Large-scale Mining: Resource Blessing or Curse Flashcards
Define Resource Curse
Inverse relationship between natural resource abundance and economic and social growth.
Countries rich in natural resources tend to experience less economic growth and social benefits
Curse: Resource extraction industry impedes social development
More natural resources = less economic & social growth
Explain how states and mining companies exercise their ownership/control over the mineral resources, and how local communities are compensated. Clarify whether local communities feel that the compensation is adequate, and why.
Nationalize subsurface minerals, disregard customary ownership claims, lease lands to mining companies
Should have eminent domain over surface-with compensation.
do not feel the compensation is adequate; state doesn’t always follow through with compensation, and other promises that came along
Define a fifth spatial linkage in the “resource-based economic development model,” and explain two different ways in which that linkage provides a mechanism for local communities to capture the economic benefits of the natural resource
Community Investment Linkage
Social development: mining companies will have to invest in new infrastructure (roads, facilities). Locals can use new infrastructure to improve their quality of life.
Economic linkages and diversification: The infrastructure the mining company builds allows forward,backward and final demand linkages to occur because of all the different businesses produced
Characterize the structure of an “export-enclave economy” generally, and through a description of each of the five theoretical linkages in a resource-extraction based economy. Use Nigeria and Zambia cases to illustrate each.
The industry helicoptering itself in, brings in everything it needs to capture/ suck out oil/resources, then pipeline it out,completely by passing all state and local linkages.
Backwards enclave: zambia got the stuff from non local equipment
Forward enclave: no value added because refinery and making plastics are happening somewhere else
Final Demand enclave: local workers, however they are low wage workers (don’t have much money to spend). Those who do earn high wages (the white people) don’t even spend money on local businesses, they spend on foreign businesses
Spatial linkages: not well not dispersed. infrastructure benefits do not make it out to the local communities
Fiscal Linkages: local gov not getting direct access to royalties or Joint Venture. Mainly goes to the state (that’s who developed the lease with the big company).
Describe the linkages between the people and the state in a diversified economy. Clarify whether the state has an incentive to provide social services for the people.
all people in all industries are all paying taxes to gov- income from a broad range of businesses and economic activities
government uses all that income to provide social services people
has the incentive to provide these services for the people because Businesses need security, educated and healthy workers, and all services provide a stronger economy, which then produces taxes for the government, creating a positive cycle.
Explain how the oil industry typically breaks the link between people and the state. Clarify whether the state has an incentive to provide social services for the people.
oil money, that outstrips any other source of revenue
government has no incentive to provide
government sees no benefit in providing services to these sectors because they see it as a source of no value for them.
Explain how governance institutions become distorted
When there is a broken link between the people and the state
states prioritize resource extraction over public welfare.
lack of investment in essential services such as schools and hospitals, as there is little incentive to respond to community demands when the state has alternative revenue sources.
Describe how oil companies typically try to buy communities off in this institutional environment, and clarify why that doesn’t work
“trophy projects,” such as building schools or clinics, and by making direct cash payments to local leaders.
Does Not work:
poorly planned, lack support- schools without teachers or clinics without medicine
promised benefits don’t happen
failing to address actual needs and prioritie
Clarify how that distortion causes a decline in economic diversification and a rise in government tolerance for environmental damage that undermines other livelihoods
sectors like agriculture and fishing are often neglected. Government funding and support for these ministries decline- causing them to decline
less need to collect taxes from other sectors. ( why would we fund them if they produce very little to our economy) Tax authority shrinks to nothing
Causes imbalance: tolerate environmental damage
Explain what is meant by the term ‘conditionality’ in a mining contract
Let’s rewrite the terms of the contrac: specific requirements must be met for contract to remain valid.
Can be transparent or not transparent
Non-transparent contracts not be disclosed to the public
Provide examples of strategies to ‘break’ enclave structures in the arena of forward, final demand and fiscal linkages
Transparency over process, professional development for negotiations.
Forward: local refineries, with local workers that fuels local gas stations.
Final: Must employ local engineers. locals buy local products.
Fiscal: pay a specific percentage that goes directly to the local government.
needs to go to a permanent fund that can be used in boom/bust time. Set up a good reclamation bond. Put a check in the mail that puts money directly in the locals pockets.
ontrast Western and Chinese mineral extraction contracts in Africa, identify which is growing, and explain the implications of this trend for Africa’s development
