Hawaii – Land of Crony Capitalism » Obama's First Home in America

Hawaii – Land of Crony Capitalism » The Antiplanner

Hawaii – Land of Crony Capitalism

Travels |June 28, 2010

Wikipedia defines crony capitalism as an “allegedly capitalist economy in which success in business depends on close relationships between businesspeople and government officials.” Crony capitalism has sadly played an important role in state and, especially, local government for just about ever. But Hawaii suffers from a particularly strong case.

Hawaii’s history of crony capitalism dates back at least to the mid-1950s. Before then, the future state was run by an oligarchy consisting of the Big Five land-owning companies and a sixth company that was mainly involved in construction. The oligarchy ran the political, economic, and social system of the entire territory in a system that would be considered more feudal than crony capitalistic. Nearly all of the private land in the islands was owned by one of these companies or a relative handful of other families, companies, or trusts, leaving only about 3 percent of the state available for fee simple ownership by ordinary residents.

That began to change in 1954, when reform-oriented Democrats, bolstered by the votes of children of immigrant workers from Japan, China, and the Philippines, took control of the legislature for the first time in the territory’s history. Among other things, the Democrats promised land reform so that more land and opportunities would be available to the average person.

As George Cooper and Gavan Daws showed in their classic 1985 book, Land and Power in Hawaii: The Democratic Years, the main beneficiaries of the reforms imposed by the legislature were the legislators themselves, not their constituents. The Big Five may have lost political power, but they continued to control the land and development by including powerful Democrats in every land deal. Cooper and Daws painstakingly reviewed thousands of development projects and found that traditional developers simply partnered up with the Democrats in deal after deal. In some cases, the legislature would pass a law benefitting one of the oligarchs and, within days, the members of the legislature who worked hardest on the bill would have their names included in a new deal.

One of those legislators was elected U.S. Senator when Hawaii became a state, and today is thesecond-longest serving senator in history. From his post as chair of the Senate Appropriations Committee, Senator Inouye makes sure that plenty of pork reaches his state.

Evidence of Hawaii’s crony capitalism can be seen in Honolulu Mayor Mufi Hanneman‘s push for a horrendously expensive and totally unnecessary 20-mile rail line that is projected to cost more than $200 million per mile. Since all of Honolulu’s electricity comes from burning fossil fuels, the rail line will do nothing to save energy or reduce pollution. But Mayor Hanneman hopes that it will propel him into the state governor’s office, for which he is running right now.

Saddle Road on the island of Hawaii.

The Antiplanner may have enjoyed another example of Hawaii’s crony capitalism on the Big Island. During a long bike ride from Hilo to Waimea, I could not help but notice that the state was widening the two-lane road into a road that must have been 60 feet wide but was still striped for only two lanes. I certainly enjoyed the extremely wide shoulders that, even with rumble strips, could comfortably fit four cyclists riding abreast. But why did they need so much asphalt when, say, 44 feet — two fourteen-foot lanes and two eight-foot shoulders — would have been more than adequate. Even in the unlikely event that traffic should someday justify four lanes, the rumble strips mean that the state would have to repave them before restriping them. It makes me suspect that this project (described on page 3 of this document) is somehow a gift to local contractors.

Crony capitalism presents a problem for liberals and libertarians alike. Left-wing reforms give government more power, which gives incentives for corporations and the wealthy to manipulate that power to their own benefit, with the result that the reforms have exactly the opposite of the goal of bringing power to the people.

Libertarians believe government should consist of a few basics, such as police and courts, needed to protect people and their property, leaving everything else the private sector. But places with minimal governments — such as America in the nineteenth century — saw plenty of crony capitalism. Meanwhile, Transparency International’s corruption perception index lists several big-government countries, such as Denmark and Sweden, among the least-corrupt countries in the world. (The United States is ranked 19; note that the index only measures perceptions of corruption, not corruption itself.)

To the extent that the index is meaningful, perhaps it means that corruption has less to do with the size of government than with the other checks-and-balances built into the government. If so, then someone should identify which checks-and-balances do the most to minimize crony capitalism and push to build those in to our system.

This entry was posted on Monday, June 28th, 2010 at 12:00 am and is filed under Regional planning,Travels. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, ortrackback from your own site.

Honolulu’s Rail Plan

posted in Transportation, Urban areas |

Yesterday, in response to the Antiplanner’s post about crony capitalism, Scrappy commented that Honolulu needs rail transit to “reduce our carbon footprint, save energy and get us off the maddening addiction to cars.” He added that, “the environmental community in Honolulu is strongly behind rail.”

I appreciate Scrappy’s comment and don’t want to discourage him from participating in this forum, but I find it sad that my former colleagues in the environmental movement have become so innumerate that they would support a turkey like the Honolulu elevated rail plan. The final environmental impact statement for that project is now available. Let’s see what it says about saving energy, carbon, and driving.

Start with energy. Table 4-21 of the FEIS says the project will save 396 million British thermal units (BTUs) of energy each day, or 144,540 million BTUs per year. Sounds great, except that page 4-206 says project construction will cost 7.48 trillion BTUs. That means it will take 52 years of savings to pay back the energy cost. Long before 52 years are up, huge energy investments will be needed to replace rail cars, worn out track, and other infrastructure. So there is likely no net energy savings.

How about reducing our carbon footprint? According to page 68 of the Department of Energy’s State Energy Guide, more than 90 percent of Hawaii’s energy comes from burning fossil fuels. Scrappy points out that “the local power utility is making a big push to use renewables in its fuel mix,” but good intentions are not enough. Even if it can find some renewable sources of energy, it would be better to use that electricity to offset some of the electricity now being used by Oahu residents, not to create a new source of energy demand.

Page 4-113 of the FEIS predicts that the project will save all of 171 tons of carbon dioxide emissions per day, or about 62,415 tons per year. Page 6-2 says construction will cost nearly $4.3 billion, which amortized out at a generous 4 percent works out to $245 million per year. Add the anticipated $72 million in operating costs (p. 6-8) and divide by the tons of CO₂ saved and you get a cost of just over $5,000 per ton. Since the going rate for carbon credits right now is less than $20 per ton, and McKinsey says we can meet carbon reduction targets if we spend no more than $50 per ton, anything that costs $5,000 per ton should absolutely be rejected by people who care about our carbon footprint.

Note that the FEIS did not estimate the tons of CO₂ that will be released during construction, which will offset much if not all of the projected savings.

Will the project help “get us off the maddening addiction to cars”? The Antiplanner isn’t even sure that this should be considered a benefit, since cars are less expensive, more convenient, and really have no greater environmental impact than transit. Even so, the FEIS predicts that the project will reduce the number of regional auto trips per day by 51,200 out of 3,003,400 trips under the no-build alternative. That is a 1.7 percent reduction. That means Honolulu would only need to build 59 more rail lines, at a cost of more than a quarter of a trillion dollars (roughly the cost of the entire Interstate Highway System), to eliminate the city’s addiction to autos.

Of course, all of the FEIS’s estimates of energy, carbon, and other savings depend on its projection that the 20-mile rail line will carry 116,300 riders per day (page 3-5). That’s more than San Diego’s 51-mile light-rail system, almost twice as many as Miami’s 28-mile elevated rail, and more than twice as many as St. Louis’ 48-mile elevated light-rail system. So there are reasons to be skeptical of the Honolulu projections.

Scrappy did not say anything about congestion, but he mentioned that the region’s voters supported the rail plan (by a tiny margin). One reason they did so is that rail supporters emphasized that the project would “ease traffic congestion.” Of course, they lied when they said this, as page 3-51 of the FEIS says that traffic delays will be worse at every intersection with the project than without it. “Mitigation,” meaning widening roads and improving traffic signals, will help at a few intersections, but then why can’t they just do the mitigation and not the rail project?

The environmentalists who support this wasteful project are the Baptists of a Baptists and bootleggers coalition that is promoting rail transit throughout the country. The bootleggers, of course, are the crony capitalists who will make tens or hundreds of millions in profits building this unsightly monstrosity. I hope in the future more environmentalists will open their eyes and support things that are truly good for the environment, not just feel-good projects that cost a lot of money.

This entry was posted on Tuesday, June 29th, 2010 at 12:00 am and is filed under Transportation, Urban areas. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.