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Who earns the first dollar?

Wink Sutton's Blog
Monday, May 30, 2011

In the early 1990s I attended a talk that changed how I look at the economy. The central theme of the address was the question − who earns the first dollar? Capital gains may create wealth for the individual but do nothing for a national economy.

Seven figure bonuses may be paid to successful manipulators of the global financial systems. As the bonuses are real, it gives the impression that massive wealth has been magically created. But has it?

We have the impression, especially from their earnings, that doctors, accountants, lawyers, and especially market bankers, actually create wealth. They may be well paid but only rarely do they actually create wealth. It is surprising that there appears very little evaluation of who or what actually creates wealth in an economy.

In the present global economic downturn there is much discussion of the future New Zealand economy. There is promotion of us becoming a service or tourist economy but that overlooks the fact that these industries do not create wealth. We would become more dependent on others creating wealth in the first place. Do we have any comparative advantages relative to other economies? A common feature of service economies is that they are generally dependent on relatively low wages. Do we really want that? Is such an economy sustainable in the long term?

Who, or what initially creates wealth? They are mostly industries –

  • Extractive, especially mining
  • Growing such as agriculture, forestry and horticulture
  • Manufacturing, creating goods.
  • Our future may be more sustainable and profitable if we based our economy on what are our comparative advantages −
    • A relatively low population
    • Abundant sunshine and a high average rainfall
    • Young and generally fertile soils.

We are very good at growing produce such as food and wood but appear to be not so good at marketing, and especially profitable processing. Rather than promoting
a service and tourist economy we may have a more sustainable and a more profitable future if we concentrate on better marketing and profitable processing of our primary production.

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Can we save old growth forests?

Wink Sutton's Blog
Sunday, February 27, 2011

A recurring objective of the world wide environmental movement is the demand to save old growth forests. While there is no doubt that mature natural forests are impressive, is it realistic to always permanently preserve them?

The coastal redwood trees in the Muir National Park, north of the Golden Gate bridge in San Francisco, have achieved impressive heights. The tallest trees are over 70 metres and diameters over four metres. When I visited, it was not the size that was impressive but the general degeneration of the stand. Some trees had lost their tops while the whole stand was obviously past its best.

The trees may survive another century or two but the stand will eventually collapse. The 100-year-old, or more, redwoods at Rotorua have not achieved the size of the Muir redwoods but the stand is very impressive. What so many in the environmental movement have failed to appreciate is that trees are living organisms and that all large living organisms eventually die.

The time scale may be longer than humans but trees cannot live forever. We pay hundreds of dollars to watch our elite sports teams and our favourite bands, but no one pays a cent to visit an old people’s rest home.

A mature forest stand may be impressive but ultimately the old growth trees become over-mature and die. We may wish to preserve old growth forests but in the long term it is not possible.

If we want to continue to maintain mature trees we should manage those forests and not simply just preserve them. As in most of the world’s forests, old growth stands eventually collapse, it is unrealistic to save old growth forests simply with preservation laws and orders that prohibit stand management.

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Disclaimer: Personal views expressed in this blog are those of the writers and do not necessarily represent those of the NZ Farm Forestry Association.

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