In many respects Alaska still has a frontier economy, little changed from colonial and territorial days. The non-Native Alaska economy has historically been characterized by a series of resource booms. Earliest among these was Russian colonial exploitation of sea otter furs. Extraction of this resource led to limited settlement only in coastal Alaska near regions of sea otter habitat. Alaska's second major resource boom was the series of gold rushes from the 1880s to the 1900s, some of which were associated with those in the Klondike region of the Yukon Territory in Canada. The gold rushes brought a series of settlers to the state, many of whom left Alaska after these rushes ended. By the time of statehood in 1959, the Alaska economy was dominated by government spending, especially connected to the large military complex that had developed after World War II, when the strategic position of Alaska in the North Pacific became apparent. Alaska's economy remains dominated by government, though now the state government is perhaps more important economi cally. The Alaska Permanent Fund, which saves and invests a portion of the state's share of resource revenues, has assets of approximately $25 billion and generates an annual income of between $1 billion and $2.5 billion, depending on investment performance. Revenue from Permanent Fund investments is a major source of state income and has allowed the state to abolish the state income tax. Since the Prudhoe Bay discovery of 1968, petroleum has become the economically most important resource in modern Alaska, continuing the frontier tradition of extractive industries with fluctuating prices and fluctuating demand conditions. Oil began to flow in 1977, but shipments have been marred by an oil spill from the tanker Exxon Valdez in 1989 and concerns about the environmental safety of petroleum development. Alaska's resource booms—fur, gold, military spending, and oil—have produced substantial revenues during periods of extraction but also have the potential to collapse quickly. Alaska's economy is therefore subject to wide swings. More moderating influences on the state's economy include the fishing and tourism industries. Tourism especially is a sector of increasing importance. Manufacturing in Alaska is of minor importance and is limited to some processing of the state's petroleum, timber, and fish resources.
In general, Alaska is plagued by distance from world markets and the associated high transportation costs. Alaska's distance from the rest of the United States has required that much transport take place by air. Ocean shipping is, however, still important, especially for bulk goods such as petroleum. Trade with Asia is increasing (subject to Asian economic conditions) and transport links with Asian countries are well developed. Surface transport is limited to the Alaska Highway and the Stewart-Cassiar Highway, both of which pass through Canada and are of limited commercial use. Anchorage formerly had excellent direct air connections to many world cities, but has largely lost those connections due to the collapse of the Soviet Union and the ability of commercial aircraft to now fly over Russian airspace. Nevertheless, Anchorage still has direct air connections to many cities in the United States, especially those on the West Coast, as well as to Asian countries. Alaska has about 800 airfields, emergency landing strips, and seaplane bases and has the highest rate of private aircraft ownership in the United States. Internal air connections are generally good and are crucial to communities that have no road connections to the remainder of the state. Larger communities, notably Anchorage and Fairbanks, have fine paved road links, but the state capital in Juneau has no road connection to any other city. Alaska also has a passenger ferry system that serves mainly the southern and southeastern parts of the state and has connections to British Columbian ports as well as Seattle. It has a government-owned railroad of about 800 km (500 mi) linking Seward, Anchorage, and Fairbanks. The TransAlaska Pipeline from the North Slope to the port of Valdez in south Central Alaska is essential for the shipment of the state's oil.
Many aspects of Alaska's economy, such as fishing, agriculture, and tourism, are characterized by seasonal employment, a factor that has further added to the economy's frontier characteristics. Today Alaska's economy depends on state government spending, federal military spending, Permanent Fund earnings, the petroleum industry, fishing, and tourism.
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