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Our Fishing Heritage
Chapter 21. Economic and Financial Pressures

It was a Saturday morning 55 years ago. A handful of skippers were sitting in the lobby of the fish salesman’s office, waiting their turn to ‘settle up’ for the week. Over the previous 30 years the fish salesmen had acquired enormous power and authority over the fishing fleets in each port. In addition to selling the fish, for which they received a modest commission, they also received the cheques or drafts from the fish buyers and from that income, paid all of the bills the boats incurred, for fuel, ice, stores, spare parts and harbour dues. Most of them became the fishermen’s business office, and kept all of the boats accounts. They also assisted the fishers with their income tax returns and made all the financial arrangements for any skipper who wanted to purchase a replacement vessel. The salesman’s office usually incorporated a ship chandler’s store, and sold the fishers what ever gear they needed, - nets, ropes, twine, floats, oilskin smocks, seamen’s boots, knives, and charts. Some salesmen companies expanded and set up offices in different ports. Among the big ones on our coast were Cosalt, Salvesen’s, Irvin’s, Duthie’s, and Caley. Each of them ended up having shares in most of the boats they served. One fish salesman came to the port as a penniless clerk, and rose to own a large fish selling company, and to own part of half the boats in the fleet.

On this particular day, the crew of a local boat were sitting in a corner with glum expressions on their faces. They had struggled that year to produce fish and make money, having faced a series of setbacks with mechanical breakdowns and poor markets. Their boat was aging and a bit small for fishing offshore. It is like that sometimes in the fishing. When things are going well it seems you cannot put a foot wrong, and all of your decisions result in success at sea and on the fish market. But you can run into a seemingly endless period of difficulty when nothing appears to go right, and you never get to turn the corner from hard times to days of plenty. So as hard as they had been working, this skipper and crew were up against it. The fish salesman had called them in to review the situation. He appeared from his office carrying a big ledger, and with a bad-tempered countenance ushered the fishers into a small room as if they were criminals and he was an interrogator. The crew followed him submissively with bowed heads and humble expressions, watched by the waiting group of skippers. The door closed behind them and one of the skippers turned to his colleagues. He gestured with his thumb at the room where the crew had gone, and said simply, “chamber of horrors” !

Even the best of fishers can go through a period of financial difficulty. Fish market slumps are a common cause of such problems. After the First World War, the formerly insatiable markets for salt herring in Germany, Poland, and Russia, collapsed. Those countries were bankrupt, or lacked foreign currency, and were unable to purchase the fish. The North Sea was still full of herring. The fleets of steam drifters were still able to bring in boatloads of the fish. But there were few merchants able to purchase their catches. For a period the drifters turned to fishing for cod, haddock and plaice with lines or trawl nets, but those lovely boats that were ideal for drift netting, were ill-suited to other methods of fishing. They were also expensive to operate, and coal was rising in price. Soon they were tied up, sold, or scrapped. A new method of catching white fish was developed by the Danes. Their snurrevod, or bottom seine, could be worked by a small boat with a diesel or semi-diesel motor of just 30 to 60 hp. They were soon to become the main producers of plaice in the North Sea, and after the Scots made the gear more versatile, dispensing with the anchor used by the Danes, seine net boats could take quality cod, haddock, hake, and whiting, better than any trawler or line boat of similar size.

But the transition from drift net to seine, and from steam to diesel was not made without some financial pain. Some good skippers that held on their drifters in the hope that the market would recover, were to lose everything, - boat, savings, and house (for houses were often mortgaged to finance the family boat). And when the seine fleet grew to become the dominant fish producer in Scotland, their catches flooded the market at times, especially in summer when there was a lot of small fish. As a young apprentice fisherman I have watched hundreds of boxes of small haddock and whiting go “up the road” to the fish meal plant. It would have taken crews many sleepless hours to gut all the fish, but their labour was in vain, and the proceeds from a rejected catch would not even pay for the fuel and the food. I recall one skipper, obviously desperate to keep his boat solvent and to give his crew a wage, pleading with the merchants to buy his catch, even at the low minimum price. But they were unable to do so. The market was to stabilise by the 1970’s, and the price paid for a 7 stone box of fish (98 lbs or 45 kgs) was to rise from £ 2 to £ 5 to £ 10, and later to £ 40, and even £ 80 or more by the 1990’s. The herring market was also to recover, but by then the effective method of capture was purse seine or midwater trawl which required huge, multi-million pound vessels to operate.

The last thirty years have seen the emergence of totally new costs that out forefathers would never have dreamed possible. Governments have escalated the cost of vessel licenses by permitting their sale on open markets. On top of the license, the modern skipper or boat owner has to pay for his fish quota. These have also become tradable commodities, to the point where today the boat license and fish quota costs the fishers more than the boat, the engine, the equipment, the warps, and the fishing gear, together. I sat in the cabin of a small prawn trawler a few years ago, in the port of Mallaig, Scotland. Next to a lobster boat, or a prawn creeler, the 40 or 50 foot prawn trawler is the cheapest fishing unit in my country. The young skipper was struggling each week to pay all expenses, to give his crew a living wage, and to pay the loan on the vessel. He explained to me what he had paid for the fishing unit.

The little second-hand boat he purchased, together with its electronics, winch, warps and fishing gear, cost him £ 30,000. The license he needed to operate vessel, - a mere piece of paper issued by the government, - cost him £ 90,000. A modest quota entitlement which authorised him to catch that amount of prawns and fish, cost a further £ 60,000. So in that simple case, the actual fishing unit, - the means of production, - was only 17 % of the total cost paid. The license, - the permission of government to operate the boat, - was 50 % of the total, and the quota price, - the result of a government-approved, but iniquitous and immoral trade in fishery access, was 33 % or a third of the total amount. Therefore, costs imposed by government on fishing boat operators amount to 88 % of the total investment. Or to put it another way, - government has imposed artificial charges on the industry, amounting to as much as 600 % of the cost of the actual fishing unit and its equipment.

The figures become obscene when we consider larger fishing units. A 30 metre offshore trawler’s license would be £ 500,000 and its fish quota could be £ 1,000,000 or more. For a 60 metre midwater (pelagic) trawler, the license might be £ 2,000,000 and the fish quota at least £ 3,000,000. These were the sums that were typical 6 years ago in 2002. I gathered them during a UN FAO assignment to assess the coastal communities of the Hebrides and West Coast of Scotland. It was one of five global regions selected by the Kyoto Conference for examination to obtain examples of the economic, environmental, and social pressures on fishing communities at the start of the 21st Century.

Two major items in the operating cost of fishing boats, that have escalated in recent years, are bank charges and fuel costs. The excessive costs of licenses and quotas mentioned above, have obliged many boats to borrow funds. The main loan most vessels normally carried was for the boat itself. Few fishers could afford to purchase a boat outright. So it was necessary to borrow for that. In most cases in my country, the borrower was not a single individual like the skipper, but also included other crew members, some of whom would be family members or relatives of the skipper. Happy were the skipper and crew who were able to pay their capital loan off within ten years. Interest repayments were highest in the first year and it was vital to achieve high productivity the first twelve months.

But as economic pressures increased on the fishing fleets, boat owners began to borrow for other purposes. It might be a new winch or echo-sounder, or a major refit of the vessel, - but whatever the purpose, these additional loans, being shorter term, carried higher interest rates and added significantly to operating costs. However, the serious additional borrowing began with the iniquitous quota system that demanded skippers purchase the right to harvest a certain amount of particular fish species. Those who argued in favour of the system said that for too long fishers had been able to fish free of charge, but now they had to pay a ‘rent’ to government for the right. The problem with that rationale is that the ‘rent’ as economists like to describe it, is being paid to speculators and banks, and “slipper skippers”, who have enjoyed the right to catch fish all their lives; who obtained quota allocations when the cost was initially low; and who, having retired, make a handsome extra income off the labours of other less fortunate fishers, by leasing quota rights to them. (My own view is that if the industry has to pay for a quota allocation, the payment should go into a special fund to support fish conservation, and to assist new young entrants to the industry).

These quota borrowings put the banks in a powerful position which they exploited to the full. In the past, bank loan interest was paid weekly along with other normal expenses. Now the banks insisted they be paid first, - before any other expense, and before any crewman received any remuneration. The resultant pressure this put on the UK fishing fleets caused a serious drop in crew incomes, and led some skippers to operate with smaller crews in order to have more money for the bank repayments. One young fisherman I knew had worked on good offshore boats, and was making attractive money. But his skipper then invested in a more powerful vessel which also carried excessive bank loans for the boat, the license, and the fish quota. He told me, “We were working very hard, catching plenty fish, and making good money before. But now we are working much harder, catching more fish than before, and yet making a lot less money.” Debts mounted on many similar boats. Local crewmen left the fishing for more stable jobs on oil rigs or on oil rig service vessels. Their places have mostly been taken by foreign immigrants. Morale on the boats has declined, and drug use has escalated. The manager of a leading Fish Salesman’s business in Peterhead, our top fishing port, pointed to the financial files he held on scores of vessels, and said, “There are very few boats under our management which would not be forced to declare bankruptcy if we were to stop all credit and demand payment of all the debts they owe now.”

Some may contend that business failure affects all sectors and those who fail should pay the price. My own view is that the current financial crisis of the fishing industry, like the housing mortgage crisis, has been created by external forces, and not by the fishers themselves. Governments have manipulated the allocation of quotas and licenses to force fishers out of business, (thus avoiding any obligation to compensate), and this is the result. But they ignore their responsibility for creating the over-capacity in the first place.

The second major escalating cost item is fuel. The fishers need diesel fuel to power their creel boats, trawlers, and seiners. Fuel costs were low for much of the last century for two reasons. First the actual cost was not excessive, and a fuel subsidy or tax relief measure was applied for a time. That has changed with the enormous increases in global oil prices. A second major factor is that for the last 30 to 40 years there has been a huge increase in the installed engine power on fishing boats. When I first went to sea, boats were happily fishing away with motors of 90 hp or 120 hp. A boat with over 150 hp was considered powerful. Even large deep sea vessels had engines of only a few hundred horse power. But for certain types of operation, particularly trawling, more power had the benefit of helping to catch more fish. Extra speed to get to the fishing grounds and back to market, was also a motivation. So our fleet structure altered with greater numbers of larger, more powerful vessels. Boats of 75, 80, and 85 feet in length (22, 24, and 26 metres), were equipped with engines of 500 hp, 750 hp, and even 1,000 hp. Even auxiliary engines to drive generators and hydraulics, increased from a mere 15 hp, 30 hp, or 50 hp, up to 120 hp, 150 hp, and even 200 hp. All this added greatly to the fuel bill, and when fuel prices escalated, the writing was on the wall.

In hindsight it is obvious that there had to be a sensible limit to the size and power of each boat. Certainly there are methods of fishing and deep sea conditions that merit a vessel of substantial size and power. But with stout seaworthy boats, most countries could harvest their seas comfortably even if he boats are of modest size and power. Pelagic boats that fish offshore for mackerel and herring, need to have large capacity, but that apart, I see no need for the dog-eat-dog rat race to get a power advantage over other boats.

The problem first struck me as a serious issue, not in the North Sea, but on the shores of Lake Kariba in the Zambesi valley, where we had mechanised the fishermen with 5 hp outboards on their 23 foot canoes. The mechanisation worked well. The fishermen were happy, and catches were increasing. But as I reviewed the costs and earnings of each fishing unit, it became apparent to me that most of the extra money generated, was going to pay for the fuel and the spare parts needed by the outboard motors. The fishermen themselves were not getting much more money than those whose canoes were un-mechanised.

Later, when in Indonesia, and beginning to view fisheries issues through the Small is Beautiful philosophy of Dr E F Schumacher, I began to research different fishing operations to calculate how much fish were being produced, per ton of fuel used. Indonesia then had a fleet of over half a million vessels, mostly sailing canoes, but also many hundreds of long liners, gill net boats, ring net vessels, pole and line tuna catchers, purse seiners, and shrimp trawlers. I was able to obtain details of the operations of each. When in the UK before then I had compiled records of the catches, earnings, fuel consumption, and specifications of trawlers of varying sizes and from different ports. To those records I added more data from the Far East and America, to compile a useful if incomplete chart of the economic and energy efficiency of each unit. The resulting broad brush picture indicated that globally, large scale fishing units caught 3.5 tons of fish for each ton of fuel consumed, while the world’s small scale fleets produced 12.0 tons of fish for each ton of fuel they burned. Counting only fish for human consumption, the total production was 29 million tons for large scale sector and 24 million tons for the small scale fishery sector. The chart also showed that for each million dollars invested, the large scale fleets employed around 20 persons, while the small scale fleets gave work to 3,000 fishermen from the same amount of investment.

The chart caused quite a stir. First published by ICLARM, the International Centre for Living Aquatic Resources, (now known as WorldFish), it was the most quoted article by that organisation in the decade 1980 to 1990. (This information was compiled following a ten year log of all references to ICLARM material, by its chief editor). FAO agreed to sponsor its update which I completed in 1988, and some 18 years later, the World Bank and FAO jointly agreed to update the study, which they referred to as the Big Numbers Picture, or the Thomson Table. A copy of the 1988 version is given below.

The ‘big numbers’ study of global fishery operations was put together in the wake of the first major global energy crisis of the 20th century, the OPEC cartel’s control of production to raise oil prices to unprecedented levels. Seeing the effect it was having on the world’s fishing fleets, I believed that the study would shed some light on the situation, and possibly indicate some sensible policies for the future. Now the world is faced with an even greater escalation of oil prices in the wake of the War in Iraq, and the grabbing of oil resources by the USA, China, Russia, and other major consumers. Instead of reducing consumption and looking for alternative fuels or renewable sources of energy, most governments are exacerbating the problem by fighting over the world’s limited and dwindling deposits of petroleum.

In line with my draft of the global fisheries table, I looked at technological options for the world’s fishing fleets and fish processing activities. This paper was presented to the Indo-Pacific fisheries council that met in Kyoto, Japan in 1979. Today the paper is typical of many thoughtful attempts to develop a more sustainable fishing industry, but in 1979 there were some in FAO who did not appear to have realised how the OPEC crisis was impacting on poor country fisheries. My paper was banned from distribution within the house. The ban was to continue for 2 years but actually made little difference. Each time I visited headquarters I was approached by colleagues who asked if I could provide them with a copy. Perhaps if it had not been banned, there would have been less interest. The official who had banned the paper was a died-in-the-wool traditional fisheries engineer. He objected in principle to my floating of concepts like construction of artificial reefs, use of waste fish to generate biogas, and re-adoption of auxiliary sail on long distance fishing boats in the tropics.

Other officials were much more supportive. I sought a meeting with the Director of Agriculture and Fisheries in the Asian Development Bank, headquartered in Manila. Dr Shei graciously agreed to see me and called his senior staff together to listen to my proposal. I began by outlining the hardship being caused to poor fishers by the fuel price increases, and went on to question why, despite that, both ADB and World Bank were financing loans for fuel-expensive fishing fleets which would only add to the problem. I suggested that the ADB had a moral responsibility as a development bank, to make the fishery sector in the Asia-Pacific region aware of technological alternatives that would reduce energy and fuel costs. My proposal was for a regional workshop where fishery sector representatives from all Bank member countries could come together to discuss and to see practical demonstrations of appropriate alternative systems suitable to the region. Dr Shei’s officers each made helpful comments on the idea. When they were finished the venerable Chinese gentleman from Taiwan, turned to me and said, “Mr Thomson, - you have heard what my staff have had to say. Please take your document away and incorporate all of their comments and suggestions. Then double your proposed budget, and bring it back to me.” I did so with some pleasure, as readers can imagine. Dr Shei was as good as his word, and financed the whole exercise.

However, my own organisation, FAO, which was offered the task of organising the regional conference and workshop, (which ADB would have paid them handsomely for), declined to participate, since they had seen no need to address the fisheries energy and fuel issue in such a comprehensive way. They were the losers however, as all other participating governments were enthusiastic, particularly the Philippines which opened its renewable energy technology development campus at Cavite, to the conference. The campus had a range of working units such as fishing boats powered by motors run on alcohol from sugar cane and palm sugar, as well as other crops. There were diesel engines adapted to operate on solid wood fuel and charcoal, through Pyrolitic digesters. Windmills of different designs were pumping water into fish farm ponds, and solar driers were being used to produce dried shrimp and fish. Maya farms, a private sector venture on the east side of Laguna de Bay, welcomed participants to view their large pig and chicken farm whose huge freezers and cold stores were powered entirely by electricity generated from bio-gas.

Other governments that showed interest were China and Mexico. The Mexican government was hosting a large Latin American Fisheries Symposium at Cancun later that year. To my surprise they invited me to attend and present a similar paper. I was well received, and seated at the head table between the Ministers of Fisheries for China and Peru. The meeting debated my paper and accepted its proposals almost unanimously. The only dissenting voices came from the delegates from the UK and France. My own organisation continued to act petulantly and had insisted the only way I could address the conference was by taking leave and doing so entirely at my own expense. But the Mexican government covered all my local hotel costs. I went through FAO headquarters 2 months later and was somewhat amused to have officials there say how good it was I had been the one FAO officer to be at that important event ! However, that is all history and we let bygones be bygones.

To come back to the present time, we are facing serious fuel costs and credit restrictions which will place major constraints on fishery operations all over the world. How are we to address them ? In the short term there will be much pain and many bankruptcies. That is not avoidable. Farming and other food sectors will also suffer, along with manufacturing. But we can and must begin to develop sustainable technologies for the 21st century. We need boats that consume modest amounts of fuel, just as we need motor cars that do the same. This is quite possible, but requires political will and fisher commitment. Fishing methods adopted for the future must be such that require minimum power and have no adverse impacts on the marine environment. To counter the high cost of borrowing, fishing units of the future should be of low capital cost. And governments must cease to add high artificial costs to vessel operations. If there are to be payments for fish quotas, they should be made after the fish are sold, and made through government or fisher associations, into accounts established to support conservation and help new entrants to the industry. Likewise fishing boat licenses should be set at levels adequate to cover the cost of vessel inspection and safety services like lighthouses and radio beacons, along with contributions from the merchant ships.

Hopefully at some point in the future, application of these concepts will minimise the number of fisher bankruptcies, and put and end to visits of struggling crews and skippers to the fish salesmen’s or bank managers’ “chamber of horrors”.

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