There are three sectors of an economy: primary, which deals with extraction of raw materials; secondary, which is the manufacturing of raw materials into the finished product; and the tertiary sector that deals with intangible goods and services.
Since we do not mine raw materials, nor do we manufacture raw materials into products to export, Guam’s economy is largely dependent on the tertiary sector, which includes retail, tourism, banking, entertainment, and IT services. These are the factors that drive Guam’s economy.
Gov. Eddie Calvo’s change of heart regarding support of the forward movement surprised me because a tertiary-sector dependent economy is all Guam has, and the forward movement promised infusion into the civilian economy. I voiced my observation to my husband Steff, who suggested that I call a friend, Joe Bradley, to better understand what grows Guam’s economy and see if his explanation could help make sense of the governor’s stance.
Joe – who is the senior vice president/chief economist and business continuity officer for the Bank of Guam – said there are two ways to define Guam’s economy. “I would say that in the last 40 years, it’s been tourism, since the end of the Vietnam War.
“We went from a fairly high concentration of military personnel here – down to about 2,000 for a while – and it’s back up now. A lot of the spending by the military takes place on base, outside of the civilian community.
“Now, there is also a lot of fudging of the numbers that they report of their expenditures on Guam because a lot of those expenditures are for desks, waste baskets, window glass, and everything else that they buy someplace else. It may be an expenditure that they buy on behalf of their operations here on Guam, but certainly not contributing to Guam’s economy.”
Another way to define Guam’s economy, Bradley said, is to ask, “'Do you include what’s behind the fence?' This is kind of a grey area.” I asked what he meant and he replied, “When I talk about Guam’s economy, I talk about the civilian economy. These would include the standard of living and things that do not include the economic activities behind the fence.”
We discussed the instance of civilians who work on the bases, and Bradley said, “Now, there are civilians who work on base, and those civilians live in the civilian community and they bring money outside the gates. But the monies that they bring outside the gates is a fraction of the expenditures the military makes on behalf of their operations in Guam.”
Therefore, there are two ways of defining Guam’s economy: the civilian economy or the combined civilian and military economy.
“For example, if they refurbish the admiral’s office, that makes little difference to the civilian community. They would hire local construction workers, but they wouldn’t purchase all the materials or all the furniture here on Guam. But refurbishing the governor’s office would mean that the contractors are hired here, the materials are purchased here and the office equipment are too. That benefits Guam’s economy,” Bradley explained.
That explanation raised the issue of another strain on the local economy as the military prepares for the forward movement. The military's local contractors are hiring away local construction workers from local contractors by offering increased wages – and that is not helping the civilian economy.
“The escalated wages offered by the military has attracted local construction workers to military contractors, and that has driven the cost of building a house in the civilian economy up by about 6 percent in the last two months," Bradley said. "The smaller local contractors must pay the escalated wages to keep their employees from going to the military contractors."
After Bradley explained that, I understood better why denying Guam approval of H-2B visas isn’t helping the local economy either, because local construction companies cannot fill the void created by local construction workers who left for more money offered by military contractors.
Guam needs the approval of the H-2B visa applications because project delays have cost millions of dollars, a loss that local contractors or Guam’s economy cannot afford. It also creates uncertainty about their planned projects and their existence.
If the military plans and undertakings for the forward movement enhanced Guam’s civilian economy – which is what Gov. Calvo, the Chamber of Commerce, the Contractors Association and the business community expected – that would be consistent with what the military promised in the spirit of being a good neighbor.
After speaking to Joe Bradley, it is clear why Calvo folded his arms firmly across his chest and turned his back on the Military Forward Movement, his posture demonstrating: not at the expense of undermining Guam’s civilian economy.