Arguments in favour of privatization are grounded in the belief that market forces promise an efficient allocation of scarce resources among alternative uses so that maximum social welfare is attained. The market economy logic reveals many pathologies associated with B.C.’s public forest ownership, which empowers the government to decide on the rate of timber harvest, determine the levels of stumpage fees, and dictate forest practices. The fulfilment of this mandate requires a large Forest Service. However, constant changes in the forest resource base versus social expectations compels the Forest Service to frequently alter its planning and delivery processes. If the Service wishes to play the role of a chief steward of the public forests and concurrently strike a balance among various stakeholder groups that hold conflicting interests, the bureaucracy is likely to swell, accompanied by rising public expenditures.

Increasing costs and inefficiencies have led several countries to relinquish public control of their forest lands. New Zealand has just completed its decade-long drive to privatize its pine plantations. A couple of years ago, Sweden also succeeded in transferring the ownership of large tracts of state forest holdings to forest companies. Should B.C. do the same? If so, how should it proceed?

British Columbia differs from New Zealand and Sweden in many ways. Traditionally, interests in establishing private forest ownership have failed to win government endorsement because of opposition at important historical junctions. Examples include the conservation movement that swept across the United States in the late nineteenth century, the nationalization sentiment in the 1930s, and the labour union movement in the 1970s. Even the timing of the privatization campaign in parts of Europe during the 1980s did not coincide with B.C.’s agenda because of a recent realignment in provincial forestry legislation and organizational structures. As far as the resource base is concerned, B.C. is more heterogeneous than other countries in terms of its forest landscape and species composition. While it is in transition from dependence on old-growth timber to the use of second-growth forests, B.C. needs to handle some two dozen tree species in addition to managing a collection of much more diverse ecosystems. Sweden has only three major tree species to deal with, and New Zealand is almost exclusively concerned with radiata pine in its forest plantations. Because of the diversity of species, B.C. must carefully assess the impact of any new initiatives.

With the rationale behind privatization being well justified, what is at issue is viability. Consider the following facts. First, B.C.’s forests command high values in non-timber uses and artificially established forests are still limited in acreage. Second, many land use issues involving aboriginal people are yet to be resolved. Third, the province’s forest industry is so excessively export-oriented that environmental groups have the opportunity to criticize the industry at both the resource and the final product ends. Therefore, should B.C. decide to privatize its forest lands, it is neither possible nor desirable to undertake an across-the-board move. Instead, zoning for siliviculture reserves, as has been proposed by Professor David Haley at the University of British Columbia is perhaps a wise initial step.¹ Any efforts in changing property titles will have to proceed slowly at first. A cautious approach, among other things, will economize on transaction costs. After all, information gathering, property valuation, negotiation of contractual terms, arrangements for auctioning, and so forth are all costly activities. Finally, what is essential is the government’s political will and the general public’s support. An alternative to the cautious approach is to maintain the status quo and wait for the inevitable crisis that will itself result in a wide-ranging ownership change of a magnitude large enough to shake the foundations of British Columbia’s economy. Clearly, incremental change is the wisest option.

1. at higher wage rates employers reduce the quantity of labour employed.

2. at higher wage rates more people want to work.

 Thus, when the minimum wage rate goes up from $6 per hour to $7 per hour some people become unemployed because they are laid off. These people lose their jobs because it is now costs the employer more to keep them on. Others will now be counted as unemployed because at $6 per hour they were not looking for a job but at $7 an hour they want to work.

As in private business, if the federal government runs a surplus and pleases its "customers," then the management should be rewarded with bonuses. Conversely, if the government runs up debt and poorly serves its customers, then management should pay the price financially.

How would such a salary scheme work in practice? First, a base salary figure would be established for MPs. Second, a series of measurable factors—personal and corporate tax levels, inflation and unemployment rates, the nation’s fiscal position, crime statistics, and poverty levels—would be individually weighted, then totalled, producing a base year figure of 100 for this new "quality of life" index.

At the end of the year, all of the above factors would be reassessed to determine which had risen or fallen and whether, collectively, the base figure was now, say, 110 (indicating a more expensive, lower quality of life) or, perhaps, 90 (indicating a less expensive, higher quality of life).

Once the new total was published, MPs’ salaries for the following year would be adjusted according to a sliding scale. If the new total was 110, then MPs’ salaries would be cut by 10 percent. Finally, politicians would be directly accountable in dollar terms for their stewardship, or lack thereof. All decisions to tax, to spend, to regulate, and to subsidize would take on added significance as MPs would be adjusting their own pay scale according to the economic merit of their decision-making.

Unemployment can’t be "cured" overnight by Parliament authorizing ditch-digging on a mass scale, as such economic interventionism would have the correspondingly negative effect of raising government spending, requiring higher taxes and/or higher deficits to pay for it. As these elements would be factored into the annual quality of life index formula, such superficial solutions would be self-defeating for those MPs pushing for a quick fix. MPs interested in raising their salaries would have to do something that is today considered quite radical: introduce cost-benefit analysis into government budgeting and regulating operations.

Canadian taxpayers are increasingly cynical, distrustful both of the motives and efforts of their political representatives. The political climate, therefore, is ripe for such a radical proposal as an incentive-based salary scheme: a guarantee that taxpayers receive value for money.

In soliciting articles for previous issues, I approached potential contributors with a theme in mind and asked for material that had a central focus. Such an approach helped to answer the question: what should I write about? When it came to this issue, I took a radically (for me) different approach: hands off!

I had hoped that when I gathered together a number of submissions representing an eclectic mix of topics, a single uniting idea would emerge to provide a context for this issue. As has been the case in the course of my experience as editor, the contributors to this issue didn’t let me down.

From the challenges of adapting to a global high-tech market to relationships with other nations; from fiscal policy to social policy to government reform: all of the issues that our authors have chosen to address contain a common fundamental idea—incentives matter.

In order to choose between options, one needs a reason to prefer one option over another. This is as true of economic choices as it is of all our other choices. In a free market, where command and coercion have no place, the reason to prefer one option over another is the benefit it confers, the incentive. As James Gwartney and Richard Stroup point out in What Everyone Should Know About Economics and Prosperity, markets work because incentives matter.