IMPOSSIBLE DREAM FOR HAWAII'S FUTURE?

I have a recurrent dream about Hawaii in the year 2025. To my amazement, we avoided too much low-budget tourism growth as well as further stagnation--but without depending exclusively on "upscale" visitors (a market which the 1990s proved is not necessarily recession-proof). We found another way to maximize the benefits AND minimize the problems of EITHER growth or no growth--both of which we learned (between 1960 and 2000) were largely beyond local control.

This alternative also helped shore up the Aloha Spirit by narrowing the gap between those opposing and those favoring more growth and more integration with the global economy. Furthermore, we finally transcended the debate between those wanting to suppress wages and cut taxes unconditionally (hoping to save or create more businesses and jobs), and those wanting to increase taxes and wages (ostensibly to benefit the poor and working class, but at the risk of eliminating more businesses and jobs).

Surprisingly, neither did this future depend upon the success or failure of increased tourism marketing or efforts to diversify the visitor industry and economy as a whole. Instead, we put as much or more emphasis on increasing workforce productivity (output per worker) throughout Hawaii's economy, which research in the 1990s suggested had increased very little since statehood. We also realized this was the only way to grow our economy indefinitely without the costs outweighing the benefits. But we didn't focus solely on traditional ways to increase productivity, such as downsizing government and cutting red tape, increasing "high-tech" research and development, and educational improvements (although the latter helped the most).

We also minimized layoffs and benefit cuts--other common ways to increase productivity (by making remaining employees work more for less). Instead, we boosted existing tax incentives and other support for firms which shared ownership and profits with local employees, AND which improved employee input in workplace decision-making (with tax breaks that increase with the amount of ownership shared). Collectively known as "Employee Ownership and Participation" (EOP), evidence accumulating since the 1970s showed that EOP could increase productivity via increased efficiency and service quality, and by reducing absenteeism, workers' comp claims, and employee turnover. Research also suggested EOP firms spend more on employee training.

Furthermore, as predicted by many in the 20th century, labor-saving technology increasingly spread through the service sector, including the hospitality industry. Technological advances increased the skills required for most jobs, while also gradually slowing job creation as they had earlier in agriculture and manufacturing nationwide. This could've been a threat rather than an opportunity, but EOP helped reduce employee fears of labor-saving technology by making sure they benefitted financially and had adequate input on its use. In my dream, businesses, unions, and government actually worked together to accelerate the spread of labor-saving technologies and EOP because this increased productivity without reducing service quality or employee incomes. Some studies also indicated EOP can initially increase job creation.

Most importantly, compared to other economic development alternatives, this better prepared Hawaii for the future no matter what it held in store. Slowing the long-term growth of our workforce during future economic expansions reduced growth-related problems (e.g. pollution, congestion, and increased pressure on infrastructure and social services). And by slowing workforce growth during expansions, this also reduced the need for wage cuts and lay-offs during future recessions. As a result, the success or failure of increased tourism marketing and efforts to attract better jobs were less important. Moreover, unlike the other alternatives, even if increased EOP failed to increase productivity, it still gradually increased the locally-owned share of our economic output. This reduced our dependence on continual growth and the number of people who need to hold more than one job.

All businesses were encouraged to gradually increase EOP, including "non-local" firms like the "big box" stores. This guaranteed more profits would stay in Hawaii even if non-local firms drove their locally-owned competitors out of business. However, the biggest increase in EOP (as our population aged) was in the large number of small, privately-owned local businesses whose owner had no succession plan after retirement. (Research showed most family-owned businesses don't survive beyond the first or second generation.) On the state level, we enhanced existing federal incentives which allowed owners to reduce taxes by selling their business to their employees, but at no out-of-pocket cost to the employees (whose stock was paid for out of future profits via a leveraged Employee Stock Ownership Plan). State and local governments, banks, unions, trusts, estates, and foundations also chipped in to create a fund (as the national AFL-CIO considered in the 1980s) to help finance employee buyouts (when necessary or desirable). But none of this required removal of existing managers or complete ownership by employees.

Finally, as argued by a Harvard MBA (Shann Turnbull) in the late 20th century, adequate incentives for EOP actually increased, rather than decreased, outside investment in Hawaii. In exchange for generous incentives (perhaps complete tax holidays for a specified period), outside investors could agree to gradually transfer ownership of the businesses they create to local employees--but only after a predetermined return-on-investment had been realized sufficient to attract investment. (Hawaiian Electric invested in similar deals in China in the 1990s.)

Unions found a new role as umbrella organizations for EOP firms, helping employees to acquire new skills and better understand management and finance techniques. Unions also created mutual funds in which local employee-owners pool their stock to reduce the impact of failure by any single firm. And as had been done elsewhere, certain government functions were privatized by making the employees the owners. They were then protected from competition for a few years while they either developed or hired management expertise if necessary.

However, even these measures could not guarantee the success of all Hawaii businesses and the security of all Hawaii workers. (But in a free market economy, neither can anything else.) So we also mended our fraying social safety net, but in ways that did not increase dependency on welfare or charity. We realized there was a variety of un- and under-used ways to plug "leaks" in household budgets and the local economy in general that would free up more cash income for savings, investment, education, and/or purchase of a home without requiring ongoing government subsidies. This also helped prepare more people for possible future shortfalls in private pensions, Social Security/Medicare, and/or the number of good jobs, while also saving a greater percentage of smaller government tax collections for the really needy.

When I wake up, I realize my dream and I are politically homeless at present. So I go back to sleep. Is my dream impossible? Maybe, but most people thought the same thing about leasehold reform 30 years ago and Native Hawaiian sovereignty 20 years ago. Nevertheless, there currently is no organized constituency to lobby for this. So feel free to wake me up if anyone shares this dream.