Monday, December 19, 2011

The MIS ponzis - who loves a monoculture?

I am just back from the Green Triangle, from canoeing the Glenelg, four days actually, and driving via Warrnambool and then back by Byaduk and Penshurst you cannot miss the plantations, rolling like dark water over the hills and valleys mainly pine, some gum (blue gum). The soil up this way is poor for farming but fine for pine. I am guessing the pines like the acidity of limestone soils.
            Much of the planting was the result of the failed managed investments schemes Great Southern and Timbercorp. A managed investment scheme (MIS) allows investors to pool their investment and pay a manager to manage on their behalf. As I understand it investors were encouraged to take the maintenance costs out as an upfront tax deduction and that was the attraction of a managed investment scheme. Timber has the advantage as do a number of agricultural products where there are high maintenance expenses over a long period of time, in tax terms that generated a good deduction that was brought forward to the time of the investment. It seems an artefact to me, just too clever: short term thinking harnessed to a long term product. There was something of the ponzi to the way the schemes managed the funds they attracted, buying production to keep the price up. And then the tax department I have been told disallowed bringing so much of the expenses to the time of the investment and ruled that the expenses had to be deducted closer to the time they were incurred. Owww. That’s a convenient explanation but not accurate. There was tax doubt but governments and the ATO worked to reassure investors. Maybe it would have been better if they hadn’t.
            In the meantime a lot of land had been bought and a lot of trees had been planted, and not just in the south-west of Victoria but as far away as the Tiwi island, which was controversial.
            The idea of the plantations is to grow trees fast and to industrialize the farming of timber. Plantations are monocultures – one tree species spread over a landscape like a disease. The industrialization of forestry means that many forestry values, say those espoused by Aldo Leopold are destroyed. It is all about the money and systems to reduce costs. It is about shortening the forester’s traditional long vision to something as short as a tree’s life can be squeezed into. It is about industrializing forestry, which is about simplifying everything to cut costs – and also to push costs especially unknown costs into the future on to other people and future generations. A forest is not a monoculture but a living diverse ecosystem, a series of habitats, a structured mosaic of ecotopes. These plantations are sucking up water and dropping the water table. One local told me that the level of the Blue Lake at Mt Gambier had a dropped a metre. The local ecology is locked up for a long time.
            The land is only productive for two rotations of timber so some 60 to 100 years, and after that the land is depleted of nutrients and clotted with roots. Will it be useable? What are we leaving future generations? Plenty of what economists like to call “externalities”, as if these are not part of their dream of a perfect economic system.
            The MIS are a touchstone for how economics and government treats the environment, seeking short-term profit blindly. 

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