1126 A NATIONAL PLAN FOR AMERICAN FORESTRY 



acres of forests stocked for the most part with trees of magnificent 

 size. At that time, however, these forests had no capital value. 

 Now their remnants have a large capital value. This capital value 

 essentially results from the relationship between human needs and 

 the forest resource and from the right of ownership, which enables 

 the owner to reap profit from the sale of forest products. Very little 

 of the present capital value of American forests has been created by 

 labor or by the investment of money. The money value of property 

 rights in private forests has grown through "unearned increment" 

 as they were handed from generation to generation. The value 

 status at any given time has been recognized as the titles were trans- 

 ferred from owner to owner. This process of valuating forests has 

 been active in one region after another. The South and the West 

 are the last regions in which prices for timberlands have reached 

 high levels. 



It is not to be assumed either that this process has come to an end 

 or that it cannot be reversed. Certainly some reversal, that is to 

 say decline in value, has recently taken place owing to deflation of 

 prices and depletion of growing stock. Future movements of value 

 will depend on the treatment the forests receive. Widespread cutting 

 operations now going on without care for future production are 

 removing forest capital too rapidly to permit replacement by growth 

 unless the forests are rigidly protected from fire and other destructive 

 agencies. Maintenance of capital value during the past 30 years or 

 more, since timber cut has exceeded growth, has depended on writing 

 up values of the stumpage remaining. 



Changes in value reflected in such "write-ups" may occur sud- 

 denly. ^ After the World War, price and credit inflation brought 

 about increases through a period of nearly 5 years except during the 

 short depression of 1921. Such changes are seldom of any lasting 

 benefit and often bring disastrous after effects. An oversupply of 

 unduly cheap credit might produce similar results. General adoption 

 of improved machinery may increase profits and thus capital values, 

 but its effect is more likely to be dissipated in lower prices to con- 

 sumers. ^ Skilled management, since it is a scarce factor of production, 

 leads to increased valuation of the properties benefiting by it. The 

 commonest ^ device of skilled management is to adopt improved 

 machinery, improved technique, and the results of research in advance 

 of the industry as a whole. 



When the term "capital" is considered as inclusive of these capi- 

 talized resource values it becomes clear that organization of forestry 

 as a business involves long-term investments and, if credit capital is 

 used, long-term credit. The capital structure of the enterprise, 

 including both ownership capital and credit capital, should be such 

 that pressure for liquidation or withdrawal of capital will be avoided. 

 For the larger enterprises the device that has been worked out, but 

 not altogether perfected, to serve this purpose is the corporation. 

 By means of the corporation the individual investment has in a 

 considerable proportion of business investments become liquid al- 

 though the enterprises are permanent. One of the chief elements 

 which often interfere with the permanence of corporate enterprise 

 is the relation of the credit capital to the enterprise as a whole. Per- 

 manence depends on limiting the creidt capital in amount, limiting 

 interest rates to a point not in excess or not much in excess of the 



