Stateside academics who specialize in Arctic studies were also roundly dismissive. “The notion of purchasing Greenland from Denmark is based on an outdated, colonialist view of the autonomous, Inuit-majority territory,” Victoria Herrmann, president and managing director of the Arctic Institute think tank, said via email. “If the United States is truly interested in increasing economic cooperation with Greenland, the administration should do some summer reading on its history and bring its requests to Nuuk — not Copenhagen.”
For starters, the president probably has some level of understanding of the difficulty of putting a price tag on “not just the money in the banks, but everything — from the resources under our feet, through our homes and possessions, and even the contents of our brains” of a country-size landmass. Because that’s exactly what he attempted to do as part of a 2011 Discovery Channel program called “Curiosity: What’s America Worth?”
Calculations such as this are highly subjective and inevitably end up with cartoonishly large error bars around them. So when The Washington Post asked the experts at the Arctic Institute to take a crack, Marc Jacobson, a senior fellow there, put it bluntly: “I’m not aware of any who would be capable” of doing that sort of calculation.
One way around this would be to borrow a technique from real estate and look at sales comparisons, meaning similar properties that have sold recently. A good comp for Greenland would be the 1867 purchase of Alaska from Russia. Alaska’s land area (586,412 square miles) is in the same ballpark as Greenland’s (836,000). Its climate is similar, its population density (a good proxy for total development) is within an order or two of magnitude, and, like Greenland, it’s rich in oil reserves.
The United States purchased Alaska for $7.2 million, which is about $130 million in today’s dollars. Since Greenland is about 1.5 times the size of Alaska, we’ll boost that price by an additional 50 percent, which brings us to $195 million, which we’ll round up to $200 million for a nice even number.
That seems awful low — there are homes that sell for more than that nowadays — so we’ll borrow another real estate technique: What have previous purchasers paid for the property?
Greenland hasn’t been on the market recently, but that doesn’t mean countries haven’t tried: In 1946, for instance, the United States considered a proposal to buy Greenland from Denmark for $100 million in gold. That would be about $1.4 billion in today’s dollars.
That still seems awfully low. It’s less than a year of the country’s gross domestic product, which stood at $2.7 billion in 2016.
Yet another method would be to treat Greenland like a business and calculate its value based on a price-to-earnings ratio. For earnings we’d use its GDP, but with one caveat: Since subsidies from the Danish government amount to about one-quarter of Greenland’s GDP, we’ll assume annual earnings of $2 billion. The average price-to-earnings ratio among Standard & Poor’s 500 companies is about 21.3. So if we were to price Greenland like an average S&P 500 company and use GDP as a proxy for earnings, we would end up with a valuation of about $42.6 billion.
However, Greenland is not an average S&P 500 company. Price-to-earnings ratios are a reflection of how much growth investors expect from a company in the future. For instance, at one point in 2016, Amazon had a price-to-earnings ratio of 847, well above any other company in the index. Despite its relatively low level of earnings per share, the market expected great things from it. (Amazon founder Jeff Bezos owns The Post.)
You could argue that Greenland’s future is similarly rosy, at least from an economic standpoint. The warming planet is melting away much of the island’s famous ice sheets, opening up massive reserves of river sand, which happens to be in high demand for making concrete around the world.
The country’s oil and mineral reserves are largely unexplored and untapped. Catastrophic global warming may render much of the planet uninhabitable, shifting world populations northward and southward to places such as Greenland and Antarctica. To a certain extent, a big bet on Greenland is a big bet that humans are not going to get climate change under control. Given the utter failure of the world, and particularly the United States, to take climate change seriously, that may be a smart bet to make.
In that case, the Greenland of 2019 may be very much like the Amazon of 2016, with limitless potential ahead, justifying a price-to-earnings ratio of 847. That would give the island a price tag of $1.7 trillion, a steep price for sure, but on the other hand just a little bit more than the cost of the Trump administration’s 2017 tax cuts.
To recap, the estimated range is $200 million to $1.7 trillion, which as suspected comes with cartoonishly large error bars. And it’s a moot discussion anyway, as Greenland has made clear there’s no deal to be made here.