The recent government consultation on the future of Scottish forestry has left significant uncertainty among the ICF membership and the wider sector. In our latest guest blog, Ian Thomas MICFor, Partner at Landmanager.eu, offers his thoughts on the future of UK forestry.
Monopoly, Oligarchy, Cartel. All words with negative connotations for most people, unless of course you happen to be the lucky or hardworking monopoly winner.
The Scottish forestry industry is undergoing a period of unprecedented change both with the proposed Scottish Government (SG) deconstruction of the FC, and with an expansion of monopolistic tendencies within some long established forestry sectors being balanced by an increased diversity in more recently established sectors.
Specifically there are ongoing vertical mergers that combine diverse industry sectors into one unit, for example, end users of timber taking control of forestry management companies and ownership of land. In addition long established capital intensive industries that are successful, such as the UK softwood sawmilling industry, can often only expand market share significantly by eliminating the competition and absorbing them. For these industries the above actions make perfect sense and in moderation are no bad thing.
In contrast young expanding industry sectors such as biomass and alternative timber uses represent the golden age for capitalism with expanding markets, innovation and competition delivering benefits for most parties. In the UK we are currently enjoying this situation, with this sector of the forest industry providing jobs, environmental benefits and putting a very welcome and sturdy floor under the prices that timber growers achieve. In the UK forestry sector getting old is a recurrent theme, of which I am only too aware every time I put my boots on in the morning, but ageing also applies to economic sectors and systems, and it is inevitable that the biomass sector will grow, mature and then senesce with the same monopolistic drift ultimately stifling competition and failing to deliver fully for society. Monopolies…are they for real.
In the UK the control of monopoly power is carried out by the Competition Commission which is charged with ensuring healthy competition between companies in the UK for the ultimate benefit of consumers and the economy. The very existence of this long standing organization makes the irrefutable case that the tendency for monopoly is inherent in capitalism, and that it is ultimately detrimental for the industry itself, the wider economy and consumers.
The problem is that to become a monopoly can require hard work and vision, and so curtailing monopolistic tendencies can justifiably be seen as punishing success and progress. We all know that scaling up any operation or working collaboratively offers huge advantages, the question is at what point does scaling up deliver more costs than returns in the widest economic , environmental and social context. Perhaps the key to taking advantage of scale, but retaining a diverse industry could be achieved by the greater use of collaboration across businesses?
Where have we been & where are we going…
We have come a long way from the days of owner cooperatives that were the powerhouse of the UK forestry sector, but these organisations, working with the FC, delivered the forest resources we depend on today and all achieved with the priorities of the woodland owner being paramount. The tendency for the company buying & using the timber, to own the management company that advises the owner on the best markets for timber, not only represents the development of a vertical monopoly, but also presents the potential for a conflict of interest for professional foresters working in a very competitive sector. Obviously professional foresters are guided by a code of conduct, but large Corporations often have overriding basic objectives orientated towards expansion and the profit motive. Whatever well intentioned procedures are in place to prevent a conflict of interest, the pressures on professional foresters to advance the cause of the parent company may be subtle but they could be inexorable & corrosive.
Diversity is strength?
Reduced competition, reduced choice, reduced resilience, reduced collaboration & reduced equality are the price the parties outside a monopoly pay for the privilege of creating a monopoly. In forestry we recognise that diverse ecological systems potentially offer greater resilience to external challenges. We all recognise instinctively that diversity confers a degree of resilience, and this is all down to the potential for diverse system to compartmentalise and contain a system failure. However diversity comes at a cost in all systems and where the correct balance lies is both dynamic and determined by perception. Globalisation, enhanced communications and the rising power of corporations to mould the world to suit their narrow interests all accelerate the monopolistic tendencies inherent in our world order. Of particular relevance to the UK situation in relation to economic resilience is what will occur if a UK monopoly or monopolistic cluster is taken over by ever larger multi-nationals, who are then in turn taken over by ever larger multi-nationals all the way up the corporate food chain. This of course is a process that has already begun. It is argued that many of the large timber processing businesses are family run through many generations and thus have a loyalty to their country of origin, a long term view and a humane perspective on their business. This is undoubtedly a valid argument, and many of our large wood using industries should be justifiably proud of their record. However, one has only to think of such former industrial icons as Cadburys & Boots to see how even the best run family firm is ultimately vulnerable to a takeover. Once the Scottish Forestry sector becomes a small part of a larger profit focussed entity, then the capacity to influence destiny, whether as a forestry professional, or indeed a small country, diminishes considerably. Seeking to empower Communities is a worthwhile endeavour that the Scottish Government has signed up to, and control of economic destiny has to be an integral part of this process; but if the mill closes due to a decision made thousands of miles away, then where does that really leave Community empowerment?
Does the FC act as a brake on the monopoly train?
In the UK the Forestry Commission has facilitated the success of the sawmilling trade by ensuring continuity of supply and this enables sawmillers to invest a great deal of capital in world beating sawmills. Sawmillers are currently amongst the biggest fans of the Forestry Commission. This support has been supplied to the industry at considerable cost to the FC, who haven’t shut the gate in hard times as the private sector would be inclined to do, it has also enabled competition to go hand in hand with investment and scaling up. However there comes a tipping point when the lead firm in the monopoly game reaches a critical mass of market share or access to timber. At this point the leader’s dependency on the National Forest Estate becomes less important, and the FC approach of supporting competition and mills across the board becomes a negative for the dominant firm. When this happen it is in the leaders interest to dismantle or undermine the strategic support system offered by the FC, as its existence keeps its competitors in the game. Monopoly economic power goes hand in hand with political influence and soft power across many fields, so facilitating change in a direction suited to the lead firm and contrary to the interests of competitors becomes steadily easier as the monopoly grows. The development of a suffocating soft power and ability to influence decision makers manifests itself in many ways. A decline in the influence of the state sector presents opportunity for the development of monopolies/oligarchies, as the space created by political decisions and state withdrawal are instantly filled by the apex economic predator. Monopolistic firms tend to exert their influence in many ways and this varies as the monopoly matures; they may determine the agenda and direction of research efforts; they may steer education and training in the direction that suits them; they may exert disproportionate influence to steer policy and grant support to align with their objectives; they may determine best practice; they may assume many of the roles of the FC, and in short they become the default voice of Scottish Forestry.
Once a critical mass has been achieved in relation to monopolies, then in the absence of political will and independent regulation a tipping point is reached where change happens very quickly, and in the modern world all the systems in place catalyse this rate of change further.
It would be nice to present a solution to the monopolistic problem that is built into our economic system but I don’t have one to hand. However I am sure that there is one out there somewhere. Economic systems are our creation, they are not foisted on us by nature, we are not stuck with them by an act of god. Perhaps there is no problem? Regulated monopolies can continue to deliver wider benefits to society economically, and of course for the monopoly winner it is always Christmas. The lack of dialogue on this issue in Scotland either suggests that there is no problem, or conversely that monopolistic tendencies are already constraining dialog amongst forestry professionals.
