Newspaper article The Christian Science Monitor

An Ill Wind Whips Economy in America's Paradise Islands Hawaii's Boom-Bust Experience Forces the State to Reevaluate Its Business Climate

Newspaper article The Christian Science Monitor

An Ill Wind Whips Economy in America's Paradise Islands Hawaii's Boom-Bust Experience Forces the State to Reevaluate Its Business Climate

Article excerpt

A few years ago, Steve Vaspra never would have expected to be where he is now. His business was humming along nicely and he had just bought a new condominium in a nearby resort community.

Today, his business of wholesaling used cars is off 75 percent from its peak in the early 1990s, and he has been forced to look for part-time work managing a coffee shop to pay for his condominium. Faced with financial realities, Mr. Vaspra plans to rent the condo and find a cheaper place to live.

In Hawaii, tales like this abound. While the rest of the nation enjoys one of the most remarkable financial recoveries in postwar history, Hawaii has become an anchor dragging behind the buoyant US economy. Since 1991, Hawaii has grown less than any other state in the country, and last year income here rose only 1.7 percent, also rock bottom in the United States. But even in the depths of the current recession, the first faint signs of recovery are appearing. As the state seeks to carve out a prosperous future, Hawaiians are increasingly being forced to choose between decades-old traditions and new pro-business ideas. "We have a reputation - one that we have earned - as being not very friendly to business," says Leroy Laney, a senior vice president and chief economist for First Hawaiian Bank. Back in the heady days of the 1980s, billions and billions of yen poured in from Japanese investors and tourists, who saw the state as an inexpensive Shangri-La. It didn't have to worry about attracting businesses. But now, with the Japanese economy in a tailspin, Hawaii is looking to American firms, who have a laundry list of reasons not to come. What's wrong? While home values tripled during the late '80s, the state government also went along for the ride, increasing its work force by double-digit percentages. Now, the large state and county bureaucracies, with their byzantine regulations and overlapping jurisdictions, are often cited as a dead weight on the state's economy. Other business flash points, however, cut much deeper into Hawaiian roots. The state's long-standing liberal tradition, for example, means that labor unions in Hawaii remain one of the state's most potent political forces, and tax rates here consistently rank among the highest in the nation. …

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