|Thursday, 9 August 2012|
THE mining industry has more to worry about than Canberra. Some powerful voices are bringing headlines you may not like. The Outcrop by Robin Bromby.
You may not yet have heard of Michael T. Klare, but you probably are more familiar with Joseph E. Stiglitz, an economist who won a Nobel Prize and who is currently a professor at Columbia University.
The common feature: they are saying things the mining industry may not like to hear.
Klare is professor of peace and world securities studies at Hampshire College. But, more importantly, he’s the author of a new book The Race for What is Left: The global scramble for the world’s last resources, a title that is just about to get a good deal of publicity for the apocalyptic warnings contained therein.
The two men are taking different roads to the same conclusion: that the mining companies have to be reeled in.
Klare is all about the looming shortages of just about everything laying the foundation for World War III while Stiglitz, in a new article for the think tank Project Syndicate, “From Resource Curse to Blessing”, draws a road map for resource-rich developing countries to extract more for themselves and leave less for the mining companies.
In the case of Klare, we have – as most readers will immediately have thought – plenty of precedents in laying down a doom scenario.
There was the Club of Rome in the 1970s and, late last year (as outlined in this space), the McKinsey Global Institute predicting we were in for one hell of a resource shock over the next 20 years caused by another 3 billion middle class people around the world.
The difference between McKinsey and Klare is that the former worries about the cost of producing all the commodities, while the latter dismisses the chance of there being enough, anyway.
Klare is seeing a new world war being fought over the dwindling supplies, not only of food, but of coal, uranium, copper, lithium – you name it.
Of course, you cannot argue with the proposition that once you use many commodities, they have gone forever. But it will be interesting to see just how much of a scare wave this book will produce.
My guess is that it will be like most books that argue a point of view: it will get its moment in the sun, and then the world will go on to another issue. However, in either the short or longer term, Klare will provide those who are already opposed to the mining industry with more ammunition.
(Note: I am not mounting a case against Klare – who may turn out to be more on the money than others – or Stiglitz. What I am doing is alerting readers to two trends in thinking that may very well gather strength in the coming years and with which the mining industry will have to grapple.)
In the case of Stiglitz, his argument is that the resource-rich developing countries – he cites Ghana, Uganda, Tanzania and Mozambique – have done even more poorly than countries without resources. It’s the “resource curse” with which, again, readers will be familiar.
This curse is said to cause the countries concerned to have strong currencies (which impede other export industries), rising unemployment (because resource extraction requires little job creation), and instability (the country’s economy pulled one way or another by the volatility of resource prices).
Stiglitz argues that these countries need to do more to reap the benefits and ensure their longer term prosperity.
He advocates a new, transparent auction system for resources – and with clauses that see these countries sharing in profits if prices soar. He urges these governments, as of now, to demand existing contracts be renegotiated or impose windfall profits taxes.
He says that there is an example to follow: over recent years, Botswana has renegotiated contracts and this has laid the foundations for that country’s “remarkable growth”.
Stiglitz applauds the move by some countries – Bolivia, Venezuela and Australia are cited (some company!) – to impose extra taxes on miners.
More importantly, he tells Ghana, Uganda, Tanzania and Mozambique to slow their resources boom, to just put new projects on hold until a new system is put in place to ensure greater shares of the mineral wealth for the locals. After all, the resources will not disappear in the meantime.
Sure, none of this makes the sort of reading your average mining executive would enjoy.
But these are arguments that are not going to disappear. Even if Klare’s particular treatise gets forgotten by the vast majority of people, there will be more such scenarios coming along.
In the case of Stiglitz, however, I suspect that his particular argument is going to get only more adherents.
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