Management of Canada’s Fisheries and Ocean Resources
Note: This post is provided by SIFF Capital Management L.L.C. (“SIFF”) strictly for information and discussion purposes. It is intended for dissemination by institutional and accredited investors, as well as sophisticated fisheries/seafood sector stakeholders including government, industry, Indigenous and ENGO leaders. This post is based on information and analysis that SIFF believes to be accurate but which SIFF has not independently verified and the accuracy or completeness of which is not assured by SIFF. Forward looking statements made below are inherently uncertain and may differ from actual future events. Nothing contained in this post should be relied upon alone or together as the principal basis for any decision making by any person or entity. This does not constitute investment advice or any form of offer or solicitation by any party in any jurisdiction.
SIFF seeks to connect with true value oriented institutional and/or accredited investors regarding co-investment or management services opportunities. We also seek to connect with like-minded industry and ENGO stakeholders regarding potential collaborations, advisory services or other opportunities. Important aspects of our views on strategy and investment are communicated in a SIFF white paper that we share selectively with potential investors and partners. Our focus encompasses diverse ways of strengthening the competitiveness of low-impact fishing methods/fleets through new and real value creation across the value chain.
“Went to see the Captain
Strangest I could find
Laid my proposition down
Laid it on the line
I won’t slave for beggar’s pay
Likewise, gold and jewels
But I would slave to learn the way
To sink your ship of fools”
Jerry Garcia, The Grateful Dead, Ship of Fools
As Jerry Garcia of The Grateful Dead sang those lyrics in a California recording studio in 1974, on the opposite side of the continent in Atlantic Canada, fishing access (licenses and quota) to the country’s valuable marine resources doled out (FREE ) to a small handful of parties that evidently had maneuvered into the right position for receiving such generosity.
A more complete look at the history and excellent reference on almost any aspect of fisheries resource management of Fisheries in Canada is Management of Marine Fisheries in Canada by L.S. Parsons, National Research Council Canada. Dr. Parsons’ book constitutes an outstanding base of knowledge and information on Canadian fisheries resource management, applicable to fisheries resource management throughout the world. Additionally, the Halifax Examiner in an outstanding three-article series by Joan Baxter provides very helpful insight into the history.
Today those licenses and quota in aggregate command billions of dollars in market value and their owners are phenomenally wealthy. To be fair, since the early 70’s, a great number of license and quota packages (“Quota”) have changed hands in private (secondary) market transactions, and many present fishery participants paid substantial $ for their Quota. Further, many of them invested additionally in their fishing enterprises (vessels, gear, crew, materials, bait, administrative capacity, etc.) and some took on commercial debts to be able to fish and monetize that Quota. But in the earlier days, seafood enterprises were built mostly using federal public money provided to those fortunate and politically connected enough to be in the Minister’s good graces. The impact of this history on present-day Canadian fisheries is discussed within this post. The goal of doing so is to look more deeply and realistically at present market conditions and identify opportunities and also shine a light on some longstanding and ever-worsening dynamics that should be cause for concern to independent fish harvesters and coastal communities.
With the establishment of offshore fishing fleets in the 70’s, inshore fishermen warned that offshore fishing by large vessels would destroy habitat and decimate the fish populations that were required for independent harvesters to continue earning their living.
Guess what happened? Exactly what they warned about.
Being but low-ranking crew members on the Ship of Fools they were powerless to do anything. They could only watch as fish stocks collapsed within two decades.
“The bottles stand as empty
As they were filled before
Time there was and plenty
But from that cup no more
Though I could not caution all,
I Still might warn a few,
Don’t lend your hand to raise no flag,
Atop no ship of fools“
Jerry Garcia, The Grateful Dead, Ship of Fools
Jerry Garcia had a wise message for the Artisanal Fleets to consider. When you have already experienced the outcome of being a lowly deckhand onboard the Ship of Fools and watched the bottles emptied, if you accept the same process (again) where you are the weakest player then you can expect the same outcome. We suggest that you must speak with the Captain about ways addressing the Artisanal Fleets’ predicament.
This time the emptying bottle isn’t a decline/crash in fish populations, it’s a decline/crash for independent fish harvesters, after centuries of their existence. A true loss of Canadian heritage that will continue absent true support from the Minister.
The problem that requires Ministerial action to address does not arise from a lack of commercial viability of independent owner-operated fishing enterprises, which experience ups and downs but tend to be highly profitable.
The problem here is twofold:
1) Price Bubble – A price bubble environment driven by financial investors and/or large corporate buyers that prices potential new entrants out of the market, and
2) Consolidation of Processing – A trend of corporate consolidation in processing that follows a rent-seeker business model. Without strict and total enforcement of PIIFCAF and other Ministerial actions the future of independent harvesters, their families, communities and way of life could be sacrificed for political expedience and the Chickenization (A power-driven drain on rural America, The Meat Racket, by Christopher Leonard) of inshore harvesters in the Maritimes.
The Minister holds the power to address these issues by steering management and policy decisions in a direction that safeguards the Artisanal Fleets from these market abnormalities and corporate machinations misaligned with Canada’s overall long term wealth preservation interests. The Minister can avert catastrophes for the Artisanal Fleets and for the Ship of Fools.
If this game continues to play out mostly in the political arena rather than within a fisheries resource management process where political influence is minimized and made transparent, then the Artisanal Fleets can easily fall prey to large corporate interests during this decade.
Understanding the current landscape requires recognizing that the initial beneficiaries of access and allocation during the early 70’s have since then built significantly large commercial enterprises that now provide them a base of considerable market power and political influence.
Since then and to this day, it drives an imbalance of power and influence between large corporate operators fishing offshore, and the fragmented but collectively larger inshore or artisanal fleet harvesters (the “Artisanal Fleets”). While this group is more commonly referenced as the “inshore fleet”, their hardworking and entrepreneurial members deserve full inclusion among the world’s artisanal harvesters and should not be denied this because it doesn’t suit certain ENGO or international body agendas. As discussed below, these labels become part of cartoons that turn into memes that turn into narratives and the Maritimes’ harvesters deserve inclusion in the Artisanal Fleets. In Maritimes’ today still harvest a broad range of fish at various times of the year, although not in the same volumes as previous decades. These include lobster, snow crab, rock crab, halibut, swordfish, haddock, tuna, urchin, herring, mackerel and redfish among others.
This post (Ship of Fools) will be the first of three in [faster than usual] succession. The next post will look specifically at the presently proposed deal by Clearwater Seafoods and Premium Brands + Membertou First Nation, presumably arranged by Coremark Securities Inc. The next post will also cover SIFF thoughts on Indigenous Title, Indigenous Treaty Rights, and opportunities for all Canadians to advance Reconciliation efforts toward a stronger and more unified Canada.
- Sovereign National Wealth: Canada’s ocean resources (ecosystems filled with marine life, valuable shipping lanes, subsea oil and minerals, etc.) represent an important and significant part of Canada’s sovereign national wealth. Fisheries resources represent hard assets for which a strong continuous market demand exists (particularly as global food scarcity and food security concerns rise). Fisheries resources can serve as a hedge against fiat currency debasement and arguably inflation too, because fisheries resources constitute returns-yielding and monetizable hard assets.
- Indigenous Fisheries and PIIFCAF: Indigenous Title in Canada is a common law doctrine that provides a foundational legal basis for recognizing that Indigenous Canadians land rights to customary tenure traditional lands persist after the assumption of sovereignty and under colonialism. Indigenous Title does not mean Indigenous ownership over assets belonging to Canada. The oceans within Canada’s 200-mile Exclusive Economic Zone belong to Canada and all Canadians (including Indigenous Canadians), but there is no legal basis for the notion that Indigenous Canadians are owners of the asset.
Indigenous Treaty Rights with respect to natural resources (including marine resources) exist pursuant to Peace and Friendship Treaties that were signed prior to Canada’s formal constitution, therefore certain Indigenous rights to access and utilize resources for food, social, and ceremonial purposes exist in priority to access privileges extended to non-Indigenous Canadians, however this priority claim does not apply to commercial harvest and trading rights (including moderate livelihood rights) arising from the treaties and related court rulings. Indigenous Title and Treaty Rights will be covered in my next post, along with a look at the presently proposed deal involving Clearwater Seafoods, therefore this post does not directly address the topic.
However, it is noteworthy in the context of this post that the existing allocations to communal-commercial fisheries by the Crown are all exempt from PIIFCAF policy designed to safeguard and protect the independence and viability of Canada’s inshore fleet. As long as this continues (and it doesn’t have to continue), such allocations to Indigenous groups will dilute protections and increase the existential threat faced by the non-Indigenous portion of the inshore fleet. This dynamic, combined with DFO’s reluctance to enforce PIIFCAF completely, has the effect of continually shrinking both the protections and the size of the independent portion inshore fleet.
- Powers of the Minister: Canada’s Fisheries Act (“Fisheries Act”) provides the Minister of Fisheries (“Minister”) with sweeping powers that include full and unfettered discretionary control over access and allocation to Canada’s ocean resources. The Minister manages Canada’s ocean resources based on research, analysis and advice provided by the Department of Fisheries and Oceans (“DFO”), however the final decisions on all matters rest solely with the Minister under what is commonly called Ministerial Discretion.
No person or private entity holds the power to make decisions on the Minister’s behalf or to force the hand of the Minister in any situation. From a legal authority standpoint, no party can overrule or even question a decision by the Minister. Doing so would require challenging Ministerial Discretion itself and defending the integrity Ministerial authority is part of the Minister’s role in protecting Canada’s sovereign wealth for the benefit of Canadians.
- Quota/Access – When the Minister provides access in the form of Quota (encompassing licenses and quota) the beneficiary, in essence, owns a derivative instrument, in that its value is derived based on the value of the underlying asset (fish). Ownership of the fish itself always rests with Canada, and the Minister authorizes the creation of derivative instruments including Quota that enable private enterprises to generate economic value by using the resources in accordance with stipulated regulations. Quota is a transferable instrument, subject to DFO regulations, and therefore holds market value.
Quota should be valued based on three major elements: (1) existence of healthy biological stocks available for harvest under the Quota regulations, (2) stability of downstream market conditions, including competitive market access, for profitably monetizing the catch, and (3) the remaining lifespan of the Quota.
Failure to understand the drivers of variability and risks associated with the above three elements, particularly by poorly informed speculating and rent-seeking investors, is among the factors causing price bubbles in parts of the Quota market.
5. A Growing Power Imbalance
“Everything changes when we wake up from our dreaming world, when we no longer allow concentrated interests of wealth and power to nudge us back to sleep with their memes and soma.”
Dr. Ben Hunt, Fell on Black Days
The imbalance in Canadian fisheries that began with the creation of the offshore fleet and Quota in the 60’s, through an allocation process that accompanied large expenditure of public funds to help build private seafood empires, has compounded over five decades, creating large corporate owners of offshore quota that wield inordinate market power and political influence in comparison to the small and fragmented Artisanal Fleets’ members. This effect of this imbalance is made worse for small harvesters by an asset price bubble in the Quota market that increases the relative strength of cash-rich players with ready access to inexpensive institutional capital and effectively prevents smaller independent harvesters from entering the market.
6. Policy for Preserving the Independence of the Inshore Fleet (PIIFCAF) – PIIFCAF is a policy framework designed to preserve the independence of the Artisanal Fleets in Atlantic Canada. It prevents fish buyers from owning and consolidating Quota within the fisheries to which the policy applies. PIIFCAF, now formally enshrined in the Fisheries Act, should protect and preserve the free-market price discovery mechanism at the wharves where fish is landed, and to prevent its suppression by fish buyers through the use of controlling agreements that the Quota owners’ selling options and financial upside. Presently it seems the Minister chooses to enforce PIIFCAF only partially and selectively, with detrimental effects on potential new entrants to the Artisanal Fleets.
7. Pricing Bubble
“Every bubble consists of a trend that can be observed in the real world and a misconception relating to that trend. The two elements interact with each other in a reflexive manner.”
The Minister’s implicit decision (by way of inaction) to only partially enforce PIIFCAF significantly reduces the number of [truly still] independent licenses available on the market for purchase by qualified owner-operators. This allows continued access for outside speculators regarding the inshore lobster fishery and in reality reduces the size of Artisanal Fleet, just not on paper. When allowed to persist over many years this creates a growing divergence between reality and official numbers for the lobster and snow crab fisheries. Additionally, the repurchase and allocation of Quota to Indigenous groups as Communal-Commercial Quota (PIIFCAF not applicable) shrinks the pool of independent licenses available on the market and this also increases the market price. This contributes significantly to what the steep rise in the price of Quota (particularly lobster licenses, snow crab licenses and quota, halibut licenses and quota, among others) during recent years to reach price points that are prohibitive to most legitimate potential new entrants, now priced out of the market.
The increase in speculative investment in Quota as well as increasingly pervasive leveraged rent-seeker business models of outside investors further inflates the price bubble. This effect has long passed the point where it began constraining the Artisanal Fleets’ ability to evolve and bring about generational succession in a manner that it needs to in order to survive the foreseeable future.
While the Minister cannot control or even influence the decisions of private investors, or of the central bankers who flooded global markets with newly minted money to feed the broader current asset bubble, the Minister can use the powers of regulation and enforcement to reduce the harmful excess flow of capital into the sector and to promote the inflow of helpful capital that strengthens sector competitiveness by adding real value to the sector. This does not require any subsidies, it only requires policy designed to offset the artificially induced market irregularities (ironically including harmful subsidies, excessive money creation, ZIRP, etc.) that continue to spill over into Quota and seafood sector markets to function systematically against the Artisanal Fleets.
It is noteworthy that the principles and progression used to systematically diminish the Artisanal Fleets’ market power and strength are in many respects similar to how “big ag” destroyed the viability of independent family farms, and how “big forestry” destroyed the viability of independent forest harvesters, and how “big food” destroys the viability of independent meat and dairy producers. It boils down to the use of political power to push the implementation of policies and regulations that enable large sophisticated rent-seekers to enslave smaller players with high debts and legal obligations, bury them in superfluous administrative requirements, separate them from downstream market opportunities using consolidation, scale and regulatory capture eliminate their capacity to struggle against their enslavement and demise. It appears that more equitable policy reform, stronger regulatory enforcement, and [non-political] private sector collaboration based on real value creation may be the only way to avert the gloomy end fast approaching the Artisanal Fleets.
8. Abstractions and Cartoonization – The abuse of abstraction and cartoonization opportunities represents one of the greatest sources of risk and uncertainty in fisheries/seafood an almost any other consumer-oriented sector. Inevitably, communicating complex and often technically defined concepts to the public requires abstracting concepts to a form digestible by the intended audience, and that provides the first opportunity to obscure or accentuate aspects of true actuality in order to achieve the desired perception of reality in the audience. Abstractions lay the foundation for cartoonization that enables memes, storytelling and narrative, which each step providing opportunities to tweak the presentation with truthiness as a more convenient substitute for truth.
Dr. Ben Hunt and his co-founder Rusty Guinn have written extensively about this on their Epsilon Theory blog. One of Ben’s many masterpieces worth a read – This is Water, makes some important points about abstractions and cartoonization that you will soon begin recognizing everywhere, including within the fisheries/aquaculture/seafood world.
The problem isn’t in the use of abstractions and cartoonization, their use is in fact essential to most communications. It’s their abuse that causes damage.
Anything complex (which is most things) can only be explained by experts to non-experts by abstracting from the complexity into “truths” that are not necessarily always true. That part is still normal and an inescapable part of communication. The problem is that the need to create and abstraction provides opportunity to twist the presentation in a way that deliberately leads its audience to biased thinking on the topic. If the very same audience would view the topic differently it would develop a different bias leaning if the abstraction been formulated differently.
Because humans are hard wired to absorb stories, cartoonization follows naturally from the abstraction. Once an abstraction is accepted and absorbed, the process of meme infection and narrative building can begin.
For example, the abstraction could be a statement that commercial fish harvesters are killing sea turtles, followed by statistics in the decline of sea turtles generally, implying that the decline is due to bycatch in the fishery being discussed. In effect, isolated incidence of sea turtle bycatch can be presented as being a common regular occurrence and blamed for the decline in sea turtles simply by presenting two facts that are true and implying that one causes the other even if these things are occurring on opposite sides of the earth. Similarly, images on the news of a few non-Indigenous harvesters physically harassing Indigenous harvesters can produce the abstracted notion that most commercial fishermen are all violent racist lunatics, and this false notion can spread alarmingly fast if a systematic effort is made to spread it on social media, conventional media and word of mouth within and between existing social groups.
Organizations, particularly political organizations and certain ENGOs, invest in cartoonization and memes as productive assets in order to achieve political influence and influence State policies and actions. This constitutes the deliberate manipulation of human thought, spreading from individuals to groups and then to society, and it surrounds us everywhere, every day. Once an effective cartoon permeates public thinking then it starts to influence political strategy and it helps special interest groups to instill fear in our political leaders. Once fear enters the political discussion process, sound decisions will no longer occur without outside intervention that corrects flawed perspectives. When this does not occur, then scarce resources are misallocated to address cartoons rather than the real needs of both government and industry.
The frequent (continuous) use of these techniques among fisheries stakeholders obscures the actual truth from the discussion, and false memes can spread quicky and broadly. In place of truth, we see a public discourse of competing cartoons and narratives that suit the objectives of the organizations utilizing them to strategic ends, and “truth” within public consciousness becomes simply the net effect of these competing forces. The Artisanal Fleets hold little power to drive or even influence public narratives and are typically on the short end of popular abstractions and cartoonization.
9. Ship of Fools – The Ship of Fools section of this post presents a twist on Socrates’ famous “Ship of Fools” allegory to help examine the fisheries resource management process. The Ship of Fools description of Athenian democracy provides an apt comparison to the Canada’s fisheries resource management system. It is not a criticism of the process or the people involved in it, but more a set of observations on the system and process itself.
A key point to it all – Among major stakeholder groups, only the commercial and recreational industry parties are motivated directly by economic outcomes, and DFO Fisheries Resource Management (“FRM”) is the only party singularly motivated to achieve long term wealth maximization for Canada and Canadians. All others are motivated by other goals, which may or may not align with the objective of long-term wealth maximization to Canada, which should in fact be the ultimate goal of fisheries resource management. Industry stakeholders naturally focus more on immediate or short-term wealth generation, whereas only DFO’s FRM branch is solely and specifically dedicated to advising the Minister on strategies for long term wealth maximization (of the ocean resources) to Canada and Canadians. All other parties are fools, including myself!
The Ship of Fools discussion below looks at Fisheries Resource Management in Canada and offers for discussion some potential improvement measures.
10. Complexity and Political Will – One of the greatest obstacles to tacking fisheries resource management challenges is that the fisheries portfolio sits nestled within an expansive bundle of portfolios and issues that the federal government must face, all of which exist within a complex socio-political system that the government is expected to manage. Because fisheries and its related complexities of scientific uncertainty, law enforcement needs and challenges, touchy social issues, sensitive and complex marine ecosystems, international politics, etc., actors within the political environment simply don’t want to deal with it. They prefer the solution that they believe will disturb their political workings the least, not the ones that offer the greatest risk/reward balance for generating economic activity and responsibly managing marine resource wealth.
While fisheries and oceans issues remain of paramount importance to regional residents and their leaders, at a national level it’s viewed as not being worth the political bandwidth. The easier route is to provide access to large corporate parties willing to take on the challenge of fishing and monetizing the resource, and flexibly design rules are needed to ensure that they continue to happily bear the burden of fisheries as they see it. This approach is easier for national decision makers, and most of them probably believe that the alternatives are not worth the time and resources needed to explore. Nobody can form an accurate opinion of something that they don’t understand accurately.
Among the consequence issue is that DFO is a grossly underfunded department, and its funding increases of recent years were lopsided toward science rather than being balanced between management, enforcement and science. The reasons for this appear to be political and grounded in the abuse of abstractions to establish the Yay, Science! Narrative (which is different from real science), enabling the political narrative of “undoing the damage of the Harper years” whether or not that was actually the best way to allocate funding within DFO. Given this misallocation of funding, DFO will tend toward excessive conservatism (timidness) rather than undertake bold actions needed to face the current challenges. Each and every one of us should recognize that changes made to complex systems bring unforeseen/unintended consequences, and DFO doesn’t have the budget it needs in order to undertake and manage this multi-step process. In fact, our SIFF model is exactly meant to bring private sector leadership and inclusive shared accountability across the sector as these challenges are overcome to the greatest extent. In any event, this funding misallocation and the resultant deficiencies must be overcome in significant measure if DFO and the Minister wish to see the Artisanal Fleets’ independence and commercial viability into the next decade and beyond. Perhaps the key question is whether the political will can be garnered.
The Ship of Fools
The above diagram relates to the process by which stakeholder input, information, advice and political influence reaches DFO FRM, under the fisheries management process. The three arrows pointing toward Political Establishment indicate political lobbying by industry (primarily large corporate, offshore Quota owners), ENGO’s and provincial governments with a view to influencing decision making. By definition, this means an attempt to override the assessments and advice of DFO FRM, which is the only party in the entire system that has no incentive to do anything other than long term maximization of ocean wealth for Canada and Canadians. All others, including the Political Establishment, are incentivized and influenced by other objectives that advance the interests of individual stakeholders or groups.
The diagram also tries to put across that DFO also has the benefit of unique visibility regarding scientific and market data, and it has unique access to federal departments and agencies, industry leaders, etc. that it can draw on to established and informed opinion regarding management decisions. DFO obtains input from the general public, from academia, neither of which have any real capacity to exert political influence on the process.
Another issue, for another post someday, relates to provincial authority over important parts of the seafood supply chain. This can create petty divisions that seem unproductive for the sector, it complicate political dynamics. As Dr. Parsons points out in his book, “managing fisheries is a matter of seizing opportunities and tackling problems”, and in order for this to occur effectively the entire value chain should be managed as a single integrated resource monetization process, which is difficult if not impossible while individual provinces hold authority over fish processing. Apposite to this point, Dr. Parsons also states the following.
“The view that fisheries management is concerned primarily with the biological conservation of fish resources has been generally replaced worldwide by a broader view of fisheries as an economic activity encompassing a broad spectrum of individuals, processes and interests. The fisheries system includes the resource base, the harvesting and processing sectors (primary and secondary) and the utilization of those resources in the marketplace.”
There are serious issue regarding the under-utilization of fisheries resources and the limited management capacity at the provincial level. Given the provinces more fundamental responsibilities for healthcare, education, public safety, etc., while all three Maritime provinces under the current structure are permanently dependent on equalization payments, Canada’s overall fisheries resource management process could benefit from revisiting provincial jurisdiction while renegotiating/restructuring equalization payments and other federal policies, support/assistance regarding the Maritime Provinces.
Fundamentally, a structural problem with this is the fact that stakeholders with the means of earning the most money, either by harvesting fish or by opposing the harvest of fish, are the ones most able to influence decision making, while those whose interests align more with long term ocean wealth maximization (science, Artisanal Fleets, the general public) are marginalized in the decision process.
The Republic, Book VI
The inspiration for looking at fisheries resource management from the Ship of Fools angle discussed her is inspired by Socrates’ famous passage describing Athenian democracy, in The Republic, Book VI, Plato (375 B.C.). Athenian democracy was a true democracy (because of its small population) rather than representative democracy with elected representatives as we have today. Following, is the translation of this passage featured on Wikipedia.
“There’s the shipowner, larger and stronger than everyone in the ship, but somewhat deaf and rather short-sighted, with a knowledge of sailing to match his eyesight.
The sailors are quarrelling among themselves over captaincy of the ship, each one thinking that he ought to be captain, though he has never learnt that skill, nor can he point to the person who taught him or a time when he was learning it. On top of which they say it can’t be taught. In fact, they’re prepared to cut to pieces anyone who says it can.
The shipowner himself is always surrounded by them. They beg him and do everything they can to make him hand over the tiller to them. Sometimes, if other people can persuade him and they can’t, they kill those others or throw them overboard. Then they immobilise their worthy shipowner with drugs or drink or by some other means, and take control of the ship, helping themselves to what it is carrying. Drinking and feasting, they sail in the way you’d expect people like that to sail. More than that, if someone is good at finding them ways of persuading or compelling the shipowner to let them take control, they call him a real seaman, a real captain, and say he really knows about ships. Anyone who can’t do this they treat with contempt, calling him useless.
They don’t even begin to understand that if he is to be truly fit to take command of a ship a real ship’s captain must of necessity be thoroughly familiar with the seasons of the year, the stars in the sky, the winds, and everything to do with his art. As for how he is going to steer the ship – regardless of whether anyone wants him to or not – they do not regard this as an additional skill or study which can be acquired over and above the art of being a ship’s captain. If this is the situation on board, don’t you think the person who is genuinely equipped to be captain will be called a stargazer, a chatterer, of no use to them, by those who sail in ships with this kind of crew?”
Book VI of The Republic by Plato begins with the following question and answer.
“Q. Which of the two classes should be the rulers of our State? …
A. Whichever of the two are best able to guard the laws and institutions of our State – let them be our guardians.“
In Canada, our State entrusts care of our ocean assets to DFO and provides a departmental budget for doing so in order for DFO to provide advice to the Minister. While all decisions clearly do rest with the Minister, guardianship of ocean assets in a true sense rest with DFO.
In our Ship of Fools analogy, DFO is the Captain, or as stated in the Wikipedia version, the “Ship Owner”.
Having now observed and/or been part of the fisheries resource management process for 7+ years now from a variety of perspectives, I consider it evident that DFO is the best positioned, owing partly to its $1 billion annual budget (which should be $3 billion) to fund more extensive marine science than most countries, continuous economic and statistical analysis, professional legal assessments of important issues, conduct investigative and intelligence gathering activity, and holds five decades of management experience, access to centuries of prior documented experiences of the Crown, etc. No other party has the visibility or capability that DFO has, similar to how no other party holds the powers that the Minister does.
As in the Ship of Fools allegory, *many* sector stakeholders would like to throw me overboard or gouge out my eyes for speaking this way about DFO. Why? Because they believe that the people at DFO are stupid and that they themselves can make better decisions than DFO. I personally know friends and colleagues, people from Industry, Science and Indigenous fisheries who could never ever bring themselves to believe what I say above about DFO. Never. And it’s very important that people who hold similar opinions continue to always have opportunity to provide input and voice their concerns.
However, the main point to realize is that the system edges a little closer to catastrophic system failure each time that political influence is allowed to drive decision-making instead of it being driven by the assessments by DFO, which is specifically charged with the role of guardianship.
Political influence in the FRM decision process can be a regular occurrence, and it has probably been one since Canada was formed in 1867. It is impossible to wave a magic wand and remove political influence from the system without risking severe unforeseen consequences, but it is possible and, in our opinion, advisable to begin moving in a direction where instances of [let’s say] “greater national importance” are brought in to the decision process are given more thought and attention. Perhaps they could even be documented and disclosed, even if details are withheld (for “national security” or “public safety” reasons)?
A potentially fatal flaw in Canada’s fisheries resource management system is that it allows stakeholders to influence decisions by applying political pressure and/or by reciprocally exchanging political consideration with political factions. The section of this post describing Abstractions and Cartoonization describes what is also a significant factor in how such political influence is firmly established and many are controlled by a few. This causes sub-optimal allocation of scarce resources relating to fisheries resources in Canada. This poses serious problem for the Artisanal Fleets very poorly equipped to win at such a game, and as it stands now, they are losing badly and most don’t even realize the extent of it.
A Deeper Look at Some Key Points
“How did this happen? How were the Great Guilds of human civilization captured while we slept?
Through the systematic use of securitization, leverage, scale and alienation.
Sometimes used in unison, sometimes used separately, these are TOOLS by which smiley-face authoritarian concentrations of wealth and power have perverted all of our human endeavors. Application of securitization, leverage, scale and alienation is the PROCESS by which our Black Days were created.
Understanding the process is everything.”
Canada’s inshore fleet of independent fish harvesters is now well into the process of its systematic marginalization: its transformation from independence to “being a cog in a wheel and liking it”.
As independent harvesters gradually have their options stripped away by controlling agreements, and dependence on an increasingly limited number of processors to which they can sell their catch, and a price bubble that disfavors them, pushes them toward debt slavery and/or squeezes them out of Quota ownership, and increasingly cumbersome regulatory and administrative burdens tailored to larger corporations with in-house legal and HR capacity, and consolidated scale in processing tied to power and influence that’s difficult to counter both politically and financially, the eventuality of total marginalization and alienation awaits them unless the Minister’s direction on fisheries policy, regulation and enforcement changes from its present course.
I. Ocean Wealth is Sovereign Real Wealth
Canada’s oceans within the 200-mile Exclusive Economic Zone includes resources worth $ trillions. The ocean represents a hard asset belonging to Canada, that is monetizable in exchange for currency, on which we rely as a store of the value. The Minister’s objectives include monetizing fisheries resources in a manner that is value-maximizing for Canada and Canadians. The Minister’s preferred method for doing so is to issue Quota to parties that the Minister (at least theoretically) considers most capable of maximizing the resource value and on terms that give Canadians (the asset owner) a suitable return for having extended the privilege of access.
An important distinction is that ocean wealth represents hard asset wealth that can be converted to our preferred form of currency, which is different from wealth that exists only as a result of fiat currency creation or “printing” (by central banks). Ocean assets are equally exchangeable for real currency such a gold or silver, which means that they likely will hold their value in the event of fiat currency debasement. Given the rate at which central banks are likely to continue creating new fiat currency, concerns around currency debasement continue to mount, and under these dynamics Quota can represent a hedge against such currency debasement.
II. Resource Access as a Coastal Zone Management Tool
Fisheries resources exist as a result of natural processes, and in order for them to continue existing, those natural processes must continue. This poses a dilemma for governments where it’s tempting to pull wealth from the future into today, by leaning harder on the ocean than they perhaps should. Canada and several other countries are less guilty of this than the majority of sovereign nations with EEZs of their own. It could be convincingly argued that no government is actually responsible with fisheries but that clearly some are less irresponsible than others and that allows them to claim things like “conservation stewardship” and a pat on the back that in truth may not be deserved.
Governments around the world have a natural tendency to lean hard on the oceans, because extracting more value from the oceans means less dilution of their available [fiat currency] budget on which political favor-fulfillment or basic governance obligations depend. So, the fulfillment by ocean access of what would otherwise require budgetary expenditure is a concept highly amenable to the politician.
This is why some sovereign national governments provide fisheries subsidies that promote what are otherwise non-viable fisheries – they perceive that it’s better to subsidize fishing otherwise non-viable fishing then to support coastal communities without drawing from and leveraging the oceans. Even if a resulting overharvest constitutes a disturbance to the natural processes that allow fish populations to thrive in the first place, those costs will be borne in the longer term, while governments of today are concerned with staying in power today.
This approach does not necessarily correspond to optimal management of fisheries resources by the Minister, because it presupposes that the parties to whom access is provided are the most capable of optimally monetizing the resource, even though the focus of decision-making is on regional cost management objectives rather than resource value optimization. This kind of decision process tends to be political and private rather than merit-based and transparent, and a competitive process for awarding access and allocation opportunities to private enterprises that put forward the strongest proposals would be preferable.
III. Financialization and the Rent-Seeking
“What is financialization?
Financialization is profit margin growth without labor productivity growth.
That sounds like a small thing, but I tell you it is EVERYTHING …
Financialization is the zero-sum game aspect of capitalism, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking….
Financialization is squeezing more earnings from a dollar of sales without squeezing at all, but through tax arbitrage or balance sheet arbitrage ….
Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction. It is a profoundly repressive political equilibrium that masks itself in the common knowledge of “Yay, capitalism!”.
Financialization is the zombiefication of an economy and the oligarchification of a society.”
The Rent-Seeker Model – Before discussing rent-seeker entrants to the lobster and snow crab space in recent years, let’s look at some definitions and descriptions of rent-seeking … Investopedia describes:
- Rent seeking is an economic concept occurring when an entity seeks to gain wealth without reciprocal contribution of productivity.
- The term rent in rent seeking is based on an economic rent which was defined by economist Adam Smith to mean payments made in excess of resource costs.
- “Rent-seeking results in reduced economic efficiency through misallocation of resources, reduced wealth-creation, lost government revenue, heightened income inequality, and potential national decline.
- Attempts at capture of regulatory agencies to gain a coercive monopoly can result in advantages for rent-seekers in a market while imposing disadvantages on their incorrupt competitors. This is one of many possible forms of rent-seeking behavior.”
- “Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity. “
- “The Tullock paradox is the apparent paradox, described by economist Gordon Tullock, on the low costs of rent-seeking relative to the gains from rent-seeking. The paradox is that rent-seekers wanting political favors can bribe politicians at a cost much lower than the value of the favor to the rent-seeker.”
Recent years have brought the arrival of rent-seeking investors in the Maritimes fisheries/seafood sector with efforts at consolidation supported by leverage. This can seem innocuous in its early stages, but it is possibly the height of naivety to believe that corporate/institutional consolidated processor interests will not eventually be used to gain political capture and then to squeeze harvesters in the same manner as what has occurred repeatedly in the agriculture and forestry sectors. But leaving that point aside, following are some reasons why the present consolidation efforts constitute rent-seeking
- Well over $200 million have flowed into the sector with absolutely zero measures adopted to boost productivity through any means. No investments are made in improving the businesses unless primarily public funds are utilized, and even then, it has been minimal.
- These investors earn their returns by maximizing the use of leverage and milking acquired companies of their EBITDA, typically through a combination of aggressive dividend policy that borrows from future capex budgets and advisory fees charged to the companies, but again with absolutely zero benefit of any kind to the companies or the local communities. Corporate earnings that used to stay within the Maritimes are now whisked away and disappear into tax efficient structures using multiple jurisdictions and creative balance sheet structuring to minimize tax liability. No longer will they be invested in local businesses or form part of the local tax base. The value of the resource is efficiently extracted by the real work effort and the use of real assets (vessels, gear, etc.) of independent harvesters and used to pay down the debts of these outside investors, and that is how their equity returns are generated. Not by creating real value or by outperforming peers (or anybody) at anything other than securing rent-seeker opportunities and exerting political influence.
- The majority of cost involved with maintaining the resource (science, management, enforcement, etc.) is borne by the Government of Canada but no incremental or marginal benefits are realized by Canada, much less the Maritimes. Instead, such benefits will accrue to the EBITDA performance of the companies. While many fish harvesters work to aid science via collaboration and investment, or to improve their fishing practices through innovation and technology adoption, the rent seekers are not required to (nor do they) do anything at all to assist Canada with any responsibilities of maintaining healthy marine ecosystems so that rent-seekers may continue to rent-seek off the backs of harvesters and the government. They prefer a one-way flow where real value creation is achieved by combining the work of government with the work of harvesters, and rent-seeking off this value to pay down their debt and build more equity.
It’s reminiscent of an old movie from the early 90’s called The Super, where the Kritski family, notorious slumlords, are taught the following by their patriarch, Big Lou Kritski. –
“What does a Kritski do when he buys a property? Nada, Zip, Nothing!”
If nothing changes, in the years ahead the rent-seekers will begin using strategic isolation (cog in a wheel) using scale, just as in many agricultural sectors, and the de facto enslavement of independent fish harvesters and owner-operated fishing enterprises. IMO, if given the chance, they will do this, and further, I submit that their plan is to do exactly this.
Clearwater Seafoods, with its considerable fish sourcing needs and consolidation of Quota, had already brought elements of chickenization into the inshore lobster and snow crab fisheries in recent years, but the consolidation of what remains of the onshore processing (which hasn’t quite happened yet but owner-operators should plan now to avoid it) capability threatens to create a consolidated corporate environment that would eventually leave independent harvesters as wholly dependent price-takers living what most would consider a highly unfavorable change in both income and lifestyle. Inshore harvesters seem largely unaware of how their future prosperity, and that of their future generations, is right now already passed the initial stages of being captured and monetized.
Financialization, abstraction and smiley-face authoritarianism all function in combination, but individually they are barely perceptible and often seem normal. The transformations that they enable can be accepted as inevitable when they are exactly the opposite of inevitable, they are what we should all reject outright as the systematic looting of future prosperity. In order to guard and defend against this looting we should endeavor to understand it to the greatest extent how it is planned and executed. This must involve a process of continuous learning and continuous vigilance maintained with discipline and a view to political oversight, so that political capture by Oligarchs does not overpower sound management decision making.
IV. Price Bubble
Since I postulate throughout this post that a price bubble is structurally altering the sector in favor of institutionally backed corporations, the following summary of what underlies this postulate seems appropriate here.
Entrance of Speculators – Speculators are increasingly present and influential in Quota markets due to several factors that include i) abundant excess cash in capital markets coupled with extraordinary low fixed income yields have sent investors desperately seeking yields from increasingly risky assets. In the case of Quota, they don’t understand the risks involved, they only see the yields possible for the next quarter or the next year, but don’t understand the cyclicality and risk factors and therefore they bid the prices higher, ii) Minister’s decision to limit the enforcement of PIIFCAF enables the presence of speculators in Quota markets. Such speculators may have diverse reasons for which they want to buy and own Quota and sometimes those reasons make it worthwhile for them to pay more for that Quota than the viable price point for any honest independent fish harvesters. This can allow speculators to buy and lease Quota (generating some return) while hoping (blindly) for a capital gain on their investment (via greater fool).
Rent-Seeker Use of Leverage – Because rent-seekers realize returns without creating real value, they can continue to operate profitable companies with minimized risk (because they do nothing, fix nothing, improve nothing), and so lenders are happy to load them up with debt. This in turn means that they can bid higher prices for assets, just as long as their political influence allows them to maintain the status quo and prevent innovations from disturbing their rent-seeking plan. It all hinges on the continued passive acceptance of this by the Artisanal Fleets’ members, as well as the rent-seekers’ continued ability to keep real disruptive innovations off the market. This occurs regularly in fisheries and seafood supply chains worldwide and is often executed by parties that publicly present themselves as bastions of sustainability.
Debt Enslavement of Harvesters – Due to the Minister’s non-enforcement of PIIFCAF, fish buyers with access to large amounts of cash are willing to finance the acquisition of lobster licenses for stand-in owner-operators forced to take on heavy loads of debt that is typically extended at usurious rates of interest. The fish buyer and lender gains control of the catch tied to the license, and on top of that the stand-in license holder will work hard and take on all the responsibility and personal anxiety tied to fishing a license in order to repay the debt. Predatory rent-seeking. As long as new licenses on the market can be purchased and monetized in this manner, new entrants will remain unable to justify the costs of entering the fishery.
Effects of Income Inequality – The stark rise in economic and social inequality that occurred in recent decades, particularly since 2009, generally saw those with less stock market exposure fall more in relative terms on the wealth inequality scale. Because of this, many fishing families who must use most of their disposable income to survive and keep their businesses operating did not benefit from the sharp rise in stock markets and are therefore at a disadvantage when competing against those who have realized large gains or who have access to credit based on their unrealized stock market gains. This has impacted the Artisanal Fleets ability to compete effectively for Quota acquisition opportunities
Potential for Further Securitization – It’s conceivable that someday a Quota holder or more likely a processor, could write a futures contracts for a certain type of fish product, agreeing to pricing and delivery conditions to deliver, say, 8 – 10 oz frozen lobster tails, at a specified future date, much like the functioning of coffee or pork belly futures. Futures contracts could be used as a valuable tool for independent harvesters to hedge the risks of price volatility, but that is not where things look to be headed. However, this and other forms of potential securitization will most likely be employed by the largest and more sophisticated actors seeking an accelerated and potentially enhanced monetization of the Quota, and/or by processors as a mechanism to help finance their fish purchases.
Such a futures contract could be traded on an exchange (or they could be replicated in entirely private “off-market” transactions), and on the other (buyer) side could be purchased through a margin accounts or other leverage … so we would see leverage applied on both sides. That is all part of how returns can be achieved or enhanced through securitization, a sub-component of financialization, but without any real productivity gains or real value created.
V. Licenses and Quota
Licenses and quota in Canada are subject to Byzantine regulatory policies and regulations (an intricate framework of policies and regulations stitched together over many decades) stipulated and enforced by DFO, but at the end of it all, nothing and nobody can fetter or diminish the legitimate power of Ministerial Discretion.
The following, however, is not an oversimplification, it’s a fact. Within the 200-mile limit Exclusive Economic Zone (“EEZ”) the ocean and all its contents above and below ground belong entirely to Canada. The Minister of Fisheries, Oceans and the Coast Guard (“Minister”) manages the fisheries and other parts of Canada’s national wealth on behalf of Canadians, in a manner that should maximize value and returns to the country, measured in economic, ecological and socioeconomic terms.
- Quota is Derivative Instrument
Quota itself constitutes a derivative instrument, in thatits value is derived as a function of the value of an underlying real asset – the fish in the ocean.
Quota pricing, the price that a rational party would pay to acquire Quota, should depend significantly on the following three elements:
1) Existence of Healthy Fish Stocks in the Fishing Area (biological and ecosystem risk)
The target species must exist in the area or zone where fishing is permitted under the license or migrate through during the designated fishing season. Otherwise, the license is likely of little value. The nature of marine ecosystems is such that these dynamics change over time according to the multitude of factors affecting the ecosystem, therefore the value of Quota can vary dramatically.
Availability of fish varies with the natural cycles of marine ecosystems. Ecosystems are so complex that we do not know all the factors that influence them or how they interrelate, but factors including land-based industrial and agricultural activity, marine pollution, etc. all have their combined effect. Outlier events such as oil spills have the potential to permanently impair the value of Quota.
Similar to the way that future earnings growth can be priced into a company’s stock, a high degree of “ecosystem optimism” is priced into much of the Quota on the market today. Ecosystem risk is often ignored or discounted, not because it doesn’t exist, but because it is poorly [or not] understood. Investments in Quota should be made based on a strong understanding of fish population health and marine ecosystem dynamics relevant to the Quota in order to understand the risks of price volatility and long-term value impairment.
2) Regulations Attached to Quota (Regulatory Risk)
Regulations attached to Quota impose restrictions on the manner in which the target fisheries resources can be accessed, including diverse types of regulatory instruments and policies with a view to advancing and achieving the objectives of the Minister. If more restrictive regulations are imposed, the value of quota should decrease. If the prospect of tightening regulations in the future is evident, then continuing to value licenses and Quota as though status quo regulations will remain is illogical if Quota is valued as an estimate of the underlying future cash flows (from harvesting and selling fish, partnering with a party who does, “leasing out” quota where permitted, etc.). Mispricing of Quota can occur when these and other risks are improperly understood.
In quota-based fisheries, a license and quota are both required. The license allows the fishing itself in accordance with its regulations, and the quota determines how much fish one can catch and retain. Often quota is already attached to a license, but either way it typically can be acquired and added to a license, all of which is subject to restrictions imposed by the aforementioned Byzantine regulations, but all of which the Minister can change or override at any time using Ministerial Discretion. Socioeconomic considerations also fall within the Minister’s mandate, there remains an open question as to what extent socioeconomic considerations should or do impact the Minister’s decisions, which in turn impact the value of the existing licenses and quota.
Canada’s most $ significant commercial fishery, inshore lobster, is not a quota fishery but is regulated by restrictions on the number of licenses issued, spatial/temporal restrictions on when fishing can occur, gear specifications to support conservation objectives, and limiting of the number of traps per license or per vessel in the case of combined licenses (partnerships). Lobster licenses are subject to PIIFCAF regulations as further discussed below, and therefore cannot be purchased by any party other than a qualified fish harvester who will fish the license.
Canada’s Snow crab, shrimp and other fisheries are regulated based on set quota amounts that are revised annually based on ecological and other considerations. Gear specifications, temporal/spatial restrictions, number of trap restrictions and other conditions also apply to snow crab Quota.
Regulations are recommended to the Minister each year by DFO (the bureaucracy) based on its overall assessments of Science, Ecological, Economic, Socioeconomic and other factors, but the final authority on everything regarding Quota and regulations rests solely with the Minister.
3) The Quota’s remaining lifespan.
This third element of Quota valuation remains either poorly defined or undefined depending on your view. It is often presumed that Quota constitutes a perpetual access right, however history shows that Ministerial Discretion can be applied when it’s in the best interest of Canada and Canadians. An alternative view would be that Quota holds a one-year lifespan (because regulations are set annually, registration fees are paid annually, etc.), and that the degree of certainty that Quota will hold its value typically decreases as we look further along the time horizon. More time means more uncertainty.
So, what is the lifespan of the Quota? For comparative reference, aquaculture leases are often signed for a 20-year period, patents under current US law are issued for 20-year periods, etc. Presently, the lifespan of all Quota is determined at the sole discretion of the Minister. The existence of Ministerial Discretion is presumably the reason why no lifespan on Quota is specified.
Today, license-holder and quota owners expect an automatic renewal each year, and also expect that regulations will be attached that allow an economically rewarding harvest, but these decisions always remain at the sole discretion of the Minister and everybody’s expectations are not always met.
It remains an open question as to how long the Minister intends for the lifespan of access to be, but it is certain that the Minister can and sometimes does reallocate access (by quota, fishing area, season, etc.), and that the Minister’s mandate provides the power to influence market conditions by way of Ministerial decisions if the interests of Canada are best served by doing so.
Quota and Title Transfer
Quota cannot be traded the way a listed security may be traded because each transfer of title requires approval by the Minister. No Quota is unconditionally transferable, and typically Quota ownership transfer requests are handled by issuance of a replacement license and not by approving a transfer, all of which is subject to approval by the Minister.
V. PIIFCAF (Policy for Preserving the Independence of the Inshore Fleet)
Following is how DFO (web site) describes PIIFCAF:
“The PIIFCAF Policy affirms the Government of Canada’s commitment to support an independent inshore fleet through the creation of circumstances for resource users to be more self-reliant, economically viable and self-sustaining on a long-term basis. The PIIFCAF Policy is part of Fisheries and Ocean’s comprehensive approach to enhance the economic prosperity of fishers and fleets through the Fisheries Renewal initiative. This approach is based on promoting stability, predictability and transparency in fisheries management decision-making.” …
“The objectives of this Policy are to:
- reaffirm the importance of maintaining an independent and economically viable inshore fleet;
- strengthen the application of the Owner-Operator and Fleet Separation policies;
- ensure that the benefits of fishing licences flow to the fish harvester and the coastal community; and
- assist fish harvesters to retain control of their fishing enterprises.”
What PIIFCAF Could Do – PIIFCAF is the primary policy/regulatory mechanism for preventing the corporate/industrial side of the industry from effectively taking over the Artisanal Fleet by controlling its activity. PIFFCAF prevents a license holder from entering into “controlling agreements” that would enable fish buyers to dictate how the license is monetized. PIIFCAF and the protections it provides to the Artisanal Fleet (particularly including lobster and snow crab) are the basis for maintaining free and open-market price discovery for the landed fish, which is the basis for independent enterprises to compete and succeed. If price discovery is removed, then the license-holder becomes equivalent to a wholly owned corporate division and is subject to internal transfer-pricing policy rather than free-market price discovery.
This typically limits the potential for harvesters to profit during years where the market would have yielded high profits, and instead those foregone profits will accrue to the fish buyer who benefiting from a lower fixed price at the shore. Effectively, downside risk and financial risk will be borne by the independent harvesters (start off indebted to the gills), but the upside will belong to fish buyers.
VI. Abstractions and Cartoonization
Before closing out this post I want to revisit this very important topic introduced in the above Primer. The main central points of this post relate to the role and function of political influence in the fisheries resource management, and what I postulate to be an unfair advantage suffered by the Inshore Fleets as a result of this. Abstractions and cartoonization are the building blocks of perception and bias, when these are used with scientific precision as a tool for influencing public hearts and minds, they are extraordinarily powerful. Part of the unfortunate upshot is that such effective us of abstractions can easily lead to the misallocation or wasting of scarce resources.
In fisheries, a foundational tool for abstraction and cartoonization is the scientific model. Such models are meant for use a decision tools and/or sources of insight into the interrelationships between variables within complex marine ecosystems. Scientific models should never drive decision making, they should only influence it, to varying degrees depending on the judgement of resource managers who have much broader vantage point and mandate.
L.S. Parsons comments as follows in his book Management of Marine Fisheries in Canada (written in the early 90’s:
“In the increasing attempts to manipulate or manage fisheries over the past three decades, managers have relied upon scientific models. These models generally assume steady-state equilibrium conditions, conditions which in fact are rarely found in fisheries systems. The role of natural resource variability was generally underestimated or downplayed as scientists strived to provide simple answers to complex questions. Although it has long been known that large-scale fluctuations in fish stocks can occur because of environmental factors, there is now increasing recognition that environmental perturbations can overshadow the effects of fishing.”
Models of marine ecosystems or populations within marine ecosystems do not represent reality, and any person or group claiming that their model does reflect reality is grossly lacking in what Rusty Guinn calls “epistemic humility”.
“As far as the laws of mathematics refer to reality, they are not certain, as far as they are certain, they do not refer to reality.”
Dr. Albert Einstein
However, reality is that the majority of Facebook and Twitter users, and the majority of the public, are inclined to accept as certain fact anything abstracted from a “model” and placed prominently into a headline. The headline is in fact an abstraction of an abstraction, but it won’t be viewed that way.
All of the claims such as “there will be more plastic than fish in the ocean by 2050” are based on models, and models can be made to produce any desired result simply by changing subjective assumptions within the models, adding or subtracting variables, or changing the computational logic built into the model.
When you hear claims that “60% of fish stocks worldwide are now overexploited” this number was produced by a model that required subjective inputs, and then selected model output is abstracted into a headline that got reposted over and over on social media … and it becomes a meme … then a narrative … and in the public consciousness it has been largely accepted as fact. If you Google % overexploited fish stocks, you’ll see that overzealousness crept in nicely at the estimates presented in abstraction form can reach up to 75%. Models are abused so often in fisheries-related public communications it’s absolutely mind blowing. This is not stopping any time soon, and it’s important for fisheries resource managers and Artisanal Fleets be acutely aware of how it’s affecting seafood markets downstream, because that affects our national ocean wealth.
Violence in the Lobster Fishery
“Violence erupted here this past fall, making international headlines, after a Mi’kmaq community launched its own treaty fishery outside the commercial fishing season. That community, Sipekne’katik First Nation, is legally allowed to fish any time under treaty rights that give them the right to earn a moderate livelihood, but locals were incensed. Mobs of angry commercial fishermen confronted Indigenous fishers, burning vehicles, blocking roads, and assaulted their chief.”
Lindsey Jones, vice.com https://www.vice.com/en/article/4adagm/theres-death-threats-indigenous-fishers-nervous-as-nova-scotias-commercial-lobster-season-opens
When many Canadians in Montreal, Toronto, Calgary, etc. read a passage like the one quoted above they see a cartoonized version of east coast fishermen … a cartoon of a violent racist hothead with no respect for Indigenous people or their Treaty Rights … they see something that they would assess to be a national embarrassment and something that should be stopped.
There is nothing in the article from which this passage was extracted that highlights in equal measure the hundreds of non-Indigenous inshore harvesters who have friendships with Indigenous Canadians, who are well-informed on the topic, some of whom in fact fish for Communal-Commercial (Indigenous) fishing programs, who are forward-thinking and interested to find ways of improving ecological responsibility in fisheries by both Indigenous and non-Indigenous harvesters through cooperation and collaboration. You won’t read about them in any article on this topic, because that simply is not the cartoon that the media is looking to portray. This is an example, one among many, of why the Artisanal Fleets are in need of improved cartoon management but must overcome the disadvantages of low political and financial strength within this game.
There are some other memes that have gained traction in recent years, and are increasingly now subject to what Dr. Ben Hunt at Epsilon Theory calls “corporate racoonery”, another regular occurrence in the seafood world. It happens when a genuine well-intending person or group starts to build traction on an important issue … and then the corporate raccoons come in with budgets and cartoonization capacity and co-opt the entire concept. The problem is that this neutralizes the effort of the well-intending person or group that initiated the line of thinking and probably brought forward a plan. Racoons win the hearts and minds of the people based on superficial imitation and before you know it they are making money from it … perhaps even enough to buy more cartoonization and a little influence on top of that.
In fisheries we now have the following:
Yay, small-scale-low-impact harvesters!
All of the above are important issues that should be addressed. But all of these issues can be cartoonized, racoonized and monetized with the help of memes and narratives, and once that happens, all of that hard work and sacrifice by all of those well-intending people goes down the tubes while token solutions to the cartoonized problems are successfully sold to the public.
If the Minister were seriously going to make all their decisions based on science, then Atlantic mackerel would not have a TAC set at 10,000 tonnes mostly being caught by seiners. But a strategy of Yay, Science! doesn’t require adherence to true science, it only requires maintenance of the cartoon.
The UN Sustainable Development Goals, as an example, are a strategically tailored set of abstractions falsely presented as a credible plan for advancing responsible resource management. As a result, there will be immense resources expended (both human and financial) on multitude of studies, presentations, conferences, PR campaigns, etc. that could have been used to support real improvements that real ENGOs, academics and industry parties could deliver but don’t deliver due to a lack of funding.
Most of the cartoon of the Artisanal Fleets presented to the public are inaccurate.
- The notion that allocations to the Artisanal Fleets are always based on social welfare rather than maximized economic benefit is false.
- The notion that the Artisanal Fleets are composed of reckless and irresponsible non-rule-abiding violent people is completely false.
- The notion that independent harvesters cannot operate viable businesses under PIIFCAF is not only false but absolutely absurd when you consider the number of lobster and snow crab fishermen who own Ferraris and toys worth $millions.
- The notion that PIIFCAF is what holds back the industry and that enforcing PIIFCAF would destroy the industry is false.
The above cartoons and memes were developed and cultivated in significant part by the corporate offshore fleets themselves, to help ensure their desired outcomes with the Minister.
Speaking in the 1999 film by Stefan Forbes, One More Dead Fish, (as reported by the Halifax Examiner) here is what Clearwater Seafoods co-founder had to say:
“Who do you think is poaching the lobsters? Who do you think is fishing in excess of the trap limits? That goddamn independent fisherman. And so what you’ve got to do is say to people, “Look, these are the rules, and if you break those rules, you’re out. Break the rules, you’re out. Out! Gone! Find a new job! You lost your licence!”
But when Clearwater broke the rules it was all a different story … you see a completely different cartoon brought forward and Clearwater is always the victim. Funny how that is …
I’m going to cut this post off here. My next post, coming very soon, will look directly at Clearwater Seafoods and the presently proposed transaction.
Thank you very much for reading this post. Feedback, discussions and comments are always welcome.
 (as the Halifax Examiner quotes Mr. Rick Williams, within one of a series of articles found here)