The financial collapse of the past couple of weeks offers striking parallels to the collapse of ocean wildlife. How is what's happening in Wall Street and in financial capitals around the world like what's happening in our seas?
Lehman Brothers and Canadian cod aren't coming back
The word "collapse" appears in nearly every thoughtful report on the financial crisis, and it's also a common metaphor in the scientific reports on fishery depletion. It's accurate in both cases because the notion that you can borrow more than you can afford, or spend more than you earn, inevitably produces a sudden and abrupt change when the money runs out. In the fishery context, the notion that you can catch and kill very high levels of wild fish each year eventually produces an empty ocean. For example, bluefin tuna fishing companies in the USA have not been able to catch their quota in the Atlantic. There just aren't enough tuna to be found out there.
By contrast, in personal financial terms, if you live off the interest and dividends on your investments, you can sustain that forever. But if you spend down your principal, you are on a path to going broke.
The cod fishery off the eastern coast of Canada has never come back. Lehman Brothers isn't coming back either.
Part of the reason the investment banks -- e.g. Bear Stearns, Lehman Brothers, etc. -- failed is because they had taken on very high levels of risk. Until several years ago, this risky behavior was forbidden by the Securities and Exchange Commission. Several years ago, the SEC caved to pressure from the banks and permitted them to leverage to the maximum.
In the fishery context, the catch quotas for commercial fishing are set by the government fishery managers.They are pressured hard by the commercial fishing companies to set quotas in excess of those recommended by independent scientists. Far too often, just like the SEC, the government fishery managers submit, and allow the quotas to be set at levels that are very risky for the long-term health of our oceans. Nearly 30 percent of all commercial fisheries in the world have now gone the way of Lehman Brothers.
What happens on Fulton Street or Wall Street affects Main Street
For decades, the commercial fish market in Manhattan was located on Fulton Street near the East River, not too far from Wall Street. And just as the crisis of confidence that started in Wall Street has created problems for businesses and homeowners all over the world, the actions of irresponsible commercial fishing companies will hurt people who never come near a wholesale fish market.
A billion people around the world turn to seafood as their primary source of animal protein. Probably 200 million livelihoods depend upon an abundant ocean. And there are countless coastal towns, large and small, which will become ghost towns if the seas are mined out.
ITQs are like CDOs
As profoundly surprising as it is to free market ideologues, we have witnessed a whole set of extremely smart and unimaginably wealthy people lose a lot of their own money by taking on excessive levels of risk. This is a cautionary tale to people who would place all their faith for ocean management in privatizing the right to fish.
Sub-prime loans are like jellyfish
As the boom in refinancing of mortgages played out over the past few years, the quality of the loans declined. Lenders, having financed all the people with solid credit scores, went looking for business in places they would not previously have visited. Voila: the sub-prime loan. Suddenly there were mortgage terms -- including no income verification propositions -- that no self-respecting bank manager would have even considered a few decades ago.
In the fishing context, this is called "fishing down the food web." Scientific reports show that now that as the big predator fish at the top of the food chain have been virtually eliminated, fishing companies are catching and selling creatures no one would have considered appetizing a few years ago. For example, in colonial America, lobsters were so undesirable that masters were forbidden from feeding their servants lobster more than three times a week. Likewise, today there are commercial fisheries focused on jellyfish.
One hopes that the bailout of the sinking Wall Street ship works to keep the world's economy above water. The cost of the collapse is clearly going to run into the billions. At this very moment, another multi-billion dollar asset is in desperate need of attention before it also utterly collapses -- the once incredibly abundant and productive ocean.
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Comments
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JStack Posted 5:49 am
06 Oct 2008
http://www.resalliance.org
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Colin Wright Posted 6:24 am
06 Oct 2008
Similar considerations could apply to collapsing economic entities: give employees a right to own and manage failing companies.
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sindark Posted 7:27 am
06 Oct 2008
While that is certainly a big improvement, it clearly isn't a solution. Even with ITQs, half the fisheries that would have failed before still do.
If we are going to maintain viable marine environments, we need to do better.
a sibilant intake of breath
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Sam Wells Posted 8:15 am
06 Oct 2008
It turns out that such Puritanical thinking was dead wrong. Some fisheries (not all) collapsed. Some markets (not all) collapsed as well.
The recent issue of Harper's has a wonderful article about the recent market collapse and its religious history. I wonder how one would re-write that for what happened with the fish? -sam
Onward through the fog
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amazingdrx Posted 12:08 pm
06 Oct 2008
Lake Superior still has a fishery, but it is small local family fishing businesses. There are no more silver shoals.
There is only one way to protect local fish or local economies, prevent industrial commercial exploitation by mega corporate operators.
Regulation will do that, but enforcement is necessary. Enforcing financial regulations is possible.
Enforcing fishing restrictions with multinational corporate players would be very difficult. So it is necessary to install devices that prevent the huge nets they use from working.
Floating energy platforms ringing the coastline that have underwater blades that cut nets is the answer.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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saluki Posted 12:52 pm
06 Oct 2008
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=re ...
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guade00 Posted 12:59 am
07 Oct 2008
But I believe you really don't want to get into a pissing match on which party wants to deregulate more on an environmental news and commentary site; this conversation is really about the fish, in case you didn't read the Sharpless piece.
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saluki Posted 12:32 pm
08 Oct 2008
No, that's the position that would be used by a brain dead leftists. Republicans believe in the minimum amount of regulation needed to make things function correctly. Leftists believe in regulating everything to death, except in cases where the business is pushing their political agenda. Then they want no regulation at all. Fanny and Freddy were pushing the Democratic agenda of making loans to people that couldn't pay them back, so of course they wanted no regulation on it. Republicans saw that Fanny and Freddy were getting too large, that their risk was way too high, and that it placed the financial system at risk. They explained this to the Democrats, and of course the Democrats stone walled them.
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Andrew Sharpless Posted 10:52 pm
08 Oct 2008
Andy Rosenberg, a fisheries expert at the University of New Hampshire, quoted by Ken Weiss in the same LA Times article, offered a good response when he noted "it's not like catch shares solve all of the problems of fisheries management." He also noted that New Zealand's orange roughy stocks nose-dived despite the switch to catch shares in the early '90s.
According to the LA Times article, Rosenberg went on to say "It remains crucial for governments to limit the total catch to keep stocks healthy enough to reproduce. And then there's the problem of fairly distributing the shares, or quotas. Inevitably, some fishermen will feel shortchanged and scream that the government 'has stolen our heritage.'"
"The study's authors," according to the LA Times reporter, "acknowledge that catch shares are not a panacea."
Catch shares do an excellent job at stopping the "fishing derby" in which fishermen race to catch as many fish as they can before the sector quota is reached. They also can make it easier for fishermen to reduce bycatch, since they have more time to catch their share.
However, they do not, as the free market idealogues would have it, solve the need for careful, scientifically based quotas, and reasonable and practical limits on destruction of nursery areas and counting, capping and controlling bycatch. All this requires a strong, independent government fishery manager with a backbone and a strong staff of scientists behind him.
Andrew Sharpless
CEO
Oceana
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Biodiversivist Posted 2:58 am
09 Oct 2008
You right wingers need to get your stories straight. Bill O'Reilly says both parties are to blame and for once in his life he's right. He's called for "SEC Chairman Christopher Cox (a Republican) to resign, Senate Banking Committee Chairman Christopher Dodd to quit, and House Finance Chief Barney Frank to step down from his position."
Not to mention that Freddie and Fanny are not the sole cause of this meltdown. The car companies have been heading for insolvency for some time now having chosen to build corn ethanol (also the fault of both parties) powered SUVs instead of hybrids and the war has been burying us with debt for many years after the original mission accomplished.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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