Editor’s note: I admit that this entry, while not a joke, is slightly off-topic for this blog. It was, however, Alaska day last week and I grew up there. So I figure it’s worth a look and worth reminding people Alaska is more than Sarah Palin.
———
One hundred and forty-four years ago this week, a company of American dignitaries, diplomats and 250 soldiers arrived at Fort Sitka, in the Russian America. At 3:30 PM on October 18, the soldiers were called to “present arms”, a salute was fired, and the Russian flag began to be lowered off of the Governor’s house at Castle Hill. The flag stuck. A soldier was sent up to untangle it. The soldier failed. Another soldier was sent up, and a third. Finally the flag was freed and lowered. Another salute was fired, this time with the Russian soldiers leading the way, and the American flag was hoisted in its place. The Russian captain then said to the American captain, “by authority from his Majesty the Emperor of Russia, I transfer to the United States the Territory of Alaska.”* The Alaska purchase, first agreed to eight months earlier and often referred to as “Seward’s Folly,” was complete.†
Alaska was purchased from Russia for $7,200,000. With Alaska being nearly 600,000 square miles, this worked out to about 1.8 cents an acre. This price was possible because Russia feared losing Russian America - primarily Alaska but including settlements as far south as Hawaii and California. The Russian government was in a tight financial situation, and had recently fought the Crimean War with the British. With the British now colonizing land ever-closer to Russian America in British Columbia, there was a concern in the Russian Government that if they did not sell Russian Americas, the British would ultimately annex them. Thus, they figured, it was better to be paid for the loss, shore up their finances, and, if possible, put a buffer - The United States - between Russia and their recent enemy. Playing it safe, in 1859 the Russians approached both the US and England about purchasing Alaska. The British expressed indifference, and with US in the middle of the Civil war, it was not in any position to undertake such a large purchase. The Russians re-entered negotiations with the US following the Civil War in 1867‡. The Russian Foreign Minister to the United States, Eduard De Stoeckl, and the US Secretary of State, William Seward, sealed the deal in an all night session on March 30, 1867.
Contrary to popular belief, reaction to the purchase was generally positive at the time, and many Americans saw the potential for riches from Alaska . There was a minority, of course, who considered the purchase a waste of money, and believed that the colony was so vast it would take generations to ever sufficiently populate it. Concerns were also expressed about the native population - America was already having difficulties with the native populations of the continental US, and legitimate concerns were expressed about exacerbating the problem. The senate was called into a special session to approve the treaty. Many republicans opposed the purchase, dubbing it “Seward’s Folly,” although their opposition appeared to be more rooted in their hostility to Presiden Johnson than the merits of the treaty. Nonetheless, the senate approved the purchase by a vote of 37-2.§
Less than 20 years later, an American prospector named George Cammack and his native family and friends discovered gold on Bonanza creek in the Yukon territories. News reached the United states by 1887 in the shadow of the bank failures and recessions of the 1880’s. When the first successful prospectors returned to San Francisco and Seattle from the Klondike it set off a massive stampede of prospectors to Alaska. Over 100,000 people set off for Alaska, though only 40,000 ever made it, with many of them starting businesses supplying the prospectors along the way. Alaska’s population, over the course of the gold rush, grew from 40,000 to 240,000 people, and Seattle, Portland and Vancouver experienced significant growth as a result as well. A total of 860,000 pounds of gold were mined in the Klondike - today worth over $22 Billion. Even using the most liberal translation of what $7.2 million in 1867 is worth today, the Klondike Gold Rush, on its own, more than paid for the purchase of Alaska, several times over‖.
And then there are the other massive resources discoveries that have happened in Alaska since: the discovery of gold elsewhere in Alaska - Nome in 1988 (3.6 million ounces, worth over $5 billion today), north of Fairbanks in 1902 (8 million ounces by 1910). Mineral discoveries continue to be made, with For Knox operating near Fairbanks, producing over 10 tons of gold a year, and the Pebble Mine being discovered in the 1980’s, estimated to contain over $300 billion worth of minerals.¶ The Talon Mine, near Livengood, Alaska, is estimated to contain over 20.6 million ounces of gold.**
Alaska also proved to be monumentally abundant in fish, now leading the nation with the value of its commercial catch, abundant in salmon, crab, shrimp, halibut herring and cod.† Lumber also proved to be of great importance.
And then there was oil. Oil was discovered by the Americans in northern Alaska as early as 1919‡‡. In 2009, the US Geological Survey estimated that potentially as much as 22% of the world’s oil and natural gas could be located beneath the Arctic. Prudhoe Bay on Alaska’s North Slope has proven to be the highest yielding oil field in the United States, producing about 400,000 barrels of oil a day, and as much as 2 million a day in the 1970’s. Prudhoe bay originally contained more than 25 billion barrels of oil, more than doubling that of the next largest field in the US.‖‖
Alaska became a state in 1959. Despite concerns over how the state would finance itself, with a low population and, thus, a low tax base, the state has prospered since, thanks to its rich natural resources. Despite giving out cash to every alaskan since 1982, today the state sits on a cash surplus in excess of $40 billion thanks to its oil reserves and wise investing - the fund had a return in excess of 20% in 2011. ¶¶
The management of the state of Alaska before and since statehood is not without controversy. Much of the state - including the two largest tracts of undisturbed land in the United States - remains under federal ownership and management. Differences of opinion on the exploitation of Alaska’s natural resources abound. Commercial exploitation often ran rampant, such as the “Alaska Syndicate,” a monopolistic effort by JP Morgan and Simon Guggenheim to exploit the region’s resources. Many species were overfished and over-hunted. Evironmental damage abounded - open pit mining is common in Alaska. The battle over the ability to drill in the Arctic National Wildlife Refuge rages on.
Nonetheless, the financial return on investment alone is extraordinary. Additionally, Alaska has proven valuable in the national defense, assisting in the lend-lease supply lines to Russia and the defense of America against Japan during World War II and a valuable asset during the Cold War.
The purchase of Alaska is, today, widely regarded as a spectacular move for the United States by its government. No real opposition exists today, nor are there any widely-held beliefs that the purchase was a mistake. Alaska generally avoided most of the problems with relations with the native population that the rest of the country experienced, through the passing of the Alaska Land Claims Settlement Act. Over 148 million acres of land (45% of the state) and nearly a billion dollars cash was repatriated to ownership by the natives in the form of corporations, paying out dividends to all native Alaskans to this day***. In turn, the natives legally abrogated their claims to the land. No serious dissent exists today around the settlement. Not even the Alaskan Independence Party, which stands for the eventual independence of Alaska from the United States disputes the wisdom of the purchase.
There have been some arguments that the purchase of Alaska was of only nominal benefit for the US Government - that the amount returned to the US Treasury was only slightly more than spent, and came at a later date†††. David Barker of the University of Iowa argues that much of the economic activity that took place in Alaska would have taken place anyway, thus the return on investment to the global economy was nominal. These arguments strike me as missing the point, at least in terms of our government doing good for its citizens. Indeed, they call out an opposite finding, in my mind: all of this economy and wealth generation would have happened anyway, and it would have happened to people other than Americans. For just over $7 million, the US in effect claimed a massive amount of economic activity for its people, not its own government coffers. The fish that were caught and sold were sold by Americans, to Americans. The oil revenues were recouped by American citizens and the Alaskan government, now run by Americans. In terms of spending a small amount of money to redirect a large amount of wealth creation to American citizens, the purchase had a staggeringly positive impact.
Read More