GDP: The optimistic side of things

Definitive information on the Commonwealth’s gross domestic product has finally hit the scene, released by the U.S. Bureau of Economic Analysis and the U.S. Department of Interior’s Office of Insular Affairs. The information covers the period from 2002 through 2009. In summary, it shows a steep decline in GDP, and in per-capita GDP, over the period. Despite this decline, however, there is some good news here.

I’m going to look at the good news side of things today. And to balance things out, next time around I’ll look at some of the pitfalls the business community faces in the Commonwealth.

I expect that “GDP” will replace “strategic” as the new buzzword in the CNMI. Hey, maybe we could hit all the buzzwords now and say “Strategic GDP diversification youth educational investment empowerment.” Wow, slap a cover page on that puppy and you could be an instant kickback consultant here.

Anyway, here are the numbers, from Table 2 of the federal report, which is in real dollars. In 2002, the CNMI’s gross domestic product was $1.175 billion. By 2009 it has fallen just about by half to $598 million.

In per-capita terms, the figures are just about as zany. In 2002, per-capita GDP stood at $15,973, for a (rounded to the nearest hundred) population of 74,400. By 2009, the population shrank to (again rounded) 51,500, and per-capita GDP fell, yes, fell, to $11,612.

Let me utter an “I told you so.” As far back as 1998 and 1999, I noted, in this very column, that if the Commonwealth didn’t develop its package tourism industry (and it didn’t) and if it didn’t parlay its manufacturing action into other meaningful activity (and it didn’t), the economy would shrink substantially and become government supported.

Which is exactly what happened. In fact, according to the same data, again, real dollars, government spending, at $305 million, comes to over half (51 percent) of GDP as of 2009. Wow, is that cool or what? And, was I right, or what? (Yeah.)

No matter how you look at the numbers, just about everything is an echo of generous federal support, one way or the other. I mean, where else could the money really come from? Financially, we call this the “multiplier” effect, as money cascades through the economy, and it’s hard to tell where it really came from in the first place.

I think the point is easier to make conceptually. So, ponder what would happen if the feds cut this place off without a dime, and without defense support, without transportation administration, without FDIC insurance for banks, without public health expertise, without search and rescue services, without postal services, without a federal court system and law enforcement services, and so on.

Who would dare invest? Heck, who would dare visit? You think the top Asian tour agents would book clients into such a situation? Well, go ahead and ask them. I already have.

Anyway, back to the numbers at hand, and, in fact, tourism. Tourism, insofar as it’s classified as an export of services, is only about one-quarter (28 percent) of CNMI GDP.

As for the closing of the garment factories, this is specifically mentioned in the GDP report, so there’s no mystery there. Leave me out of any arguments on that note; I’m not a part of that scrap.

In fact, the garment thing is so hot-button that it masks a far more important fact, and that fact is that an industry-based economy is not going to fly here, garments or no garments. The Commonwealth’s people don’t want that system. They want the current system. Which is fine with me, I’m not an advocate for any type of system; I forecast the economic weather, I don’t try to change it. Big difference.

Let’s get to the happy news. Despite the falling GDP, the fact is that we’ve got an economy that produces so little it barely moves the needle, and yet which has a per-capita GDP that exceeds that of about 135 of the world’s nations, as well as exceeding the world average. Money for nothing! Much of the world faces brutal, hopeless toil just to eat. But we don’t. Why not? Like I say: windfall.

Although the opportunities for large industry are small to nil in the CNMI, there are some very solid niche plays here, and will be as long as the federal government keeps sending out money.

I cut my teeth in a similar regional economy. So this is familiar turf.

You don’t need net growth to have a business opportunity. All you need is turnover in the ownership of businesses, and, trust me, there will continue to be turnover on this note, a point I’ll hit when I note the “pitfall” side of things. Stay tuned.

Meanwhile, here’s the bottom line: Despite the fall in GDP, the Commonwealth is in far better economic shape than its low level of productivity would otherwise provide.