Buying Greenland

Back in 2009, I made the modest proposal that Iceland become an unincorporated territory of the United States. It wasn’t serious. 

But it looks like the Trump administration is serious about buying Greenland. Or, well, “serious,” because it is the Trump administration. To start with, they want to negotiate with the government of Denmark, when they should be negotiating with the government of Greenland. Constitutionally, Denmark does not have the authority to transfer the sovereignty of Greenland to anyone but the duly-elected government of Greenland.

But the government of Greenland, well, it can do whatever it wants.

So what the hell! I have seen some numbers out there and I think that I can do better. What price would make sense and make it hard for the Greenlanders to refuse?

The administration could offer every resident of Greenland a cool one million dollars, or $57 billion. It could also promise to take over the $535 million Danish annual transfer payment. In fact, the U.S. could do Denmark one better: in 2009, Denmark froze the transfer in nominal terms. (See Kevin McGwin, Denmark’s annual state of the kingdom report paints a rotten picture of Greenland’s economy, The Arctic Journal, April 20, 2017.) For some reason the number $750 million keeps getting thrown around, so let’s say we up our subsidy offer.

So would that be overpaying? Well, it turns out that in 2014 the Danes estimated that the mineral and oil rights under Greenland would bring in a cool $69.8 billion over the next 40 years. At the current U.S. 30-year-bond rate of 2.07%, that would have a net present value of about $47.9 billion. Subtract from that the $20.3 billion 40-year NPV of the subsidy, and you have a get that Greenland’s mineral rights are worth about $27.6 billion, or $485,000 per Greenlander. 

Is there a strategic value to Greenland? Yes, but we already have that! A 1951 Treaty gives the U.S. carte blanche to do pretty much whatever we think we need to do, subject to a potential Danish veto over the establishment of new military facilities. Is getting rid of that veto worth $27.6 billion? 

No, but come on. We all know that Trump wants to buy Greenland because it would be cool and awesome. That would be worth $27.6 billion. Or he could just offer each Greenlander $485,000 and see if they bite. 

Any Greenlanders out there? Could you get a majority to vote to become an unincorporated territory of the United States for somewhere between a half-mil and a mil for every woman, man, and child on the island?

Of course, getting concurrent majorities in the House and Senate or getting two-thirds of the Senate to approve the resulting agreement would be ... difficult. Still, somehow Jimmy Carter managed to get the supremely unpopular Panama Canal Treaty passed.

That said, Donald Trump has not exactly proven himself to be a master of the Senate. 

And that, of course, is why this boneheaded idea is not going to go anywhere. I suspect that President Trump could bribe the Greenlanders to switch metropoles. I do not for a minute believe that he can bribe Moscow Mitch (let alone Nancy Pelosi) to get them to agree to drop $27.6 billion (let alone $57 billion) on this vanity project.

I have to admit, though, that the sheer craziness of the fact that I am writing this as an analysis of a real proposal by the POTUS has me quite amused. And scared, but mostly, for the moment, amused.

Comments

[Will Baird]

Alright. If you are going to spend that much money on a territory, why would you want it to be an unincorporated territory? I'd think that would be bad for a couple reasons:

1. they could in some scenarios find a way to bolt since unincorporated allows for the US and the territory to separate. You just spent all that money and ... it's gone.

2. While I doubt there's any scenario where the Greenland would have a population above the statehood threshold any time soon, being in the unincorporated status would leave them potentially in the Puerto Rican status hell.

[Andrei Gomberg]

Scared we all should be. Forget about the Greenland idea - ok, he has been asleep for the last 70 years and has been unaware of that minor thing called decolonisation - could happen to anyone, really. But his response to the Danish/Greenlandic reaction is what really scares me. He could have easily gotten out of it saying that this was just a studpid joke blown out of proportion by the fake media trying to sabotage his trip.

He chose to do the opposite. This tells us that he is no longer listening to anyone even on matters of protocol. At this point, it seems clear that if he decides to bomb Copenhagen - or, for that matter, Kansas City - he cannot really be stopped, at least not by persuasion.

[Noel Maurer]

Will: in this case, there would be two very good reasons to keep Greenland unincorporated.

First is that you could selectively apply the constitution. Given oddities in Greenlandic land laws (among other things) this is the only way you could possibly get Greenlandic voters to sign on board to U.S. sovereignty, even with $500,000 per person cash on the barrel.

Second is that you keep unilateral secession on board as an option. It is possible that Congress could vote to give an incorporated territory the right to secede, but the Sherman v. Johnston precedent makes that an unlikely move. If the worry is that the Territory of Greenland would declare independence, well, there are ways to structure a contingent loan contract that would insure that the U.S. Treasury would get its money back.

Of course, as Andrei points out, this idea is not serious. (Although a case could be made that it should be.) And the price I mentioned is too high, as it assumes that the returns from those mineral deposits is risk free ...

Andrei: Agreed.

His approach to Greenland is in keeping with his approach to trade.

Consider: If you want to win a trade war with China, then you make a consistent list of demands and bring allies on board. He has done neither. If you want to protect American industry and encourage onshoring, then you make sure the tariffs also hit countries like Vietnam and give assurances to investors that they are here to stay. He has done neither.

The problem isn't so much that the goals are harebrained, it's that they are being carried out with extreme incompetence.

In this, I am reminded no one so much as Hugo Chávez.

[J.H.]

But Noel, re his approach on trade....

what is his goal then? I thought you had done a walk through with some students and they came up with the conclusion that he wants to make the trade war permanent. In so doing, wouldn't he be making tariffs permanent?

Re Chavez, now I have thoughts of what might have been had there been a summit of Trump, Chavez and Kim Jong-Un...they might have all (scarily) gotten along to be honest....or despised each other..

[Noel Maurer]

I'm pretty sure that Trump wants the tariffs to be permanent.

I'm also pretty sure that he's winging it. He keeps holding back making them permanent. Why? Maybe he likes making threats? Or maybe he's indecisive? It seems to me that he wants permanently higher trade barriers but hasn't worked out a political or administrative strategy for getting there. He certainly hasn't figured out how to raise tariffs at the minimum possible domestic cost.

[Will Baird]

Noel:

The problem is once Greenland is an incorporated territory, Congress can do whatever Congress wants with it. Whatever might have been agreed to at the time of the annexation, you can bet it will fall when the pressure gets high enough or the price is right. Do you really believe Congress will resist the enormous pressure from various interests to allow private ownership of property? Or immigration would be restricted? All it takes is 57,000 continental Americans to move and...well...

The bond is interesting, but, well, getting the money back from 57k people seems pretty much impossible.

[Will Baird]

unincorporated...gah.

[Noel Maurer]

Well, the whole idea is daft!

I'm reluctant to discuss the idea seriously. (I just got back from hiking and the sun is shining!)

But I have a couple minutes, so ...

(1) It's hard to say what Congress could or could not do with an unincorporated territory that came in under a special arrangement. But that's true of an incorporated territory as well.

(2) I can't say that understand your specific scenario all that well --- 57,000 people aren't going to move to Greenland anytime soon. Congress, historically, has respected special arrangements in Samoa, the CNMI, and the Panama Canal Zone, so I don't see why this would be different.

(3) It wouldn't be at all hard to collect the debt if the contract is structured properly. The income stream that would pay back the Americans would come from Greenlandic mineral exports. Plus, independent Greenland would need new financing, and that would depend on paying off old debts. So if the U.S. drew a hard line with a new Greenlandic government, then that government would pay ... unless if couldn't, but that's a whole nother kettle of fish. After all, a Greenland facing that sort of headwind is a Greenland unlikely to secede. (The place isn't planning to quit Denmark anytime soon.) Plus, $56 billion is chump change, so who cares?

I feel silly even discussing this, but I do have to admit that it is a fun sort of silly.

[Noel Maurer]

To be fair, those mineral exports really had better succeed, because Greenland's current GDP is only ~$2.7 billion and there ain't no way on God's green earth that they could pay anything close to that back without that projected oil and mining boom ...

Flip side, of course, is that risk means that Greenland's future income stream from mineral rights and taxes

[J.H.]

Will, I don't think it matters if Greenland was an unincorporated or incorporated territory, because once it was a territory at all, Congress could do whatever it wanted with it.

And to the best of my knowledge immigration of American nationals can't be restricted for unincorporated or incorporated territories or for states (even for American Samoa, American nationals can move there...American Samoa's immigration unique immigration laws apply to non-Americans). The only example I could think of would maybe be the Commonwealth of the Philippines and even then I'm not sure if Americans were restricted from migrating there.

[Noel Maurer]

Americans were not restricted from moving to the P.I., even during the Commonwealth period. There were, however, very strict restrictions on what Americans could invest in on the islands.

I don't agree that status doesn't matter, however. Consider the Covenant of the Northern Marianas Islands. It stipulates autonomy and (on paper) binds future Congresses from making certain legislative changes that would affect the CMNI:

https://www.govinfo.gov/content/pkg/USCODE-2013-title48/pdf/USCODE-2013-title48-chap17-subchapI-sec1801.pdf

A fuller discussion can be found on pages 126-29 of the November 15, 2006, Senate hearing on "The Report by the President's Task Force on Puerto Rico's Status."

So far, Congress hasn't pushed the issue, so we don't know how the courts would rule if it tried to unilaterally change the CNMI's status. Should Greenland choose to join the United States, I imagine that there would always be some uncertainty.

But saying there is uncertainty is a different thing from saying that it wouldn't matter if Greenland were incorporated or unincorporated! If incorporated, Greenland is entirely subject to Congress's whims, subject only to the individual rights Greenlanders get under the U.S. Constitution. If unincorporated, Greenland is not subject to Congress's whims and Greenlanders, as U.S. citizens residing outside the incorporated U.S., get most of the protections of the constitution, plus whatever else is agreed to.

A future Congress could push the issue, but you'd have to ask why they would.

Calling Doug Muir!

[Douglas Muir]

"we don't know how the courts would rule if it tried to unilaterally change the CNMI's status."

It's impossible to predict the behavior of future courts, but so far they have upheld all provisions of the CNMI's Covenant. That includes some bits that have been challenged for violating the US Constitution, like restrictions on land ownership, or /very/ disproportionate representation for the islands of Tinian and Rota.

Those restrictions were upheld under the Insular Cases, btw -- and despite a lot of argument, plus the fact that they're ummm kinda racist? like, actually really racist? the Insular Cases have been repeatedly upheld by the Supreme Court.

So, yeah -- unincorporated territory. The question would then become, how directly does Congress administer it, and how much autonomy is granted? There's a lot of room for creativity there. Normally you'd say the current level of autonomy (high) would set a lower bound.

Doug M.