Keli’i Akina, Ph.D., president and CEO of the Grassroot Institute of Hawaii, chatted earlier this month with Pacific Media Group COO and MauiNow director Jack Dugan to answer questions about the state of Hawai’i’s economy.
MauiNow’s summary of the interview can be found here. A complete transcript is below.
Jack Dugan: Aloha, I’m Jack Dugan and this is “Hawaii Tourism Now.” Today we’re sitting with Dr. Keli’i Akina, president and CEO of the Grassroot Institute of Hawaii as well as the trustee-at-large of the Office of Hawaiian Affairs. How are you doing, Dr. Akina?
Keli’i Akina: I’m doing great, and aloha to you, Jack, and to all of the viewers today. I appreciate the opportunity to come on board and chat a bit.
Dugan: It’s our pleasure. Thank you for your time. We have a handful of questions for you here, and I’ll get right into the first question.
Question: Would you please provide a high-level overview of what the organization the Grassroot Institute of Hawaii is focused on here in the state?
Answer: Certainly. Grassroot Institute is an independent public policy think tank. The fact that we’re independent means, by choice, we don’t take money from the government or the university or the military or any political parties so that we can be a voice to speak about the economy and the government in a way that represents the people and not any special interests.
Our focuses are really on three main values:
>> We want to promote individual liberty, which is the protection of our constitutional liberties.
>> We want to promote economic freedom and the free markets here in Hawaii.
>> We want to promote limited and accountable government throughout the state of Hawaii, and sometimes on federal issues.
In some cases, we’re the watchdog for people, and in a lot of other cases we provide economic advice to various levels of government. We hope that they take our advice because we are trying to encourage an economy that will be robust for individual businesses and consumers.
Q: The COVID-19 pandemic has been affecting communities around the globe. Hawaii has been no different, of course. There has been a lot of information and here in Hawaii about the total number of cases, the number of deaths. We see these numbers daily. What other impacts have the Hawaii government mandates had in our local communities here?
A: Jack, that’s a complex question. Let me start by prefacing what I have to say by pointing out that there has been an important role for government to play in protecting public health and safety. I don’t envy in any way our governor, our mayor, and other leaders of the counties, as well as legislators, because they’ve had a very, very tough job. I don’t doubt their sincerity, but oftentimes they’ve had limited information or inaccurate information. It’s been very difficult to navigate.
There’s no question about it: Their intentions have been good, but we need to say and to recognize: The shutdown of the economy has had a devastating effect upon Hawaii, one that is both short-term in terms of crisis and one that will be long-term. Recovering from it becomes more and more difficult the longer we remain shutdown.
There’s no question about it: The shutting down of the travel of tourists to Hawaii, the massive disincentives for anyone to come here, while they may have contributed to some of the public safety and health benefit, have also damaged an industry that affects many throughout the islands. That’s why we’ve got up to almost a 30% unemployment rate here in the islands, and we haven’t even begun to feel the impact of that that we’ll feel when federal funding starts to dry up.
What I believe is this: We need to strike a balance. Just as we have been aggressive in protecting public health over the last several months, simultaneously, we also need to be aggressive in reopening the economy, especially the tourist industry because the longer we wait, the harder it will be to climb out of a hole.
Q: Speaking of that balance, to be clear, the balance of the public safety here in Hawaii, along with the local needs of our economy. I don’t expect it’s an easy question to answer, but how do you believe we should balance those two very important priorities? The public safety here in Hawaii, as well as the local economy?
A: Well, I don’t think it’s so much what we do, because what we do should follow common-sense guidelines. It’s who does it. I think that’s very important.
When the government plays the major role of forcing people to take behaviors that are harmful to them economically and issues those decrees across the board, it’s a one-size-fits-all solution that isn’t a solution whatsoever. We have to recognize that when it comes to the economy, public health and a good economy are not at polar opposites. We need to pursue both of them, and the best people to pursue ensuring public health are the businesses and consumers who themselves have a great incentive to see that they’re safe.
The typical business is able to figure out a way to ensure social distancing, good hygienic practice to protect its own employees and its consumers. And if we let businesses do this, I think we’ll be better off in the long run.
If we really look at the numbers, we’ve had a very low amount of fatality and even disease with the coronavirus, and to some extent — and I want to give credit where credit is due — that’s due to our public-policy leaders who have instituted safety measures. But it’s also due to the fact that the public itself has embraced safety measures. Businesses and the public have tremendous incentive when allowed freedom to operate. They’ve got tremendous incentive to institute the kind of safety practices that will truly lead to a balance, and by balance I mean simultaneous practice of safety and simultaneous practice of opening up the market and opening up the economy.
Q: Considering both the economic and public-safety factors that we’re talking about, what’s your viewpoint in regards to how and when Hawaii should bring tourism back?
A: Well, there’s no question about it. We are bleeding and hurting terribly every day we fail to bring tourism back. We need to consider, as part of our motivating thoughts, the cost of closing the economy as it continues to remain less than fully open.
There certainly may be deaths and disease as a result of COVID-19. As I mentioned earlier, that’s been fairly minimal. But we also have to consider the human cost to people who are not able to work — people who are laid off of work, people who don’t have income, don’t have health insurance.
There are deaths of despair. We’ve written a paper about that on the Grassroot Institute website, which anyone can access. Researchers are showing that it’s potentially the case that hundreds and even thousands of people may suffer because of the consequences of the economic impact on their lives and on their families.
Without throwing caution to the wind, we have to be motivated nonetheless, to realize that there’s a terrible cost to not opening up.
In answer to your question, the sooner we open, the better. The place to start, of course, the biggest place we have to consider, in addition to opening up our businesses locally, is opening up our airports so that we can receive travel. Now, I think the important thing here is to use the least restrictive methods to allow people to come to Hawaii safely.
As I mentioned before, it’s not what we do, it’s who does it. Let me give you an example. Just earlier this week, I was tremendously encouraged when I read that United Airlines had taken the lead in deciding to institute a health screening process for anybody who is flying to the islands. That’s very important. It includes a questionnaire; it’s quite extensive and so forth.
It may not be all the screening that everybody wants, but in addition to the hygienic measures that United Airlines is taking, the standards it’s maintaining for its staff, the screening process, and more to come, … we see a good process being instituted by the private sector without government enforcing it. The private sector has every incentive to do this.
It’s kind of like the typical businesses in your neighborhoods, restaurants and so forth. People are online all the time giving reviews through sources such as Yelp. If they don’t take care to make sure that their employees and their customers are safe, they’re just not going to get business. Business has the incentive to go after business, and that is the greatest incentive to ensuring public safety. I think what we need to do is get the government out of the way and let businesses take the leadership in this.
Q: Okay. If I understand your point correctly, it’s that your belief is, instead of the government with their proclamations and mandates for travel requirements, quarantines, tests that might have to be done, that are again put in place by the government, it’s your viewpoint that instead, the government should stay out of those decisions and allow airlines and perhaps hotels, or the local or not the local, but the private sector businesses, to make those decisions as far as managing the safety and health risks for COVID-19?
A: Well, Jack, let me be clear. I’m not saying the government has no role to play at all. Government represents the leaders whom we elect to lead us in the right direction. We want government to be playing a significant role of coordinating, of providing information, of encouraging, but the government occasionally has to step out of the way of restrictions that it has on businesses.
It has to allow private citizens and businesses to take the initiative that actually works better in the free market than through government enforcement. I’m looking for a more reasonable approach on the part of government, one that actually fosters the initiative on the part of the private sector.
Q: Discussing the rebuilding of our economy, if we can shift gears into that real quickly here, what the future could look like for Hawaii, what are your viewpoints is it relates to better diversification with industries beyond just tourism?
A: Well, I think that’s a great question. Diversification has been talked about here for decades. I remember back in the ’60s as a student, in the ’70s when I worked at the state Capitol in one of my first internship jobs, politicians were talking about diversification in all kinds of sectors. I think that George Ariyoshi, the governor, had a great vision of that.
Here’s the problem: It has to do with not what our vision is, but who is in charge of implementing it. The government has taken steps through tax credits, through incentives and other kinds of legislation, to start up different businesses for diversification in Hawaii. Tech startups, film industry, agriculture, biotech, technology parks, venture capital funds and so forth.
After 40 to 50 years of doing this, we are still not highly diversified. That’s largely because when the government plays the key role in determining which businesses will thrive and succeed, and which are backed, and which are not, they choose the losers and the winners rather than letting the market, which is far more efficient in doing that.
As a result, the government intervention in the market prevents the diversification that is necessary. I think that that’s something that we have to deal with. The key to becoming diversified is to make Hawaii business-friendly. I’m talking about our tax structure toward businesses. I’m talking about our regulatory environment, which regulates businesses to a very high level and so forth. We’ve got to deal with reforms in these areas in order to make Hawaii attractive to businesses and to become a magnet for capital.
As we do that, when government gets out of the way, we let the factors that the market can manage, matching supply and demand at a price level that a consumer will actually find appealing, work. Let me give you one example when it comes to tourism. We spend a huge amount of money on government attempts to stimulate tourism. The Hawaii Tourism Authority, for example. What if instead we took that money and allowed tax breaks on the tourist industry and let the tourist industry itself innovate ways of making Hawaii attractive, bringing the cost of travel down and providing incentives for customers to come to Hawaii?
The private sector would do a great job in terms of doing that. When it comes to rebuilding, I really think it’s a matter of making Hawaii a more economically free environment in which businesses will say, “We want to come to Hawaii. We want to stay in Hawaii. We want to build our business from Hawaii.”
Q: I’ve heard a lot of different people talking about diversification, and almost every local community member I’ve spoken to on a personal basis seems to be for having diversification beyond tourism. What steps are there for people to take on a personal level? Local families, local businesses, people that are hearing all of this and saying, “Yes, let’s do it.” How do we make this happen? What can people do?
A: Well, one of the most important things to do is to educate ourselves as to what’s needed to make it business-climate friendly here and clamor for the attention that we need. Speak out to our public officials and others and say, “We want the freedom as individuals and businesses to operate with a better tax structure, to operate with fewer regulations and so forth. We want to be able to have the freedom with which to do business.” I think that’s important, and we need to elect officials along those lines.
A good example of looking at long-range solutions rather than short-term immediate crisis solutions is the policy brief that we’ve written at the Grassroot Institute called “Roadmap to Prosperity,” and the subtitle is “How Hawaii Can Recover and Even Excel After The Coronavirus Lockdown.” It’s available at grassrootinstitute.org.
Some of the solutions we look at are, for example, permanently exempting food and medicine from the state general excise tax. Now, that may not sound very glamorous, but it’s an important long-range decision to make, and most states in the country have already made it because it actually impacts a very important population, medical doctors.
One of the reasons that medical doctors are in shortage in Hawaii and leaving Hawaii at massive rates — and you can’t find a specialist on the neighbor islands in most cases — is simply because they’re being taxed out of business through the general excise tax. If we can remove the general excise tax from food and from medical care, we can help solve this problem, as well as the problem that many face when they can’t get medical care affordably to them.
Other solutions, in the long run, would be to delay or suspend tax and fee collections for local businesses, or to defer occupational licensing renewal requirements across the board. Our occupational licensing requirements are so heavy that they’re preventing a lot of people who are capable of working productively from doing so. Or remove county zoning and licensing restrictions on home-based businesses. Reforming zoning laws and streamlining the permitting process would also help us to have a greater supply of housing, which would bring down the cost of housing.
Now once again, it’s not rocket science. These solutions are good policy for the long run. The point we’re trying to make is that there’s no instant switch that will switch the economy back on. There’s no silver bullet that will necessarily revive the Hawaii economy. It’s a matter of doing the important things rather than the urgent things.
One of the other things that’s very important is to reduce the cost of government spending. The cost of government in Hawaii is exorbitant, if you count the federal, the state and the city. The ones we can do something about at the very least happen to be city, state and county levels. What we have to do is take the burden of government cost off of the people and not increase it tremendously. Reducing taxes as well as making sure that we loosen up regulations — that’ll make a make a very big difference. And in the long-run, that will get us out of debt rather than increasing our debt level as we move forward.
Finally, let me just mention one item out of the 23 that’s in our report. It’s to modify a 100-year-old shipping law called the Jones Act. I know there’s been some controversy about this, but the majority of people in Hawaii recognize that these shipping laws need to be updated for the 21st century because we are surrounded by water. Everything that comes to us is through shipping, and we need to experience the economies that the 21st-century updates to the Jones Act could bring.
With that said, I invite anyone to visit our website to take a look at the “Road map to Prosperity.”
Q: Got it. Thank you so much. … Is there anything else, in conclusion, you’d like to say to our audience in this difficult time for many?
A: I think that we must not give up hope whatsoever. We’ve been hit hard. Families and individuals have been devastated. I’ve talked to countless business owners who are heartbroken after having let off so many workers. I’ve talked to many people who’ve lost their jobs. Even this morning, coming into the studio or at the office here, I was told of a dear friend who had lost a job. This hasn’t stopped whatsoever.
The key thing is not to lose hope, and yet at the same time, to be strong and firm in speaking to our public officials about what needs to be done, that we’re not going to settle for short-term solutions, but we’re going to bite the bullet as needed, cut costs as a government and institute long-range solutions. If we do that, I think we could have a brighter future in the long run for Hawaii and our place in the world.
Dugan: Thank you for your insights, Dr. Akina. Hope to talk to you soon.
Akina: Aloha. I’m delighted to be here.