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On a scale of spending muscle....

Do You KNOW THE DIFFERENCE between the Philosopher, the Economist and the Government? The first ponders the great truths of the Universe, such as where Man fits within the Grand Scheme. The second delves into the capital required to get Man there and to help him keep up with the Grand Scheme's Joneses once he arrives. The third, of course, is concerned with taxing the Joneses, the Grand Scheme and Man, not necessarily in that order.

In the end, it all boils down to three basic issues: Where do we fit? What do we earn? How can they tax it? Let's take a look at these questions from an Alaskan viewpoint.

First, where do we fit? Actually, from a philosophical standpoint, I've no idea. This is an economics column. Relative size is the issue, not existence. Have you ever wondered where you stand in the grand scheme of the world's economic entities?

The answer is just about 70, a guestimate stemming from a review of countries and multinational corporations according to the size of their annual output. This is a typical measure used by economists to compare international spending muscle.

The United States comes out first on this basis by a wide margin. In fact, it may surprise you to know that no other country in the world has even half the gross national product (i.e., annual sales) of the United States.

Even at 70, however, Alaska has neighbors that aren't all that shabby. We fit in just behind Atlantic Richfield and just ahead of Chrysler. OK, so I lied. Chrysler is a little shabby, but they're a fading star anyway.

If Alaska keeps up the modest growth path we've seen in the last year or so, we could overtake New Zealand (66) and Israel (67) in the next 12 months. This would put us within driving distance of Toyota (64) and only a slick away from Amoco (62). Don't plan on bottoming-out against Exxon (24) or running into General Motors (22) any time soon, however. These guys are up there I with Switzerland (23) and Saudi Arabia (26).

What we actually earn is less impressive. At year-end 1989, Alaska had a gross state product of about $21.3 billion. While this is about 10 times the net worth of Donald Trump, it accounts for only 0.04 percent of U.S. GNP. By way of comparison, California accounts for about 14 percent of the U.S. total. Of course, California also has more people, more pollution, fewer whales and a full-time legislature. So things do have a way of evening out.

It is also instructive to note that Alaska is nowhere near the smallest economy in the nation. At least nine other states are behind us the least productive being Vermont. (No, I'm not going to say anything nasty about Vermont. It's a nice place to visit, even if it is owned lock, stock and cracker-barrel by gentlemen farmers from New York City.)

Where Alaska does shine is on the basis of per-capita income. Despite the setback of the mid-1980s, Alaska's average employee earns more than anyone in the nation. Wages last year ran about $30,000 per worker. This is more than seven times the average factory wage in the Soviet Union (No. 2 on the GNP list), and probably more than most employees make at General Motors (22 on the world index).

The only trouble with per-capita income is that someone is always trying to tax it away from you. Enter the Government. It is sometimes said that the only time lawyers have their hands in their own pockets is when it is bitterly cold. The federal government is not temperature-sensitive. Either that, or it wears gloves. In any case, the Feds are always looking for ways to increase their spending power, which is already number 4 on the world chart.

Although all states have complaints regarding this behavior, perhaps the least kind cut is truly Alaskan: The Permanent Fund distributes about $900 to every Alaskan annually, of which the federal government promptly takes 30 percent. I guess no one respects the small guy. Pass the Wheaties and let's bulk up on economic development. AT&T isn't that far away 51)!
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Title Annotation:The Economy According to Safir
Author:Safir, Andrew
Publication:Alaska Business Monthly
Date:Sep 1, 1990
Previous Article:Rule change.
Next Article:Bob Hickel's Iditarod Trail.

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