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Earthquakes and other economy shakers.

A SILVER ANNIVERSARY OF SORTS occurred on the West Coast recently, as the ground under San Francisco showed its distinct displeasure at the 4-0 loss of the Giants to the Oakland A's. It was 25 years ago last March that the Great Quake hit the 49th state. The Anchorage "tremor" of 64 measured 8.3 on the Richter Scale. This was approximately 12 times more powerful than the recent one in northern California, but substantially cheaper.

Even upscaling the 1964 estimates for current dollars, Anchorage suffered only $2.5 billion in damages. San Francisco estimates are now at $7 billion and climbing. Moreover, the economic aftershock of the 64 quake was clearly positive, as reconstruction spending vastly exceeded the dollars lost from tourism and related industries in the immediate aftermath of the destruction.

Unfortunately, this will not be the case in San Francisco. First, despite Mr. Quayle's flying visit and Presidential assurances, aid money just doesn't flow as rapidly as it used to. Bureaucracies have grown some in the last 25 years. Even an optimist should understand that the larger the bureau, the less it will do for you.

Second, the product mix of San Francisco today and its economic scale are vastly different than Alaska in 1964.

Tourism was not the lifeblood of Alaska back then, and even where it was important, the dollar size of the industry was pretty rudimentary. If anything, the Great Quake boosted tourist income by focusing national attention on a state that had hitherto been largely ignored as a tourist destination.

In contrast, San Francisco already had a massive tourist infrastructure, none of which was damaged, but much of which was tarnished by its fourth-quarter case of the jitters. As a result, any construction spending will be hard pressed to offset widespread losses in such areas as restaurants, hotels, taxis and sourdough bread.

There is a paradox here. Economic theory generally suggests that a diversified economy is more immune to recessionary forces than a developing economy such as Alaska's: Sharp downturns in sectors such as construction are balanced by increases-or at least inertia-in others. Yet these diversified economies have trouble recovering from balanced shocks across their system, which may provide growth opportunities for less sophisticated economic communities.

Another lesson in disaster relief is that private mishaps are more lucrative than public ones. If the Exxon Valdez had belonged to the U.S. Navy, it is unlikely extraordinary sums would have been spent in a cleanup effort. Let's face it: The government takes a pretty parsimonious view of its own liability.

Private-sector damage payments are limited only by a lawyer's imagination. This is undoubtedly why "reef relief" has cost Big Oil almost $1 billion in just 10 months. I'm not saying it isn't warranted, but we are talking here about a sum almost one-third as large as was generated by the 64 quake, and that took several years to arrive.

As you might imagine, the impact on the epicenter of the spill has been somewhat severe. According to the Alaska Department of Labor, the Valdez work force doubled in the first two weeks. Some of the new laborers were altruists who like to clean birds for free. Most, however, were in it for the money.

Base wages for the cleanup were set at $16.69 per hour for a 7-day, 12-hour shift plus overtime. This is a weekly paycheck of $1,800. By way of comparison, the average monthly wage in 1987 was only $2,308. Forgive me, but I can't see the government moving this rapidly to cast bread upon oiled waters.

If the Big One ever hits again, let's hope we can blame it on private industry.
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Title Annotation:Alaska
Author:Safir, Andrew
Publication:Alaska Business Monthly
Article Type:column
Date:Jan 1, 1990
Words:614
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