1128 A NATIONAL PLAN FOR AMERICAN FORESTRY 



There is no adequate basis for estimating with any precision ^ what 

 additions to capital value can be expected as a result of restoration of 

 the growing stock through conservative forest management or what 

 portions of the capital required for this restoration must be borrowed. 

 The enormous losses through growing-stock depletion, the loss of 

 forest improvements, and other features of timber cutting under the 

 liquidation policy add huge sums to the current operating expenses of 

 the industry. The increase in net earnings that will result from sav- 

 ing these losses, under normal conditions of price and of operating 

 costs, will be reflected in capital value. Weighing such information 

 as is available on the present condition of the forest capital with the 

 conditions that must be brought about if the Nation is to continue to 

 be served with forest products warrants the belief that the forests 

 now in private ownership need and reasonably warrant rebuilding to 

 double or more the present capital values. 



In addition to enabling present owners of forest land to restore the 



Eroductivity of their holdings, credit capital would almost certainly 

 ave a still larger function in assisting in a redistribution of ownership 

 that would bring more forest land into the hands of enterprisers with 

 the desire and the ability to create permanently productive operating 

 units. 



Notwithstanding the desirability of facilitating better management 

 of forests by making credit capital available at reasonable costs, 

 caution should be observed in these credit transactions. An excessive 

 flow of low-interest capital to this field would assuredly result in 

 unjustifiable writing up of capital values. This may be socially un- 

 desirable owing to the tendency to divert an undue share of the 

 product of industry to fixed charges at the expense of labor and 

 management. 



SOURCES OF PRESENT CAPITAL AND COSTS OF CREDIT 



CAPITAL 



As has already been stated, the principal source of capital in forests 

 (including resource value) has been the gradual process of valuation of 

 the forest resource. The form which title to the capital takes, and the 

 distribution of title, are of importance. ^ Unfortunately, complete 

 information does not exist as to the proportions of capital represented 

 by direct property ownership and by long-term and short-term credit. 

 The most definite information available on any region was obtained 

 by the West Coast Lumbermen's Association in 193 1. 1 These data 

 show that the investment value of the lumber industry within the 

 Douglas fir region is approximately $838,761,149, of which $502,674,- 

 500 is attributed to timber and the remainder to manufacturing plants. 

 No figures are given for the pulp and paper and other important 

 forest industries of the region. The capital involved is represented 

 by direct ownership to the extent of about 75 percent. The form 

 and times of maturity of the debt represented by the remainder are 

 not given. 



It is known that no great amount of capital has been available for 

 long-term loans in the form of timber bonds and that the maturities 

 of such bonds are too early to permit amortization of the loan except 



i Greeley, W. B., The Northwest Lumber Crisis. American Forests, September 1931, pp. 529-533. 



