FREE THE FORESTS: PRIVATIZE THEM! By Paul Geddes The forests are often credited with being the major engine of economic activity in British Columbia. Forest lands cover 45% of the province and a good proportion of BC's employment comes from logging, manufacturing wood products and otherwise servicing this sector (transportation, trade and other business services). Lumber, pulp & paper comprise 50% of BC's foreign exports. As in many other jurisdictions, in BC many hard working entrepreneurs and seemingly independent and vibrant business organizations are dependent on the whims of government policy for their prosperity. With one big exception. In most other jurisdictions, government doesn't own the resource that is the basis for the private economy. Currently, title to 95% of the forest lands of BC are held by the provincial government. The numbers are similar in other Canadian provinces. BC may have the more productive forest lands but these only account for about a fifth of Canada's forests. Across Canada, 94% of forests are owned by the government. Among the major wood producing nations only the USSR topped us in percentage of forest lands owned by government (resent events suggest this will like change soon). Even pre-Wall-destruction Eastern Europe had a higher percentage of private ownership of forests. And in Sweden, the much envied paragon of socialist virtue, 74% of forest lands are privately owned. The consequences of this large share of government ownership is often alluded to in the myriad of government commissions and reports on the forestry sector in BC. The Pearse Royal Commission (1976), Economic Council of Canada Report (1984) and the BC Forest Resources Commission (1991) all alluded to the vast dissipation of valuable BC forest rents. Because of our form of ownership, potentially efficient changes (that could add net benefits to all) have little chance of success. Many people have different demands on the forest resource but with public ownership, the only way to get your use is through politics. Rather than competing with other uses by offering bids (best estimate of the discounted future net benefits), in BC too many forest use decisions are made on a basis of who can mobilize the most political pressure. As landlord, the BC government chooses to earn its revenue mostly through "stumpage fees". Private companies pay stumpage for the volume of trees they harvest. Setting these fees at the right level is difficult and the government also has to decide who is allowed to harvest which trees at that price. Most of the forest lands are placed under the control of private organizations with one of two types of tenure or grant of exclusive right to harvest. The "Forest Licence" created by 1979 Forest Act covers about two-thirds of BC's forests. Private organizations are given to guarantee for a certain volume of wood in return for a promise to meet minimum standard of reforestation and other duties. The cost of such operations are credited against the stumpage payable. Another fourth of BC forests are covered by the often controversial "Tree Farm Licence (TFL)". Under a TFL, the private organization is given more freedom to manage their area. They are entitled to harvest as much timber so as to maintain a sustained yield of timber. There is much debate among economists and other forest watchers about whether either type of tenure gives tenants the incentive to manage the resource to maximize the long term interests of its owner. Among the problems debated: How do participants know if the stumpage rates are set at the correct level? Agricultural land is also variable productivity. Owners of farmland capture the rent from richer land by having extra crops to sell. In the forests, the private tenant (not the landlord) captures the extra rent from luckily having more easily harvested trees. What if timber production is not the best use of land? What incentives do forest tenants have to save forests for other uses if hunters and other recreational users are willing to pay enough not to have an area harvested? Are adequate resources being devoted to reforestation? Tenants do not have exclusive harvest rights in perpetuity. Licences can't be sold without government interference and some licences have been rescinded and altered. It is not surprising that many forest companies have been accused of only supplying the minimum reforestry required to maintain their tenancy. Private owners would likely invest differently. The solution, as every libertarian knows, is to turn forests as quickly as possible to private ownership. Ownership is the human institution devised to allow people with different ideas about the uses of resources to have a peaceful manner to resolve conflicts in the marketplace. The self-interest of owners will tend to make sure that resources aren't wasted, but used where they please the most consumers. Private property rights also encourage dynamism by allowing those who come up with new ideas to bid resources from less valuable uses. No one claims that a world of more constant and stable property rights would have no problems, but compared to our present world, many efficiency gains (in the broadest sense of this term) are possible. So how can we get private ownership of BC's forest resources? For private property rights to work, they have to be seen as legitimate. Otherwise so much resources will have to be devoted to exercising you control over what you think is your in law, that it won't be worthwhile. A good plan must be politically acceptable. We should be able to adapt variations of the programs used by the current governments of Eastern Europe as the face a similar problem in trying to liberate their economies from government's deadly control. After settling native land claims, some of the best forest lands could be sold at auction (the capitalized value to of future stumpage rates could be substantial enough to retire much of the government debt). Other forest lands could be divided into smaller units and given to the public (eg: conservation groups, etc - RKC). One interesting option would be to have citizens (foresters, hunters, hikers or wild animal lovers) compete for the available forests with government-given vouchers. Each group should be able to outbid others for at least some of the forest lands. If most citizens make some gain from taking the forests out of government control, future property rights should retain legitimacy and make defence of property cheap enough for all of us to make great gains from a much vitalized forest resource. Further Readings: David Haley, "The Forest Tenure System as a Constraint of Efficient Timber Management: Problems and Solutions" Canadian Public Policy 1985. David Friedman, The Machinery of Freedom: A Guide to a Radical Capitalism 2nd ed., 1989.