Eco-extremists aren’t extremist enough

Posted on March 21, 2000 by Other News Sources

Lawrence Solomon
National Post
March 21, 2000

They have the power to crush destructive forestry firms

The eco-extremists are poised to win their biggest battle yet over British Columbia’s vast forest lands. But the eco-extremists aren’t environmental groups. The extremists are the B.C. government and major forestry companies who are hell-bent on destroying the splendour of the province’s landscape, even if they must do so at a loss.

After years of organizing boycotts on both sides of the Atlantic over forest products, Greenpeace, Rainforest Action Network, Sierra Club of B.C. and other environmental organizations sent the forestry industry reeling last August when Home Depot announced its home-improvement stores would stop selling wood products from “environmentally sensitive areas” by the end of 2002. Ikea and others have also joined this green revolution. The forestry companies, with the B.C. government as their silent partner, decided they had no choice but to negotiate with the enemy, despite the bad taste that left in their mouths. According to leaks from behind-closed-door negotiations that have taken place, before this month is out six major B.C. timber companies — Weyerhaeuser, Canfor, and Fletcher Challenge Canada among them — will have agreed to an 18-month logging halt in B.C.’s hotly contested coastal areas.

The strategy — used successfully by industry and governments elsewhere — involves co-opting environmental groups by giving them a seat at the table. The government would agree to set aside the pristine valleys that environmental groups especially covet, and the environmentalists would effectively sacrifice much of the rest.

At first glance, this deal seems a compromise between the needs of the environment and the needs of the economy. But the environmentalists have not compromised. Not recognizing the strength of their bargaining power, they have capitulated. The economy does not need the forestry industry; as it currently operates, in fact, the economy would fare much better without it.

Canadians look at our tall, majestic pines, remember our heritage as hewers of wood, view the recurring pitched battles between loggers and environmentalists in the nightly news, and assume that forest resources represent a towering part of our economy. Toothpick is more like it. According to Statistics Canada’s latest figures, the logging and forestry industry — for all the devastation it causes — only account for about one half of one percent of the national GDP. To make that one half of one percent happen, our governments spend more than $2-billion annually in direct forestry subsidies, about what they receive in stumpage for the trees, and several times as much in indirect subsidies. That makes logging a great cost — not a great benefit — to forested provinces and to the country as a whole.

It gets worse, because forest-related subsidies are deeply rooted. Manufacturing industries that use forest resources, such as various wood products and pulp and paper, are also heavily subsidized, and not just by receiving below-cost timber. These industries, which account for another 1.5% sliver of GDP, receive tax breaks and other subsidies, most recently the $100-million that the Quebec government gave pulp mills in its budget last week. To these multi-billion dollar hard costs must be added the real but impossible-to-calculate environmental costs that come of deforestation, pulp mill pollution, soil erosion and the loss of plant and animal species.

And what does Canadian society have to show for these extreme economic and environmental costs that we are expected to bear? PricewaterhouseCoopers tells us in its annual audit of the private sector operations of the forestry and forest-related manufacturing industries.

These industries’ return on capital was only 4% over the last decade, the same as a risk-free investment in Canada Savings Bonds over the same period. The industry’s total net profit came to a mere $432-million in 1998, the last year it audited, down from $460-million the year before, and $804-million the year before that. Those sums represent the totals from all the logging, pulp and paper, wood products and other companies in the forestry and forest manufacturing sectors combined, from the smallest firms to the Canadian operations of Weyerhaeuser, the U.S. giant that recently swallowed MacMillan Bloedel. For every dollar that shareholders in Canada or abroad earned, Canadian taxpayers contributed many.

Once the majestic trees are gone, the land’s highest economic value disappears. Tourism industry surveys show nature travel growing at double-digit rates. One analysis of tourist motivations found that 40% to 60% of all international tourists are nature tourists, and 20% to 40% are wildlife-related tourists. Regions that can offer true wilderness experiences become scarcer by the day. Yet instead of preserving our irreplaceable treasures, both for their ability to inspire and for their wealth-producing potential, we desecrate them.

The forestry industry’s position is blunt. And it is extreme: “Forget that we haven’t been profitable, even with all the breaks we’ve been getting. Just give us your trees and give us your money and accept that we’ll leave mayhem behind. And to show our appreciation, you take your pick of the prettier valleys — don’t mention that they’re yours to start with.”

The government’s position — “that sounds good to us” — is just as extreme.

Now that the environmentalists are prepared to strike a deal, government and industry will also be able to add: “We gave you what you asked for in our secret negotiations. Now leave us alone.”

Responses to: Eco-extremists aren’t extremist enough

Forested divide
The National Post
Tuesday, March 28, 2000
Letter to the editor
Brad Wellman, Mount Vernon, Wash.

Thanks for printing Lawrence Solomon’s piece, “Eco-extremists aren’t extremist enough” (March 21). As an American who spends my tourist dollar visiting the wilderness in British Columbia, I am finding far less pristine and beautiful places to visit up there. The loggers still seem to be getting their way. I visit B.C.’s wilderness to experience the beauty and the diversity of the old growth forest and to try to catch wild salmon, experiences we can no longer have in my home state, Washington.

I would like to see Canadians use Washington state’s logging and salmon disaster as the textbook study on how not to “manage” Canada’s forests. The sad truth, however, is that the Canadian logging industry keeps perpetuating the myth that the vital “new growth” tree farms will be better than the dead and dying ancient forests — “Just wait and see.” Well, you don’t need to wait, just look at the disaster that is going on next door in Washington! We have lost all that B.C. still has and B.C. is well on its way to the same disaster. Our dead logging towns all wish they still had ancient forests to attract tourists and to nurture our dying wild salmon runs.

Canadians need to wake up to the truth. We Americans didn’t until it was too late.

__________

John Hector, Orleans, Ont.

It has been some time since I have read such a poorly researched and poorly written piece of unscientific sensationalism. Let’s get the facts right. According to Statistics Canada and Industry Canada figures, the industrial component of the forest-products sector had $64-billion in shipments in 1999, with $44-billion of that exported, providing an enormous $36-billion contribution to our trade balance. That is more that all of the other resource industries combined. Even our automotive, high tech and aerospace industries have a tough time equalling these figures.

In addition, this component employs some 242,000 Canadians directly. Close to one million Canadians indirectly owe their livelihood to the forest sector. It is the sole employer in some 300 communities across our country and is the main employer of our aboriginal peoples.

Mr. Solomon chooses to state that we are destroying our forest resources to appease the insatiable appetite of the forest industry. Let’s get the facts right. Of the 418 million hectares of forested land in this country, 235 million hectares are classified as commercial forests, of which 119 million hectares are managed forests. Roughly one million hectares are harvested every year, but natural disturbances such as forest fires and insect defoliation affected 8.5 million hectares in 1996. Canada still has close to 50% of its old-growth forests.

Posted in Forestry | Leave a comment

The real enemy of free markets

Posted on March 7, 2000 by Other News Sources

Lawrence Solomon
National Post
March 7, 2000

 

Big corporations the biggest advocates of interventionism

Now that communism has fallen, free market advocates should train their guns on the most powerful remaining impediment to the free enterprise system. Not environmentalists. Not nationalists. Not even labour unions. The chief threat to free enterprise comes from big business.

Environmental groups, which free market types view with renewed alarm after the World Trade Organization riots in Seattle, are often apolitical and pose no concerted threat to liberalized trade. The Environmental Defense Fund, one of the largest U.S. environmental groups with 250,000 members, supports both international trade and the WTO. China’s Dai Qing, one of the Third World’s most respected environmentalists and winner of the West’s prestigious Goldman Environmental Prize, supports foreign investment and increased trade because they empower the public against state monopolies. While some environmental groups do resemble mouthpieces for organized labour (notably the Canadian Environmental Law Association, also dubbed the Canadian Environmental Labour Association), most environmental groups unambiguously have environmental goals.

Nationalists such as Mel Hurtig and Maude Barlow, though they make for great theatre, take a back seat in influencing policy — Mr. Hurtig’s National Party achieved just 1.4% of the vote in the 1993 elections, and then disappeared. Labour unions, protectionists like the nationalists, have steadily lost clout with the demise of smokestack industries. The Nasdaq index, in effect, inversely tracks the stock of labour unions: The higher the new economy rises, the lower the unionized workforce’s share of the overall economy.

But corporations are neither benign nor in decline. In almost every sector of the economy, the dominant corporations are those skilled at using their influence with government to marginalize competitors. Though some business leaders may abstain from lobbying, and others — like Bill Gates — may reluctantly lobby to defend themselves from competitors who can’t win in the consumer marketplace, the corporation that eschews politics does so at its peril. As a result, the corporate world undermines the workings of a free market as no other. Air Canada v. Onex. Brand-name pharmaceutical companies v. generic drug manufacturers. Bell Canada v. Sprint. The Big Three v. offshore automobile manufacturers. In all these cases, the ultimate battle for control of a business sector occurs in the political arena.

Free market sympathizers tend to forgive companies at the government trough, saying companies are obliged to seek every available subsidy for shareholders. The real responsibility, these advocates claim, lies with those in government who dispense the pork.

But absolving CEOs of responsibility for their role in a corrupt system of governance goes nowhere. As Adam Smith noted 200 years ago, it is in the character of business people to engage “in a conspiracy against the public or in some contrivance to raise prices.” Business people strive to establish monopolies, not to establish free markets. And their time-honoured mechanism for doing so is collusion with government.

Industry doesn’t just accept government largesse, it plies politicians with campaign contributions and other inducements to secure rules that keep their competitors at bay. The result of corporations and governments being in bed together? A system in which corporations accounted for two-thirds of the federal Liberal party’s contributions in the last election year. The major contributors were either regulated by the federal government, or recipients of its largesse.

Free market advocates also rail against governments for imposing regulations on companies, without realizing the regulations’ origins. Modern utility regulation was the brainchild of Samuel Insull, the continent’s greatest electric power tycoon, early last century. “To protect the public,” Mr. Insull argued, “exclusive franchises should be coupled with the conditions of public control, requiring all charges for services fixed by public bodies to be based on cost plus a reasonable profit.” Government regulation transformed Mr. Insull into the most powerful businessman of the 1920s, by some accounts, and so successfully entrenched corporate power that companies in other industrial sectors soon demanded regulation, too.

Other schemes for corporate control failed, but just. GE president Gerard Swope won wide acclaim in the business community for his 1931 blueprint for turning America into a fascist state. The Swope Plan called for the compulsory cartelization of all major American corporations into federally controlled trade associations, overseen by a national economic council. A poll of Chamber of Commerce members showed 90% favoured central planning.

Central planning has since had bad press, and business leaders no longer praise it by name. But several months ago, Air Canada CEO Robert Milton achieved in Canada for his sector what GE’s Mr. Swope failed to do in the U.S. The nature of business has not changed.

“Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor,” wrote Adam Smith. Those who believe in free markets, and want civil government turned into an instrument of equal opportunity for all, must call a spade a spade and do battle with real, and not imagined, enemies.

Responses to: The real enemy of free markets

Free markets kudos
The National Post
Monday, March 13, 2000
Letter to the editor

By Peter R. Babiak
department of English
University of British Columbia.

Re: The Real Enemy of Free Markets, March 7.

Just wanted to commend you on your clear and lucid argument. It was good to see that, in calling “a spade a spade,” you read Adam Smith’s take on mercantilism and government lobbies the way it needs to be read. It’s a nice antidote to the obscene free-market euphoria that passes itself off as classical liberalism these days. Excellent piece.

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Help support the mining lottery

Posted on February 22, 2000 by Other News Sources

Lawrence Solomon
National Post
February 22, 2000

Rogue industry seeks more public largesse as investors choose newer games of chance

Much of the worldwide mining industry is in financial difficulty, with many of its members scratching out a living and staring bankruptcy in the face. “A lot of drilling companies are facing Chapter 11,” warns the Prospectors and Developers Association of Canada.

Nothing much new here.

As Adam Smith noted more than 200 years ago in The Wealth of Nations: “When any person undertakes to work a new mine in Peru, he is universally looked upon as a man destined to bankruptcy and ruin, and is upon that account shunned and avoided by everybody. Mining, it seems, is considered there as in the same light as here, as a lottery, in which the prizes do not compensate the blanks, though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects.”

Mining required lottery-grade investment acumen, and more. For mining to thrive — as Europe’s leaders deemed necessary at all costs — the rights of individual landowners were crushed. “Any person who discovers a tin mine may mark out its limits to a certain extent, which is called bounding a mine,” Mr. Smith went on. “The bounder becomes the real proprietor of the mine, and may either work it himself, or give it in lease to another, without the consent of the owner of the land … the sacred rights of private property are sacrificed to the supposed interests of public revenue.”

Adam Smith wasn’t reporting on new developments. For centuries, miners in England had been exempt from ordinary taxes and ordinary rules. Miners could take timber from neighbours’ woods for use in mines, and even prevent the neighbours from cutting their own woods, if the miners might need it. Miners could freely divert streams needed by farming communities so that “nothing will remain of all that good land except great stones and gravel,” said one report that survives from mediaeval times of the effect of tin miners on Cornwall’s rich soil.

In the centuries since The Wealth of Nations was published, little changed. In 1921, after the Canadian Copper Co. (one of the companies that merged to form Inco) tired of paying compensation to Sudbury-area farmers for damage caused by the sulphur dioxide fumes from its roaster yards, the Ontario government prohibited courts from hearing future cases, a law that would soon destroy trees and other vegetation and turn that once-fertile region into a moonscape. In 1991, the Ontario government, in sympathy with mining firms that resented sharing profits with private land owners possessing mineral rights, proclaimed a law designed to expropriate their land — some 90,000 properties — without compensation. “The only way for mines to be developed and for Ontario to prosper is to take the property,” said Gilles Pouliot, Ontario’s former minister of mines.

And the mining industry’s still at it. Next month, the mining world’s elite will converge on Toronto for Mining Millennium 2000, a conference unabashedly structured to lobby governments for financial aid and access to public lands. The conference will also, for the first time, bring together the world’s mining ministers in a high-powered World Mines Ministries Forum.

The topics? How to involuntarily resettle aboriginal people, how to manage public concern over contaminated mine sites, how to subsidize the mining industry. The chair of the organizing committee? A member from the World Bank, an organization whose projects have forcibly resettled millions of people around the world, and which recently restructured Romania’s mining sector, now in the news for the cyanide spill that poisoned 60 kilometres of a Danube tributary. The speakers? They include a member of the Fraser Institute, who charges that “policy-makers are rarely accountable for the effect of increasingly onerous regulations, uncertainty about land use, and high levels of taxation.” Another is general manager of a company that’s mining big-time in Romania, who asks, “Why, at a time when economic growth is so vital to so much of the world, are we miners often so unwelcome?”

The mining industry is unwelcome for an unimpeachable reason: It is a rogue industry, which for two millennia has been in bed with despots and other unaccountable leaders, violating the property rights of small holders whose livelihoods are lost through environmental ruin, or whose lands are expropriated outright. It is also a rogue industry that doesn’t pay its share of taxes: Canada’s few profitable mining companies, for example, face effective tax rates one-sixth of those paid by the retail trades or the construction and transportation industries, while the many unprofitable companies cost the country far more in grants, tax holidays and environmental liabilities than they contribute.

In the past, that government largesse, coupled with the mining industry’s brilliance at enticing small investors into long-odds mining plays, has let it thrive. But the small investors have found a lottery that draws fewer “blanks,” to use Adam Smith’s term — the Internet and dot-com stocks. Despite a recent hot streak for some mining sectors, major brokerages such as Merrill Lynch, Lehman Brothers Holdings and CIBC Oppenheimer have cut or eliminated their metals and other commodity businesses. Some mining companies, too, recognizing that their real business is separating investors from money, not ore from rock, are following their investors to the Internet. Goldstake Explorations Inc., a TSE-listed company which recently formed Goldstake Information Technologies Inc., is raising $500-million for an Internet venture through a private placement.

With its own soul mates abandoning the cause, Canada’s vanishingly small mining industry — even with all its subsidies, it now accounts for less than 1% of GDP — has its back to the wall. But don’t count this ingenious little industry out, even if the mining ministers refuse to deliver a richer vein of subsidies for them. Revenue Canada recently came through for the industry, by deeming its salvation a charitable act, rewarded with a charitable tax receipt. If you agree, do help. Contributions to the Prospectors and Developers Association of Canada’s education wing are now fully tax deductible. Cheques can be sent directly to the association’s offices at 34 King Street E., Suite 900, Toronto, Ont. M5C 2X8.

Responses to: Help support the mining lottery

Barry Posner
Letter to the editor
Financial Post, March 7, 2000

Re: Help Support the Mining Lottery, Feb. 22.

Lawrence Solomon’s disingenuousness is broad as it is deep, as evinced by his opening salvo: “much of the worldwide mining industry is in financial difficulty …” What he paints as the seemingly monolithic “mining industry” is composed of two separate and rather disparate factions: prospectors and operators, otherwise known as juniors and seniors. It is currently (and, it seems, eternally) true that many prospecting and exploration companies are barely scratching out an existence, but the seniors are, by and large, as profitable and stable as any industry that is slave to commodity prices can be. Speaking of prospectors in the same breath as mine operators is akin to lumping small cattle farmers and MacDonald’s in the same industry; both have something to do with beef, but little else in common.

Mr. Solomon is correct when he observes that some (although far from all) juniors are established by shysters for the singular purpose of separating fools and their money. However, this phenomenon has no connection whatsoever to the seniors, whose primary goal is, in fact, to make a profit by separating ore from rock.

The primary theme of the lament, it appears, is the privileged position of miners at the public teat. The author cites no comparative statistics to show that the mining industry is a greater beneficiary of governmental largesse than any other, but even if one were to accept his ramblings prima facie, it is apparent that the blame lies at the foot of the governors. Surely Mr. Solomon cannot blame miners for simply being successful at wheedling concessions and favours out of our politicians? That is an activity every interest group, either social or commercial, partakes in. Mining firms only strive to do what every firm, in every line of business, is obliged by law to do: maximize shareholder value. It’s the ministers’ (and inevitably, the public’s) responsibility to keep the keys to the treasury out of reach, and maintain the goals of society en masse as their primary focus.

Mankind has long found itself in need of coal, oil, iron ore, copper, gold etc., and as long as it does, firms and individuals will provide those commodities via the only method available: mining. Simply put, as long as mankind exists, so will mining.

(Please note: the aforementioned views are my own, and are in no way reflective of my employer.)

Barry Posner, slurry pipeline engineer, Rescan Environmental Services, Vancouver.
__________________________________________________

Douglas Hume
Letter to the editor
Financial Post, March 7, 2000

The main problem with Mr. Solomon’s tirade is that he has been somewhat cavalier with his facts and missed the entire point of Adam Smith’s book, The Wealth of Nations. For instance, while he suggests mining properties could be occupied without leave or compensation for mining purposes in Peru, he deliberately omits Smith’s comment that “a very small acknowledgement must be paid [to owner] upon working it.”

Most of Mr. Solomon’s quotations are highly selectively used and are from the earlier parts of the book which deal substantially with the various economic components that describe the diverse workings of a nation’s productive resources. If he had fast-forwarded to page 459, he may have realized where Smith was heading.

In his Chapter Five, Smith defines the four different means of wealth creation and capital investment as follows: “In the first way are employed the capitals of all those who undertake the improvement or cultivation of lands, mines or fisheries; in the second, those of all master manufacturers; in the third, those of all wholesale merchants; and in the fourth, those of all retailers.”

Smith goes on to say, “Each of those four methods of employing a capital is essentially necessary either in the existence or extension of the other three, or to the general convenience of the society. Unless a capital was employed in furnishing rude produce [raw materials] to a certain degree of abundance, neither manufacturers nor trade of any kind could exist.”

In the succeeding 224 years, classic economists have reconfirmed Adam Smith’s assertion that society can progress only through employment of its capital resources in productive and profit-making enterprises.

With this second display of “irrational exuberance,” Mr. Solomon has dispensed some limited advice. Explorers and miners welcome and need the support they receive from society and its legislators, who understand and appreciate the benefits to our affluent society.

H. Douglas Hume, past president,
the Prospectors and Developers Association of Canada.
__________________________________________________
Tony Andrews
Letter to the editor
Financial Post, March 7, 2000

In your great wisdom you have made the ridiculous assertion that we are “a rogue industry that doesn’t pay its share of taxes.” The Canadian tax system is highly complex and defies debate by neophytes like you and me in these few lines. But a simple example will suffice to make my point. Diavik Resources, a soon-to-be diamond producer in the Northwest Territories, recently calculated what its resource income will be and how it will be distributed. Guess who gets the biggest chunk? A whopping 44% will be paid in taxes to government agencies at the federal, territorial and municipal levels, not only in the form of corporate taxes, but also as a plethora of non-profit-based taxes, levies and fees. No doubt about it — we are definitely paying our tax freight and then some!

As “Canada’s vanishingly small mining industry,” we produce no less than 58 commodities worth $50-billion annually, contribute 15% of the country’s export revenues and 26% of its trade surplus, directly employ 370,000 Canadians, many of whom live in our northern and rural regions, and our products constitute 56% of all rail freight revenue and 69% of all port volume. On top of all this, Canada’s mining industry is considered a global leader! Now there is a fact worth remembering: Canada actually has a world-leading industry!

Tony Andrews, executive director,
Prospectors and Developers Association of Canada.

Posted in Mining | Leave a comment

Insurance deregulation and the public interest

Posted on February 18, 2000 by Other News Sources

Lawrence H. Mirel, Commissioner, Department of Insurance and Securities Regulation

Government of the District of Columbia

February 18/2000

Remarks prepared for a seminar on this topic sponsored jointly by the American Enterprise Institute and the Brookings Institution.

Lawrence H. Mirel Commissioner District of Columbia Department of Insurance and Securities Regulation

Professor Harrington has made the case well for deregulating property and casualty insurance rates and forms. My role here today is to report on the impact of one such deregulation on the private passenger auto insurance market in the District of Columbia.

1. History

The District of Columbia, an entirely urban jurisdiction with a high number of automobile accidents, has historically had one of the highest private passenger automobile insurance rates in the nation1. For that reason there has been political pressure to control rates through government intervention, and until a competitive rating law was enacted in 1996 the District had a law requiring prior approval of rates for private passenger automobile insurance.2 Except for workers’ compensation, no other property or casualty insurance was subject to prior approval of rates, although the Commissioner always had (and has) the authority to review rates to determine that they are “adequate, not excessive, and not unfairly discriminatory,”3 and to order that rates not in conformity with this standard be modified prospectively.

Starting in the 1980s the market for private passenger automobile insurance became progressively distorted, as the then-Insurance Administrator refused to approve rates she considered too high. Particularly hard hit were those standard and non-standard writers whose criteria for obtaining insurance were looser than for the preferred writers, and whose rates therefore needed to be higher. Companies such as Dairyland and Progressive moved out of the District market entirely in those years, and subsidiaries of preferred writers-such as the Criterion standard writer of the GEICO group-wrote little if any business in the District. As a result, the assigned risk program (AIPSO) grew very large, eventually insuring as many as one in four insured drivers in the District. District drivers with one or more accidents or speeding tickets on their record were unable to obtain insurance in the voluntary market and had to go to the assigned risk plan, or else go without insurance entirely, as many did. For independent agents, the lack of standard and non-standard writers meant they could offer nothing except the assigned risk plan (for which the commissions were very small) to customers who did not qualify for preferred policies. Most preferred policies were (and are) sold directly or by company agents, so that the lack of competition in the standard and non-standard markets had a depressing effect on the activities of independent agents in the District.

2. Rate deregulation

In 1996 the Council of the District of Columbia enacted a law that, among other things, abolished prior approval of private passenger automobile insurance rates4. Those who argued in favor of the change-primarily people from the auto insurance industry-claimed that competitive rating would attract more insurers to the District, and that the increased competition would result in lower premiums, more choices, and fewer people going into the assigned risk plan. Those who opposed the change, including at the time the Insurance Administration, were concerned that without the prior approval mechanism, rates would soar. The Council, when enacting the law, included a provision that required the insurance regulator to report back to the Council in two years on the impact of that law on price and competition in the private passenger auto insurance market in the District. The report, which was almost a year late, nevertheless provided stark evidence that the supporters of the change were correct; the change produced more competition, reduced the numbers in the assigned risk pool, and lowered rates overall.

3. Impact of deregulation

Almost immediately after enactment of the competitive rating law, standard and non-standard companies once again started writing in the District. Progressive Insurance Company moved back into the District market in 1997, selling both standard and preferred products. Other companies, such as Travelers and Liberty Mutual, once again started competing for customers in the District, and a number of companies that wrote only preferred insurance before 1997 began writing standard auto insurance in the District, including GEICO, State Farm, Allstate, Nationwide and USAA. The trend has continued. Only recently two additional companies, Response Insurance Co. and Argonaut Insurance Company, have made filings and are starting to write private passenger auto insurance in DC Many of these companies use independent agents.

As a result of this new competition, especially in the standard and non-standard markets, the assigned risk plan quickly began to be depopulated as customers found coverage in the voluntary market. In 1997, just before the impact of the new law was felt, there were 13,395 assigned risk policies. In 1998 the number went down to 5,670, a decrease of 57.4%. In 1999 the number went down further to 2,120, a decrease of 62.6% over 1998. Altogether, from the time the competitive rating process kicked in until the end of 1999 the assigned risk plan was reduced by 84.2%.

Under the file and use provisions of the new law the companies feel free to make more frequent filings. In the fourth quarter of 1996, just before the new law took effect, there was one private passenger auto insurance rate filing. In 1997 there were 12 rate filings. In 1998 the number went up to 17, and in 1999 there were 20. As is to be expected, some of the filings were for increases, but most were for decreases-decreases of as much as 15%. Overall, according to the NAIC Fast Track data, from 1996 through the second quarter of 1999 the average earned premium on private passenger auto insurance in the District of Columbia declined by 5.5%.

4. Conclusion

The competitive market place works. Perhaps not at all times and in all places, but in the District of Columbia in the waning years of the 20th century, replacing a prior approval rate system with a file and use rate system stimulated the private market, providing more choices and lower rates for consumers, as well as more business opportunities for insurers and for insurance agents.

1According to figures published by the National Association of Insurance Commissioners (“State Average Auto Premium and Expenditures Report”), the District in 1998 had the second highest private passenger auto insurance premium rates in the nation, next to New Jersey. It should be noted that the District of Columbia often, as here, is compared with states, which is somewhat misleading since the District is in reality a city. Even among cities, however, the District’s rate is high.
2Congressional law of May 20, 1948, 62 Stat.243, ch.324, Sec. 3, as amended, formerly codified at DC Code 35-1703(f)(2).
3DC Code 35-1703(f)(2).
4Automobile Insurance Amendment Act of 1996, eff. Sept. 20, 1996 (DC Law 11-60; DC Code sec. 35-1703).

Posted in Automobile | Leave a comment

How to save the farm: More immigration, less suburbanization

Posted on February 8, 2000 by Other News Sources

Lawrence Solomon
National Post
February 8, 2000

Just as we direct immigration away from Canada and Canadian farms, we play God by replacing our best farmland with suburban sprawl

Interfere with natural cycles and court disaster. Today’s crisis in the family farm directly follows decisions to influence where, and if, people may live in Canada. Collectively, we all played God in absolute ignorance of the price to be paid down the road.

Immigrants, mostly land-grant settlers and homesteaders from Europe and indentured and hired labourers from Asia, built Canada’s agriculture industry. When farmers or their children left the farm for the city, another wave of immigrants, from another faraway place, was there to take over. They brought new dreams, new vigour and new technologies to farming, and continue to do so today. More than 10% of Canada’s farmers are foreign-born, and these are among our most entrepreneurial, and most successful, farmers. Of the landed immigrants who became farmers within the past 10 years, almost half manage farms with sales of more than $100,000 per year — a proportion that’s 50% higher than the average for all farmers. One in four of the recent immigrant farmers grosses more than $250,000, and one in 20 grosses more than $500,000.

While the number of family farms in Canada has been steadily decreasing, especially in provinces that don’t attract many immigrants, farming thrives near cities to which immigrants flock, in good part because immigrants create local markets for ethnic foods. Family farms are on the increase in Alberta, a province immigrants favour, especially near Edmonton, Calgary and Red Deer. In British Columbia, thanks largely to Chinese and Punjabi farmers who settled near Vancouver in the fertile Lower Mainland, the number of family farms soared by 12.6% between the 1991 and 1996 census. Chinese-speaking farmers own more than half of the province’s mushroom farms and more than one-quarter of its vegetable farms. In Southern Ontario, vegetable growers produce 2,500 hectares of oriental vegetables to sate the demands of the 500,000 people of Asian descent who live in or near Toronto and Hamilton.

Increased immigration would bolster the family farm, yet instead of welcoming more newcomers, whose exotic tastes will then turn up in restaurants and specialty food shops, our society thwarts the natural process of immigration. In so doing we rob our farmers of customers for their crops, of workers for their fields and of purchasers for their farms when it’s time to retire.

Just as we direct immigration away from Canada and Canadian farms, we play God by steering local migration into prime agricultural areas, replacing our best farmland with suburban sprawl. Although the Greater Toronto Area (GTA) is Canada’s most populous and most industrialized region, accounting for the lion’s share of the country’s economic output, it is also an agricultural powerhouse, producing 50% more farm output than Nova Scotia, 67% more than Prince Edward Island and 80% more than New Brunswick.

The great value of Toronto-area farms comes partly from the area’s climate and its soil. Most of the GTA is part of the 0.5% of the Canadian land mass considered Class 1 land — land that will grow almost anything — and virtually all GTA farms are in the 5% of the Canadian land mass classed as prime agricultural land. But even more importantly, GTA farms service Canada’s largest urban market, which has given the area Canada’s most diversified agricultural economy. The result: The GTA farm economy is viable in almost any economic environment, and it is largely immune to global trade wars. Unlike Saskatchewan, which depends on just three types of farming — wheat, small grains and cattle — for almost 80% of its farm economy, and which primarily produces low-value raw commodities in grim competition with lower-wage or more efficient producers, the GTA has no dominant farm type.

GTA wheat — an ancient variety called spelt found in the Horn of Africa — caters to Toronto’s Ethiopian population. GTA herbal remedies and organic vegetables stock the city’s health food stores. GTA horse farms serve pleasure riders and breeders. GTA exotic plants grace hotel lobbies and greenhouses in Rosedale mansions. GTA niche vegetables adorn plates in trendy restaurants. All told, the value of the GTA’s fast-growing specialty farming sector now matches its traditional farm production, such as dairy, pig and poultry.

Yet in its ignorance, the Ontario government is destroying this well-situated, inherently valuable farm economy through massive government intervention. As the historical land use patterns of the GTA show, after governments installed sewers, water systems and roads, suburbanization followed. Most of the suburban infrastructure that the provincial government has installed had no economic justification, and would not have occurred if land developers had been required to fully finance their expansions. Between 1976 and 1996, the province subsidized the conversion of 150,000 acres — one-sixth — of the GTA’s prime agricultural land. So, too, in Vancouver, Calgary, Montreal and other urban centres. Without further subsidy, growth of suburbs — of which we have decades of surplus — would stop dead in its tracks everywhere in the country.

Yet instead of stopping the subsidies, governments are heaping them on, using them to spur developments at the behest of developers. At the same time, governments have been subsidizing the destruction of vast swathes of wilderness, ill suited to farming, to bring it into agricultural production. At great expense, we trash our high-value farmland; then we replace it with unsustainable farms, remote from markets, again at great expense. If we keep at this much longer, we won’t have the family farm for long.

But if we stop subsidizing suburbanization, the institution of the family farm will be secure. And if we learn to see immigrants as part of the solution — especially in Saskatchewan, which more than most provinces needs population growth and the diverse farm markets that new blood brings — the family farm can prosper around Canadian cities from coast to coast, more than it ever has before.

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