Over 140 years ago, the US government overcame its miserly tendencies and purchased Alaska from Russia for $7.2 million in gold. It brought us Sarah Palin, which some would say was a good deal and others would say was not. But looked at from the perspective of dollars and cents, rather than politics and personalities, a new analysis by an economist suggests the investment hasn’t been worth it for taxpayers in the other 49 states.
David Barker says, “Cash flow from Alaska to the federal government since 1867 has certainly exceeded the initial purchase price, but this fact is not sufficient to demonstrate the purchase was a sound financial investment. The economic benefits that have been received from Alaska over the years could have been obtained without purchasing the territory. In financial terms, Alaska has clearly been a negative net present value project for the United States.”
It IS a rich source of natural resources, especially oil, but Barker argues that the federal government spent so much money to acquire Alaska (the $7.2 million in gold had the value of about $10 million at the time), then govern the area and build the infrastructure needed to access its resources that whatever financial benefits the state has provided have been far offset by the costs. By his calculation, the state has cost the federal government $13.4 million in 1867 dollars, which translates to a $16.5 billion loss in today’s dollars, adjusting for the size of the economy.
Barker points out the belief among many historians that if the United States had not purchased Alaska, Great Britain would have acquired it and made it a part of Canada, and given the historically close and friendly relationship between the United States and Canada, Americans still would have had access to Alaska’s resources, just as Americans today have largely open access to Canada’s resources, including its oil (and maybe its UFO files!). But that access would have come at a much lower cost to Americans because the costs of developing the region’s economy with roads, rail, port facilities and other infrastructure would have been paid by Canadian taxpayers, not American.
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