One of the more peculiar effects of the pandemic has been a deluge of optimistic calls for a revitalized economy, usually one focused on renewable energy and agriculture. These initia- tives matter, but their advocates tend to overstate their impact and blithely assume away some 60 years of failed efforts at diversification. If we wish to diversify, we must first understand why we haven’t yet.
The near-complete failure of Hawaii’s efforts to diversify is exemplified perfectly by agriculture. Hawaii has, optimists say, vast untapped agricultural potential — and in the purely natural aspects it does. So much so that at one time we could not, despite our best efforts, escape what were then the oppressive clutches of an agricultural economy. Not much later, we could not halt agriculture’s near absolute collapse. And despite some three decades of work we haven’t been able to kickstart a new agricultural sector.
There is some vast disconnect between what we say we want and what we are able to achieve. We couldn’t get out of agriculture when we needed and wanted to, we could not stop its swift demise, and despite decades more of trying we can’t get agriculture 2.0 off the ground, either.
We tend to blame our leadership for these failures. But Hawaii’s politicians and CEOs are not on average any worse than anywhere else, and some have actually been quite good. Our failures to branch out have another source.
The fundamental challenge is that our economy is defined by the free market between Hawaii and the U.S. It is a market in which every resource is ordered toward its most efficient use and to satisfying the need that that particular resource can best meet. Diversifying our economy answers no such need and — from the perspective of the market — is grossly inefficient.
The U.S. economy neither needs nor benefits from Hawaii producing more food or, what would probably be better, diversifying its financial sector. It already cheaply produces these. To the extent that Hawaii adds value to this market system, it is not by providing something that we can get cheaper from somewhere else.
Free trade, such as exists between the U.S. and Hawaii, demands not diversification but specialization. Such a system does not spontaneously diversify. It tinkers on the margins or ekes out another 0.5% efficiency improvement. Despite our best hopes, entrepreneurial energies and capital investment will see their highest rewards not in defying market trends, but by taking advantage of them.
In the context of this system, Hawaii’s efforts to diversify are like a popular burger joint announcing to the line of customers snaking out its door that it is now offering audiobook editions of classics like Emily Brontë’s “Wuthering Heights.” The queue is unlikely to suddenly realize that was actually the reason they were there. They are far more likely to respond by saying: “Uh, anyway, can I get some fries with that?”
The arguments made here could be extended to examine how the categories and advantages we think we enjoy, simply aren’t priced into the market. We might also examine how the ready mobility of labor between Hawaii and the continental U.S. hinders our efforts to upskill our local workforce — a necessary step for any meaningful diversification.
But it will have to be sufficient to note that the market is the purest democracy there is; it’s just that what votes is not people, but dollars. In this framework, our own paltry incomes cannot hope to compete against the far larger aggregate of international and continental U.S. demand. The votes for tourism and vacation homes far outweigh those for diversification. Diversification is not impossible, but it must deal with this fact.
Micah M. Hicks, of Pupukea, holds degrees in finance and management information systems, and is working toward a master’s degree in mechanical engineering while working as an engineer.