Roast vegetables, grilled shrimp, and fried polenta graced an elegant dinner table last night as we debated production of goods versus provision of services. The basic premise is that mining is good as it produces a tangible product that makes further production of goods possible—and those goods presumably enhance lifestyles and human happiness. Conversely the dinner-table guests decried provision of services as a mere cost-increasing activity.
The irony is that the wealth that provided the fine setting and finer food and wine was generated by consulting to the mining industry. My host has for years consulted from California to the US mining industry and grown rich in so doing. I demurely pointed out that consulting is a service industry, not actually producing hard core goods, but merely generating revenue via advice and long reports to regulatory agencies.
“Without decent consultants, no mine could profitably extract minerals,” was the sharp retort. “We are an integral part of a vast productive machine.”
“But most of your consulting has pertained to take-over bids, financial issues, due diligence, and efforts to increase share value. Little has lead to an increase in mineral out-put or reduction of production costs,” I noted.
Again a squeal of protest.
The wine flowed, the stars floated on, and the argument continued without closure. We could neither fully research nor resolve the conflict of the benefits, if any, accruing from consultants involved in what one may call “financial mining,” i.e., the provision of services to the mining financiers who wheel & deal around mining take-overs and restructuring deals. Clearly those consultants providing such services profited greatly in the build-up to the bubble. Clearly the mining industry folk leading the charges of take-over & restructuring were prepared to pay for the services and considered them value-adding. Clearly many people and companies grew richer as a result of the consultants’ activities and advice.
Maybe much of that wealth had been wiped out by the bursting of the bubble. Maybe much of it will return as the economy turns and a restructured, more efficient mining industry re-emerges. Maybe this is all but part of the workings of a free-market economy. And we need both goods & services to make a free-market operate efficiently. At least that is my opinion. Let me know if you see it differently.