Newfoundland’s Curious Attitude to Private Property
Newfoundland’s thin soil and the long history of free trade militated against the development of agriculture. Although early planters tried to till the soil, the economic return from fishing was so much greater that agriculture was left far behind. But that excessive reliance on a common property fishing resource, owned by no one, has hobbled development. That lack of “ownership” that farmers typically bring to their land may be the reason that Newfoundland trails Nova Scotia and New Brunswick when it comes to non oil-generated employment growth.
The commons attitude is most evident in the way the fishery is prosecuted, but it colours all of Newfoundland. Prior to the late twentieth century collapse of the cod stocks, ground fish were a common resource, one that could be exploited by anyone. Those with the fastest boat, with the most fishing skills would prosper.
When groundfish stocks collapsed in the early 1990s the federal government moved to quotas. Those quotas were a form of property rights, but they were only transferrable by selling the whole enterprise, no one fishermen could amass additional quotas. When fish stocks declined, the quotas for all were cut equally, leaving even less for individual fishermen.
Yet the lack of fishing quotas that can be sold and transferred freely may be part of the reason Newfoundland is the economic basket case of the country.
Research by Peruvian Economist Hernando de Soto has found a strong link between private property rights and prosperity. In his research in developing countries he found that there was incredible wealth held by even the poorest in the world. What was missing were the laws and courts that would allow poor people to borrow on these assets, to sell them at a fair price, and to use them to create the businesses that create wealth. Unless property can be used to create additional wealth, societies cannot use these assets to move to higher levels of prosperity.
Although Newfoundland is far from a third world country when it comes to property rights, long held attitudes towards the commons have severely stunted any attempt to use the natural wealth of the province as the grubstake to build prosperity.
In the fishery a strong preference for family fishing enterprises has prevented individual fishermen from buying additional quotas from their less efficient brethren and becoming more efficient. Unfortunately that attitude is even codified in the regulations of the federal department of fisheries.
If western Canadian agriculture had developed in the same way, farmers there would still be toiling over a quarter section with a horse and plow. The modernization and amalgamation that has vastly increased agricultural productivity would have been stymied.
This attitude has led to fisheries opening for as little as a week or two with many more fishermen than are necessary. The earnings for most fishermen are poor but, supplemented by very generous employment insurance payments, the number of fishermen still stays high.
The individual quotas are the property of the fishermen. But they are dead assets that cannot be used to build additional profits, cannot be sold to redeploy fishermen in other more economically useful pursuits.
As a result, little capital is being generated in rural Newfoundland. There are not enough rich fishermen to supply work for their newly redeployed but less successful fishermen. The tragedy of rural Newfoundland is not the decline of the fishery, but the failure of the economy to create new enterprises and jobs for the next generation of Newfoundlanders and Labradorians.
That commons approach has also coloured the way land based resources are developed. When the province moved cautiously to increase the number of outfitters on the rivers and in the woods, they were met with a groundswell of opposition. Hunting and fishing groups would not allow individual outfitters to invest their funds in the private development of the outfitting industry, even though the moose population, the resource, is at an all time high. In the end the province backed down.
But other government policies have also frozen assets. In large areas of the province land is held by absentee landlords, the sons and daughters of people who have long ago emigrated to other provinces. The lack of a universal property tax has locked up their land from further development. Much of the most fertile land in the province lies fallow with no way for more ambitious farmers to add it to their land base.
Whenever a community proposes imposing a land tax the citizens react strongly, reflecting the ancient hostility to land taxation that was part of the reason Newfoundlanders rejected confederation with Canada in the nineteenth century. It is part of the tradition of holding natural resources in common.
It is also part of the love/hate ambivalence Newfoundlanders bring to their relationship with the large companies that exploit the forests, water power and minerals of the province. Much of Inco’s trouble in developing its Voisey’s Bay deposit is grounded in the commonly held attitude that these resources belong to the people and will not be developed unless extraordinary benefits accrue to the people.
It is not surprising that St. John’s with its more modern attitude towards property and its use, is the fastest growing part of the province, with the lowest unemployment rate. In rural Newfoundland the ethos of the commons has frozen development and led to unemployment levels that range from 20 per cent in western Newfoundland to 30 per cent elsewhere.
Unfortunately the ethos of the commons is Newfoundland. The attitude has led to a continuous decline in the ability of the province to build an economy that would employ younger Newfoundlanders. The results are obvious. Newfoundland’s population topped out in the early seventies, and has been declining for most of the last decade. Alone among Canadian provinces it has seen its population decline by 40,000.
If we follow De Soto’s advice the way ahead is clear. Stronger property rights in the fishery, in the ownership of land, and a means of ensuring that land is not frozen for decades by absentee landlords, is necessary if the assets of the province are to be used to increase wealth, and employment.
As in third world countries, the assets in Newfoundland are there to develop, all that is needed is strong property rights that would allow the assets to generate growth.