Have salmon fisheries become a Ponzi scheme?

BOARDED LANDSCAPE WITH TREES approx 18" x 28" by Simon Davies

It seems that Ponzi scheme is something we are all becoming more familiar with these days. Bernie Madoff as one of the more prominent in headlines. In today’s Globe and Mail there is the headline of Earl Jones being sentenced to 11 years in prison for running a Ponzi scheme that cost investors over $50 million. Madoff’s was more impressive with investor losses an estimated $65 billion (yes that’s with a ‘b’).

As the definition on Wikipedia suggests:

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.

Now, the thing with Ponzi schemes is eventually the bubble bursts. Eventually something has to give and the scheme becomes evident – either the initiator walks with the cash, or folks get caught and put in jail like Madoff and Jones.

I’m not one to suggest that fisherfolks are raking in big profits — by any means. The last several years, even decade or more have been disastrous for owner-operators of many commercial fishing boats from California to Alaska. Boats that are not part of corporate empires (such as Jimmy Pattison’s Canfisco) have been in really tough.

As mentioned in previous posts, this year on the coasts of California, Oregon and Washington all commercial salmon fisheries were shut down. (this despite over $ 6 billion in direct funding to fish recovery projects in the Columbia River alone between the 1980s and early 2000s)

However, to the north in Alaska commercial salmon fisheries appear to have been decent – except of course with the exception of the Yukon River Chinook fishery (it crashed). Yet, as also pointed out in earlier posts, a large proportion of the Alaskan catch is propped up by salmon ranching activities – whereby baby salmon (billions) are pumped out of hatcheries, raised in net pens near the mouths of streams, then sent out to the North Pacific (the pasture) and caught in commercial fisheries upon their return.

Various estimates suggest that salmon ranching is responsible for between 35%-45% of the total commercial salmon catch. In places like Prince William Sound salmon ranching accounts for over 90% of the commercial catch.

In British Columbia, almost 200 salmon hatcheries around the province pump out almost 600 million baby salmon. Estimates suggest around 30% of the total commercial catch are hatchery releases. Fisheries and Oceans Canada Salmon Enhancement Program has an annual budget of over $30 million. Various foundations, countless volunteers, and other funding bodies prop up many of these hatcheries – meaning the annual cost of pumping out baby salmon is much higher.

If we then start to add in the cost of fisheries management and salmon research (total annual Fisheries and Oceans Canada fisheries management budget is over $200 million per year) then add in fuel subsidies, dock subsidies, license buy-back schemes, and then habitat restoration and enforcement – and, wow, is this really a worthwhile investment?

The bulk of commercial fisherfolks that target salmon are getting hit hard by dwindling salmon stocks and shorter fishing seasons. However, someone somewhere has got to be making a profit – a substantial one – otherwise what’s the point of all this?

What’s the point of some salmon marketing association pushing for over nine years to secure an “ecocertification” (Marine Stewardship Council) on B.C. sockeye salmon?

An ecocertification that appears largely geared to simply supplying massive U.S. retailers Target and WalMart.

An ecocertification that is based on a non-fishery this year on the Fraser River.

(that’s what I call ecocertifying air pie — why certify something that does not exist? – the Fraser sockeye population crashed – isn’t this like some National Safety body certifying a plane that just crashed into the ground?)

As I mentioned in a post the other day (It’s not the economy stupid, it’s you…) the BC salmon fishery only had a landed value of just over $40 million in 2007 – with sockeye representing 9% of the catch but almost 50% ($20 million) of value.

Where’s the investment pay-off? And who the heck is reaping that benefit?

Remember – “A Ponzi scheme… pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned” – from what I can see in the numbers somebody must be reaping a profit from the 2007 $40 million in landed value of salmon.

However that $40 million is a result of government investment – investment that represents a huge net-loss to government (and hence citizens).

Even just factoring in the $30 million a year to run the federal Salmon Enhancement Program – let alone salmon management, research, habitat restoration, and fisheries enforcement (let’s say a very rough estimate of $100 million a year).

So remember that part about: “The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.”

It seems that the “investors” that are keeping the flow of money going is the federal government – through Fisheries and Oceans Canada – I’m just wondering who gets the perpetual returns?

My experience suggests that it sure as hell isn’t coastal British Columbia communities — or owner-operator commercial fisherfolks.

My point here is not to suggest that there may be some conspiracy afoot, it’s more related to my post to the other day. “It’s not the economy Stupid, it’s you!

If your sales are down 40 percent or 50 percent and you’re continuing to lose money, you haven’t adapted to the changing market realities. If you’re at the point where you’re not able to realize modest profits and pay yourself, it’s probably because the recent years of unparalleled national prosperity put you into a coma. You have a choice: Wake up or pull the plug.

The numbers of landed salmon over the last decade to two have been dropping faster then rain on the Olympics, the value of those landings (i.e. sales) even faster – and yet the costs (or investment into the scheme) of salmon management, enforcement, habitat restoration, and interventions such as hatcheries and license buy backs are going up.

Maybe it’s time to pull the plug… and figure out a better way… one that supports and facilitates healthy coastal communities.

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