A Free Market System
Greetings,
Many people would agree that the United States economy is based on a free market system. What is a free market system? According to an article written by Marc Orlitzky, fact checked by the editors of Encyclopedia Britannica, “a free market is an unregulated system of economic exchange in which taxes, quality controls, tariffs, and other forms of centralized economic interventions by government either do not exist or are minimal. As the free market represents a benchmark that does not actually exist, modern societies can only approach or approximate this ideal of efficient resource allocation and can be described along with a spectrum ranging from low to high amounts of regulation.”
In a Copilot Search, “a free-market economy is an economic system where the production and sale of goods and services occur with little to no government control. Prices are determined by supply and demand, and voluntary exchanges between buyers and sellers drive the market. In this system, individuals own resources and make decisions about buying, selling, and producing goods without centralized authority intervention. One of the central principles of a free market is the concept of voluntary exchange, which is defined as any transaction in which two parties freely trade goods or services.”
It is no secret that the logging workforce, or the potential lack thereof topic, is placed on a plethora of agendas for forest industry organization events. Some might ask why loggers are getting out the forest industry and going into fields of work that are more financially beneficial. The answer is simple. One reason is that the voluntary exchange of goods and services provided by loggers is no longer viable. It is simply not possible to sell goods for a long period of time when the value of the goods has dropped to mid-2000 pricing and the cost of doing business has increased 200% over the last 4-5 years alone.
The second reason is that markets have become very undependable for all producers and especially small producers. Just like the small farmers, they are being forced out of business because they no longer have the support of locally owned family run banks for their financial needs. Looking back, the locally owned banks I used to deal with have been bought out and replaced by giants such as Wells Fargo, Associated, Citibank, and others. Just like the banks which would rather deal with large customers, it is more cost effective for wood purchasers to deal with a handful of large producers as opposed to 100’s of small ones.
Think about this, the Federal Reserve was created in 1913 to add stability to the banking system. Despite the perceived stability, 5,711 banks went broke between 1921 and 1929 and the Fed also allowed over 9,000 banks to fail from 1930 and 1933 during the Great Depression. How is that for stability? That’s the same time frame in which the demise of the small farmer started. It was those small locally owned family banks that had personal relationships with the local farmers and had no problem borrowing them money for their farming operations. The saddest part about the Great Depression bank failures, is the farmers lost every penny of savings they had in those banks without opportunity to recoup their loss. On the other hand, they were given more time but were still held accountable to repay their debt according to the terms of their loans. How’s that for a fair playing field?!?!
As mentioned in an earlier quote it was stated that “interventions by government either do not exist or are minimal.” With all of today’s laws and regulations a person must wonder how the word “minimal” was defined when the free-market system came into existence. What role does government play and what role should it play?
Legislation, called the “Wisconsin Forestry Revitalization Act,” was recently introduced in the Wisconsin State Senate. The legislation calls for a $210 million state investment to attract and support the future location of a Sustainable Aviation Fuel (SAF) production facility near Hayward Wisconsin. The legislation calls for $60 million in tax credits and $150 million in bonding to support upgrading the infrastructure needed to support the SAF plant operations. The argument could be made that the investment is entirely for that business, however there would be nothing to stop another business from moving to that area once the infrastructure project themselves are completed. It is our understanding the infrastructure upgrades included are electrical grid, gas supply lines, and wastewater treatment facilities.
This question is whether the investment interferes with the free-market system and whether it’s a good investment of taxpayer money? Guaranteed government will most certainly have its say when it comes to the permitting process. Another question is, will the entire state see a gain from this project, or will the gain be realized by just one, two, or maybe a three-county area? GLTPA would argue that the entire state will gain and here’s why. Beginning in 2020 the Lake States Region lost several wood consuming mills. The fact is that they are gone and never coming back.
Because of this industry loss, it is becoming more and more evident that forest health is declining at a much higher rate than when the mills were running and consuming raw forest products. If forest health declines and recreational opportunities dwindle greatly, doesn’t everyone lose? Isn’t a healthy forest where clean air, clean water, and abundant wildlife habitat are found much to everyone’s benefit? Without a healthy forest industry, healthy forests rarely exist. At least not in this part of the world.
When examining Forest Inventory Analysis, it becomes even more clear that the region’s forests are losing much more volume to forest health issues than what’s being harvested. Lack of markets also creates multiple issues for landowners who are enrolled in tax law programs. When it’s time to harvest and there are no viable markets, who will cut their wood? Likely no one. Forest health and the landowner’s ability to manage their property declines even further. Considering there has not been a major wood consuming facility built in this region for over 40 years, and adding in the great loss of pulp markets, a couple of facts stand out. One is that raw wood is available, especially since recognizing that SAF can be produced from various forms of residuals that may currently not have a market. This is also true for roundwood that does not currently have a market such as smaller diameter softwoods and desirable species such as black oak, basswood and all the rest.
Ultimately the free-market system should prevail. While there may be a taxpayer investment for infrastructure that may potentially be used to attract additional businesses, the SAF plant itself will be paid for by a company willing to invest $1.5 to $1.7 billion in Wisconsin creating, jobs, economic growth, and most importantly, forest health.
Until Next month,
Henry