Forest Industry Crisis - One Step At A Time
By Peter Ewart
Monday, January 21, 2008 03:45 AM
A person has to watch out in winter when climbing slippery steps. For instance, it is usually not a good idea to take two steps at a time – you could end up falling flat on your face. The same advice could be given to the Chief Forester of BC, who has recently mused that “privatizing” the ownership of forests in the province is “worth thinking about”.
Our forest industry is in the midst of a grave crisis that shows every sign of getting worse. But this crisis has been a long time coming - the conditions have been created over many years. To a greater or lesser extent, successive governments have contributed to it whether these have been Social Credit, NDP or the current office holders the BC Liberals.
It is tempting when a crisis hits to look for quick and easy solutions. But that is where the danger lies. There is a crucial step that comes before putting forward solutions. And that is identifying the problem and its cause. This question must be addressed first, otherwise history will simply repeat itself and we will end up in another dead-end a few years from now.
In the case of the forest industry, there is not just one problem but rather a number of them, and they overlap. The fact is that over the years the big companies and big government have developed forest policies and made economic decisions that have resulted in BC’s forest industry ending up in a blind alley.
Let’s just look at a few of these. For years, the big forest companies were told by practically everyone under the sun that they must diversify. Even their own investment analysts told them this. For example, Mark Connelly of Credit Suisse, put the issue bluntly: “Every time you read a money management thing, it says diversify. And B.C. didn’t.” More than that, it is believed by some in forest industry circles that big companies in the Central Interior and North successfully opposed the development of the value-added wood industry on what seems to be self-serving grounds. As a result, we have a highly skewed and distorted forest economy that is focused mainly on the primary industry sector.
The big forest companies in BC were also told repeatedly that they must diversify their markets and not have their sales so dependent on one country, the U.S. But again, they did not listen. We are seeing the unfortunate results of that decision in the form of massive layoffs and mill closures in our region now that the American housing market has collapsed.
Then there is the pine beetle problem. Yes, the pine beetle is a natural phenomenon. But the current outbreak is at least partly related to human causes, such as not addressing the outbreak in a timely manner, engaging in decades of fire suppression that built up a host of older trees susceptible to the beetle, and the planting of a monoculture of pine in various parts of the regions. As a result, we have the worst natural disaster in recorded North American history and a severe blow to the present and future of the province’s forest industry.
And there are other problems that can be directly linked to decisions made by the big companies and allowed by big government, including a lack of reinvestment in forest industry operations, the extreme monopolization of production, the favouring of the interests of the big companies in forest policy over that of medium and small companies, contractors, and so on.
All of this is why the Chief Forester’s comment about privatization of the forests really sticks in the craw. If the forests are privatized, it is quite likely, given past practice with the awarding of timber licenses, that the big companies will end up getting the best timber and owning the lion’s share of the available productive forest. In other words, they will be richly rewarded for all their bad decisions and for the fact that the industry is now beset with its worst crisis in modern history. The existing monopolization, lack of diversification, and so on, could simply end up being reinforced.
Strange as it may seem but that is the trend today. If you are a big company that makes bad decisions, you will be rewarded, and even get a pat on the back. Look at the current banking and credit crisis in the U.S. After pulling a massive swindle on their own clients and the American people as a whole with the subprime mortgage scandal and the “toxic” securities scam, top level bankers are receiving hundreds of millions of dollars in bonuses and payouts, and financial institutions are being bailed out behind the scene by government to the tune of billions of dollars.
So, in reviewing the forest industry crisis, let’s do one step at a time. Let us first establish what are the problems in the industry and what are the causes. Then we can go to the next step, which is: what are the solutions. We may just find out that privatization is not one of them.
Peter Ewart is a college instructor and writer based in Prince George, British Columbia, Canada. He can be reached at: peter.ewart@shaw.ca
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Posted by: loungingntheloops on January 21 2008 7:52 AM
http://www.jimpattison.com
High time Canfor bought a hotel chain..... and a guitar manufacturing businees ....
;-)