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Rightly or wrongly, people often bring up Hawaii’s geographic remoteness to explain our nation-leading high prices.
But there is another geographic element that costs us: We live in America’s most fractured state — and the space between islands comes at a price.
On neighbor islands this has many effects. For one, it aggravates the frequent lack of competition. When there is limited — or a total absence of — competition, a seller of goods or services can more easily jack up prices. This partly explains how a jar of cashews can cost $26 on Molokai or, more importantly, spare car parts can be even more expensive beyond Oahu.
Things could be different. Imagine an archipelago where more people could pass more efficiently — and affordably — between islands. Now imagine that they could transport the tools of their trade or on-sale goods with them. Basic economics suggest this would translate into more economic activity and, likely, job opportunities and improved salaries. “That’s the entire theory of trade in economics,” said former Bank of Hawaii Chief Economist Paul Brewbaker.
Increasing interisland competition — if done at a large enough scale — might just lower the cost of living, or at least make it more manageable for more residents.
To do that requires finding ways to further intertwine the economies of the various islands. In our digital era, this can be done by improving Internet capacities that allow people to work remotely. In regulatory terms, policymakers can make it easier for businesses to have a foot in multiple counties by simplifying bureaucratic requirements. But the most effective ways to combat the high cost of living on those islands is likely to be more practical; travel between islands needs to become more efficient and affordable to a lot more people.
Accomplishing this would come at a cost.
That said, pretty much all transportation on or between the islands is subsidized in one way or another. This includes the bus system, roads, ports and airports on every island, which were built by and are maintained by the state. (Honolulu International Airport was recently granted an additional $16.5 million for infrastructure improvements from the U.S. Department of Transportation.)
If investing in bridging the space between the islands is calibrated to help residents, especially the middle class, better cope with the cost of living, it could help the economy to grow well beyond that investment.
States usually have intrastate highways. In Hawaii, the ocean fills that role.
It would feel like a very different and much more connected Hawaii if a local could load up a truck, drive down to the harbor and roll onto a commuter ferry. After arriving on another of the more populated islands several hours later, the driver could pull out some tools and ply his or her trade or sell goods.
The idea is hardly revolutionary. It is done all the time in states like Alaska, New York, Washington and many others. Internationally, ferries work the open seas from Samoa to Spanish archipelagos in the Atlantic Ocean.
But in a state like Hawaii, an interisland ferry system could have a special impact. It could better integrate the more populated islands’ economies, diversify deliveries and shake up the calcified pricing habits of some stores and companies.
From a cost-of-living perspective, it is difficult to think of a more effective way to integrate the various island economies, job markets and salaries. Too many job opportunities end at the water’s edge of Oahu.
This, of course, is where we need to talk about the Hawaii Superferry. As those who loved it — and those who battled it — will recall, the Superferry began traveling between Oahu and Maui in 2007. It was supposed to expand to Kauai, but surfboard- and canoe-mounted protesters helped to prevent the vessel known as the Alakai from docking in Nawiliwili Harbor.
(You can see what the Superferry looked like on the open ocean in this 47-minute National Geographic documentary on its technical prowess and the challenges it faced.)
The most convincing argument in favor of a ferry system is that an affordable one would help combat the high cost of living.
By the time the Hawaii Supreme Court ruled in 2009 that the Superferry — which was capable of carrying more than 200 vehicles and more than 800 passengers — couldn’t operate until after it completed an environmental impact study, the company behind the venture was struggling mightily. It declared bankruptcy soon after.
While elements of the Superferry, and then-Gov. Linda Lingle’s workaround to keep it running without getting the mandated impact study, were problematic, it seems clear that many people in the islands want an interisland ferry system. A non-scientific Hawaii News Now/Star-Advertiser poll in 2014 found that 87 percent of people would like to see a ferry system, with just 11 percent saying no. (Two percent had no opinion.)
At this point, getting a new ferry going would require creativity and commitment. Funding is the biggest challenge. Private companies don’t seem to be pining to leap in where Hawaii Superferry lost tens of millions of dollars, and the state isn’t exactly sitting on huge piles of cash.
But discussions have begun anew with people putting forward ideas about public-private partnerships, a slower ferry and creative ways to finance it.
There is something else that probably wouldn’t have as profound of an impact, but it could happen more easily: More affordable air interisland air travel.
It could happen in several ways. Lower oil prices have led to decreasing airline fuel fees around the country. (That said, oil prices might well be recovering from their recent lows.)
Prices also tend to come down, as several local economists noted in interviews, when a new company enters a market where there is little competition. But those same economists question whether Hawaii has a large enough interisland air travel market to sustain another company.
That’s a problem because past competition likely helped to drive Hawaiian Airlines to do something that, if repeated, might benefit the state now. Until about 15 years ago, the company offered discounted travel to locals. These days, it offers deals that allow frequent travelers to lock in lower rates, but that is unlikely to get people who aren’t hardcore travelers to fly more often. And getting more people to move between islands is what might generate more economic activity.
A return to the days of kamaaina discounts would make it easier for people to travel between islands, whether to check on family members or to work. The lower the rates were, the more likely people are to go more often. The more they go, the more they are likely to spend — or the more interisland business they are likely to be a part of.
As it stands, Hawaiian Airlines travel within the islands increased in price by 34 percent between 2004 and 2014 — just less than inflation, according to numbers supplied by the company.
Further competition, whether from another airline or from a ferry system, might add pressure on Hawaiian to limit further price increases going forward. The greatest economic benefit for Hawaii likely involves ticket prices that allow locals to travel between islands less expensively and, as a result, more often. Policymakers, of course, could encourage this.
The islands’ history has long been about overcoming its geographic remoteness, to get necessary resources from the outside world to supplement what was here. “Hawaii now is more connected to the world, its economy more intertwined with its global counterparts than ever before,” said Brewbaker.
It just needs to get more connected to itself.
• Marina Riker contributed to this report.
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