In the previous article we tried to demonstrate that sustainable fishing cannot be a management objective on its own. In reality heavily depleted resources which generate very little economic rent can be harvested on a sustainable basis indefinitely.
The problem is that the same resources, if managed properly, have the potential for tripling their production and multiple increases in the level of economic rent to due a combination of larger sustainable yields and a reduction in the total costs required to land the sustainable yield. However resource depletion is not the only adversity that modern fisheries are faced with.
A very common problem in the management of fisheries is what is generally termed overcapitalisation. In simple terms a fishery is defined as overcapitalised when its fishing and processing capacity exceeds the minimum required in order to catch and process the annual Total Allowable Catch (TAC).
This implies that there has been an over-investment in fishing and processing capacity and that there are just too many factories, too much storage capacity, too many people employed. In previous articles we explained how an open access management (or mismanagement) policy inevitably leads to the “tragedy of the commons” phenomenon which is characterised by overcapitalisation, amongst a range of other features. Overcapitalisation is however not limited to open access fisheries and is in fact a common characteristic of modern fisheries controlled by an annual TAC.
The question is how and why many modern fisheries are trapped in an overcapitalised state despite the fact that on the face of it, it makes absolutely no economic sense to invest in fishing and processing capacities when these appear to exceed basic fishing and processing requirements. The reasons for this are:
- Capital investment: during the development phase of the fishery capital investment is often based on unrealistic expectations about the productive potential of the resource, and so too much fishing capacity is purchased. As a result, the fishery is being exploited at an effort level that is too high.
- Inefficient control system: there are inefficiencies and loopholes in the fisheries control system. This means that there is still some incentive for a "race to catch", leading to a creeping increase in total effort levels.
- Performance based quota allocation: quota's to individual participants are based on their historical performance. Therefore fishermen cannot afford the risk that they will be unable to catch their quota, since this might lead to a reduced quota the following year. Since the availability of fish can decline unexpectedly due to an environmental anomaly, they have to carry enough fishing capacity (vessels, manpower etc.) to land their quota under any conditions.
- Labor consideration: quota allocations may favour individuals with unused capital equipment, since this capital equipment can be used to employ labour. It might therefore be strategic to have some unused capital equipment on hand, since this might be rewarded by increased allocations, by authorities seeking to enhance employment opportunities.
- Inter-annual variations in the allocation of individual quotas: for a variety of reasons a particular company may be the recipient of an increased individual quota. In order to increase the likelihood that this allocation is sustained in future years, it is imperative that the entire quota is landed. This means that companies need to maintain high capacity levels even during “thin years”.
- Opportunistic approach: there are always new opportunities in fishing, and it pays to have the infrastructure on hand to take advantage of these opportunities.
To summarise (iii) - (vi), although it may seem unsound that a company has the infrastructure to catch 40% more than its quota if required to do so, it may make a lot of economic and political sense. What fisheries managers are most immediately concerned about however is points (i) and (ii), that too much effort is being deployed in the fishery, and that this is keeping the resource in a depressed and sub-economical state. This is a very severe problem in many of the North Sea fisheries, where effort levels are estimated to be about four times larger than the optimal long term effort level.
The problems involved in reducing effort and attaining the long term, optimal economic goal are daunting. To take the simple example of the North Sea fisheries, an immediate reduction in fishing effort by 75% would cause a sudden and economically catastrophic 75% reduction in landings. It might take more than 10 years or even longer for the resource to recover to the point that it is generating a larger sustainable yield and economic rent at this reduced effort level.
The benefits of this exercise, although academically appealing, are practically disastrous. Most of the existing participants would almost certainly become bankrupt, and the markets for their fish products would very likely disappear and collapse, since there are always substitutes for fish as food.
The future industry that would emerge would be based on new participants, with huge start-up costs involving capital investment, redevelopment of markets at phenomenal cost (markets for fish products are typically fickle, and require a very aggressive and active marketing strategy) and recreation of a new generation of fishermen.
In the face of these obstacles and arguments, it is perhaps not surprising that in the North Sea the fishing industry has, until recently, successfully resisted attempts to reduce fishing effort. In response, fisheries managers have opted for a status-quo policy, hoping to maintain current levels of effort without further irreversible increases.
However, the sort of resistance managers are likely to encounter when trying to reduce fishing effort means that they will (correctly) view effort increases as virtually irreversible. Hence there is always a certain amount of justified paranoia about excess effort in management bodie
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