…read this one, from the Vancouver Sun.

According to the story, panelists at a forum on the future of the BC forest sector warned that the industry is completely unprepared for the long-term effects of globalization.  With the emergence of a worldwide timber market, BC is now competing against dozens of new rivals, ranging from New Zealand to Malaysia to South America to Europe.  And cutthroat competition among suppliers means one thing for timber prices:  they’re going down, down, down. 

The upshot—industry analysts predict that the extreme market competition in years to come will make the pressure of the 1980s and 1990s look ‘tame by comparison’.  That doesn’t bode well for BC, since its timber companies are only about half as profitable as those from other parts of the globe.

To add to the BC timber industry’s woes, the worldwide demand for timber may be artificially high right now, as a global real estate boom (worldwide, property values are up an astonishing 33 percent in three years) has fuelled homebuilding in the US and elsewhere.  But booms can quickly turn to busts, and if the red-hot US real estate market turns out to be just a bubble, the biggest market for BC timber could dry up.

Low prices will mean that timber companies will have to radically squeeze costs—which typically means replacing people with productivity-enhancing machines. But if the history of the US Northwest’s timber wars in the late 1990s is any guide, we should expect the BC industry to turn to blame someone else—either the government or environmentalists—for the job losses.

In the end, pinning your economy to low-priced commodities in a global market is a sucker’s game.  So if you start hearing stories about how BC’s (still lax) environmental regulations are responsible for thousands of timber job losses, and a decline in BC’s competitive advantage in forest products, don’t get suckered yourself.

Editor’s note: We asked Thomas Michael Power, Chairman of the University of Montana’s Economics Department, to comment on a new reportby BC’s Urban Futures arguing that the province’s primary economic engine is its natural resource exports. Power disagrees—and argues that true economic development has little to do with exports and everything to do with creating a web of local economic relationships.

Two and a half centuries ago, early economists in France postulated that all wealth springs from the earth: farming, timber harvest, mining, and fishing were the sole sources of value, value that then circulated throughout the rest of the economy. It was not a coincidence that the ruling landed gentry who controlled the dominant resource, agricultural land, supported this theory. In England, at about the same time, a different theory dominated: All wealth results from exports that bring in the outside income that circulates through the economy. It was not a coincidence that the rising commercial trading class strongly supported that theory.

Economics as we know it, starting with Adam Smith, developed as a critical attack on such self-serving narrow conceptions of the “origins of the wealth of nations.” But two and a half centuries later we still have self-interested parties flogging these theories rather than treating them as long discredited and abandoned historical curiosities. The Urban Futures, Inc. consulting group’s “Regions and Resources: The Foundations of British Columbia’s Economic Base” (article here; pdf of executive summary here); is the latest example.

The report argues that the BC economy continues to be almost exclusively dependent on natural resource industries operating in the rural areas of British Columbia. The greater-Vancouver metropolitan economy is simply an avaricious parasite living off the wealth generated by the hardworking folks in the hinter land.

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