For months I let Paul Collier’s The Plundered Planet sit on my desk. A reader of this blog had recommended the book to me. A colleague took it off my desk and returned the book praising it. I was almost nervous to read it least I could not share their enthusiasm.
Having just finished one of those light paperbacks that pass time in airports and planes, I sat me down and read Collier’s book. It is a fast read; it is an easy read; it is eye-opening and filled with ideas that had not previously hit me. Of course I had read about the plunder of the oceans by over-fishing, the plunder of the forests by over-logging, and the over carboning of the sky by industry. Those topics take up the latter third of the book and you can skim them if the issues are familiar.
It is the first two-thirds of the book that is of interest to the mining folk. Collier is Professor of Economics and Director of the Center for the Study of African Economics at Oxford University. He is not a miner, nor for that matter particularly engaged in mining. He uses mining in Africa to study and write about the plunder of resources as an economist.
In that he is writing primarily about mining and oil extraction in Africa (with a few asides to Chile and Norway), this is no global vision. At times it get to be that bland, boring old stuff; most African countries are ruled by the incompetent and corrupt. Botswana is the exception and he makes much of its success in using mining revenue to improve the place. He praises Botswana; but not once does he note that Botswana, unlike most other African countries, is essentially uni-racial and unbeset by tribal conflicts that pull down so many other African places. In eschewing any mention of race or tribe he is a liberal Oxford don.
Here is a paragraph he writes in Chapter 7, by which stage he has set out his major arguments—he is in fact summarizing the previous six chapters:
Suppose that the government has got each of the three previous decisions right: It has commissioned geological surveys that have revealed sufficient information about opportunities and thus has been able to auction extraction rights for likely discoveries at good prices; it has designed a tax system which has captured the lion’s share of the rents that constitute the economic value of the natural assets; and it has saved the bulk of these revenues—less than 100 percent—because it judged some extra consumption to be consistent with meeting its obligations to the future, and, recognizing that the rate of return on domestic investment would be much higher that the world interest rate, counted on a capital gain to ease the burden of responsibility. All that remains—the final link—is to implement that domestic investments.
One of the ideas that was new to me is best summarized thus: Norway is investing all income from its oil discoveries in world markets. The idea is that they are turning a non-renewable resource into a sustainable resource. That is the first time I have ever come across the idea of mining as a sustainable action: mine, pay the expenses, reward the shareholders, and let the government of the country of the mine, invest the rest in world financial markets, thus establishing a sustainable fund. Seems only Norway, another essentially uni-tribal place, has got it right.
He likes royalties, writing this:
In 2006 the Chilean government, which has a reputation of being highly astute, switched from an excess-profits tax on copper to a royalty. It did so because in all the years that it had imposed a profits tax, not a single cent had been raised. Somehow, the copper companies kept failing to make any net profits: large revenues were always offset by large expenses.
Another new idea is that, as he writes:
If the countries of the bottom billion have only around a quarter as much of the known endowment [of natural resources, mineral reserves] of the rich countries because the other three quarters have not been found, this has three major implications. One is that the natural assets of the bottom billion constitute a massive opportunity. Second is that global discoveries will be located disproportionately in the politically difficult territories of the bottom billion: the easier resources have already been discovered. Third if countries at the bottom billion have discovered only around a quarter of as many natural assets as the rich world, then something must have gone pretty wrong with the discovery process.
Like any academic, he tells us what has gone wrong, and tells us how to fix it: national geological surveys paid for by donor countries as aid. Controversial I am sure. But then much of the book is in spite of it gentle tone and sensible suggestions. If his ideas were easy to implement the bottom billion, most in Africa, would not live lives of misery.