 Welcome to this show, The State of the State of Hawaii. I'm your host, Stephanie Stoll Dalton. Our show title today is, The Question Has COVID, 19 Killed Hawaii's Equilibrium. Now this question is based on an article written by author and contributing editor, Don Wallace for Honolulu Magazine in February. In the article, Don examines COVID's effect on the state's economy, including the social and cultural and local supports that made Hawaii work from its lonely spot in the middle of the Pacific, even though it came at a high price. His article discusses what happens now by asking in its title, which we will have a URL up for, so you can get to it if you'd like to read more. And the title of the article is, Will the Higher Cost of Paradise End or End Up Ruining Hawaii? So we have Don here, Don Wallace is here to discuss some of these ideas and issues which are very pertinent to the challenge for where Hawaii is now in its current emergence or post pandemic, hopefully post pandemic circumstances and where it's gonna, it's going. So Don, welcome, welcome to Think Tech Hawaii and this show. Well, thank you very much, Stephanie. Thank you for having me. And I always thank you, Think Tech, which is an invaluable aid to journalists everywhere. I've tapped into many programs over many years. Oh, that's wonderful praise. It's good to hear of your viewership and your appreciation of citizen journalism, which is quite the adventure. So Don, let's get started on some of the implications of your article and the meaning of it. And with explaining what I grabbed from it, which was this issue of what was and maybe is and maybe will be or not Hawaii's equilibrium. What is the meaning of that phrase as you used it in the article, the Hawaii's equilibrium? You know, it was something that came to me as I had been interviewing the state economist, Eugene Tian, economist Paul Brubaker of TZ Economics. These are people I've talked to before and over the years and talking to Mike McCartney over at D-Bed. And we're talking about so much data in the problem of inflation. And remember, I was interviewing these people in December for a February story. Here we are, August. We thought in December that we were writing a story that would be ending about April. Inflation would be back. But it still came to me from having come like everyone through the pandemic, that we lost so much of our sense of Hawaii and during the pandemic and that we lost this as the inflation began to hit. And then in 2021, the crazy home prices began to spike and the rents began to spike. We and the food prices and everything else. We lost what used to be a kind of very local, lucky you live Hawaii kind of attitude. And one example was you could say, well, house prices are going up. Hey, isn't that great? Cause I live in a house and one day it's going to be worth more. So, but if you were buying a house, it was like, oh, you know, house prices are going up. Well, on the other hand, my rent's still cheap and I can go to the beach. I can go to, you know, rainbow drive-in. I can get a plate lunch. It's not too expensive. I could pick a mango off a tree. My neighbor just gave me some lychee. You know, life in Hawaii really has its compensations. Hey, sure, we pay extra for gas, but look at what we got. You know, we don't have heating oil like they do in the East Coast in the Midwest. And that was equilibrium where you also have a sense of faith and trust that the status quo is always going to have place for you. And you're always going to kind of have a nice, may not be a standard of living, but it's a way of being that where you feel good. And I think a lot of us have lost that loving feeling, so to speak, in the last couple of years. Lost that loving feeling. Well, I thought it was interesting because to note that Hawaii is expensive for all of us and many, many people struggle for the privilege of that mango and the lychee trees and getting to the beach every day if they can. But there was a history that you brought out in that article that was most informative about how the history of Hawaii's economy has led into having this state suppressed wages because we have suppressed wages compared to the mainland. And until I saw that in your article, I hadn't really understood what was the history. And I know I'm sure it's complicated but you pointed out some of that background that has allowed Hawaii to move in that direction of lower income, even though it's more expensive to live here. And why is it that the residents are okay with that? And I saw that as part of the equilibrium that had been established, does that make any sense to you? Oh yeah, basically what you're referring to is the kind of like the thing that we often don't acknowledge which is that this state, which was existing in an agricultural state basically under the native Hawaiians changed into the world's first experiment in mass monoculture. World's first, there's a great book called Sovereign Sugar that everyone should read. We were where everything was kind of, we're gonna convert entire islands over to sugarcane. To do that, we needed a subservient labor force. Everyone knows the story of bringing in draft after draft of contract workers. The native Hawaiians didn't work out because they viewed it as their land. Why should they have to work to live here? So then we bring in Japanese, Chinese, Koreans. And that deal depended on less than a dollar a day wage and a company store. And so then we created a sort of social mythology of nostalgia for the plantation. Life was good then. Everyone took care of each other. When in truth, that kind of disguises the fact that really up until socialized medicine came in and in the 40s, 1940s and 50s, plantation life was extremely hard and life expectancies were low. We have populations that tend to live really long with the Japanese American, but overall our population longevity was not good. And so then we convert around 1959 into a mass tourism boom. There might have been a moment there when people in the state said, you know, we should start paying a really good wage and have everyone rise with this boat that were floating jumbo jets flying in. And that didn't happen. Instead, there was kind of this, okay, we're gonna keep everyone down at a low level, about 60 to 70% of the population. Everyone's gonna have this low job, which means they're also gonna be in public education. We're going to underfund public education and send our kids to private school, which has already become an established fact, Hawaii has the highest or second highest rate of private schools in the country. And we're just gonna keep them down on the plantation essentially, except now the new plantation is two to three service jobs serving tourism. And so that's that part of the equilibrium. That's what you might call dark matter in the sense that those who are floating on top of it don't notice that that's what's holding them up. And when I talk to the state economists, they all get it, you know, it exists and they're all really, now we're really in a moment as we painted ourselves into a cul-de-sac. People can't afford to live here anymore. The jobs don't pay enough. We need a workforce, but what if our workforce goes away? And we're at the point now where this is starting to really show up. And it showed up in what was called the Great Resignation, which was suddenly when work started coming back online and everyone said, Hawaii is open for business in October of 2021, what should happen but the workers didn't come back to work or they came back and they found themselves being overworked and they quit. So for the first time, and the article goes into this, for the first time, we're having 50,000 people a month quitting, leaving their jobs, even as we're adding 20,000 a month. And the economists were just, they'd never seen anything like this. Well, in the article, I think that you, did you bring up that example of Nikos, which is, can you share that again because that makes it real? Yeah. Yeah, I highlight four businesses, Lex Brody, Michelle Golymba with her aggressive beef, Latour Bakery, which has, puts out like before the pandemic was putting up, I don't know, 100,000 pounds of bread a day. You know, incredible network. All this crashes to a halt. And at Nikos, Pier 38, which most of you know the restaurant, they're probably the largest consumer of auction ahi tuna and fish. And they do a really good job of just getting it out there and he employed 150 to 200 people. And, you know, it was a really, really pinpoint operation, really run well. I did a full story on them once and just found it impressive as a business writer. But then everything gets shut down to nothing. Then he's selling ahi in the parking lot at bargain basement prices in order to keep going. People drive up and they give them auction ahi, right? For four or $5 a pound. Then October 21 comes, he said, or actually summer comes and tourists are returning. They bring back the people that they can. They've had people they've kept on. And he said, they come in and they are overwhelmed by the number of tourists who are coming in. But also everything is faster and more rushed, less pleasant. And they said the tourists are really unpleasant. Now, this is the case of pent up demand, right? But it's also a case for Japanese tourists where the basis of our tourism economy aren't coming and they still aren't coming. And what we're getting was bargain basement mass market tourists from the United States, primarily from the Western States were coming in and some of them had a chip on their shoulders and they were really getting in the faces of the service workers here. It's not just in Nica's but around the state. This has been widely reported but it has a real effect on you if you're taking it every day. And so you've found people quitting, burning out, quitting, starting a job, their old job. They're saying, you know what? I don't want to take it anymore. So was it, that's amazing that that behavior, that kind of like, the root, rudeness, right? Or that not respectful, tourists who aren't respectful of our service industry, like as you say, we're used to having the Asian influence here and the Japanese and they didn't present in quite that way as the Americans do. Oh my, well, that is interesting. So, but now that is stunning and that was hard on the workers. What other factors were driving them to quit? I mean, is that a factor really for Nica's? I mean, where the local, in other words, Nica's clientele is mostly tourists. I guess I thought they were more local, but I guess not. They depend on the tourists. They get every, you know, they're well positioned there on Nimitz Highway too. They get a great business going to the airport. You know, locals make it their last stop. Yeah, they actually, I think people have a fisherman's worth mentality and they see a seafood restaurant. And also, don't forget, the internet has made everything more accessible for everyone when we used to visit, even though my wife's family's here and we'd come over for our visits, we forget everything except for just one or two local places and have to relearn it. But more to the point also, in a point that Paul Drew Baker was making and Eugene Tian. These are the economists that you've been talking about. These are the economists. We don't pay our people have money to have housing. Then the pandemic hits. They already are living in multi-generational homes, which means if one person goes to work and gets COVID, the whole house gets COVID. This was happening and people were dying. And we, again, those of us who have better healthcare and better situations, we don't know what it's like to have someone in our house maybe dying or a whole house full of COVID. And this was happening and it's still happening with the new variants because this is the problem of will we get equilibrium? We all know we're in the middle of the BA5 variant. What many of us are only beginning to understand or hear from the news is the more times you get COVID, the more times the more your odds for long COVID go up. So what we've taken is we put all these people who aren't making enough money anyway and they live way out in the West side or central Oahu, they're crammed into a house. Now, with the economy crashing and no more PPP payments, more people are tightening and filling up these houses. They're getting more crowded. So we've set up a situation that's just gonna keep on rolling. We're gonna have, it seems, and this is again, not my opinion, but the health people's opinion, they're very worried that we're gonna have more waves, more waves, faster waves because we just have set ourselves up for this, particularly in Hawaii. Yeah, this is very, very frightening. So what are these people then are with the COVID rate, it's not going away, but with the variants, but it's not killing people as it was before. And now with the lack of support, the PPI and the Biden programs that sent so much money and the unemployment that was bumped up. Now, is the reduction of all that federal support gonna have an impact on the workers and drive them back into these jobs? Is that a direct equation there that they don't make a difference? You know, the economists, that was part of that discussion with the great resignation because by December, the money was already going away or had gone. And that was the great fascination was that in the fall, the late fall, winter rather of 2021, wow, they're not coming back to work, they're not rushing back. And then they said, oh, okay, maybe they all have savings. Now we're at a point where they definitely don't have savings. And instead, what we have, I think, is this is gonna be our new reality, our new equilibrium, which is, and it's driving restaurant workers, for example, Honolulu Magazine just had a blog on this. They're having to really curtail operations because they can't get staff and they recognize this is the new normal. A lot of them are, you know, that big wide open restaurant with tons of staff hovering over you as a thing of the past. Maybe if you stake houses and, you know, where you're paying for the waiter. But, you know, that's the new world and we're living in it. We have to start looking for fixes. And the fixes that the Tian and Drew Baker, Courtney were all sitting is, we have to start just thinking of ourselves. We really have to build our community from within that. We have to provide the housing, the healthcare, the education upgrades. And we have to really restructure how Hawaii is working before we hollow it out. This is really important and given that it's an election year, these are factors that people ought to be considering in their selection of a candidate to take on the CEO jobs, the gov and the lieutenant gov. I mean, this is critical. Well, I know there's another interesting idea that came out of the article that was, to me, I think, meaningful for our future. When you talked about the polka dotted swans, which is kind of a take on the black swan effect, can you talk a little bit about what that means for Hawaii? Yeah, well, the black swan, which everyone pretty much now knows, was the 2008 crash caused by collateralized mortgages which no one had ever heard of, being sold in tranches and underlying debt that collapsed and no one even knew who owned the house, whose mortgage was handed over to someone in Switzerland or London, that was called a black swan. We didn't see that coming. And it relates to the fact that when the European explorers reached Australia, swans were black, not white. And they said, oh, yeah, we thought swans were white. But now they are not in a situation. I mean, the pandemic was a black swan that was much bigger than 2008. And we go, how can that happen? It was only 12 years ago. This is like too soon for another black swan that we also had in this period, we've had rain bombs wiping out Hawaii, right? Twice. And then we have things like that that utterly cut off an island. We have climate change, stopping the roads going on Honolulu or Oahu. You really have to think about if you're gonna drive around the island now. We see that we're no longer facing blacks swans, it's polka dots ones. I think we're gonna see really frequent eruptive, interruptive events. I mean, look at the volcanic eruption. It's just gonna, we no longer are in this every 30 years, something happened, window. And we do some things that are coming out of the pandemic like bringing back business to the United States is gonna help the mainland, but it isn't gonna help us. They're not bringing a factory back here in China. They're bringing it back to the mainland. Well, the other question is how is it that Hawaii can take part in the recovery for its own best welfare? What, where does it go for recovery? I mean, we hope that our politicians, well, our governors, our leaders will do something about it, but then what is gonna happen in terms of trade and like you say, factories and changes in US economy? Well, you know, there are already, all that talk about overturism seems to have vanished. The newspaper headlines are celebrating more tourists, you know, or acting worried if there was, you know, 50,000 less tourists this month. Meanwhile, the house prices are rising. The rents went up 14% so far in 2022, 14%. That's unsustainable as we know. In terms of forming an economy here, you know, I look back, my favorite example, economics sustainability is the 1934 dock strike which paralyzed the West Coast and the whole Pacific region. For five months, no ship came to Hawaii. Nobody, nobody suffered. Hawaii produced 85% of its food. The major imports were fuel and lumber from the Pacific Northwest for building and, you know, stuff that people buy, but non-essential stuff, you know. Hawaii didn't blink during five months of no supplies. So now we import 90% of everything. But the most important of all, we import our economy. We import tourists. It's kind of like they're money bags that come here and we fleece them, right? Well, when the tourists go away, we have nothing left. So when you look at the alternatives, remote work is fine, all centers are fine. We're not going to be producing silicon chips because that requires importation of goods. The best thing we could do is really, as Larry Ellison is doing on Lanai, turning to intensive agriculture. And it sounds counterproductive and people say, oh, that's for hippies and crunchy granola types, but you look at the alternatives, like I do most of my shopping at the farmer's market in KCC. Not because it's hip or anything, it's cheaper, you know? And the produce is really good. Well, I'm also very pleased to hear Larry Ellison is doing something so positive. How is that working now? Because there always seems to be obstacles, impediments for agriculture here in Hawaii except for pineapple and sugarcane. And of course, we're out of that. So what has he found out that he can do? Well, insofar as anyone knows what Larry Ellison is really up to. Well, we do know that he has been talking up and importing stuff to create. And I believe it's a large amount of hydroponics and controlled egg where you have large brains. And I imagine he's going to do it on a gangster scale, you know? And he will be growing, I assume. microgreens and, you know, vegetables. And of course, where is he going to sell him? Is he planning to actually supply Hawaii? Or is this going to be, you know, the source of restaurant vegetables for billionaires? We don't know what our billionaires are up to. They're not going to save us, that's for sure. Well, except that we're all in the boat and at one point they have to get their feet wet too. So perhaps there's some hopefulness there. I mean, I like hearing that. Have you written anything about what he's doing? Yeah, and are you planning another article to tell us a little bit more about how Hawaii's going ahead based on what you said? I think I have to keep my articles to come under my vest, so to speak. Journalism is a poker game and we're up a print magazine. But I covered Larry Ellison for years I'm a marine journalist as well. So when you follow the guys with the super yachts and the big boats, the one thing you learn is they're always about creating secure and completely controllable environments. And so he's got when I, Zuckerman, he's got Hawaii and we don't, and I heard that there's as many as 15 billionaires who've bought in Hawaii over the pandemic. That was a Board of Realtors comment I heard on the radio. So who knows? We won't know what's going on, but what that does do is it's gonna squeeze the average person eventually. And in a way it's a paradigm of where we are headed, because the people who are left are being, are those who serve the billionaires, the people who are left are those who serve the millionaires or the tourists, the middle class is tighter and tighter. So it leaves the dilemma here for children not coming back or not able to stay here because they can't make the living and they've already used up their Ohana privileges by this generation on their lawn. So it is a desperate, it could be a desperate situation. And we'll have to look forward to, as I guess we've mentioned before, that maybe the government can help some, but I mean, this could make for a difficult situation in Hawaii. Do you think that that accommodation, that agreement that we've all been living under that equilibrium and happiness with all our private schools and all our low wages? Are we gonna be there for another generation or are people gonna need to have a different way of living here? I think I have 10 seconds to say, this is a case for government and it is a case for affordable housing and schools. And at least if we can provide trust in those basics there's hope. Well, I like hearing something positive about government party here much that way that it can do good. It has done awfully good. Well, yes, with PPP and that we seem to forget all of that really fast. Now that it's not here, we're back in the ditch, but well, let's see. We'll see what happens with the election and we'll have to talk about this some more when some new views emerge about where we're going and how that's all gonna work. So look forward to maybe coming back and talking some more about that, Don with maybe some other participants to see what's looming because it's very frightening to hear that Hawaii has these kinds of shadows over it for the future and your article wants us to get back to paradise. We wanna be paradise again but we wanna be able to afford it. So I really am sorry we're out of time and it's a thank you to Don Wallace for participating and sharing his views on these issues of Hawaii's economy and the welfare of the state. And I'm your host, Stephanie Stoll Dalton and this show, The State of the State of Hawaii will be back in two weeks. Thank you so much for your viewership. I'm Mahalo and aloha to everybody. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram, Twitter and LinkedIn and donate to us at thinktechhawaii.com. Mahalo.