FOREST POLICY AND TRADE: THE NEW ZEALAND EXPERIENCE

FOREST POLICY AND TRADE: THE NEW ZEALAND EXPERIENCE
by
Kenneth E Jackson
University of Auckland
On leave in Department of Economics
University of Western Australia
DISCUSSION PAPER 91.10
JULY 1991
ISSN 0811-6067
ISBN 0-86422-134-7
1
INTRODUCTION
Officially New Zealand was a dependency of New South Wales from 1840-41 and
a separate Crown Colony from 1841-1852.
Even with the granting of
representative Government, however, the economic status of New Zealancl,
remained very much that of a dependent state. It was dependent upon the U.K.
market for its trade in wool and later in the century meat and dairy products, as
well as being largely dependent upon Australian markets for its trade in timber and
other forest products. Whilst the former has been altered in recent times, the latter
remains relatively unchanged.
Government regulation and control was generally ineffective for much of the early
period. Government attitudes were part of a wider ethos in favour of clearance.
Little if any real concern was apparent for retaining any sizeable stock of forest.
Early Conservators had unfortunate experiences, one being drowned in the period
between his appointment and taking up office and another lasting only a brief
period before his post disappeared in the face of financial stringency. To 1920 at
least there was more rhetoric than action. Most of the settlers were probably
looking for land for agricultural and pastoral purposes, rather than looking for
entrepreneurial opportunities as sawmill owners. Clearance was uppermost in their
minds and was encouraged and fostered by the activities of governments who
subsidised it directly, as well as indirectly with their infra-structural developments.
From 1853 the compilation and reporting of New Zealand's trade statistics was
centralised. At this time total timber export receipts were of major significance.
Their value then of £93,000 was not exceeded for another twenty nine years and
it represented approximately 30 per cent of export receipts when taken together
with Kauri gum, flax and other non-timber forest products. (Bloomfield 1984,
263, 271 and 279). Chart 1 displays the relative position of the principal
exports over the course of the next one hundred and twenty years.
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2
3
As the chart clearly demonstrates, the relative importance of the
impact upon the state of the New Zealand timber industry. In the third
international trade in timber quickly diminished after 1853. Imports of
section of the paper the domestic trade in timber is briefly considered in
timber were also limited, leaving the domestic trade as the dominant
terms of its interaction with the international trade position, and then the
factor in determining. the industry's contribution to the rate of depletion
similarities with the present day South American position are considered
of the natural capital stock. This domestic rate of consumption is also
in section four.
linked to international trade. It is the purpose of this paper to demonstrate
that the introduction into the international economy of the basic, and more
especially the pastoral, products of New Zealand directly affected the state
of the natural capital. stock in the forests and draw some comparisons with
the current Amazonian experience.
It has been sugg?sted that relative to agriculture, the historical
development of timber in New Zealand has been neglected (Roche 1990,
295).
In the rush to count sheep perhaps drowsiness has dulled our
perceptions and lecLto such neglect, but recent work such as Michael
Roche's and Rollo Arnold's (1976) has at least provided a sound base
from which to proceed. What follows attempts to expand and refine their
contributions and demonstrates the interaction of agricultural and forest
development. The impact of growth in the international trade in timber
itself upon the rate of depletion of the forest resource, was limited. Nontimber trade growth, however, played an important and integral part in an
explanation of how both the external and domestic timber trade
developed. The paper concentrates largely on the period ending in the
nineteen twenties as little addition to the area under cultivation is to be
seen in the inter-war period.
The sequence of this paper is to look firstly at the consequences of the
international trade in timber, followed by considering the impact of the
international trade in other products of the soil and their consequential
4
5
PART ONE
such neglect, in maintaining that the high current level of interest in
NEW ZEALAND'S INTERNATIONAL TRADE IN TIMBER
conservation matters, especially a concern for indigenous forests, has
worked against analytical studies. He does stress the less fanciful and
"New Zealand imports practically all kinds
more likely reason, that difficulty in finding source materials has been a
of manufactured articles from building
major contributing factor, rather than the fear of the conservationists' ire
materials to soaps, and some raw materials,
(Arnold, 1976, 105). Whatever the problems facing the researcher, the
such as pig iron, oils and even timber"
very low level of export share, at 1 or 2 per cent for much of the late-
(emphasis added).
nineteenth century, would appear to justify at least some of this neglect.
Concentrating on exports is understandable in the sense of Arnold's lack
The almost audible.tone of surprise revealed by Condliffe (1915, 860)
of source material or data, since customs records exist whereas basic
reveals just how embedded in New Zealand's economic history was the
domestic records are somewhat more erratic, especially at the level of the
thought that it was.exports that acted as the principal engine of growth in
individual firm. The over-concentration upon timber exports, however,
the nineteenth century. Timber played a significant role in exports from
leads to the omission of the major part of the story, that of the domestic
the earliest days, with pit-sawn timber being sent to New South Wales on
consumption of timber at this time. This can be linked directly to the
Australia's eastem; seaboard from the eighteen twenties and thirties
trade situation in terms of the growth of other exports and the constant
(Roche, 1990, 29TJ.
demand for land for pastoral and agricultural production and for timber
By 1853 timber exports, then at their zenith,
accounted for approximately one third of all export receipts (Condliffe,
1915, 906).
as an input into various industries.
The direct contribution of timber to the export position
receded rapidly from.this peak, never again reaching double figures in
The general feeling that the history of timber has been neglected is
terms of a percentage of all exports by value after 1854. 1860 was the
correct, but the approach which sees progress solely through the
eve of the gold era in New Zealand and timber exports had contracted to
successive tightening of legislation and control can lead to a partial form
only 2 per cent of the total receipts, subsequently fluctuating between 1
of analysis, disregarding or neglecting the possibility of other forms of
and 2 per cent through to the outbreak of World War One (Condliffe,
change. The eventual appearance of the Forest Service can be seen as the
1915, 906-907).
culmination of this march of progressive interventionism. Failure in the
early legislation is seen almost as sufficient evidence that what was
This rapid decline in export share has led to much neglect of the role of
needed was more of the same, or more effective forms of it, rather than
forests in New Zealand's economic development. The timber industry
asking if there were really other causes of difficulty. Other causes such
receives but scant attention in most works concerned with the expansion
as general export growth did exert some influence, with some of the
of settlement. Rollo Arnold produced a rather imaginative argument for
interventionist activities working against, rather than for the cause of any
6
rational approach to the forest
7
Kauri was a threatened species by the early twentieth century and part at
least of the blame for this can be laid at the timber industry's door. Of
It would appear that the direct demand for timber exports exerted only a
the total milling resources at the end of World War One, only about one
very limited impact upon the level of the natural capital stock in an
half of one per cent was Kauri (Neale, 1925, 322). Saw millers were
aggregate sense, but it may have been significant in terms of the demand
apparent rent seekers who encouraged the acquisition of government
for specific species with consequent impacts upon the mix of indigenous
protection from imports and discouraged any fledgling ideas of
forest. Kauri timber was the main component of exports before 1914,
conservation such as the attempt at export taxes to protect the forests
with Kahikatea being used for the specific purpose of packaging for butter
noted in 1915 by Condliffe (Condliffe, 1915, 912). Exports by this stage
and cheese due to its non-tainting qualities (Roche, 1990, 302). Australia
were dwindling in any case, as can be seen from the accompanying
formed the basic market for exports of such timbers, since it was only in
graphs. The story of the inter-war years is one of a declining export trade
the inter-war period that Britain really started to consider such far-flung
from a 1920 value peak ending a short post-war boom and a 1915 volume
outposts of Empire as part of its potential source of supplies and even
peak (Bloomfield, 1984, 281). By 1921 Imports had moved ahead of
then only to a very limited extent. Transport costs were sufficient to
Exports by value (Neale, 1925, 322) and New Zealand was viewed as an
preclude earlier or greater consideration.
unlikely source of future supplies by Britain.
The Reconstruction
Committee report of 1917-18 wrote off New Zealand, along with
The larger firms were dominant in the New Zealand export trade and they
Australia, India, and South Africa as potential suppliers. (Acland, 1918,
were centred on the Auckland region. By 1881 over 90 per cent of
19). Only small amounts of Kauri, Rimu and Totara found their way into
timber exports by value were leaving through Auckland ports (Stone,
Britain in the nineteen twenties (Stobart, 1927, 31).
1973, 93) and the vast majority of these exports were of Kauri. The
market, Australia, remained the dominant customer taking some 98 per
timber industry appeared set on a course of rapid cutting, but its business
cent of timber exports (Neale, 1925, 322). Little wonder that the biggest
decisions and their consequent impacts were largely the result of the
industrial combination ever to operate in the early industry, the Kauri
institutional background they worked against. New Zealand was not a
Timber Company, had extensive financial, market and other links with
conservation conscious society in the late-nineteenth century. The social
Australia.
The traditional
costs of forest clearance were relatively neglected in a push for
agricultural and pastoral expansion. If pastoral produce prices rose, the
It is the decade of the eighteen nineties that is crucial in determining the
incentive to clear land rose, more timber was therefore available for
role timber exports played in the deforestation process. At this time of
immediate cutting, reducing the likelihood of any conservation through
greatest activity in forest clearances, the level of exports as can be seen
increased price.
in the charts, was actually falling away, only recovering to 1888-91 levels
Government policy hastened this process, thereby
assisting in the rapid demise of the virgin forest.
and above by 1899. The eighteen nineties saw a 14,000 square mile
8
9
decrease in the forested area, the maximum of any decade and up from
stationery as a category represented between 4 and 5 per cent of the total
the 6,000 square miles cleared in the course of the previous decade
value of imports by the early twentieth century (Condliffe, 1915, 914-5).
(Condliffe, 1959, 3). Not only was the level of exports not rising in
Comparative cost advantages probably determined this to be an
commensurate fashion to the increased rate of depletion, it was actually
appropriate form of trade, but did not prevent complaints from those
static if not declining, with the collapse of the Melbourne residential
seeking conservation, who saw only waste and burning of the local
construction boom in the early nineties removing a large part of the export
timber. There are surprised comments regarding the existence of imports
demand. The subsequent pick up in exports in the twentieth century,
of timber whilst burning for clearance was widespread (Fleet, 1984, 81).
which peaked in 1912, represents only a doubling of the 1890 level of
Such action may or may not have been economically appropriate, no-one
demand, not enough to satisfactorily account for the rapacious clearance
appears to have properly studied the question, either then or since.
rates obviously continuing at this time, with 1895-1914 seeing almost half
as much additional land again brought into cultivation as in all New
1908 saw a pre-war peak in imports of 51,000,000 super feet, more than
Zealand's previousbistory. (Simkin, 1951, 169). Milling for export does
double the amount imported in any previous year (Beasley, 1930, 28). At
not provide a satisfactory answer for the rapid rate of depletion, except for
this peak imports constituted more than I 0 per cent of the total domestic
the specific case of,Kauri, and even then the answer is only a partial one.
consumption, but this was the only year before 1914 that they achieved
Other factors contributed to Kauri's demise apart from the international
such a high level. Normally they were at minimal levels before 1900,
timber export trade.
essentially confined to specific hardwoods such as Ironwood and Jarrah
and other timbers difficult to obtain locally, along with small supplies of
Possible responsibility could still rest with the industry through milling for
Douglas Fir, known locally as Oregon Pine (Neale, 1925, 322).
domestic purposes, but before considering that something must be said of
the import position, since imports could have substituted for local
After World War One imports climbed to a peak in the late twenties and
production. Until the nineteen twenties, imports remained low. Only a
declined sharply thereafter through to 1934. Their overall value remained
small portion of the total timber used domestically came from abroad.
slight in relation to all imports and their contribution in terms of reducing
Imports of timber do not rate a mention in the general trade statistics as
the impact on the local forest of meeting the demands of domestic and
a significant entry for the early period, except in a manufactured or value
general export expansion was very limited. Suggestions that in the inter-
added form.
Condliffe commented that despite having timber found
war period the domestic price level was set below the export price (Carter,
suitable for paper-making, all the paper used was imported from England
1972, 189-90) by controls suggests continuing foolishness in intervention,
and Canada. (Condliffe, 1915, 867). Kauri was exported for furniture
if forest destruction was to be avoided.
making some of which, along with any exported fibre going into paper,
might be returned to New Zealand in its manufactured state. Paper and
10
11
PART TWO
of agriculture and pastoralism as the main business in hand.
EXPORT EXPANSION AND DOMESTIC ACTIVITY.
By the close of the nineteenth century it is clear that the New Zealand
The export trade in timber has generally been accepted as not being the
forest was suffering from an attitude to "the bush" that saw it as a barrier,
prime cause of deforestation in New Zealand. The results of Part One's
an encumbrance to be removed.
investigation would<tend to confirm such an opinion. Writers as diverse
pastoral products that formed the basis of the land based economy. The
as Condliffe (1959; 134-5), Horgan (1990, 1), Searle (1975, 30), and
farming sector was reputed to produce not just most of the exports, but
Roche (1990, 299Yhave all concluded that the extension of agricultural
60 per cent of all national output by 1900-1. Forestry in all its forms,
and pastoral settlement was the root cause of deforestation.
including Kauri Gum for varnish, fungi and other non-timber products
Several
observers have suggested in the past that the industry and government
In terms of export receipts it was
totalled only some 6 per cent. (Simkin, 1951, 177).
regulation made things worse rather than better by wasteful use of the
resource and by distorting the price structure through intervention. These
There is a lack of definitive figures as to timber's share of Gross
effects were visible and were generally antipathetic to conserving the
Domestic Product. Measures such as employment, capital employed and
forest. Whether or not they would greatly have affected the eventual
output in physical terms reveal it to be a major player in the
outcome is open to some debate.
Government encouragement to
manufacturing sector, but a bit-part performer in the wider sense. Even
clearance through "improvement leases" (N.Z.O.Y.B., 1914, 512-3)
at 6 per cent of G.D.P. the timber industry, would represent a significant
shortened the time available to exploit timber since improvement required
but relatively small component of the whole.
clearance. Subsidising rail transport for timber reduced costs in particular
areas, probably didno more than allow a greater use of timber that would
The role played in deforestation by the domestic timber industry was
otherwise have been burnt.
larger than that of its export counterpart. Domestic output levels between
3 to 3 1/2 times those of export volumes appear to have been the normal
Direct efforts at conserving timber stocks were evident, but limited before
order of magnitude at the end of the nineteenth century. This includes
1914. Prices charged for royalties varied with the major changes outlined
none of the output put through small mills or roughly processed for use
in Chart 3. Until 1921 royalties were essentially charged, not on standing
in the bush (tramways etc.) or on farms, only that passing through the
timber but on mill output (Conway, 1974, 8) and there was disguising of
major mill establishments. Firewood represents another missing item.
public as private timber, where both were being milled, so that royalties
could be avoided. There was also different treatment for timber licences
The consequent impact on the forest resource of the home "milling"
in mining areas, a problem not fully redressed until 1949 (Kirkland &
industry is therefore far larger than that of the export markets. It was
Trotman, 1974, 1) and a general preference for clearing and the extension
responsive to general levels of economic activity both domestic and
12
13
external. The level of domestic trade far outweighed the external trade,
activity in general. Timber was a temporary, not a permanent, resource
for timber as it did for products and services in general (Condliffe, 1915,
and as the opportunities increased for marketing agricultural and pastoral
948). The domestic use of timber was extensive, New Zealand often
products, so the amount of land cleared increased and along with it the
being referred to as "built of wood" (Roche, 1990, 299).
amount of timber available for cutting as an alternative to its being burnt.
This temporary increase in supply produced a decrease in price.
Wool exports expanded by similar absolute amounts in each of the
eighteen seventies, eighties and nineties. Frozen meat exports take off
The 1896 Conference on Forestry participants were correct in saying that
from the middle of the eighteen eighties and butter and cheese exports
too rapid a rate of depletion of the forest was occurring (Bilek & Horgan,
expand rapidly in the eighteen nineties (Condliffe, 1915, 901-2). AU of
1990, 2) but they were wrong in attributing it to over-harvesting. Much,
this expansion led to clearance for the extension of settlement, peaking in
if not most of the cleared timber was never harvested-it was burnt (Roche,
the eighteen nineties and led directly to a rising demand for wood as an
1990, 295). It was only economic to mill stands near to markets since the
input into several processes associated with such development. Problems
amount coming on stream, particularly in the eighteen nineties, was such
in the Australian pastoral sector after 1890 probably increased the number
as to push the price towards zero if not to reach it. With nearly 14 per
of migrant pastoralists coming into New Zealand (Schedvin, 1990, 539)
cent of the New Zealand land area being cleared in that decade, a society
further adding to the.pressure.
of some one million people was not capable of utilising that amount of
timber in one gulp. With export quantities actually falling at the start of
the nineties, further burning was all but inevitable.
The aim of the
As more land was made available for clearance for agricultural and
process was as rapid a method of clearance as possible, rather than any
pastoral production, standing timber prices decreased. Clearance meant
form of maximisation of timber production. The details of the process
the possibility of a greater stock for the timber industry, provided out of
have been outlined elsewhere (Fleet, 1984, 48-50 and 80-1).
the natural capital. The process therefore is very different to the situation
in a modem afforestation context where obtaining land for planting would
mean that there was competition for land use and the production costs for
The response of the forestry authorities was to fear an imminent timber
timber would rise as other end products prices rose. The process in the
famine and to press for a form of bureaucratic intervention. A global
nineteenth century New Zealand case, generally accords with the first
development of foresters deciding the future needs for planting and
stage of the virgin forest resource experience as outlined by Alston (1983,
conservation was seen in various countries, including the U.S.A. Australia
6) namely exploitation and mining of the resource. There is little general
and New Zealand. The inter-war period therefore saw an interventionist
concern with establishing a long-term industry, the timber is essentially
response to a situation which might have been avoided, or at least
a by-product of, and input into, the pastoral export trade and domestic
ameliorated, if subsidies to pastoral activity and institutional demands for
14
15
clearance to foster trade in pastoral products had been absent in the late-
low price, if a price was charged at all (A.J.H.R., 1913, lxiii). If the price
nineteenth century. Issues of pricing and regulation were only really seen
was not zero then it closely approximated to it.
as important post 1920. Agricultural output continued to increase at that
time with little or no increase in land being made available, through an
The reduction of royalties on Kauri at the start of the eighteen nineties by
increase in productivity (Philpott & Hussey, 1969, 10).
some 20 per cent (A.J.H.R. 1913, 40) was only reversed at the end of the
First World War.
At first sight such a reduction was folly, merely
PART THREE
increasing the likelihood of timber being cut and supplied to the market.
GOVERNMENT, FOREST OWNERS AND ECONOMIC
In terms of massive clearances of land in the eighteen nineties, a
RATIONALITY.
reduction in royalties seems appropriate, however, if the aim was to
ensure as much of the timber as possible was used rather than burnt, since
The basic rule which an economist might advocate in a harvesting
royalties were imposed on mill output not on the standing timber.
decision is that the owner of a mature forest (or of rights to cut in a
Destruction involved no payment to the state, whereas processing did.
forest) should try and equate the costs of holding onto timber stands with
Some general changes in the way in which royalties were charged would
the extra returns anticipated to result from doing so. In accordance with
have been needed for price changes to be an effective control mechanism
the basic idea behind the Hotelling rule, will the interest costs and any
in the eighteen nineties. Cruised or appraised volumes of standing timber
lease payments be less than the expected change in stumpage value of the
was needed in pricing for royalty purposes regardless of whether they
standing timber over the review period. If so then stocks should be held.
were burnt or processed. This royalty could have been set at some rate
If holding costs are equal to, or likely to exceed the addition to stumpage
appropriate to compensate for social as well as private costs. Clearly,
value then harvestinR appears called for. The decision can be made on a
from the tone of Ellis' complaints concerning the failure of royalty rates
year to year basis with knowledge required only of current likely changes
to keep pace with the rise in retail timber prices in the twenties (Ellis,
in log prices, lease costs and interest rate (Sharp & Hull, 1988, 28).
1920, 3), such an approach was a long way from realisation in the
eighteen nineties.
It appears at first sight that such a decision rule was not really applied in
New Zealand in the late-nineteenth century. The scale of clearance was
Johnson & Libecap's analysis of the Great Lakes timber position,
such that few writers have seen the outcome as anything but wasteful of
concludes that unclear property rights, as well as inappropriate pricing led
a "valuable" resource. Attempts to consider this question in an economic
to over cutting in that case (Johnson & Libecap, 1980, 372). Again
framework appear hampered by a lack of price data. The sporadic price
changes in government attitudes and regulation would have been required
information available is partly literary or subjective in form rather than
for any such factors to have worked for conservation in the New Zealand
quantified. In an overall sense it was felt, timber was clearly sold at a
case. The same authors had earlier argued (Libecap & Johnson, 1979,
16
17
141) that privatisatfon would have assisted correct decision making.
embodiment of such an achievement. To avoid a timber shortage the
Despite apparent support from Julius Vogel in 1868 when he suggested
Forest Service set out on a twin pronged programme of better utilisation
small private plots as the way to ensure best management of the resource
of the remaining indigenous forest and afforestation, particularly of
(N.Z.P.D., 1868, 190-1) the route chosen by government was first to
"unproductive" areas such as the Central North Island pumice lands. The
subsidise clearance and second, when fear of timber famine struck, to go
better utilisation of the indigenous forest was essentially a move towards
for direct bureaucratic intervention.
greater engineering efficiency - fuller use of the resource and less waste.
The afforestation was partly a fad of the time, although in this case not
The early twentieth century saw the culmination of the debate. Whereas
taken to the extremes of the U.K. Forestry Commission with 60 per cent
before this time New Zealanders had generally considered themselves
of their plantings being in Scotland, furthest distant from the main
overstocked with natural forest areas, by World War One the force of
strategic market in South Wales (Geddes, 1922, 51).
questioning was becoming far stronger. The assumption that no or little
arguments for state forests were similar in the sense that in both countries
consideration of the relative returns from timber versus pastoralism was
there were proponents arguing essentially that it was essential to move
needed, since the latter was clearly superior, could no longer be sustained
this way because others were doing so and for reasons of autarky
without considerable debate. The timber stock had been reduced to a
(Horgan, 1990, 3).
point where it had some value.
The general
Its export price was rising as were
domestic retail prices. Instead of allowing such market forces to reign,
State afforestation had relatively little impact in terms of output until the
however, government chose control by intervention and ownership.
nineteen sixties and seventies. By the late twenties state planting was
joined by more extensive private afforestation efforts, against bitter
In the early twentieth century foresters in New Zealand, as elsewhere,
opposition from Ellis on behalf of the Forest Service (Roche, 1987a, 110).
appear to have held the view that what was needed in order to conserve
One of the government policy aims was to cut back on imports, whilst
timber supplies was some form of physical, bureaucratic control. The
another was to assist in the expansion of Empire output. The economic
unbridled operations of the open market were perceived to have produced
basis of many of these decisions were therefore almost secondary to
a situation where only interventionism could save the forest.
As one
political and other motives. Symptomatic of the economic miscalculation
writer put it "the destruction of the forests of New Zealand forms a
was the enthusiastic appraisal of the prospects for the future of New
lamentable history." (Daly, 1924, 177).
Zealand forestry given in 1925 by E.P.Neale. He was over-optimistic on
many fronts, not least in the assessment that competition from Australia
Shortly after World War 1 the process of interventionist bureaucratic
in producing pines was unlikely to eventuate, except for Tasmania. He
control had been accomplished in many parts of the Empire.
The
also asserted that: "The well-watered strip of Southern Chile is so narrow
establishment of the New Zealand Forest Service in 1919 represents the
as to be almost negligible as a source of timber supply" (Neale, 1925,
19
18
322), a not well founded assertion in the light of Chile's emergence as a
1990, 8).
The precautionary value of diversity (Pearce, Barbier &
major source of such timber in recent times.
Markandya, 1990, 15-16), was subsequently shown in the economic
effects of loss due to fungal disease.
The outcome of the inter-war
The thrust of legislation and intervention in the inter-war period was
decisions have been that almost 90 per cent of current exotic plantations
moving away from a free market position. Quantitative restrictions on
are now composed of Pinus Radiata and some 96 per cent of wood fibre
exports were implemented until revoked in 1928 in the face of pressure
produced in New Zealand comes from the exotic plantations. Putting all
from rising unemployment. Some raising in royalty levels did occur, but
ones eggs in this particular basket is a risky economic and biological
the main aim seems to have been associated with securing long term
game.
supplies for the local market and cutting back import growth. At the
the rate of forest clearance before 1914, but may have helped encourage
same time domestic retail processed timber prices were regulated in an
the stock purchase attempts of companies such as the Kauri Timber
attempt to keep them below export levels, to secure short term supplies
Company which were substantially frustrated by regulation, as well by
for the local market (Roche, 1987b, 196). Imports faced successively
their inability to control the market. Post 1920 the emphasis appears to
raised tariff barriers in 1927, 1930 and 1932 (Roche, 1987b, 199).
have been placed predominantly upon direct control and ownership with
A free market situation would probably not have greatly slowed
unfettered market prices playing only a small part in the process.
With the major clearance programme complete at the start of the inter-war
period, there was a chance to e·stablish a privately-owned, sustainable
forest industry. Intervention was predicated on the assumption that the
state, rather than private enterprise, was the appropriate body to undertake
such a task. The major part of the nation's forests were already in state
hands, but little attempt had been made at afforestation or production
forestry before 1920. The appeal of rapidly growing exotic trees resulted
in a virtual mono-culture. If as Ellis felt, the state could incorporate the
social values of the forest better than the private sector, then a relatively
poor job was done in terms of risk minimisation by spreading the
production amongst a diverse stock of trees.
Horgan has described the afforestation result of this concentration upon
Pinus Radiata amongst both the public and private afforestation campaigns
as turning that tree into "a sort of battery hen of the plant world" (Horgan,
20
21
PART FOUR
can be compared to the rate of depletion in New Zealand's peak period
THE AMAZON: A CASE OF REPETITION ?
of conversion of forest to farmland, the late-nineteenth century, which saw
the clearance of some 22.5 per cent of the 1840 forested area (estimated
The causes of deforestation outlined in the New Zealand pre-1914 case
from Condliffe, 1959, 134-5) between 1890 and 1900.
were essentially related to a clearance for agriculture imperative. The
expansion of an internal market-based economy for a wide range of
products impacted on the forest area in a negative manner and this effect
A dramatic and similar process to that observable in the New Zealand
was significantly enhanced by the demands of the international economy.
case, is to be found on the frontier regions of the Amazonian basin.
New Zealand was increasingly brought into the international market-place,
Timber cutting is only partially responsible along with agricultural
principally by virtue of the price incentives for wool production and other
clearance and fires (McNeill, 1988, 18-19).
exports and latterly by the technological changes associated with transport
achieved by burning rather than clear felling for milling. Cattle ranching,
improvements and refrigeration techniques which respectively reduced
general development and settlement are the underlying driving forces,
costs and opened up new possibilities for markets. New Zealand timber
often spurred by government subsidy and at times by speculative activity
was at this stage a by-product of clearance.
Other places such as
(Hecht, 1985, 663). The result is that forest resources are plunged onto
Tasmania are said to have suffered in much the same manner (Dargavel,
the market in much the same way as they were in the late-nineteenth
1988, 191 and 197), although the extent of clearance by fire alone appears
century New Zealand case. Attempts to raise the level of royalties would
to have been somewhat less. The history of major clearances such as that
therefore be met by an increase in the burning off, unless those royalties
of the United States (Williams, 1982) give the impression that change was
are levied on the existing timber stands and can be enforced. Imposing
slower and much of the timber was utilised in one form or another.
royalties on timber output only distorts the picture in favour of
Clearance is principally
destruction. At the margin or frontier of Amazonian expansion the rate of
Whereas little economic explanation of this phenomenon of a rapid
clearance and the subsequent level of timber supply is such that there may
extension and intrusion of a market-based economy has been attempted
be no price millers are willing to pay. Regulatory enforcement of royalty
in an historical sense a very similar case has been presented for the
payments in such circumstances implies that the rate of clearance should
present day situation in the Amazonian rain forest. The amount of timber
be slowed, in contrast to the subsidy approach which suggests a more
utilised from the cleared area is but a small part of the total available. It
rapid rate is desirable.
is agricultural clearance that is primarily responsible for the disappearance
of the forest cover. The rate of depletion is currently estimated at 11 per
The process of development in the Amazon, has been extensively
cent of the total forest area in the decade 1975 to 1985, with little being
documented in several case studies. A typical process is one occurring
cleared before 1975 (Pearce, Barbier & Markandya, 1990, 192-3). This
in two stages. Initially transport links and settlements are established,
22
23
together with the expansion of cattle ranching which forms the basis of
voiced even by contemporaries (Gisborne, 1888, 233-4) as well as
essentially speculative claims to property rights over the land. Next the
complaints of selected logging by species and by value.
more extensive clearing occurs within the newly settled area once the
Kahikatea formed the bulk of the exported timbers, with Kauri being the
claims are legitimised. (Summarized in Pearce, Barbier & Markandya,
major component (Jackson, 1990, 4-5). The best trees only were taken
1990, 197).
and imposing royalties on output alone, as is the case in both instances
Government assistance occurs not only in the form of
legitimisation of claims to property rights, but in direct subsidisation and
Kauri and
under examination, only seems to enhance this effect.
encouragement of the clearance process. (Hall, 1986, 412). Population
growth and easier transport access are seen as contributing to a major
The underlying rationale is one which sees agricultural products as clearly
discontinuity in development (Feamside, 1986, 1).
the preferred use for land. A freely operating market may well say much
the same thing, although with subsidies removed it is less likely to say it
With the full social costs of forest depletion taken into
The terms under which rights to land are granted often include
so strongly.
requirements for land to be cleared within a specified period, frustrating
account the strength of the deforestation case is weakened. The historical
any attempt, if the owners so wished, at moving towards an optimal rate
and current examinations of the impact of clearing virgin forest for
of depletion by restricting supply and in so doing raising prices to a true
agricultural expansion to meet a rapidly growing internal and external
market level.
market, find the process wanting in some respects.
In current circumstances, existing timber prices are pushed below a true
Temporal and geographical distance clearly do not guarantee a difference
market rate by subsidies both paid directly to ranchers and indirectly
in approach. New Zealand in the nineteenth century and the modern
through payment for such things as roading improvements. Far from
experience in the Amazon can be added to Richard G. Lillard's 1984 list
taxing ranchers and small farmers to compensate for the loss of other
of examples of a common theme of:
forest products, soil erosion and climatic change amongst a wider list
" ... chaotic, unplanned, heedless cutting on eighteenth century
(Pearce, Barbier & Markandya, 1990, 199), Government appears intent on
Japanese Islands,on the Western Himalayas in the nineteenth
subsidising their activities, thus further distorting market signals.
century, and during the present century in Papua New Guinea,
Tasmania, Ghana and other African Nations." (Lillard, 1984, xvi).
To talk as the studies do, of waste, of logging as a by-product of
agricultural clearance and of selective clearance of only a few select tree
Lillard's findings came from discussion on the experience of all those
species, such as Mahogany and of then only bringing the best out of the
cases in a 1983 Conference. Essentially the underlying message is pretty
forest is more than reminiscent of the New Zealand nineteenth century
clear to those who care to discern it. An over rapid rate of destruction is
experience.
perceived, although how you determine over rapidity is something of a
The same descriptions of waste are found to have been
24
25
moot point. Globally in the recent past the actual rate of diminution of
The uncertainty of future environmental effects are such as to render the
the forest reserve has been somewhat slower than many might lead one
quick-fix appeal of solutions such as those proposed by Libecap and
to believe. For the twenty years ending in 1985 the decline in the world's
Johnson far more difficult to implement successfully than would appear
forest and woodlands was less than 5 per cent of the total (Kula, 1988,
at first sight. Such efforts have more to do with current, narrow allocative
63). Such a percentage is still a significant decline and the effects are
efficiency arguments than long run sustainability and any accounting for '
magnified if quality deterioration accompanied that decline.
Where
externalities visited upon the environment and the future. The message
selective logging of particular species occurs, the more mature and better
of Libecap and Johnson, however, can be taken as demonstrating that
trees are extracted, accompanied by some destruction in their removal.
intervention without foresight can make things worse and has certainly
The result is to reduce the value of the timber left on land which remains
done so in both late- nineteenth century New Zealand and in the
apparently still covered in trees.
Amazonian case.
Since World War Two a greater
emphasis has also been placed upon deforestation in tropical areas than
was previously the case. The typical process in places such as Indonesia,
Papua New Guinea and .elsewhere has involved the extension of these
forests more completely into the international economy, with logging
company practices attracting much adverse comment. The thrust of policy
and practice has been the maximisation of timber production (Gillis, 1988,
51, Hurst, 1990, 142-5).
Whatever the methods chosen to counter-act undesirable features of
deforestation, whether the market is left to operate or the extension of
regulation and state intervention occurs is largely a matter for individual
value judgements. The urging of caution is warranted, however, since the
risks are high and the future uncertain. Under the precautionary principles
currently being developed in environmental economics literature some
resources would be required to be set aside now, to compensate for
disastrous worst-case scenario outcomes for future generations (see
Perrings, 1990). This was not done in the eighteenth and nineteenth
century cases and appears unlikely to be so in the twentieth.
27
26
nineteenth century forest case the motivation came from a combination of
CONCLUSIONS
inappropriate policies and the enhanced attractiveness of good returns
The future remains uncertain, but moving towards more rapid destruction
from pastoral products compared to indigenous timber stands. Part of this
by subsidising clearance activity at the expense of the forest is not only
attractive rate of return was based on the fertility of newly cleared lands.
counter to allocative efficiency criteria, but over-rides the precautionary
At the same time the flood of timber stands thrown onto the market'
principle and assumes little responsibility for future generations' welfare.
depressed their value, confirming the perception that farming was the best
The extent to which past or present generations bear responsibility for the
land use choice. In the longer term therefore the indigenous forest capital
future consequences of their actions is a matter of debate, but intrinsically
stock was depleted (degraded) for short term gains. Rational economic
it is no less important a matter than is the question of intra-generational
forces may well have set off the process but political rhetoric and
equity.
economic myopia assured its rapid continuation, probably past any
appropriate cross-over position.
Deforestation and agricultural expansion resulted from
growing
international trade pressures in nineteenth century New Zealand.
The point in time at which a possible trade-off was reached in New
Technological changes opened new markets through reducing transport
Zealand would appear to lie in the early part of the twentieth century.
costs and introducing refrigeration.
This represented a shock to the
The true price of timber was disguised rather than revealed by subsidies
system, given its rapidity, which the system responded to in dramatic
and other interventions and over rapid depletion was the result. Social or
New Zealand possessed a large area of forest relative to its
environmental costs were not given serious consideration before 1920.
In more densely
The timber industry expanded somewhat haphazardly as the result of a
settled areas such as Europe, the history of deforestation had been a
mining or quarrying operation of the area being cleared. Whilst export
relatively long drawn out process, with timber always occupying an
logging may have deleteriously affected one particular species, Kauri, in
important part in the rural economy. Societies faced with a more rapid
general it was not the external logging trade that was the root cause of
adjustment process appear to over-emphasise the need for a rapid rate of
deforestation in New Zealand, any more than is currently the case in
depletion. They fail to set an appropriate level of royalties and in fact
Amazonia.
subsidise the destruction process.
environmental and economic costs, imposed on standing timber whether
fashion.
population size and dramatic change was possible.
An appropriate level of royalty payments to cover both
for clearance or for use as an input, may be an alternative to state
The implications of the way in which adjustment was achieved may
ownership. In colonial New Zealand the real problem was that neither
include short term gains at the expense of long term degradation
was tried, subsidised clearance was the chosen path.
problems.
Amazon seems set to repeat the dose.
Currently some have attributed some cases of resource
degradation to poverty (see Perrings, 1989).
In the New Zealand
The Brazilian
QUANTITY (miliion sup. ft.)
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1848
1853
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1868
1873
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+·Pastoral
1893
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1903
1908
1913
1918
31
30
CHART 3: ROYALTIES ON SAWN TIMBER 1885-1920
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(/)
0
c
0
<D
0
"'
"'"'
(/)
I
[\
F
~~~L____J__ _ _I ~
OllO • IJHIIOJ-"
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UNIVERSITY OFI
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