been a net drain on the U.S. Indeed, we are still one of the top recipients for federal spending per capita. We absorb far more federal dollars than we pay in federal taxes.

Even Alaskans doubt Alaska. We have a net population decline as of July 2018, and a panel of speakers at an event on March 8 about Alaska’s future reported with regret that the majority of high school students they’ve spoken to “couldn’t wait to leave the state.”

So can we really say that Alaska was a good investment? Is there any reason to celebrate Seward’s Day? I think that there is. To recognize that is more meaningful than just a scholarly debate among historians. It correlates to a sense of confidence in Alaska and its future. It is a sentiment that influences population growth and retainment in this state. That is sorely needed in a globalized world where human capital moves freely.

To set Alaska’s record straight, we need to look at the nation’s return on investment in a more holistic way. The aforementioned essay by economist David Barker looks at Alaska in terms of the U.S. Treasury. It is true that this state absorbs far more federal dollars than it pays in federal taxes. Alaska receives nearly twice the national average of per capita federal spending yearly. Our small population implies a small income tax base, and our oil companies possess special privileges that allow them to defer or acquire exemption from federal tax.

However, gross domestic product paints a more important picture when arguing Alaska’s worth. The state’s GDP per capita, which measures the value of all final goods produced here annually relative to population, sits at an impressive $63,971 as of 2016. Our pre-recession high of $71,087 in 2011 is worth noting as well, in order to account for the steep fluctuations that Alaska goes through in its productivity. Alaska’s GDP per capita is frequently among the highest in the nation. The significance here is that Alaska’s economy is especially productive in relation to its population. This is largely due to the high value of export commodities like oil, gas and minerals. Alaska’s contribution to GDP matters more than its federal dependency because, ultimately, GDP is constructive while federal taxation is extractive. One grows an economy and the other siphons from it.

The federal government isn’t getting a totally raw deal on Alaska. Its return on investment should be viewed as strategic rather than financial. Alaska is the only reason that the U.S. is an Arctic nation. That matters when considering how important the Arctic will become as ice recedes and rival nations scramble to stake claims. Because of Alaska, the U.S. gets to have a say in how maritime shipping through the Bering Strait is conducted, as well as preventing or monitoring the movement of Chinese military vessels into the Arctic. The advantage that Alaska’s polar position bestows upon Washington D.C. is something that Seward’s detractors could have never imagined.

We could do a better job at communicating Alaska’s benefits, though. Washington D.C. is still mostly apathetic, and it is rare to see a bill in Congress that addresses an Alaskan issue specifically. Our senators are lucky enough to get something tacked on to one of the gigantic omnibus spending bills that Congress passes without reading. Alaska doesn’t need special treatment, but it surely could use some recognition given the current population decline. In all of the non-congruous foreign territory acquisitions that the U.S. has made through its history, Alaska has been the most rewarding.