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Wrong Businesses For Island's Economy
David Stanowski
08 August 2008


This article originally appeared in the Galveston County Daily News on 08 August 2008. The text version of the article appears below. 

Wrong Businesses For Island's Economy


Many people who live and work in the City of Galveston are painfully aware of the anemic state of the local economy. They don't need an economic study to convince them that something is wrong, because they struggle to make a living every day! The simplest way to actually measure what they are experiencing is by using the Median Household Income. The latest available data (2005) showed that Galveston's Median Household Income of $30,500 was 28% below that for the State of Texas ($42,139).

The decline of the City began when the Houston Ship Channel opened, in 1915, because the new port, in Houston, began to "lure" traffic away from the Port of Galveston. By 1940, something at the Port had changed so dramatically that a transfer of ownership from its private owners to the City government was believed to be the best course of action.

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It shouldn't be surprising that the decline of the economic engine that had built a wealthy city, lead to the decline of that City, but why had the Port been so important to the success of the local economy, and why haven't souvenir shops, restaurants, bars, beach houses, and condos been able to replace it? The answer lies in how effectively "capital" is utilized in each of these "enterprises".

A business that utilizes significant amounts of capital in the form of tools and machinery to make its employees highly-productive is one that can pay high wages. Those that need highly-skilled workers pay above average salaries, too. However, businesses that do not require major investments in “tools” for their employees, or people with above-average skills often pay below-average wages.


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A port is an enterprise where large amounts of capital are invested in the workforce, but souvenir shops do not do so. That is why many local businesses can not match the Port in wages. In addition, the major focus of local capital investment since 1980, residential real estate development, does not even create any permanent jobs.

This period has seen a decline in population, a decline in the number of jobs, a decline in retail sales per capita, a decline in cargo handled by the Port, and stagnant growth in Median Household Income. This should be sufficient proof that residential real estate development does not and cannot raise incomes, or boost the economy.


Unfortunately, our city-owned port has been unable to raise sufficient capital to keep updating and expanding, which means that some form of privatization needs to be explored that would allow the Port to start raising the capital it needs to be a major player in the 21st century.

When the Galveston economy is examined in terms of available capital, and the allocation of that capital, the reason for the below average Median Household Income should be fairly obvious. The City must find new ways to increase our human capital (skills of the residents), to raise new financial capital, and to allocate that capital into enterprises that will use it to raise incomes. 


Also see The Galveston Economy Diagnosis and Cure


For more information on the Galveston Economy: CLICK HERE

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