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The Economic Foundations of Forest Politics


Aberglaslyn Pass, North Wales. (Photo by courtesy of British Information Service.)

Editor's Note. In view of special features of the thesis presented by the author, he has preferred the broad term "forest politics" to the more commonly used English term "forest policies."

THE term "forest politics" is intended to mean the sum of measures taken by the state or the municipality to safeguard pubic interest in regard to forests and forestry.

There may be considerable disparity between private and public interests in forestry. This is due to the fact that a forest may present one group of utilities to the individual owner but a different group to the community at large.

The individual utility of forests lies mainly in their production of material goods, such as wood and timber, for which there is a market. The balance between supply and demand for these products is maintained by the free interplay of price-determining factors. By selling his products the forest owner obtains a certain gross revenue in money. He can easily compare his expenditure and income and determine whether the way he manages his property is profitable or not.

The public utility of forests may not be connected at all with the value of their products but may be measured in terms of climatic influence, regulation of stream flow, or the importance of domestic wood production as a source of employment. It produces no goods for sale on the market, prices do not enter into the picture, and no income accrues to the individual forest owner. The public utility values of forests and forestry, therefore, are entirely omitted from the balance sheets of private enterprises, with the result that privately owned forest property is managed as if no public utility factor were involved at all.

But although this public utility value is not marketable, any community that attains a certain cultural development must determine its forest politics in order to ensure and if possible develop the intangible assets of its forests. It has been said that the forest politics of a state are the best yardstick of the cultural conscience of its people.

Fundamental economic principle in forest politics

Forest politics imply foresight and social self-control. This does not mean, however, that any form of public utility capable of being derived from the forest must be secured regardless of cost. The community or the state, as well as the private forest owner, must decide whether it will or will not be worth while to produce any given form of utility. Owing to the lack of automatic price adjustment for the collective forms of utilities, this decision often becomes rather difficult and only an approximation is possible.

Private and community balancing of costs against expected returns have one thing in common: the means of production are scarce. In both cases the fundamental consideration in situations of scarcity has to be observed, i.e. the scarce means should be so apportioned among the different possibilities of production that the maximum total utility is obtained.

In private enterprise the balancing is easily done. Here money value of the products is accepted as the measure of utility. Expenditures of money are costs, receipts of money are revenues, and comparison of receipts and expenditures shows the net profit. The profitability of any given enterprise as expressed by the earning capacity of the capital investment can then be compared with the profitability of other enterprises. Under ideally free economic conditions capital would naturally move from enterprises with a low profitability to enterprises with a high profitability, and thus available resources would be used in accordance with the valuation of different utilities through the price-fixing process of a free market.

When a community, however, has to calculate the cost of public utility values in order to establish a balance, the whole picture changes. Expenditure need not be money costs, benefits need not be money revenue. The balance cannot be figured in money at all. The true cost of producing utility of one kind is the loss of utility of another kind that might have been produced with the same means of production. In these cases it is necessary to think in terms of nonmaterial utilities rather than in terms of money. So far in most countries forest politics have not had much regard for this fundamental economic principle. Forest politics should be based not on what the government can put into immediate operation but on what the community can afford.

Growth of the public utility concept in forestry legislation

The Romans were already aware of certain collective utilities to be derived from forests. The Lex duo decim tabularum put into force in 450 B.C. contains provisions against devastation of the forests, and Cicero characterized those enterprising people who cut down the forests of Macedonia as enemies of the state.

In the Middle Ages there seems to have been no concern about the forests for their common utility value, but in the countries of central Europe private rights in the forest were strongly defended (Lex salica, Lex Burgundionum, etc.) by rough punishments for such acts as setting fire to the forest, tearing off the bark from old oaks, or cutting in private enclosures.

The oldest cases of preservation of forests as protection against catastrophes such as avalanches were recorded in Switzerland in the Canton of Schwyz in 1343 and in the Canton of Uri in 1383. In the course of time the rulers of European countries put many local forest ordinances into effect. They wanted to regulate cutting in order to maintain a constant local wood and timber supply, since transport facilities were so poor that it was impossible to move bulky cargoes over long distances at reasonable cost. However, it is equally apparent that the ruling class, which was behind these old forest ordinances, was also very much concerned with the preservation of the forests for their hunting.

One of the outstanding achievements in forest politics was Colbert's classic Ordonnance des Eaux et Forêts of 1669 for France. Its motive was a concern which, together with hunting, influenced forest politics in many countries; this was the collective utility of forests as providers of material for building warships. To rule the waves, it was necessary to possess big oak forests within the frontiers of the country. This is very clearly illustrated by England's forest politics. In 1588 the Spanish Armada, aiming at the south coast of England, had been ordered first of all to destroy the royal forests after invading England. Following such a destruction England would not have been able to build another navy within a hundred years. Events turned out otherwise, however. After the miraculous destruction of the Spanish Armada, the English Government realized the danger and ordered vast new oak forests to be planted farther inland, but interest in this enterprise soon lagged. About a hundred years later England's struggle to overcome Dutch sea power once more made it concerned with planting oak forests. At this time, one of the first textbooks on forestry was written: Silva, or a Discourse of Forest Trees and the Propagation of Timber in His Majesty's Dominion, by John Evelyn.

Once again, the concern of the Government about growing forests in England vanished until, after another century, it was revived with the Napoleonic Wars. Then enormous sums were made available for the planting of forests, but not much had been achieved before the replacement of wooden ships by an iron navy definitely abolished the collective utility of forests for maritime warfare. After that, forestry became a "lost art" in England. Nevertheless, during the first World War, when Great Britain found itself cut off from continental wood and lumber markets, a new era of forest planting was inaugurated for the fourth time.

Up to about 1800 the French forest ordinance of 1669 served as a model of forestry legislation for a number of European countries. Then, under the influence of Adam Smith's economic theories, forestry legislation was repealed in most countries. This happened as early as 1791 in France, 1795 in Norway, 1805 in Finland, 1811 in Prussia, and 1828 in Sweden. Furthermore, vast areas of state forests were put up for sale. In France about 1,000,000 hectares of forest passed from state to private ownership between 1807 and 1823. Only in Denmark did development tend in the opposite direction: in 1805 government control of private forest management, established in 1681, became more stringent; devastation of forests was strictly prohibited; all existing forests were to be treated as enclosures wherein the grazing of cattle or other animals was prohibited. Slightly amended in 1935, this act is still in force.

In many parts of Europe extensive devastation of the forests took place following the abolition of government control of cutting and the sale of state forests. The same period brought unusual climatic conditions - scarcity of rain in some places, and elsewhere abundant rainfall and numerous avalanches, torrents, and floods. This gave rise to a strong but only vaguely substantiated idea of the influence of forests upon precipitation, stream-flow regulation, and many other phenomena of nature. These ideas have survived to the present day, although for a long time it was impossible to establish scientific evidence for them. Only in a few instances was the collective utility of the forest obvious - that is, in protection against avalanches and torrents.

In some European countries special legislation on the management of protection forests was passed. By passing a very rigorous forest act in 1852, Austria became the leading country in this respect; it was followed in 1860 by France, in 1876 by Switzerland, and in the course of the following 25 years by practically all the other countries on the Continent.

From the public concern about forests for their protective functions grew concern about their social and economic utility as a source of raw material within the national borders for timber and wood-working industries. This led to the passing of a series of forest laws in various countries concerning private forests. In most countries clearing of forest areas was forbidden unless such areas should afterwards be used for other productive purposes, chiefly agriculture, or be reforested. The Swedish forest act of 1903, re-enacted in 1923, formulated this principle by stating that cuttings in mature stands must not be made at such a rate as to endanger the possibility of self-regeneration.

During the years between the two world wars nearly all European countries revised their forestry legislation, and some of the new or re-established countries passed very stringent laws, for instance Poland in 1927 and Czechoslovakia in 1928.

This development within European forest politics is obviously due to the general trend of world economy after World War I away from free trade and towards self-sufficiency and protectionism. It is further one of the many aspects of the world-wide problem of protecting the national currency against devaluation and of securing within the national borders employment for all able citizens. To do justice to these developments, it would be necessary to go much further into theoretical consideration of a rational economic approach to forest politics than is necessary in dealing with the protective utility of certain forests.

Rational economic approach to forest politics

Where it is a question of private investment in forestry, the profit obtainable for the capital investment is the crucial point. Labor must be paid according to current labor-union agreements. For a few forests situated in very fertile regions, a certain ground rent must be calculated as well, since such a rent would be obtainable by the growing of crops other than wood. But in most cases forest soils are of so poor a quality or the situation of the forest areas is so remote that only the growing of forests is feasible. In such cases no ground rent should be calculated. What is left after payment of wages can be considered interest on the capital investment. Should calculation show a rate of profit equalling or exceeding the average rate for investments in other fields, forestry will be continued as a satisfactory commercial enterprise. If not, all private capital will be withdrawn from the forests, i.e. all stands which can be realized at a profit will be cut down unless such a course of action is prevented by legislative measures and due control.

In balancing costs and returns of forestry operations undertaken to develop social utilities, forest economists are apt to use a corresponding method. The probable return on the capital investment is calculated; and in case of a deficit, a further balancing of the deficit against the estimated values of collective utility derived from the forestry in question is undertaken. However, this method is rational only if collective utility is dealt with, e.g. protection against torrents or the value of the forest for recreation. If the forest as a source of employment and national supply is under consideration, an entirely different method of balancing has to be used.

If one considers how the maximum national production can be obtained, labor is the weakest link in the chain. This was already the case in the entirely free interplay of liberal economic conditions before the labor unions emerged, and nowadays it is even more so, because no civilized community would permit the free regulation of labor supply through starvation. If a man cannot support himself and his family, the community takes care of him and keeps him alive. In one way or another, according to the development of social foresight in the country concerned, he will get his share, modest though it may be, of the total national income even though he himself does not contribute to its creation. Under these circumstances it is of the utmost importance from the point of view of the community that everybody should contribute to the national income by performing some kind of work, even if the value of his work does not offset the value of what he consumes and lies far below union wages.

In private enterprise the marginal utility of a worker must be the equivalent of his wages. In an enterprise run by the state or the municipality, insofar as there is unemployment, even a submarginal utility is worth while. In practice this means that in balancing state or municipal enterprises, first and foremost a reasonable interest on the capital investment must be deducted. What is left can be considered as earned by labor. As such, however slight it may be, it justifies the start or the continuation of the enterprise in question from a social point of view since it will lead to a higher total effective income than unemployment.

This gives rise to a very difficult practical problem of social policy. Private enterprises abandoned as nonremunerative on account of the discrepancy between labor-union wages and the marginal utility of the laborer might, if continued, contribute a considerably higher amount to the total national income than new state enterprises, started in order to combat unemployment but having an even lower submarginal utility of labor. The solution lies in state subvention of private enterprise directly or indirectly through protective tariffs or other measures.

Particularly in the case of forestry and forest policies, two possibilities must be considered. One is the planting of forests on denuded areas. The other is the conservation of existing forests and the converting of forestry practice from periodical exploitation to sustained yield through adequate legislative measures. Both possibilities create employment in areas which hitherto did not contribute at all or contributed only slightly or occasionally to employment. Furthermore, national production of raw materials is increased, which in its turn results in higher employment and a better standard of living for more people. During the years between the two world wars unemployment was a predominant factor in most European countries. This accounts for the great interest and lively activity in forest politics in those years.

A new period of unemployment was expected after World War II; but in some of the European countries with great forest areas, just the opposite has been the case. War losses, together with a diminishing birth rate starting 20 years ago, have reduced the number of young laborers now becoming available. A strong tendency to move from the land to the city to look for industrial employment has aggravated the shortage of agricultural and forest workers. This further complicates the problem of determining the most rational forest policy or policies. At the same time, owing to the ravages of war, construction demands for wood and timber have risen enormously.

Forest politics must also take into account the difference between workers who can easily be moved from a labor-surplus area to a labor-shortage area and workers, such as the many small-holders, who are linked to their holdings by strong ties of hereditary ownership and tradition. In many countries, e.g. Finland, Norway, and Sweden, it is of fundamental significance to production that these workers should be employed in forestry in the periods, often of considerable length, when they are not needed for agricultural work. From the point of view of the community, such supplementary employment is worth while even if its utility is less than its cost, whereas the full-time employment of workers transferred into forestry must show a marginal utility comparable to the marginal utility of their industrial employment.

A linking together of small forest properties with small holdings of agricultural land might prove of great value. Such a combination of agriculture and forestry, however, would require further legislative measures to prevent devastation of the small forest holdings and also a system of indirect subvention, through free advice from trained foresters on forest management, with sustained yield as the goal.

Where the forests have been devastated, reforestation will have to be a national or municipal enterprise. The expenditure on capital goods necessary for reestablishing forests in devastated areas is small; it is a question of some hand-tools, plows, and harrows. The price of these things is trivial when compared with the expenditure on wages for the workers. For the private owner this expenditure is a genuine cost as it diminishes his individual share of the current total revenue. But to the community it is not necessarily a cost because current total revenue is not diminished when spare workers, who must otherwise be maintained in idleness, are employed in planting forests; on the contrary, future total revenue will be augmented by such a measure.

France has given the outstanding example of the wisdom of such measures. Under an act of 19 July 1857, the county councils of southwestern France, between the Garonne and the Pyrenees in the swampy and deserted region called Les Landes, were obliged to drain the soil and plant forests. If they did not do it themselves, the state would do it. But the state would then, of course, be entitled to take all future income until all expenses, including the total amount of interest, had been repaid. Within a period of only 20 years, 600,000 hectares were drained and reforested, and today the forests of Les Landes cover about 900,000 hectares, or 80 percent of the total area. From being one of the poorest parts of France with a small and unhealthy population, this province became within 50 years one of the most prosperous.

It has been the purpose of this article to show that the urgent problems of forest politics cannot be solved by more or less emotionally dictated measures, as has hitherto been the approach to them in most of Europe; they must first be put on the solid basis of rational economic analysis.

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