Mr. Rehmke heads the Economics in Argumentation program for the Reason Foundation, 2716 Ocean Park Blvd., Suite 1062, Santa Monica, CA 90405. This article is adapted from the April 1989 issue of Econ Update, published by Economics in Argumentation.
Time began its January 2, 1989, “Planet of the Year” issue with a two-page photo of a burning Brazilian forest, and declared: “Man is recklessly wiping out life on earth.” A February 23, 1989, Rolling Stone article, “The Scorched Earth,” shows cattle in the state of Rondonia in western Brazil nibbling at still-smoldering shrubs.
Government-sponsored television advertisements, says Rolling Stone, encourage impoverished Brazilians “to seek their fortune in the farming, ranching, mining, lumber and hydroelectric projects under way in Rondonia.” The article explains that the 900-mile Highway BR-364, financed by the World Bank, cheaply transports settlers to Rondonia from urban areas.
Nearby, in the western state of Acre, residents depend on the Brazilian government for 85 percent of their income. But these subsidies are only the latest in a long series of uneconomic policies subsidizing rain-forest development.
The Brazilian military has insisted that building roads and settling the Amazon basin is necessary for national security. “The Amazon is ours,” declared Brazilian President José Sarney, in an April 6th speech announcing a new internationally financed program he said would “permit the rational siting of economic activities” in the Amazon basin.
The speech was reported to be strongly nationalistic, and many Brazilian officials see pressure to limit Amazon development as part of a “campaign for the internationalization of the Amazon.” General Leonidas Pires Goncalves, Brazil’s Army Minister, recently complained of “that tiresome grinding on and on” about forest destruction. Meanwhile, Fernando Cesar Mesquita, head of the new Brazilian environmental agency, be lieves “There is a true danger of foreign occupation of the Amazon.”
Citing “national security” to justify uneconomic programs is a popular ploy for special interest groups around the world and is certainly not unique to Brazil.
Subsidizing Rain Forest Destruction in South America
The cattle-ranching and road-building projects that first drew Brazilians into the Amazon were heavily subsidized with funds from the World Bank, the Inter-American Development Bank, and the International Monetary Fund. By 1983, the Brazilian government had spent $2.5 billion to subsidize deforestation for large- scale cattle ranching that, according to the World Resources Institute, “would not he economically viable in the absence of the subsidies.”
After decades of subsidizing cattle ranching in the Amazon, the Brazilian government apparently decided it needed to subsidize farming communities to balance the concentrated wealth of cattle ranchers. The Polonoroesta plan, a project in northern Brazil funded by the International Monetary Fund, foreign lenders, and the government, was to develop 100,000 square miles of tropical forest for small farmers. Seventeen percent of the land has been deforested so far.
Yet the program, in addition to being environmentally destructive, has apparently led to an even greater concentration of land in the hands of ranchers. After a section of forest is burned, nutrients left in the ashes support only a couple years of crops. With the nutrients exhausted, the soil will support only grasses—making the land suitable for raising cattle.
Local cattle ranchers then purchase the land cheaply, and settlers move on to raze new acreage. The burning program continues to redistribute income from taxpayers (both domestic and foreign) in order to provide subsidized labor and !and for cattle interests.
In “How Brazil Subsidises the Destruction of the Amazon,” The Economist (March 18, 1989) cites a new World Bank study outlining a variety of misguided policies: “Brazil’s laws and tax system have made deforestation and ranching in the Amazon artificially profitable.” High inflation encourages people to invest in land, since money savings are wiped out. Agriculture is exempted from taxation, so legitimate farmers are bought out by those looking for tax havens, and farmers then move deeper into the forests to clear new land.
Land taxes on unimproved land are reduced 90 percent when cleared for crops or pasture, thus punishing private preservationists. Tax credits subsidize money-losing development schemes, generally benefiting rich cattle ranchers at the expense of poorer Brazilian taxpayers. Finally, government regulations give “squatters’ rights” to those who wander onto private land and begin using it “more effectively,” i.e., clearing the forests and planting crops. However, this last policy seems to work both ways: The New York Times recently reported that the squatters’ rights policy has allowed rubber-tappers in some areas to delay landowners’ plans to clear forests.
The Brazilian government, however, isn’t alone in subsidizing forest destruction. A program operated in the U.S. by the Forest Service and the Bureau of Land Management (BLM) transforms forests in the Southwest into grazing land for leasing—at below-market rates—to cattle ranchers.
“Engines of the Public Good”
Known as “chaining,” this U.S. Forest Service practice destroys pinon and juniper forests on Federal lands in the American Southwest. Giant tractors, pulling either end of a 600-foot, 60,000-pound anchor chain, rumble across the land ripping out shrubs and trees—“cleansing” the land for grasses and, later, cattle grazing. Economist Terry Anderson notes: “Between 1960 and 1972, the BLM chained nearly 300,000 acres in Nevada and Utah, and the Forest Service, more than 80,000 acres. More than 3,000,000 acres, including land in Arizona and New Mexico, have fallen to this destructive and expensive practice."
Brazilian burning reduces the diversity of species as tropical forests are cleared and replanted with single crops. The BLM’s chaining program does much the same thing. Forest Service reports, notes Ronald M. Lanner, show that chained areas contain “about 50 species of fish, 66 reptiles and amphibians, 75 mammals, and 140 birds in and around the pinon-juniper woodlands.” The “twenty-two common shrub species, fourteen grasses, and seventeen forbs [herbs other than grasses]” are replaced by the Forest Service with a single species of Asian crested wheat-grass.
Calling chaining a “plant control program,” the Forest Service claims it is “rehabilitating” grasslands. The Forest Service, unable to lease scattered pinon-juniper woodlands for logging, has labeled them as “uncommercial forests.” Much like burning in the Amazon, chaining is a process of converting uncommercial forests into commercial rangelands. Then, again as in the Amazon, these converted rangelands subsidize local cattle operations.
Lanner explores the Forest Service logic that leads to chaining: “active, on-the-ground management passed from frustrated timber-oriented foresters to range managers whose professional objective is the production of red meat. Trees are more of a hindrance than a resource to range managers, and chaining is an attractive method of removing them.” The Forest Service and the BLM so vigorously and imaginatively defend the benefits of their “plant control program” that Lanner refers to the chain-pulling D-8 class tractors as “veritable Engines of the Public Good."
From the jungles of Brazil to the southwestern U.S., special interest groups fuel forest destruction. Both projects would be unprofitable without governments’ shifting development costs to taxpayers.
Subsidizing Rain Forest Destruction in North America
The same is true in the Tongass National Forest in Alaska, one of the world’s last temperate zone rain forests. The Forest Service subsidizes logging operations in the Tongass rain forest, which lose 98 cents for every taxpayer dollar spent. Logging jobs bolster the local economy, but cost U.S. taxpayers an average of $36,000 for each job created. The benefits are concentrated, creating Forest Service and logging company jobs (and profits) in the area, while the costs are spread out among U.S. taxpayers.
In the Tongass National Forest, and in other U.S. forests, government-built roads subsidize logging, just as Brazilian government roads subsidize logging and burning in the Amazon. The U.S. Forest Service has built 342,000 miles of roads in the national forests.
According to a study by the National Center for Policy Analysis: “These roads, primarily designed to facilitate logging, extend into the ecologically fragile backcountry of the Rocky Mountains and Alaska, where they are causing massive soil erosion, damaging trout and salmon fisheries and causing other environmental harm. Because the costs of these logging activities far exceed any commercial benefit from the timber acquired, this environmental destruction would never have occurred in the absence of government subsidies.”
Road building does create jobs, though, and increases Forest Service budgets. The programs are driven by the logic of special interests—the benefits are concentrated, while the costs are spread out.
Tongass logging, Southwest chaining, and Amazon burning are all uneconomical projects that probably never would have been started without subsidies. Either the land would have been left alone, or other less destructive practices would have been developed.
Indians in the Peruvian Amazon, for example, have apparently learned how to cultivate the rain forest in profitable and environmentally sound ways. The Economist (February 11, 1989) cites a Peruvian study showing “the value of the products of a natural forest exploited sustainably for its fruit, rubber and timber, exceeded threefold the value of beef that the land would produce as pasture.”
Saving the Wilderness by Freeing the Cities
Many environmentalists, possibly influenced by Malthusian arguments, believe that overpopulation and economic growth alone force settlers into the Amazon rain forests, and into other tropical rain forests around the world. But if Brazil had an open economy, with sound money, free markets, and free trade, the opposite would likely happen: people would be drawn from the countryside into the cities, to take new jobs and share better living standards.
Cities can absorb an astonishing number of people, and when unshackled can transform low-cost labor into rapidly increasing prosperity. Singapore and Hong Kong are two recent examples of thriving cities creating wealth for their once-impoverished workers.
The mass migration of rural workers to urban areas has continued since the Industrial Revolution. People take advantage of the better jobs in and around thriving cities, leaving behind the agrarian life in isolated villages. Most Latin American economies, however, are neither free of inflation nor thriving.
Hampered by protectionism, taxes, regulations, and money-losing state-owned companies, Latin American cities have not been able to create the new jobs and prosperity needed to employ and enrich swelling urban populations. Brazilian politicians, instead of deregulating theireconomies, have dreamt up schemes to relieve urban pressure by shuttling the poor out to exploit the “hidden riches” of the Amazon.
Protection Through Ownership
Though eliminating government subsidies would make the current destruction of the Amazon rain forest (and Alaskans Tongass rain forest) unprofitable, private commercial development of the rain forests might someday be profitable.
If people want to stop future commercial rain-forest development (rather than just stopping subsidies for current unprofitable development), they should be willing to translate that desire into action. The Nature Conservancy did just that in Costa Rica recently with a $5.6 million debt swap that will finance nine local conservation projects, protecting some of Costa Rica’s rain forest from development. Another debt/nature swap in Bolivia encourages ecologically sound development (rather than just setting aside virgin forests, which does little to enhance the local economy).
If Americans want more of Latin America’s 1.6 billion forest acres set aside, they should consider buying the land, or purchasing long-term leases. In the same way, if Brazilians want to protect one of the world’s last temperate zone rain forests from destructive logging, or protect pinon-juniper forests in the Southwest, they too should have the right to purchase or lease the land.
Unfortunately, as it now stands, the Brazilian government is no more likely to let Americans purchase and protect land in the Amazon’s tropical rain forest, than is the U.S. government to let Brazilians purchase and protect land in Alaska’s temperate rain forest.
- Terry Anderson, “The Market Alternative for Land and Wildlife,” in Doug Bandow, editor, Protecting the Environment A Free Market Strategy (Washington, D.C.: The Heritage Foundation, 1986), p. 41.
- Ronald M, Lanner, “Chained to the Bottom.” in John Baden and Richard L. Stroup, editors, Bureaucracy vs. Environment The Environmental Costs of Bureaucratic Governance (Ann Arbor: University of Michigan Press, 1981), p. 163.
- Ibid., pp. 159,154.
- John Baden, “Destroying the Environment: Government Mismanagement of our Natural Resources,” National Center for Policy Analysis, Policy Report g124, October 1986.