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The buggy whip industry

Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” It is interesting to think about how Henry would have run Northern Ontario’s forest tenure reform.
David Robinson, Economist, Laurentian University,

Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” It is interesting to think about how Henry would have run Northern Ontario’s forest tenure reform.

It seems likely Henry would have made major changes. Instead the stakeholders in an industry in decline he might have tried to come up with something more than a slightly faster horse.

When you make a major decision you should understand the alternatives. When the province set out to revise the forest tenure system it should have had a clear understanding of alternative tenure systems. Since I am an economist, I have the odd notion that we should work out the economics of the alternative tenure systems, and not just repaint the one we have.

There was almost universal agreement that the old system had failed economically and socially. The basic model had been developed back in the 18th century. It had degraded the forests of Northern Ontario. Companies were going bankrupt and communities were in crisis. The tenure reform process offered an historic opportunity to come up with a model that could renew the forests, rebuild the economy, and promote community development.

There were three basic alternatives: tinkering with the existing system, moving toward local control of the forest, or privatization. Almost everyone agreed that privatization was not on the table.

A 2010 Ivey Foundation report by Tom Clark, Jeremy Williams and Chris Wedeles recommended allowing community tenure and expanding the scope of tenure to include recreation, carbon and other non-timber benefits. They also recommended having multiple pilot projects. These were the really interesting elements in their report. They were also the items that were ignored by the government.

We know now that the reform process ended up making fairly minor changes. The experimental Local Forest Management Corporations are interesting, but they are small steps. There are only two, and the province will evaluate them in 2016. If they don’t produce a miracle in three years, will they be abandoned? It took almost three years to produce the Northern Growth Plan.

The simple fact is that the province, including the bureaucrats, the politicians and the consultants, were profoundly ignorant of the economics of local control, and never seriously considered it. They set out to develop new rules for the buggy whip industry.

It isn’t surprising. There was no book to consult. There were no specialists in the economics of community forestry. The previous government had killed the NDP’s experiments in community forestry. The industry opposed local control.

But there were economic principles that could have been applied. For example, if you want to develop what economists call human and social capital, community-based forestry makes sense. When people have to manage local resources they develop their skills. That means there are more brains involved in management.

With more brains available, community forestry can do a better job than traditional forest companies. Brains are a cost for companies, but they are actually one of the products communities work to create. Communities raise children and pay for schools. If they ran their own forests they would find ways to use the forests as educational resources, job training and financial support for their children.

It might not maximize profit but it would be economically efficient. Communities that ran their own forests would pay much more attention to generating human and social capital than forestry or business economists would. They would also pay more attention to tourism, recreation, water quality and sustainable energy. And they would support local businesses and local job creation. They would have a stake in adding local value.

It is easy to make a list of the economic advantages of community forestry. It wouldn’t be hard to develop a whole textbook on the economics of community forestry. It would cost much less than flying in overpriced foreign experts to fake community consultations.

The tragedy for Northern Ontario is that no one ever asked for the textbook on community forestry. Natural Resources Minister Michael Gravelle and Northern Development and Mines Minister Rick Bartolucci relied on their staffs to identify the alternatives. Their staffs gave them faster horses and better buggy whips. Henry Ford would be appalled.