Who is Destroying the World's Forests? R. Rehmke

Nearby, in the western state of Acre, residents depend on the Brazilian government for 85 per cent of their income. But these subsidies are only the latest in a long series of uneconomic policies subsidizingrain-forest development. The Brazilian military has insisted that build ing roads and settling the Amazon basin is neces sary for national security."The Amazon is ours," declared Brazilian President Jose Sarney, in an April 6th speech announcing a new international ly financed program he said would "permit the rational siting of economic activities" in the Amazon basin. The speech was reported to be strongly nationMr. 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. alistic, and many Brazilian officials see pressure to limit Amazon development as part of a "cam paign for the internationalization of the Ama zon." General Leonidas Pires Goncalves, Brazil's Army Minister,recently complained of "that tire some grinding on and on" about forest destruc tion. Meanwhile, Fernando Cesar Mesquita, head of the new Brazilian environmental agency, be lieves "There is a true danger of foreign occupa tion of the Amazon."

Citing "national security" to justify uneconom ic programs is a popular ploy for special interest groups around the world and is certainly not unique to Brazil. SubsidizingRainForest Destructionin SouthAmerica 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 be economically viable in the absence of the subsidies." After decades of subsidizing cattle ranching in the Amazon, the Brazilian government apparent ly decided it needed to subsidize farming commu nities 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 per cent of the land has been deforested so far.

Yet the program, in addition to being environ mentally 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 ra;isingcattle. Local cattle ranchers then purchase the land cheaply, and settlers move on to raze new acreage. The burning program continues to redis tribute income from taxpayers (both domestic and foreign) in order to provide subsidized labor and land 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 sys tem 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 ex pense of poorer Brazilian taxpayers. Finally,gov ernment 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 pol icy 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 pro gram 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 cat tle ranchers.

437 Chaining:"Enginesofthe PublicGood" 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 6oo-foot, 60,000 pound anchor chain, rumble across the land rip ping 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 300,000acres in Nevada and Utah, and the Forest Service, more than 80,000acres. More than 3,000,000acres, including land in Arizona and New Mexico, have fallen to this destructive and expensive practice."1 Brazilian burning reduces the diversity of species as tropical forests are cleared and replant ed with single crops. The BLM's chaining pro gram 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 wood lands." The "twenty-two common shrub species, fourteen grasses, and seventeen forbs [herbs oth er than grasses]" are replaced by the Forest Ser vice with a single species of Asian crested wheat grass.2 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 man agement 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 trac438 THE FREEMAN • NOVEMBER 1989 Cleared land in Brazil's rain-forest region.

tors as "veritable Engines of the Public Good."3 From the jungles of Brazil to the southwestern U.S., special interest groups fuel forest destruc tion. Both projects would be unprofitable with out governments' shifting development costs to taxpayers. SubsidizingRainForest Destmctionin NorthAmerica The same is true in the Tongass National For est 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 $36,000for each job created. The benefits are concentrated, creating Forest Service and loggingcompany 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 subsi dize logging and burning in the Amazon. The U.S. Forest Service has built 342,000miles of roads in the national forests.

According to a study by the National Center for Policy Analysis: "These roads, primarily de signed to facilitate logging, extend into the eco logicallyfragile backcountry of the Rocky Moun tains and Alaska, where they are causing massive soil erosion, damaging trout and salmon fisheries and causing other environmental harm. Because the costs of these loggingactivitiesfar exceed any commercial benefit from the timber acquired, this environmental destruction would never have occurred in the absence of government subsi dies."4 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 WHO IS DESTROYING THE WORLD'S FORESTS? 439 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 prod ucts 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." Savingthe Wildernessby Freeingthe Cities Many environmentalists, possibly influenced by Malthusian arguments, believe that overpopu lation and economic growth alone force settlers into the Amazon rain forests, and into other trop ical 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 coun tryside into the cities, to take new jobs and share better livingstandards. Cities can absorb an astonishing number of people, and when unshackled can transform low cost labor into rapidly increasing prosperity. Sing apore 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 Revolu tion. 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, regula tions, and money-losing state-owned companies, Latin American cities have not been able to cre ate the new jobs and prosperityneeded to em ploy and enrich swelling urban populations. Brazilian politicians, instead of deregulating their economies, have dreamt up schemes to relieve urban pressure by shuttling the poor out to ex ploit the "hidden riches" of the Amazon. ProtectionThroughOwnership Though eliminating government subsidies would make the current destruction of the Ama zon rain forest (and Alaska's 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 willingto 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 Bo livia 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.