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David Brodwin's blog

The Right Catch of the Day

For years, many of the world’s wild fish stocks have dwindled as we pursued too many fish in the effort to feed growing populations. The North Atlantic cod is close to extinct from a commercial standpoint, and Atlantic oyster production has fallen 99 percent from its high in the 1920’s.

This type of problem is well known to economists as the so-called “tragedy of the commons,” first recognized in England in the early 1800s. Too many sheep were let loose on public land, and their overgrazing ruined the fields for all. Since then, policymakers have struggled to devise solutions for managing shared resources – grazing lands, forests, fisheries, air and water – to preserve their value for future generations. Sometimes, seemingly good solutions backfire.

Until a few decades ago, fisheries were managed on the principle of “first come, first served.” Catches weren’t managed or limited, and some fisheries were decimated. Then an approach called “Individual Transferable Quotas” was implemented. Under this approach, each fisherman was awarded the right to catch a certain percentage of the total annual allowable catch, which was set each year. The idea was that if each fisherman owned a percentage share of the total, they would have a strong incentive not to overfish and destroy the fishery, since that would of course destroy the value of what they owned. This was supposed to protect the fishing ground, and also protect the economic security of individual fishing operators.

Unfortunately, the quotas brought about significant economic and ecological harm, and losses to consumers. Individual Transferable Quotas – now referred to as catch shares – are transferable, which means they are easily bought and sold. Quickly, they have been accumulated, in some cases by investors that never went anywhere near a boat, in other cases by large agribusinesses concerns. Economies of scale have grown overwhelming due to the costs associated with permit-trading and permit-leasing.

Although catch shares are promoted as a means to protect the fish and small-scale fishermen, the new system has had a devastating effect on the latter. Individual fishing operators, the small businesses of many coastal areas, were turned from entrepreneurs and business owners into sharecroppers and day laborers. All but the largest and most “efficient” operators were beached. In more recent transitions to catch share management, the economies of once-vibrant fishing centers have begun to suffer. 

Consumers are suffering too. Highly concentrated market share rarely yields the highest product quality, choice or price points. Labeling fraud is now rampant, as fish is mislabeled in an effort to get consumers to pay premium prices for low grade fish.

Some of this could be overlooked if Individual Transfer Quotas did a superior job in protecting the fisheries. But for the most part, they haven’t. Quotas were set based on catch history – those who caught the most historically got the largest piece of the pie. Quota owners found ways to manipulate the system. Many valuable fish were dumped overboard, dead, as by-catch, so that fishermen could maximize their haul of the most valuable species. In effect, what the quotas accomplished was a transfer of wealth from America’s small fishing operations and fishing towns to large agribusiness operations and absentee investors.

None of this should surprise us. Our society is suffering the consequences of over-privatization and consolidation in other parts of our economy such as agriculture, education and health care.

But the small fishermen and women of America’s coastal towns are fighting back. They’re inspired by the new economy ideas. They are adopting new practices from local food movements, which have connected farms with nearby communities, introduced safer and more sustainable farming practices, and emphasized high-value, mostly organic produce and humanely raised livestock over cheap, mass-produced crops and meats.

The economic value of food production cannot be measured in commodity prices alone. More is involved than the price of fish sticks or high-fructose corn syrup. The total economic value of the industry needs to take into account the nutritional, social, economic and ecological value of the food produced, which varies depending on what is produced and how it is produced. The value depends on proximity between where the food is caught, raised or grown and where it is consumed, because nutritional value and enjoyment diminishes with transportation time while carbon footprint increases. The value depends on how much of the money “sticks” to provide decent livelihoods for the individuals involved in production and the communities in which they live.

Regulators are beginning to pay attention to the bigger picture. The federal government’s National Oceanic and Atmospheric Administration is charged with regulating fish stocks, habitats and fishing practices under the Magnuson-Stevens Act; its Greater Atlantic Regional Fisheries Office recently put forth a draft strategic plan that acknowledges the importance of the whole fishing industry value chain and all its stakeholders. The recent plan was praised by organizations dedicated to preserving local fishing and fishing communities. These include the Fish Locally Collaborative network convened by the Northwest Atlantic Marine Alliance. Said Niaz Dorry, coordinating director of the alliance, “We applaud the Agency for finally hearing that there are better solutions than privatization and consolidation of the fishing industry. Community based fishermen globally are challenging the status quo, sometimes even putting their lives on the line as they create solutions that can truly protect our ocean commons. This effort by NOAA is a good first step in acknowledging the blood, sweat and tears shed in creating these alternatives.” (You can add your name an open letter praising the new plan.)

Meanwhile individual fishing operators and their associations are taking steps to promote resilient fishing that doesn’t depend on regulatory changes. They’re building Community Supported Fisheries. Modeled after Community Supported Agriculture, these connect small-scale fishermen to local consumers. They’re raising money to create cooperatively-owned processing and distribution facilities. They’re tapping into demand among institutions like schools, hospitals and hotels, that would benefit from a steady supply of fresh-caught local product. And they’re funding research into better ways to commercialize fish byproducts, turning fish scraps into fertilizer and including cod skin in high tech bandages for diabetics.

America’s fishing industry is a crucial part of our food system, coastal economy and an important link to our past. As we tinker with market structures to solve the tragedy of the commons, we must save the fish while creating solutions that support and protect the entire value chain.

David Brodwin is a Co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report January 16, 2014.

The Gloves Come Off

Earlier this week, leading economists got into a rare public kerfuffle over the core ideas that undergird the U.S. economy. The annual meeting of the American Economic Association usually draws little public notice as economists pore over PowerPoints dense with graphs and formulas. But this year, a tense confrontation developed between mainstream, neoclassical economists and those who challenge the conventional wisdom about how the economy works.

One challenge was ignited by the ideas of Thomas Piketty, whose best-selling 2014 analysis of inequality caught mainstream economists by surprise. Anyone who hasn’t been living in a cave knows that inequality has soared, breaking records that go back to 1928, before the Great Depression. Piketty showed that the rise in inequality reflects a fundamental and ultimately damaging dynamic of capitalism; it cannot be brushed aside as a temporary and self-correcting imbalance, nor the result of workers failing to obtain the right education.

Piketty’s analysis poses a challenge for conventional economic thinking and raises significant policy questions. He argued that inequality will rise to dangerous levels, except: when interrupted by major disasters that wipe out accumulated wealth (as World War I and II did in Europe); when major economic crises lead governments to change the rules of the game (as with the New Deal); and during rare periods of truly exceptional growth. The neoclassical orthodoxy wants to believe that inequality is more or less a sideshow, of no great significance. The mainstream has struggled to respond to Piketty’s extensively researched and well-argued work; several sessions at the conference dealt with this topic.

While panelists debated inequality and other issues, a group of protesters led by Keith Harrington, who studied economics at the New School for Social Research, brought provocative tactics to challenge mainstream views and draw media attention. Harrington’s team wielded its own projectors to splash tough questions on the walls as proceedings were underway. It used the question and answer periods to raise uncomfortable questions that brought withering stares. For example: Why were so many leading economists utterly blindsided by the collapse of the mortgage market? Why did standard economics fail to predict the near-bankruptcy and federal bailout of most major financial institutions in the U.S.?

Unfortunately, the problems with mainstream economics go beyond the difficulties predicting and explaining major real world market failures. And they go beyond the profession’s defense of austerity theories that simply do not work in practice. The problems also involve how economics is taught and how economists are compensated. Intro economics courses do little to expose students to the diversity of views within the profession; all too often they present mainstream ideas as beyond debate, which they are decidedly not. The situation is like teaching psychology in a way that ignores the ongoing tension between talk-therapy and psychopharmacology. The logistics at the conference mirrored the problem: The mainstream neoclassical sessions took place at one hotel, the heterodox sessions were held at another, which further limited engagement.

Another challenge in economics is the way that faculty augment their university salaries as consultants to major financial firms. The Academy Award-winning 2010 documentary “ Inside Job demonstrated the problem in its exposé of the mortgage crisis: While professors in economics departments and business schools rake in consulting fees, they advise the highest levels of government on policies that directly affect the performance of the clients that are paying them. Why shouldn’t econ faculty have to disclose potential conflicts of interest in the same way that medical school faculty are required to disclose their consulting contracts with drug companies?

This week’s confrontation was much more of a beginning more than a conclusion. Much work lies ahead to create an economics that provides the basis for a just and sustainable society. But the crucial questions are being raised in more public way, and other major media are covering paying these important debates that shape our world. It’s a good start.

David Brodwin is a Co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report January 9, 2014.

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