Skip to comments.Crony Capitalism Comes to the Fishing Industry
Posted on 02/11/2011 8:18:25 PM PST by Vob
Michael Milken evokes thoughts of financial wisdom at a level far beyond that of an unsophisticated fishing industry essayist like me. So, when one of the sessions at the Milken Institute Global Conference 2009 is titled "Innovative Funding for Sustainable Fisheries and Oceans," I take notice. The panel for the fisheries session was moderated by Larry Bond, a consultant for the Environmental Defense Fund (EDF) and the speakers were David Crane, David Festa, Jerry Schubel, and Jason Winship. Two members from EDF and none from the fishing industry, oh, well.
The audio of the session is fascinating, particularly that of Mr. Festa, an engaging presenter. Mr. Festa, a vice-president of EDF, is also chairman of the Conservation Committee of the Sea Change Investment Fund (managed by Jason Winship, another of the panelists), and served on Obama's Department of Commerce Transition Team. He envisions a "complete redefinition of our relationship to the natural resource [the fisheries]." By this, he means that the fisheries will all be converted to catch shares, a highly controversial approach sponsored by EDF. This will present a "business opportunity" and require capital.
The macro-economic status of the fisheries is essentially a threatened hostile takeover of the industry by the investment interests of the EDF and other environmentalist organizations. In a recent article, Nils Stolpe asks, "Is this the future of fishing?" His answer is alarming.
What is the micro-economic status? Consider the simplified but typical example of Boat A and Boat B. Each boat has an owner/captain and three crew members. Each owner is gifted by NOAA with an identical individual transferable quota (ITQ) or catch share. Neither boat can fish profitably with the catch allocation that the gifted share carries. A deal is struck. Boat A leases Boat B's share. Boat A goes fishing and Boat B's crew goes on unemployment.
Boat A has a good trip and the catch brings a good price. Revenues look good to the EDF bean-counters. But, because expenses have been significantly increased by the need to lease allocation, the monies to be divided by the crew are less than they used to be. Take-home pay suffers.
Dr. Jane Lubchenco is Obama's anointed head of NOAA, the agency responsible for the management and administration of the fisheries. She has a talent for avoiding quotable sound bites. Still, it has been widely reported that she favors a significant reduction of the fishing fleet and she has been quoted as saying that a catch share is, "A negotiable stock that fishermen can sell as they go out of business, allowing them to exit with some cash."
In the Boat A/Boat B example, the fleet of two has been reduced by 50%, owner B has left with the money from leasing his share, four jobs have been lost, and the other four jobs are paying less. While Dr. Lubchenco gets a gold star in prognostication, this is not the change for which we had been hoping.
The above is an example, a hypothetical. For a scholarly and well-annotated discussion of the economic negatives of catch shares, see "The Elephant in the Room: The Hidden Costs of Leasing Individual Transferable Fishing Quotas" by Pinkerton and Edwards. Other references that depart from the propaganda of the EDF and point out the dangers of catch shares can be found here, here, and here.
But these are just references, words, pieces of paper. To truly understand, you need to walk the docks of New Bedford or of Gloucester or of Portland. Remember Neutron Jack Welch of GE, who would buy a business and soon the buildings would be left but the people would be gone. Well, Neutron Jane Lubchenco has a similar effect. Walk the docks on the first of May, the one-year anniversary of catch shares in New England. You will see the boats, they will be there, they will be empty, and the people will be gone.
In an earlier essay I said that catch shares; given decent management, restrictions on who can buy shares, and most importantly reasonable allocations, is a viable management technique. I received feedback from American Thinker readers that has convinced me that I was wrong. The economics of catch shares will drive the consolidation of the fleet (the Neutron Jane effect). Restrictions on who can buy shares, while a liberal/progressive feel-good idea, relies on legislating against human nature. Imagine the law suit should a financially disadvantaged fisherman be disallowed from selling his shares because of such a law. I understand that the New England Fisheries Management Council adopted limitations on the number of shares that can be held by any one entity. Good try. It will slow things down, but it will ultimately fail.
So, what will happen? Let us return to Mr. Festa who is not very complimentary toward current day fishermen, comparing them to the bar scenes in the movie "The Perfect Storm." He says that the fishermen in the "incumbent industry" have a "series of part-time" jobs and that they must survive a "valley of death" while the industry is "rationalized" under catch shares. He views the transition as a favor to fishermen.
The public-private partnership implied by Mr. Festa in his Milken presentation is ugly and open to ethical criticism, crony capitalism at its very worst. Mr. Festa suggests that an unvested interest, the unbridled environmental lobby, join with NOAA, the co-opted regulatory agency of the government, to destroy the generations-old fishing industry so that a new industry with a different paradigm can be implemented. He implies 400% returns.
Neutron Jane, herself a former vice-chairperson of EDF, is doing her part. Her dictatorial imposition of parsimonious catch allocations is holding down the value of the shares being gifted to the fishermen. Is this a deliberate strategy to drive the fishermen out of business? Or maybe to reduce the entry fee for the bottom-feeders that want to transform the industry? The allocations could easily be 30% higher and still comply with the Magnuson-Stevens Act (MSA).
Dr. Lubchenco's second-in-command, Monica Medina, has been tapped as the NOAA catch shares czar. Ms. Medina was a Senior Officer to the Pew Environment Group, and like David Festa, was a member of Obama's Commerce Transition Team. Her husband is Ron Klain, until recently Vice President Biden's chief of staff, the position he also held under Al Gore. The tentacles of the environmental movement go very deep into NOAA under Obama.
This is all counter to the intent and to the letter of MSA, which requires that the "sustained participation of such [fishing] communities" be provided for and that "adverse economic impacts on such communities" be minimized.
Dr. Lubchenco should be fired, and quickly, before Neutron Jane eliminates all of the people.
While the damage is done in New England, NOAA is poised to expand catch shares to the entire country on both commercial and recreational fishing. Congress should place a moratorium on all new catch shares initiatives. This requires a national will that does not yet exist. Perhaps this essay will help.
In addition, recognize that the fishing industry is but a small example of the Obama Administration's environmental offensive using regulatory forces. Think off-shore drilling, clean coal, and natural gas; all domestic energy areas being diminished by Obama.
Mike Johnson is a concerned citizen, a small government conservative, and a live-free-or-die resident of New Hampshire. E-mail email@example.com.
Minus Phil. RIP.
I don’t think you understand what happened in Alaska. Some made out quite well but the majority lost all. This will be a trip down memory lane but Tyson Foods used to be a huge player in the crab business. Not sure now.
I instead use the phrase “crony statism” which is more accurate, albeit less common.
In brief, capitalism invokes free markets, free trade, with a fair and level playing field for all participants where the rules are enforced regardless of stature.
Cronyism is an un-level playing field; dishonest players with the help of corrupt referees create disadvantages to competitors.
Statism is the ready willingness of government actors who collude so easily and instinctively with powerful private interests — that means unions, too!— to tilt the playing field.
God Bless Mark Levin for making "statism" an "unpopular" word by repeatedly using it in his NYT best-seller "Liberty and Tyranny."
The bald guy is Don Tyson for those of you on the younger side.
And who, dammit, should make those decisions?
I've been seeing this happening way too long and it makes me sick when each even more egregious example pops up. I could care less about fish, I don't like fish.
But the Dr. Frankenstein Congresses, cranking out an endless series of monsters has got to stop.
Unless they want to see millions of citizens going postal.
NOAA quite clearly has gone from researching and promoting understanding, to becoming judge and jury of the entire process, and giving elected representatives and the stupid citizens a fait accompli, and making the social and economic decisions themselves.
Isn't that sweet?
Rule by appointed, unanswering delusional sociopath bureaucrats!
This has got to freaking stop!!
There is a huge zoo of these alphabet soup agencies which have been "playing this game" for decades.
We need somehow to elect a Congress (both houses) with a collective science IQ greater than 100.
Anything that bears the name of Michael Milken stinks in my book.
THis sounds like a carbon trading-like scheme for the commercial fishing industry and needs to be kneecapped in its infancy. I have an enormous amount of respect for commerical fisherman. New England birth does that but I spent many days in my choildhood summers around the docks of Rhode Island watching the hard and dirty work they do day in and day out, in all kinds of weather. They’ve done it for hundreds of years without such “help”. Leave them alone.
This is much bigger than just fish. Marine spatial planning, ocean zoning, marine payments for ecosystems services, catch shares, are all the precursors for public private partnerships. These partnerships will control and profit from our marine resources. Fisheries, energy, shipping, military uses, and recreational activities will all have to starting paying to play.
The big question is who will they pay? ENGO’s or foreign governments.
It is the same group of people and they have big plans.
anti-dog eat dog rule —ala ayn rand.
He's one of about a dozen Texas billionaires who met with Kay Bailey Hutchison when she first expressed interest, in 2005, in running to succeed Rick Perry as Governor of Texas. She and her husband had just adopted kids and were looking forward to returning to Austin to raise them, and she thought the governor's job would be a good step in that direction.
The billionaires, led by Tyson, Bo Pilgrim, one of the Trammell Crow family, and homebuilder Bob Perry among others, told Kay in no uncertain terms to get her butt back up to Washington and be a good little senator.
As one of them put it, "I've got good money invested in Rick Perry, and I damn sure want to get my money's worth!" The meeting was reported as an eyewitness story in the Houston Chronicle. Normally the Chron's political reporting isn't really trustworthy, but this sounded absolutely raw -- and true.
Remember the "Soylent Corporation"?
Administering poverty and want, one handful at a time -- the essence of socialism.
Nineteenth-century "ordoliberalism" answers this description. Open markets and honest cops to keep the combinations and crooked players in check.
So named from the extinct German theoretical journal Ordo, "order", where classical liberals and ordoliberals debated the efficacy of the market as a self-policing mechanism. (The very subject in which we've all been handed our ass, courtesy of Alan Greenspan, "Poppy" Bush, and Bob Rubin, among others.)