Mining Economies & The Mining Wars Flashcards
Review the four components of the “resource-based economic development model” clarifying the ‘base’ of that economy, and the ‘multipliers’ or linkages that are generated from that base. Clarify how each linkage provides a mechanism for local communities to capture the economic benefits of the natural resource Use the New Mexico Case to illustrate each linkage
- Base: Oil in New Mexicoz: export based economy
- backward: welders (make pipes), tool makers, construction company that builds roads:
- Forward: gas sation, gas processor,
- Final: Housing and Food, stuff workers spend their money on.
- Fiscal: Sales and Property Taxes, Severance Tax/ Royalties, Philanthropy
- Investing in your own local community with mining
To explain why mining communities face impending doom, identify/describe at least three causes of booms and busts in the mining industry
Economic Depletion
* Boom Phase: When resources are initially abundant, the cost per pound is low, and mining operations expand, creating a boom. As demand increases, ex: minerals needed for electric vehicles (EVs), prices rise, leading to increased extraction and profit
* Bust Phase: Over time, resources become depleted
* Economic depletion: when extraction costs rise
* Physical depletion: when the resource is significantly diminished
* As companies dig deeper, costs increase, and the price per pound may decrease. Operations become unprofitable, leading to mine closures and economic decline in the community.
Innovations and Demand
* Demand-Side Innovations: The rise of electric vehicles creates significant demand for minerals like lithium and cobalt. Causes a boom as companies rush to increase production to meet this new demand.
* Supply-Side Innovations: Advances in technology (ex: fracking), can increase the overall supply of related resources, lowering prices. If supply outpaces demand, it can lead to a bust as mining companies reduce operations due to decreased profitability.
Global Economic and Geopolitical Factors
* Global Capitalist Economy Cycle: Level of output high during expansion, low duing recession.
* Geopolitical Events: Ex: fluctuations in the price of oil, can impact mining operations. Oil prices rise due to geopolitical tensions, the costs of mining operations can also increase. If tensions ease and production increases, mineral prices may drop, leading to bust conditions.
Characterize jobs in the mining industry in terms of wages, trends in job availability, and stability
Wages
- 1900s, mining jobs were often viewed as low-status leading to low wages.
- formation of labor unions in the 1950s: fought for better wages and working conditions, leading to mining jobs becoming higher-paying positions.
Trends in Job Availability
- Mechanization: As technology advances, many labor being replaced by machines. Companies to reduce labor costs and increase efficiency, but it also means fewer jobs for workers..
Stability
* Lack of Job Security: The mining industry is inherently cyclical, often subject to booms and busts based on commodity.
* leads to job instability, with workers facing layoffs during downturns.
Explain what workers are expected to do during busts, and what many ‘addicted’ workers do instead
Addictive behavior 1: Labor concessions
* Industry experiences “economic exhaustion”
* Workers: shy away from unions and accept lower wages
* Miners want to stay in mining because they enjoy the fact that it is a high wage job, so they’ll do anything to keep thor high wage job including undermining their own hard work and power by stopping unionizing and taking salary decreases
Addictive behavior 2: Avoid change
* Normal behavior: You lose your job from a bust, the normal thing to do is move or find another job
* Do not pursue higher education/reduction, wait for mining to come back because Mine wages for high school grads are higher than educated service job wages
* Forgo alternative employment: Just hunker down and wait for the boom to come back, it always does, collect unemployment until then
During busts, workers are expected to seek new opportunities and improve their skills. However, many engage in addictive behaviors, such as accepting lower wages to keep their jobs and avoiding change by waiting for the next boom while collecting unemployment.
Identify/describe the two main mistakes that local/state governments make during boom times, and explain why they make these mistakes
Failure 1: Failure to create permanent development fund
demands for infrastructure increases because of the increase in population that follows booms, so these governments feel they need to spend the money now so that they can respond to immediate needs
Failure 2: Failure to support economic diversification
relying heavily on the mining industry. focus resources on supporting existing mining economy. priority to strengthen the industry that provides jobs and revenue. resist idea more diversified economy.
Describe and explain the “double whammy” that local/state governments face during busts
situation arises from a sharp increase in community needs while their capacity to meet those needs diminishes.
Busts occur: significant rise in unemployment. places a strain on social services, as more people require assistance.
-extraction industry declines, local and state governments experience a significant drop in fiscal revenue. Capacity to meet needs declines
Loss of fiscal linkage revenue to provide services
No more extraction companies to donate to them
Out-migration - declining property values, estates, sales tax; entire town dying
Oversupply of housing
Identify/describe the two main mistakes that local/state governments make during bust times, and explain why they make these mistakes
Try to lure industry back by:
* Lowering env regulations
* Build more infrastructure: build the stuff you need
* Lower taxes
Consequences: Lower financials, incurring more debt
Why: Failure to support amenity economy
Even tho these towns move to an amenity economies they would rather undermine that economy and not let the federal government clean up the old mines, rather wait fornext boom
Compare and contrast (with specific examples) the linkages/multipliers associated with natural amenity economies under more ‘liberal vs strict’ conservation designations
- Natural Amenity Base: Ely Forest Example
Liberal (Less Strict): Stronger Economy: a variety of businesses that support outdoor activities
* Backward Linkages: Rental gear and equipment( Local gear like kayaks, canoes, and camping equipment), Supply for Resorts/Hotels ( demand for local suppliers, food vendors, maintenance services)
* Fiscal Impact: Lease land and property taxes, use fees
* Final: Homes and Grocery Stores
Strict: faces tighter regulations on land use, significantly limiting the types of activities.
* Backward Linkages: Primarily catering to those who bring their own equipment, Restrictions on what equipment can be used (diminishes the opportunities for local businesses to cater to visitors)
* Fiscal Impact: Fewer businesses operating and limited tourism, the local economy suffers from a lack of fiscal resources. Fewer taxes
* Final Economic Impact: Limited Spending: With fewer visitors and limited services, there is minimal spending in the local economy.
Take a position on whether you think Ely should pursue nickel mining – based on economic grounds alone. Back up your argument with direct references to linkages/multipliers and to short-term vs long-term concerns.
On economic grounds alone, yes. Without mining, you lose strong linkages. You increase revenue for local communities.
- Backward: more jobs in related sectors
- Fiscal: boost local government revenue through taxes, royalties, and leasing fees
- Short-Term Benefits: bring economic benefits, including job creation and increased local spending. T
- Long-Term Sustainability: Economic benefits can provide funding for environmental restoration and sustainable practices in the long run.
By investing in infrastructure and community development through mining revenue, Ely can create a diversified economy that supports both mining and natural amenity-based activities.
Review the legal basis of the “right to mine,” and clarify how that priority undermines the ability of federal agencies to support natural amenity economies
right to mine” is a legal principle that prioritizes mining operations
restricts the BLM’s ability to enforce land use policies that could benefit natural amenity economies.
resource allocation that favors extraction over the preservation of natural landscape
Mining activities lead to environmental degradation, which negatively impacts the resources that support natural amenity economy
Identify/Explain the loophole that environmental lawyers have recently found that may dislodge the “right to mine” juggernaut
- Stopping a Highway (1950s): mining claims were used to halt projects like highway construction. This established a precedent that mining rights could be leveraged against other land uses.
- Surface Resources Act (1955): granted the federal government the authority to manage public lands for multiple purposes, not just mining. Lands could be utilized for a variety of interests
- Mining Claims Rights Restoration Act (1955): Federal government could restrict mining in specific areas if it can demonstrate that mining would interfere with other uses of the land.
- The Loophole: lawyers are now using these laws to argue that the “right to mine” is not absolute.
