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Quota systems and resource management: Icelandic fishing
by Gísli Pálsson and Agnar Helgason
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Inequality And The Distribution Of ITQs
  We need to keep in mind that some, if not all, of the 'giant' companies are owned by a large number of share-holders. One could argue, therefore, that the concentration of ITQs described above really masks a more egalitarian distribution of access and ownership. However, this is not necessarily the case. Unfortunately, very little research appears to have been undertaken in this field. What data there is, indicates that the distribution of share-holdings in the public companies involved (almenningshlutafélög) is very positively skewed, with a few large shareholders controlling the majority of the shares and a large number of small shareholders with the rest.18 Moreover, it seems that some of the biggest 'giant' ITQ holders also own shares in other fishing companies. It is also probable that other individuals or companies simultaneously own shares in several different ITQ-holding companies (Icelandic banks and oil companies, in particular, seem to own shares in many different fishing companies). As a result, an analysis of the distribution of fishing rights at the level of shareholders might even reveal a greater degree of concentration and distributional inequality than is indicated by our present study, even though the total number of shareholders of fishing companies surpasses the total number of ITQ holding operators. Finally, it is important to note that regardless of whether an analysis of share-holders will reveal a more egalitarian distribution of fishing rights, it is nonetheless true that through the ITQ system a relatively small group of managers have acquired immense powers in their hands. They are the ones who control access to the resource, how the resource is used, what happens to the products, and how the benefits are distributed. These managers effectively control the fate of whole communities in Iceland that increasingly depend on one or two large ITQ holding companies for employment and economic existence in general. This dependency has grown more acute concurrent with the ongoing concentration of fishing rights.
  Almost all of the significant changes that have taken place in the distribution of ITQs, particularly after 1990, were the result of exchange -- that is, the buying and selling of ITQs. According to orthodox economic theory, exchange is a mutually beneficial act undertaken by two (or more) autonomous agents. In this conception, the small operators who sell their ITQs and leave the system do this willingly because they perceive such a move to be profitable to them. However, invariably, the matter is not so simple. Markets do not exist in a social vacuum, and as a result there are a great many external factors that influence and direct the motives and nature of exchange in any situation. With regard to the radical decrease in the numbers of small operators in the Icelandic ITQ system, we have been told of cases where owners of small boats sold their ITQs for a windfall profit and left the system (such practice is generally castigated by fishermen and cited by the opponents of the ITQ system as indicative of its inherent immorality). It is much more common, however, to hear of cases where smaller operators considered themselves to be forced into selling their ITQs. The reasons given by these former ITQ holders, many of which cite the devaluation of their ITQ shares as the source of their predicament, are significant to any explanation of the distributional trends we have observed in the foregoing sections.
  In the Icelandic ITQ system the actual amount of fish a boat owner is allowed to catch each year (the catch-quota), depends both on the size of the ITQ share and on the size of the total allowable catch set by the Ministry of Fisheries for that particular year. Consequently, if the total allowable catch is reduced, ITQ shares effectively become devalued -- that is, all operators in the industry suffer cuts to the amount of fish they are permitted to catch, even though their actual ITQ share remains constant. This aspect of the ITQ system is highly relevant for the distributional developments. Following bleak estimates of the fish stocks in Icelandic waters by marine biologists, the Ministry of Fisheries has made recurrent cuts to the total allowable catch since 1988. As a result, many small companies found themselves increasingly left with insufficient catch-quotas to keep their boats active throughout the fishing year. To give some indication of the extent of these devaluations, a boat owner who controlled an ITQ share in cod of 0.1% (the upper limit of a 'dwarf') was entitled to approximately 254 tons of cod in 1987, 200 tons in 1991 but only 106 tons in 1994.
  Obviously, larger companies were also affected by these cuts, but such operators seem to have had more success in adapting to the situation. Indeed, as we have seen, while many small companies were forced to sell their ITQ shares and leave the system as ITQ holders, the larger companies reacted by buying up this new supply of permanent fishing rights. From their point of view this is money well spent, given that the stocks eventually recover, resulting in higher total allowable catches. In that event ITQ shares would engender much higher catch-quotas, and would consequently become significantly more valuable. A major factor in the apparent success of the larger companies in accumulating fishing rights is their ready access to capital through the Icelandic banking system, something that is less available to the smaller operators. The larger operators are generally vertically integrated businesses that own two or more vessels. Their approach to 'business' and ITQs is very different to that of the smaller operators. To the owners of the larger companies, the system provides new opportunities to maximise profits and, consequently, they tend to support ITQ management. In contrast, the smaller operators tend to perceive the ITQ system as an irritation and obstacle to their traditional way of fishing. These producers attempt to adjust the system to their way of doing things, fishing their ITQs whilst waiting for the system to be abolished and something more akin to the 'old way' to be reinstated. As it has turned out, however, with the ITQ system legally entrenched for an indefinite term, this seems unlikely to occur. Moreover, because of the recent devaluation of ITQ shares, it has been increasingly difficult for the small-scale operators to continue fishing as they used to -- their ITQ shares simply do not yield enough tons any more to sustain the fishing operation throughout the year. This situation is concurrent with a growing trend whereby the larger companies have increasingly been sending their trawlers to fish in international waters. In these cases, the larger companies do not 'need' all of their ITQ shares, as they can keep their vessels in action without them. This state of affairs has given rise to radically new relations of production in the Icelandic fisheries.
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Quota systems and resource management: Icelandic fishing,
by Gísli Pálsson and Agnar Helgason.
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