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Sunday, February 28, 2010
Hawaii’s corporatist model imploding?
By Selected News Articles @ 12:18 AM :: 6952 Views :: Energy, Environment

EDITOR's NOTE: Hawai`i Free Press is posting this previously unpublished 1998 look at the fate of corporatism in Hawaii in order to advance public discussion of the state's political and economic challenges.

Encyclopedia Britannica defines corporatism as:

The theory and practice of organizing society into 'corporations' subordinate to the state. According to corporatist theory, workers and employers would be organized into industrial and professional corporations serving as organs of political representation and controlling to a large extent the persons and activities within their jurisdiction. However, as the 'corporate state' was put into effect in fascist Italy between World Wars I and II, it reflected the will of the country’s dictator, Benito Mussolini, rather than the adjusted interests of economic groups.

Unlike Mussolini's Italian police state, in Hawaii's system of Democratic corporatism competing interest groups are managed through the medium of the elected one-party system. The election of Republican Governors in 1959, 2002, and 2006 has coincided with internal crises within the Democratic Party which rendered all leading Democrat gubernatorial candidates unable to mediate between the competing factions.

The challenge facing Hawaii is whether to reform the existing corporatist system or to overthrow it. The default answer has been reform, since very few recognize the nature of the system, fewer advocate its overthrow, and nobody has spelled out what overthrow of the corporatist system in Hawaii would consist of.


Hawaii’s corporatist model is imploding

By Sol Sanders, 1998

Honolulu—Hawaii’s corporatist model is imploding.

Like everything in these islands, disintegration of the power structure of half a century creeps. But the days of the combine of Big Business, Big Labor, Big Government and the Democratic Party are clearly numbered. What replaces it and when remains in doubt.

Imitating corporatism everywhere, Hawaii's mid-1950s compact built on the notion that insiders, negotiating for their constituencies without transparency, would deliver a just and frictionless society. In the same way some Catholic moralists justified Franco's Spain as avoiding “the evils of capitalism” or Solzhenitsyn would "return" Russia to some paradisiacal Orthodoxy, the Hawaii Establishment promised to preserve “the aloha spirit” of a mythic Polynesian past.

The mid-1950s Democrat victors, after a century of Territorial Republicanism, had used the fight against Big 5 domination to overthrow the old regime. Some 40% of registered voters in the new state were Americans of Japanese Ancestry [ AJAs]. Many of the leaders were 442 Regimental Combat Team [incorporating 100th Battalion] veterans, among the most decorated units in U.S. military history. The Japanese Americans had volunteered after Pearl Harbor to prove their right to be considered loyal Americans.

Old habits die slowly and the “revolutionaries” who came in with statehood simply cut themselves a piece of the pie. Rather than overthrowing the old order, they built on the authoritarianism of the Hawaiian monarchy, the Big Five plantation and transport corporations, and the U.S. military. Jet tourism and military expenditures of two Asian wars kept the old system going. Spin-off from the Japanese “bubble” economy which sent soaring yen into dollar real estate here created a false boom.

What has brought everything crashing is economic stagnation. It’s all been dramatized by a fight for Bishop Estate, Hawaii’s largest landowner and one of the biggest charitable trusts in the country, assets conservatively estimated at $10 billion.

On the face of it, whatever a half dozen official and unofficial inquiries [including a belated IRS investigation with Washington implications] finally reveal, a Hawaiian princess’ legacy intended to give a helping hand to native Hawaiian children through better education is a farce. The massive fortune supports “preppy” schools with only 4000 students. Its five trustees get $1 million annually. There are accusations of conflict of interest, use of foundation funds for personal gain, incompetence in money management—and arrogance—leading to New York and Washington connections. [For example, Bishop owns 12% of Secretary of Treasury Rubin's former firm, Goldman Sachs.] Lack of disclosure that no public corporation could maintain and the proverbial somnambulance of the Islands have masked all of this.

However corrupt ties between the state’s Democrat machine and Bishop, its operations typify the monopolistic practices that have brought the local economy to its knees. Whether retailing—“neighborhood pricing” takes on a new meaning where a grocery can charge 50% more for a product a block away by appealing to a particular ethnic group—or dwindling manufacturing, actual product costs are often fantasy. Regulations, licenses, permits, overlapping bureaucratic controls often have greater commercial value. The layers of bureaucracy are ridiculous—fifth in the nation on a per capita basis for a million people.

Pyramiding controls have exacerbated land tenure problems, already restricted by plantation history and mountainous, volcanic island terrain. “Planning” has turned much of Oahu into slums. Affirmative action programs and mismanagement of Native Hawaiian Lands makes the Interior Department’s Office of Indian Affairs look good.

Mainland emigrant environmental radicalism has compounded all this. Recently, for example, “activists” demanded a Japanese paper company, promising badly needed new jobs on the Big Island, plant long maturing hardwood instead of quick growing soft woods. Meanwhile, unprocessed garbage has ruined a fishing ground where it is dumped near the luxury hotels on the other side of the Island.

With virtually every other state trimming welfare, Hawaii’s bill rose 36% in 1996 over 1993, and looks to keep on going up. [Arrivals can go on the welfare rolls 48 hours after arriving.]

Now entering its eighth year of recession—with no hope of relief in sight, despite the California boom—the Establishment seems mesmerized with its 50-year-old slogans. A vaunted governor’s commission for economic revitalization came up with insipid palliatives. Threatening injury to insult, in one of the most highly taxed states, they suggesting additional levies on an already limping tourism. Since no one has figured out how to meet Honolulu and the State's 10% shortfall in revenues for the next budgets, there is even talk of cutting back the bureaucracy--and in an election year!

Accounting for a quarter of the state’s GDP, visitors’ expenditures are down 20% -- bound to drop as the full impact of Asia’s economic crisis hits harder. The Hawaii Visitors Bureau has succumbed to its own propaganda-- that a tourist worries whether he is in a four-star hotel in Yucatan or Waikiki. Fewer and fewer are willing to pay double the price it costs to go to Cancun in less than half the time. Liberty House, an upscale retailer, just bellied up. Bank of Hawaii, cornerstone of the establishment, has called in a hot shot New York banker and what he will find is a sheaf of nonperforming loans to insolvent East Asians. Hawaii would have been perfect for the software industry spinning out of Silicon Valley, but new business has been frightened away. And the multinational heirs to the old Big Five -- BHP which just sold its refinery here -- are quietly liquidating, getting out of a market that is more trouble than it’s worth.

There is no doubt about the unique beauty of these islands. But they cannot defy the laws of supply and demand as their Democrat leaders for decades have promised. With a cost of living as much as a third over the mainland’s, there is probably more income disparity here than any of the lower 48. The word is slowly getting out: emigration of Hawaiian “locals” to mainland jobs is having its effect.

The state in 1997suffered a net population loss for the first time in a century. And some Hawaii emigrants are calling back to say that it may not be so lovely on the Mainland, but one can afford decent housing and luxuries that an increasing below-the-poverty-line population cannot in the Paradise of the Pacific. “If something isn’t done,” said one small business leader, “we are going to be worse off than Puerto Rico”—a slur that really puts more than the trade winds up in these Islands.


Sol Sanders, formerly a visiting fellow of the East-West Center, is now International Business Editor of the Washington Times.


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