Tyler Cowen makes an interesting claim:
7. Consider a deal that does make sense: the U.S. buying Greenland from the Greenlanders and also Denmark. Can we really in essence pay the 56,000 or so residents to give up their country and territory?
I agree that the Greenlanders would be unlikely to sell, but I’m skeptical of the claim that the purchase would benefit the US.
American schoolchildren are taught that our 1867 purchase of Alaska for $7.2 million dollars was a bargain, but I’ve never seen any convincing evidence to support that claim. Yes, Alaska produces lots of oil, but what about all of the US government money that goes to subside Alaska? What’s the net benefit?
In any case, Greenlanders are aware of their large oil reserves and would be unlikely to sell for $7 million, or even $7 billion. And as the world transitions to a low carbon future, the value of the oil (including the negative externalities) may be less than many people assume.
There are also diseconomies of scale in governance, which suggests that we might govern Greenland less effectively than did Denmark.
When we purchased southern Arizona from Mexico in 1854 (for $10 million), we should have pressed harder for Baja California. Even a small sliver of northern Baja (say the top 10%) would be far more valuable than Alaska. Heck, my own Orange County (only 800 square miles) is far more valuable than all of Alaska, a region roughly 800 times bigger. Greenland would be even less valuable than Alaska.
Greenland might have a minor military value, but I doubt it. Between the US, Canada, Britain, Norway, and Iceland, NATO already controls the North Atlantic. Given the pathetic performance of Russia’s military in Ukraine, I doubt they’ll be setting their eyes on the North Atlantic anytime soon.
There’s a lot of recent talk about state capacity. It’s pretty obvious that America’s state capacity has been in sharp decline for decades. Now is not the time to take on additional government responsibilities in Greenland (or outer space), rather we need to fix our dysfunctional government in its current areas of responsibility. For instance, just south of Orange County is the massive Camp Pendleton Marine Corps base. That land could be used to build a wonderful new city with a population larger than Alaska, with a glorious climate and a much smaller carbon footprint than the sort of places in Texas, Arizona and Florida where the extra population growth is currently expected to occur. These are the governance inefficiencies that we need to focus on addressing.
Don’t buy Greenland—sell Camp Pendleton.
Think big in terms of utility, not geography.
READER COMMENTS
Matthew W Anelli
May 17 2022 at 5:25am
It’s hard to measure it in terms dollar value, but we got lucky in Alaska for a reading Seward couldn’t have forseen.
Imagine if the Soviet Union had owned a bug piece of North America.
Matthias
May 22 2022 at 3:55am
The Russians sold Alaska to the US, because they were afraid that otherwise the Brits would take it from them.
So in the counterfactual of no sale to the US, the history would have likely seen Britain and then Canada in charge of Alaska.
JoeF
May 17 2022 at 7:27am
Carbon is a well-mixed gas. The difference (say 10 metric tons, probably much less) between the annual carbon emissions of a medium-sized city in SoCal vs a medium city in Texas probably represent less than .00000000027 of annual total worldwide carbon emissions (roughly 36 billion tons). Think big.
Scott Sumner
May 17 2022 at 10:18am
Yes. Certainly the better climate in SoCal is the main advantage, not the smaller carbon footprint. I’m just saying it’s also good for the environment in net terms. So there’s really no downside and a pretty big upside in utility terms from developing Camp Pendleton.
MikeW
May 18 2022 at 8:16pm
I don’t know. The new city would still be in California, with all the excessive state regulations. And I expect it would be just as expensive to live there as all the other coastal California cities.
Scott Sumner
May 19 2022 at 12:08pm
But the primary bad state regulation in California is restrictions on housing. In other respects, California is a great place to live, as evidenced by its absurdly high housing prices.
Mark Brophy
May 19 2022 at 6:10pm
Maybe a new state or territory could be created so that Camp Pendleton isn’t governed by California.
Matthias
May 22 2022 at 3:56am
Perhaps a charter city under Singaporean administration.
TMC
May 17 2022 at 10:23am
“Sell Camp Pendleton” is a good starting point. In the same vein, the feds own most of the land in Alaska. It should subsidize it, aka ‘pay for maintaining what it owns’, or sell it off.
Aaron
May 17 2022 at 1:45pm
Scott,
You talk about the federal money that goes to subsidize Alaska, then you provide WalletHub’s ranking of states “Most Federally Dependent States.” However, I am not sure that WalletHub’s data necessarily tells us which states are being subsidized by the federal government.
Why? Well, when I look at the link you provide, WalletHub defines their methodology as follows:
So, 50% of the points given to a state are determined by the proportion of state revenue that comes from the federal government. With this criteria, and assuming a fixed per-capita federal funding amount, states with smaller state governments will have a larger portion of their revenue coming from the federal government and will be scored with a high “federal dependency” score. However, I don’t think that means these lower tax / fewer service states are necessarily more dependent on, or being subsidized by, the federal government.
Scott Sumner
May 17 2022 at 2:03pm
I agree. That’s why I said I’ve never seen any convincing evidence. Where is the evidence that we benefited from buying Alaska?
In other words, I’m agnostic on the issue.
Floccina
May 18 2022 at 3:00pm
What would be the benefits form buying Greenland? What can’t USA companies and workers do in Greenland/buy from Greenland now that we would if it were part of the USA?
Scott Sumner
May 18 2022 at 7:53pm
Exactly.
Monte
May 19 2022 at 11:32am
The ROI for such a purchase would be poor indeed. The U.S. should consider selling instead of buying more land. Why not sell from some of our least fiscally viable states (Mississippi, Kentucky, Louisiana) to China, which is desperately in need of arable land for contract farming to buttress their agriculture industry and feed its citizens? China already owns more than $1.4 billion in U.S. farmland and could use considerably more. At the risk of incurring the wrath of some of my fellow Americans, from a practical standpoint, it’s like being compensated for sacrificing nonessential body parts.
Matthias
May 22 2022 at 3:58am
Are you talking about selling land in these states, or about selling sovereignity over these states?
Chinese companies can already do the former. And grow all the crops they want there.
Monte
May 23 2022 at 8:08pm
I know they already do the former. That’s why I mentioned that China owns more than $1.4 billion in U.S. farmland. It seems to me this would be more beneficial transaction for the U.S. than the prospect of purchasing Greenland.
I’m not sure that selling land to China in addition to granting them unconditional sovereign rights to that land would be such a good idea. I’m not even sure that’s constitutionally permissable.
Phil H
May 19 2022 at 1:03pm
“NATO already controls the North Atlantic…It’s pretty obvious that America’s state capacity has been in sharp decline for decades.”
These two statements are slightly contradictory.
More sharply, it’s not obvious that America’s state capacity has been in any kind of decline, let alone sharp. The USA’s ability to deter potential military rivals has remained as strong as ever: the USSR self-combusted, and China has not (yet) raised any kind of meaningful military challenge. The US government’s ability to ride out crises has remained strong: it emerged from the 2008 crisis better than any other country. The US state’s ability to provide for its people is awesome: in the midst of the most publicized racial conflicts since the end of legislated racism, American institutions never faltered, not even a tiny bit.
I think you are radically misreading what state capacity is, and how much the USA has.
Scott Sumner
May 19 2022 at 5:51pm
I agree that our military is very strong. I was referring to things like our ability to build infrastructure and housing, run schools and public health programs, etc.
Warren Platts
May 21 2022 at 1:50pm
Re: Alaska — it should be self-evident that we benefit from “Seward’s Folly”, but anyways:
(1) Crude oil production there accounts for 4% of total US production. That may not seem like a lot until you consider price elasticity of oil is 0.1. Moreover, the Naval Petroleum Reserve and ANWR have yet to be tapped.
(2) Fisheries: By far the best fisheries in the USA are in the Alaskan EEZ.
(3) Wildlife: There’s close to a million caribou in Alaska plus innumerable other wildlife there. That may not seem like a big deal until you consider that 96% of all mammalian biomass on Planet Earth consist of either humans or their commensals. Thus the wild biomass in Alaska is a unique resource.
(4) Gold: USGS estimates that around 1 to 2 percent of all the gold on Planet Earth has come from Alaska. No doubt the gold extracted during the ’97 Klondike Rush alone paid for Seward’s folly multiple times over.
(5) “Dependence”: Sorry, but these sorts of economic beauty contests need to be taken with a grain of salt. They arrive at their figure by taking federal expenditures and dividing by IRS receipts. Since there is a disproportionate number of federal workers working in Alaska, that is not surprising. There’s big US Army & Air Force bases, early warning radars that have to be manned, Coast Guard installations, there’s USFWS, NPS, USFS, USGS, NMFS, NOAA, etc. So it’s not like Alaska is populated by nothing but a bunch of welfare recipients — the federal workers there are earning their salaries.
(If you want to talk about “dependence”, look at the District of Columbia, where the “GDP” per capita is like $180,000 per year. Who knew that sausage manufacturing was so lucrative!)
(6) Geopolitics: This is probably the most important. If we didn’t own Alaska, then the brutal dictator Putin would be running the place. There would likely be massive nuclear missile & bomber bases there aimed at us living down here in the lower 48.
Re: Greenland: It would be worth it just for the EEZs, but again, geopolitics is the main consideration. What we don’t want is the CCP Chinese building airbases there. So far the Danish have proved to be reliable allies, so there is no need to own the place. If it comes down to it, however, we can always send in the Marines to clear out any unwanted enemy bases.
Re: Selling Camp Pendleton: Sorry, but that is the silliest proposal of all! The place is the main training base for the US Marines on the west coast. Plus it’s about the only undeveloped stretch of land between San Diego & Los Angeles, and therefore essential wildlife habitat, including for several endangered species. And anyways, if you turn Camp Pendleton into another Los Angeles, WHERE IS THE WATER GOING TO COME FROM? There’s not enough water to go around as it is. The place is overpopulated — as evidenced by the insanely high property values. To put it another way, the problem is not a shortage of housing supply, it’s too much demand.
Matthias
May 22 2022 at 4:00am
Russia sold Alaska because they were afraid of losing it to the Brits.
If Alaska had thus ended up a part of Canada, they could extract the oil just as well as American companies can.
Warren Platts
May 22 2022 at 8:08am
Probably better! I’ve worked on a lot of oil rigs. The Canadian ones were the best in terms of safety and automation, for sure. 🙂
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