VII. ECONOMIC ASPECTS

Economics tries to quantify what we spend and what we receive. It is a means to discover whether the initial purposes of a project have been achieved, how much it costs, and whether the consequences were expected and are acceptable. By trying to quantify what we spend and what we receive, we are simply adding a perspective to the review. It is important to note that quantifying expenditures and receipts may involve attributions of value which vary among different people or interests.

Our natural resources ought to be universally accepted as having value. This review of the economic aspects of industrial hog production and processing is rooted in the public good and in the public interest, and the value judgments are related to public more than to individual interests. It could be argued that all the information available to the commissioners spoke in some way to the consideration of economics regarding this industry. Necessarily, only some of the information presented has been selected for this section.

Private Benefit and Public Cost

The MLM plant at Brandon, as with other government-sponsored mega projects, was developed with the costs and expected benefits to the owner clearly identified and predicted. The benefits to the public from investment, construction, and jobs can be similarly predicted. These estimates are relatively straightforward, involving few intangibles and few attributions of value that depend on qualitative judgement. However, the citizens and taxpayers in Brandon and across the Province of Manitoba also will be responsible for expenses that are difficult to quantify. These may include:

1. The capital cost of any additions to the water treatment facility in Brandon, and liability in case of downstream damage.

2. The ongoing and indefinite costs for additional social infrastructure (e.g., social and health services) that predictably will increase.

3. Expenditures to identify and correct problems associated with wastewater discharges from the plant in Brandon as well as waste, manure, and dead pigs at production facilities.

4. The opportunity cost borne by the public for loss of use and quality of the Assiniboine River, Red River, and downstream lakes caused by increased pollution, and increased risk of contamination of humans by transferred residues and parasites.
5. The decommissioning and cleanup costs for the Brandon plant and hog production facilities, excepting those covered by The Contaminated Sites Act.

6. The cost to the City of Brandon and the Province of Manitoba to monitor for compliance with the licence and for secondary environmental impacts.

These costs will accrue to the public through acceptance and licencing of the developments by the provincial government. They translate into real dollar outlays which should be assessed before the government commits itself to such proposals. If the purpose of the investment of public money and resources is to generate net benefit for the province then that purpose cannot be said to be accomplished if the costs of the consequences of the project are ignored or minimized, and these costs exceed the benefits.

A number of presenters produced in-depth reviews of the consequential public costs that have been experienced by other jurisdictions hosting these mega-projects. There is enough similarity of experience in the U.S. and Canada to state that these consequences can be accepted as relevant to Manitoba. The public should realize and be greatly concerned that in most cases governments have ignored or understated the public costs before committing to a proposal. In addition, although social scientists across North America have described the problems in detail, little has been done to develop methods of quantifying the costs associated with development.

Public Good Falls Through the Cracks

Assessment procedures exist in most Canadian jurisdictions to identify the consequences and public costs relating to proposed developments. However, there are significant differences among jurisdictions as to how an assessment is done and for what purpose.

The federal government, in general, takes the view that the assessment is an integral part of the decision-making process, and that purpose and consequence should be considered before irrevocable decisions are made. Unfortunately, this government has, in its legislation and practice, so restricted the circumstances under which it will apply these principles that they are often irrelevant to real life. An example of this is the MLM plant in Brandon, where the federal government expressed deep concerns about potential pollution of the Assiniboine River (letter, B. Briscoe to L. Strachan, 17 March 1998). Nevertheless, it did not initiate an assessment of the project even when specifically asked to do so by the Long Plain First Nation.

The Manitoba approach starts from a different premise, namely that the purpose of an assessment is to mitigate the consequences of the project, rather than to decide whether the project should proceed.

Briefly, the federal government approach looks at pollution issues in advance, while the Manitoba approach is to monitor the consequences and fix problems as they arise. In relation to the MLM plant, the Province of Manitoba, by the terms of the licence, made the City of Brandon responsible for expenses for remedial work and some liability for future problems. Each level of government steadfastly stakes out its position based upon its legislation.

This situation can easily lead to higher costs for the public in the future. For example, millions of extra dollars are expected to be needed for remedial work to deal with ammonia and phosphates in the discharges from the Maple Leaf plant at Brandon. These problems were anticipated, but neither senior level of government dealt with them before the approvals were given for the project. Further, the Long Plain First Nation has put the federal government on notice regarding its liability for future costs because it failed to assess the project.

Sustaining Individual Producers and Rural Communities

The largest industrial producers in the U.S. have already moved to vertical integration of production and supply by controlling every aspect of the hog industry from conception to consumer. Profits are focused at the retail end of the business. In the U.S., pressure has been put on small-scale producers to lower their costs, which eventually puts them out of business, while the consumer pays an ever increasing price at the store. If these methods are transported to Canada, we can anticipate massive changes to the sustainability of individual producers and rural communities. There are predictions and signs that this will happen. Diverse opinions about the economics of this approach to pork production, and its impacts on farmers and communities, were expressed at the hearings and in the other material available to the commissioners.

When the MLM plant at Brandon was announced in 1997 Manitoba hog producers were promised an increase in price at the farm gate when the Brandon facility opened. Has this happened? The Western Producer (January 6 2000:47) again makes such a claim in relation to the proposed Schneider/Smithfield plant at Winnipeg. This report, however, steps back from the previous “promise” and reflects more of a “contingent possibility.” How likely is such an increase in payment to the producers? This is an important question because the experience in the U.S. Has been to the contrary.

It is in the public interest to have independent and competent reviews of the following questions:

1. Will the individual producer benefit or not?

2. Will our rural communities benefit or not?

3. What are the consequences of the industrialization of farm production?

4. What serves the public interest best: individual producers or industrial producers?

Only when such a review has information and perspective from industrial producers, individual producers, processors, retailers, consumers, and the public, can reasonable and balanced policies be developed. Ad hoc decision making will surely lead us to trouble. We are aware that some predict that industrial hog production will bring great economic benefit to producers and to communities. Others equally qualified say that these economic benefits are illusory. If the latter view is more accurate, there will be substantial costs to the public as the income levels of individual producers and family farmers shrink and local communities continue to erode. If the former view is more accurate, increased income will enable communities to remain strong and to handle increased costs. These are important economic questions with important social consequences. A full review of events in other jurisdictions and of current specifics is necessary before decisions are made.

The Economics of Regulation

Scientists who identified in detail the waste disposal, contamination, and pollution problems flowing from hog pro duction stated that these problems are directly related to the size of the operation. It is clear that more proactive regulation of industrial agriculture is required. In general, a clear distinction between industrial- scale agricultural production and individual farm producers was made in the material available to us, e.g., the regulations for disposal of wastes (Manitoba Gazette 1998; Transcript. Brown). When additional regulation of farm practices is considered, individual producers are properly concerned that their profitability will be reduced under the weight of excessive regulations. Therefore, any new regulations must be sensitive not only to the problems of large-scale waste disposal but also to the realities of and costs to smaller, individual farmers.

The Future of Agriculture is Related to Economics

We cannot expect producers of agricultural goods to continue to produce if they do not receive adequate and reasonable compensation for their efforts. We are living with rapid structural changes to ideas on profitability, social services, community infrastructure and other matters, caused by the industrialization of agriculture in response to globalization of production, processing, and marketing activities. Structural changes can have both good and bad consequences. And so the question becomes: “How do we achieve a balance that provides net benefits to the communities of Manitoba, the West, and Canada? ” It is essential that we plan appropriate responses in our approach to these changes. It should be possible to use public money effectively by developing agricultural policies that respond to the changing world.

The following are some of the questions that could underpin the development of such policies:

1. What are the structural change factors (as distinct from the cyclical change factors) which are evident in agriculture today?

2. What are the effects of these changes?

3. How can we best adapt to meet the challenges of these changes?

4. How can we position ourselves to the best advantage now and achieve sustainability for the future, acknowledging that there are external forces?

5. What is worth saving?

6. What merits rejection?

Future Costs: Who Should Pay? Who Will Pay?

During the hearings we heard from government officials, scientists, producers, and producer groups who told us that there are many unanswered questions about industrial hog production and processing. Significant funding is being allocated to problem identification and the quest for solutions. In the future there may be significant issues of liability for damages and compensation depending on how these problems are solved. By way of analogy, governments across North America spent large sums over a period of years supporting the tobacco industry and then more money in identifying associated health and social problems. Then, private and public litigants began to sue the tobacco companies to recover private and public health costs. Many of these claims have been successful. How long will it be before someone develops a claim for the private or public costs of pollution, remedial work, or resource depletion consequent upon a large industrial project such as the MLM plant? Who are the parties at risk of liability? The industrial proponents? Government as partner? Government as regulator? Both industry and government should be interested in reducing their future risk of liability by improving the quality of their decision-making today. In addition, the public in Manitoba have a right to know whether any level of government has accepted or considered the costs of future remedial work and liability relative to hog production and processing projects. Government has the obligation to provide this information if it is to be seen as acting in the public interest.

Recommendations

1. The Government of Manitoba should review and change its environmental assessment procedures to do away with staged licencing. Evaluation of the whole picture is needed for large developments, including whether it is in the public interest that the proposal as a whole should proceed or not. This should be the function of a body, established through legislative mandate, to conduct such assessments.

2. The Government of Manitoba should review and change its environmental assessment procedures to require a display of the actual and contingent present and future public costs of a development. The legitimate role of government in a development is to assess the proposal in the public interest, by identifying the issues, getting the best answers to questions of fact or science, and balancing the tradeoffs for the public good.

3. Government, and thus the public, should avoid undertaking open-ended liability for pollution cleanup and decommissioning relating to industrial hog production. The consequences should follow the profit.

4. A public inquiry or commission, established by the legislature of Manitoba, should be convened as soon as possible to review and report on the future of agriculture and the purposes, methods, and consequences of the industrialization of agricultural production. These are issues of vital importance to all Manitobans and only a body with legislative authority will be able to bring before it representatives of all interests.

5. Federal and provincial officials should jointly establish a framework for the gathering of baseline data on natural resources that would be available as a foundation for future decision-making. These data should be available to the public on an ongoing basis.

6. The terms of all development agreements between government and an industry should be made public so that citizens can properly judge what has been traded for what.