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Chapter 4 Dealing with conflicting interests
Facing
the problem
Taking
an economic view
The world's forests are at the centre of a tangle of conflicting interests. Accepting the fact that most of these interests are legitimate is an essential first step if progress is to be made in reducing today's rates of forest loss.
It is simplistic and counterproductive to portray the complex issue of forest depletion as a struggle between the good forces of conservation and the evil of shortsighted greed and recklessness. People and governments in the developing world should not feel that they have to apologize for trying to find enough land to feed themselves and their families, for earning a living using the forests as humanity has always done or for promoting the growth of their national economics. The basic reason for the accelerating pace of forest depletion is the ever-increasing pressure on the world's finite resources.
Farmers must have land if they are to grow the food they need to survive. Many lack the financial resources or the knowledge required to farm their land on a sustainable basis; when its fertility declines they have no alternative but to move elsewhere. Others, displaced from their homes by famine, drought, war or inequitable distribution of land, move into new areas looking for land they can farm. Young people reaching adulthood on farms that are too small to feed them, let alone to enable them to marry and raise their own families, must go and find land elsewhere.
In much of the present developing world the forests and woodlands are the only source of new agricultural land. Many of those seeking land they can farm are on the margins of society; they are usually desperate for the means to live. They are thus not easily deterred by laws, nor are they influenced by exhortations about the need to preserve the forests. Their clearing the forests is not malicious or frivolous; they do it because it is their only way of surviving and the forest as it is has no value to them.
Loggers, whether they act as individuals, as small local companies or as large national or multinational corporations, see the extraction of forest timber as a legitimate way to earn a living. Harvesting forests for timber is as old as human society. The products are in demand in the local, national and international markets. In producing and selling goods and services that others require, those involved in the timber trade are no different from the rest of the human race. Condemned for being involved in cutting trees, loggers and timber traders ask why they are at the centre of public criticism, rather than the cultivators of rice, wheat, maize, beef and other foods who are mainly responsible for deforestation.
Many governments of developing countries deeply resent being cast in the role of wantonly destructive environmental villains. They have the unenviable task of trying to meet their people's needs in a largely indifferent world. They are faced with ever-worsening terms of trade as the prices of their export products decline and the costs of their imports increase. The burdens of debt that the developing countries have accumulated, often at the urging of the industrialized world, have suddenly been multiplied by factors beyond their control as world interest rates have soared during the past 15 years. Timber exports provide these countries with some of the foreign exchange they need to stave off today's crisis. Even when these governments want to manage their forests more effectively, most are short of the technical, financial and institutional capacity required to do so.
Nor are the conflicts over forests simply between those who would preserve the forests and those who would destroy them. Shifting cultivators see fertile soil where foresters see sustainable timber yields. Governments concerned with the broader interests of society find themselves trying to enforce regulations restraining the activities of farmers or timber companies so that watersheds or especially vulnerable areas are protected. Loggers find themselves confronting the people who traditionally depend upon the forest for their living.
Many of these competing claims did not emerge in the past. The forests seemed an inexhaustible resource capable of satisfying the needs of all groups. Now it is clear that this was a faulty perception and the implications must be faced. Strictly preserving an area of forest for future generations means not only excluding squatters and encroachers, but also denying local people the right to earn a living from cutting and selling wood or hunting wildlife; it means opposing the attempts of a developing country's government to earn foreign currency. If, on the other hand, forests are to be conserved through sustainable management practices, then the people's needs for the goods and services of the forest can be met.
A slowing and eventual halting of the depletion of the world's forests is widely accepted as desirable; no one wants a world without forests. This can be done by harmonizing use and conservation through sustainable harvesting and cropping practices. But nothing will be achieved unless people's legitimate rights and interests are recognized. In some cases it may appear easy to take sides, but mostly it will be found that there are no simple or easy answers. Deciding on what should and can be done in each case will involve dialogue and almost always some degree of compromise and conciliation.
Most human activities involve costs and benefits that people have to weigh before they decide what they want to do. In general, no rational person embarks on a course of action if the costs are expected to outweigh the benefits.
In the same way, and at its simplest, the question to be asked in relation to the proposed management of an area of forest is whether the benefits of doing so exceed the costs. In purely financial terms, this involves a comparison between the income from the sale of timber and other products and the costs of management. The greater the revenues generated, the more likely it is that the management will be financially justifiable and will not require government or other subsidies. The more secure the financial base for a management system, the more easily it can be maintained on a sustainable basis, with the important proviso that from the revenue earned the required funds be channelled back into forest management.
The reality, however, is that most cases cannot be reduced to such simple terms. The gains and losses from conventional forest management are often distributed widely, with the gains going to one person, group or generation and the costs being paid by others. Moreover, the impacts may also be separated in time, with the gains typically coming immediately, leaving the costs to be borne in the future.
The further apart in space or time the costs and benefits are, the more difficult it is to reconcile them. Those clearing land for ranching are unlikely to be concerned with the contribution of their actions to future global warming or the consequences for another country that may be more prone to floods as a result of it. Nor will a farmer chopping down a tree for fuel on a watershed worry about adding to the siltation of a reservoir for hydroelectricity 100 km downstream. In this, the tree cutters are behaving no differently from the person in Los Angeles, Mexico City or Athens who takes a car to work and ignores the global warming implications of the journey or the contribution it makes to the smog from which the city is suffering.
Economics provides a way of objectively examining such issues and of looking at the full range of costs and benefits involved wherever they fall. A logging contractor wondering whether to take up a lease, for example, will simply calculate if it will be profitable. An economic analysis will not only address the profit or loss of the contractor but should take into account the full range of benefits and costs to society.
On the benefit side, the economic analysis may, for example, look at the impact on local employment and any knock-on effects this has; the special benefits to the local or national economy from additional foreign exchange if the logs are exported; or the additional value produced if the forest land is being cleared for agriculture. On the cost side, the analysis may look at the effect on the future supply of forest products, the downstream impact if the logging is to take place on a watershed or any other negative impacts that the logging may have.
Similarly, if a decision is to be made on whether to permit the clearing of an area of mangroves for, say, a tourist development, an economic analysis could consider all the benefits and costs. The benefits would include the direct flow of earnings, the foreign exchange implications, the local employment generated and other beneficial impacts. The costs, in addition to those of clearing the mangroves and building and running the tourist complex, would include the loss of the timber and fish yield as well as any damage likely to be caused by the reduction in coastal protection or the loss of biodiversity.
In sum, forest management economics has to deal with much more than a short-term cash flow perspective, no matter where it is applied and no matter who is the owner or the manager. The economic assessment of management must integrate all the functions of the forest, and it is the inclusion of all the venous functions that makes forest management economically sustainable. The main question then becomes how to make sure that the beneficiaries share the costs equitably.
This broader view of forest economics is particularly important in the tropics and subtropics, where the state is generally the owner of the natural forests. The financial costs and benefits are derived only from harvesting costs and paces for the limited number of tropical timbers that are marketed, which are strongly influenced by current market demand and rarely reflect the cost of their replacement. The state has to extend its evaluation beyond a limited financial analysis in order to meet the full range of its responsibilities to society. This wider analysis would encompass the broad spectrum of outputs of all goods and services from the forests and the effects external to the boundaries of the forests and would compare all the costs and benefits of alternative of land use with natural forest management. In considering the whole range of benefits arising from natural forests, whether inside the forests or external to them, it is difficult to determine monetary values for many of the costs and benefits involved. The tools presently available to assess and quantify the benefits and services provided by forests are inadequate. The valuation of services is particularly difficult. The forest manager is thus at a serious disadvantage when competing for scarce resources of funds or staff.
Comparing the management of forests with that of alternative forms of land use is equally difficult. The long time scales involved in forest management present a particular problem, because a great deal of conventional economic analysis IS based on the reasonable observation that people consider immediate benefits to be more valuable than those that are deferred to some later date. A promise that $100 will be paid after ten years is obviously worth less than $100 immediately.
This is dealt with in economic calculations by discounting or reducing the value of costs or benefits that occur in the future. The discount rate is the percentage by which the value of future benefits or costs is reduced for every year until they are realized. A discount rate of 10 percent is commonly applied in the analysis of development projects. Using this rate, the value of a return income of $100 to be paid in ten years is $39; it is just $0.84 in 50 years. If this analysis is applied to the relatively slow growth of timber under sustained yield management of natural forests, with a 5() or 100 year wait for a financial return, timber often turns out to be hopelessly unprofitable compared with other opportunities for financial investment, sometimes using the same land. In cases where other functions of the forest are not important and the alternative use of the land is equally sustainable, the most economically productive alternative may be the appropriate use.
Economists recognize, however, that evaluation of direct commercial costs and benefits is often not sufficient. The deeply felt human attachment to the care of the forest reflects appreciation of values other than the direct costs and paces. The traditional concerns for conserving forests are often associated with recognition of their protective functions in soil and water conservation and in provision of shelter, which have material importance. There may also be cultural, aesthetic or spiritual values for which people care deeply. Economists seek to take account of these values. In the case of material benefits from protection, tangible values may be assessed from the cost of damage resulting from its absence. In the case of cultural values, the economic value is assessed as the value of the financial returns that are forgone when society decides simply to conserve the forest.
Another approach put forward is the idea that there is a stock of natural capital in the world on which the productivity and survival of the human economic system depend. This natural capital can be divided into two types: renewable, such as biomass, and nonrenewable, such as petroleum and mineral resources. The moral assumption is that it is the responsibility of each generation to pass on an undiminished stock of natural capital to the one following. In an economy managed in accordance with this principle, it would be permissible to exploit renewable resources up to their sustainable limit. Non-renewable capital, on the other hand, could only be exploited at the rate at which substitutes were created. Although such theories are at an early stage in development and are highly controversial, they reflect a growing awareness of the urgency and complexity of the vast range of environmental and resource depletion problems facing the human race.
The Brundtland Commission expressed a similar Idea m Its description of sustainable development, which it said "is not a fixed state of harmony, but rather a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are made consistent with future as well as present needs" (World Commission on Environment and Development, 1987).
The strength of economics, whether conventional or based on such ideas of sustainability, is that it provides a method for examining the range of costs and benefits associated with the choices open to society. Costs and benefits may be distributed in space or in time, and may be seen differently by those with different perspectives - the state, the private owner, the logger, local communities, environmental groups, etc. Benefits may be obtained as marketable goods or as public services, or even as other human values. Economic analysis permits an objective comparison of the overall costs and benefits of various options from various viewpoints. The data for reducing such complex calculations to purely cash terms are not yet fully available, but there are few cases where an attempt to examine the question from the economic viewpoint, assessing and comparing its overall costs and benefits, will not provide useful and illuminating insights.
If any type of forest is to be sustainably managed, the people and the countries concerned must be convinced that the land will remain more valuable under forest than under another form of land use. It will be necessary to find the means to assess the value of the forest accurately in monetary terms and to develop techniques to compare this value with that of alternative forms of land use. The real challenge of justifying the management of land as forest, however, will not so much be to make the return match the pre-established discount rate, but to ensure a fair distribution of costs and benefits that would make sustainable management a competitive proposal compared to other investment options.
