FORESTRY AND COMMUNITY DEVELOPMENT. 11 



It has often been claimed that the incentive to make money by 

 speculation has been one of the important factors in bringing about 

 the development of many parts of the country, and particularly of 

 the Western States. To what extent this is true depends on whether 

 speculation is defined as a business venture involving considerable 

 risk and therefore demanding a high interest return, or merely as an 

 investment entailing no productive operations and depending for its 

 profit on an expected increase in value. In the former sense, specula- 

 tion undoubtedly has done much to open up previously unsettled 

 portions of the country. In the latter sense, this may also be true of 

 speculation in standing timber so far as such speculation has led 

 to actual production as a means of realizing on the investment. 

 Furthermore, it is obvious that the taxes paid by private owners 

 of timberland, whether speculators or not, have aided materially in 

 supporting local community improvements and governments. On 

 the other hand, it may be open to question whether the development 

 stimulated in these ways was always a normal and healthy one. 



In many parts of the country, but particularly in the South and 

 West, timber owners to-day find themselves in the position of having 

 an overload of stumpage. Urged on by the belief that stumpage 

 values were bound to rise indefinitely and that speculative profits are 

 an inevitable consequence of timber ownership, they acquired enor- 

 mous areas of forest lands, far in excess of the present needs of the 

 industry. Contrary to expectation, these now have become a burden 

 instead of an asset. Carrying charges, such as interest on the invest- 

 ment, taxation, and fire protection, in many cases are mounting up 

 faster than the stumpage is increasing in value. 



In California and the Pacific Northwest, for example, the capital- 

 ized value of privately owned timberlands is estimated at approxi- 

 mately $1,100,000,000. Much of this is bonded, and on all of it carry- 

 ing charges are heavy, while in recent years stumpage values have 

 risen little or not at all. Consequently, all except the strongest owners 

 have been forced to cut, irrespective of the demand, in order to meet 

 current expenses and to retire their investment. In times of depressed 

 market conditions the natural result of this has been to bring about a 

 greater cut than the market can absorb at prevailing prices, with con- 

 sequent failure of the weaker owners and general instability of the 

 lumber industry. 



From the standpoint of the manufacturer, overproduction begins 

 when lumber prices do not return the cost of production plus a living 

 profit. Curiously enough, this condition sometimes has accompanied 

 a decrease in the total lumber cut. The explanation of this paradox 

 lies in the fact that a decreasing demand for lumber, which is of 

 course particularly marked in periods of general depression, means 

 lower prices. In other words, the decreased demand that always ac- 



