Showing posts from category economics.
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Trillions of Dollars of Minerals? Misusing Geology and Economics to the Detriment of Policy
›Monday’s New York Times article, “U.S. Identifies Vast Mineral Riches in Afghanistan,” triggered a memory of a 70s-era Popular Science magazine cover that screamed “$3 trillion of minerals on the ocean floor!” That article, along with speeches from promoters of deep seabed mining, built up the anticipation that there were windfall profits to be had from the deep seabed. From this gross misuse of geologic speculation came all the difficulties with the negotiations of Part XI of the Law of the Sea Convention — and the United States’ continuing struggle to join the convention.
One of my roles on the U.S. delegation to the Law of the Sea Conference in 1979 and 1980 was to play defense against the misuse of geology and mineral economics in the negotiations, both by countries on the other side of the negotiating table and by seabed mining promoters at home. Part of that task was to gather and accurately “translate” the scientific and economic data from mineral statistics agencies, including the U.S. Bureau of Mines (since incorporated into the U.S. Geological Survey [USGS]), for policymakers and diplomats.
At times I felt like a goalie in the Part XI negotiations, blocking shots being taken by the forwards of the other teams that were promoting seabed mining as an economic bonanza. Unfortunately, by that time, too many groups had a vested interest in portraying the profitability of deep seabed mining and we couldn’t (yet) turn back the clock to a more reasonable approach.
When I read this week’s article in The New York Times, I had the same feeling of policy being manipulated by misuse of geologic data. With some help, I located the original DOD powerpoint presentation. The differences illustrate how science and economics can be misused to cause extensive damage in the policy process—a lesson I learned from the Law of the Sea negotiations.
The New York Times left out two important items from the DOD graphic accompanying the article:
First, the word “undiscovered” was left out; the original phrase reads “known and estimated ‘undiscovered’ resources anticipated by USGS and AGS and using prices as of 12/09.” Not only does that hide the important fact that the resources cited have not yet been discovered, it obscures that the estimates are largely defined by the USGS as either “hypothetical” and “speculative” resources — not the kind of numbers on which to stake a strategy for war and peace.
Second, the article omitted a caveat from DOD’s original powerpoint slide: “USGS agrees with the assertion: ‘At least 70 percent of Afghanistan’s mineral resources are yet to be identified.’”
Therefore, less than 30 percent of DOD’s estimated value is based on tangible evidence of deposits and 70 percent of the estimate is based on hypothetical or speculative resources of uncertain grade and abundance.
The value depends not just on metal content but also on the type of mineral, the grade (percent metal content) in the deposit, the size of the deposit, the distance from fuel and power, the amount of earth that covers the deposit, among other factors. If this report had geological merit as a USGS report, it would have said how much ore was in place at what grade.
Assigning a value to as yet undiscovered deposits is an effective way to influence a policymaker in a powerpoint presentation or generate a headline story from a reporter who has no experience with the terms of art used by geologists. But it has little to do with reality.
So, I drafted these points in response to the story in The New York Times:- According to the USGS, at least 70 percent of Afghanistan’s mineral wealth as estimated by the DOD is hypothetical or speculative, based on geologic theories, not measurement.
- The value estimates are grossly exaggerated by including sub-economic resources because they fail to consider capital and operating costs of recovery and processing to recover ore and convert it to finished metal.
- The DOD assessment fails to note whether the known or hypothetical deposits in Afghanistan are capable of competing economically with known and hypothetical deposits elsewhere in the world.
- Seventy-six percent of the estimated value comes from iron and copper, both of which are already found and produced in many locations around the world in commercially viable mines.
- The DOD values fail to distinguish between economically viable deposits and those that cannot be profitable in the foreseeable future, or to note those that are entirely speculative.
- The headline value of nearly $1 trillion is grossly in error and misinforms policymakers as to the economic potential of mineral deposits in Afghanistan.
Caitlyn L. Antrim is the executive director of the Rule of Law Committee for the Oceans. This article originally appeared in The Ocean Law Daily. To subscribe, please email caitlyn@oceanlaw.org.
Read more on Afghanistan’s mineral wealth and transparency initiatives on The New Security Beat.
Photo Credit: “Sunrise in Afghanistan,” courtesy of flickr user The U.S. Army. -
Sustainable Development
›Are Women the Key to Sustainable Development?, by Candice Stevens and appearing in Boston University’s Sustainable Development Insights series, asks whether gender-conscious development strategies are the missing link in the three pillars–social, economic, and environmental–of sustainable development. She points out that “An increasing number of studies indicate that gender inequalities are extracting high economic costs and leading to social inequities and environmental degradation around the world.” In the policy world gender-conscious initiatives are often more effective as well. “United Nations and World Bank studies show that focusing on women in development assistance and poverty reduction strategies leads to faster economic growth than ‘gender neutral’ approaches.” Stevens finds that achieving greater gender parity may be the key to better governance, increased growth, and a safer environment.The Role of Cities in Sustainable Development, by David Satherwaite and also appearing in Boston University’s Sustainable Development Insights series, argues that traditional depictions of cities as dirty and unsustainable are inaccurate. Instead, “…with the right innovation and incentives in place, cities can allow high living standards to be combined with resource consumption that is much lower than the norm in most cities today,” he finds. Satherwaite contends that high-density living arrangements can reduce per capita energy consumption, transportation emissions, and costs of public service provisions like hospitals and schools. However, he warns that none of these potential advantages are guaranteed, and city planners must utilize effective local governance in order to make cities safe, clean, and sustainable. -
Afghanistan’s Mineral Wealth: Gold Mine, Curse, or Illusion?
›June 15, 2010 // By Schuyler NullAccording to The New York Times, U.S. officials have discovered a veritable bonanza of heavy metals and rare earth minerals in Afghanistan that have the potential “to fundamentally alter the Afghan economy and perhaps the Afghan war itself”:
The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.
Reaction to the announcement has been mixed, with both Foreign Policy and Wired bloggers expressing skepticism about the timing of the announcement – in the midst of a difficult period of the war – and pointing out that the “discovery” is old news.
Others have expressed hope that the find, worth an estimated $1 trillion, might provide an injection of much-needed capital into one of the world’s worst economies. Environmental security expert Saleem Ali of the University of Vermont told Public Radio International’s The World that “there’s an opportunity now for the country to develop outside of a predominantly drug-dependent economy and if properly managed the minerals could provide a catalyst for all kinds of other activities as well.”
Afghanistan’s rare earth minerals in particular might prove to be extremely valuable as global demand continues to grow for these critical components of renewable energy technology and advanced electronics. The New York Times reports that an internal Pentagon memo says Afghanistan has the potential to become the “Saudi Arabia of lithium”:Just this month, American geologists working with the Pentagon team have been conducting ground surveys on dry salt lakes in western Afghanistan where they believe there are large deposits of lithium. Pentagon officials said that their initial analysis at one location in Ghazni Province showed the potential for lithium deposits as large of those of Bolivia, which now has the world’s largest known lithium reserves.
The existence of mineral reserves in Afghanistan is not new news, nor is foreign interest in them (see our coverage of Chinese copper investments at Aynak earlier this year). But the size of these resources warrants attention and raises new questions about the possibility of the unstable country falling victim to the natural resource curse – remaining mired in poverty while generating billions of dollars for an elite few.
Mineral wealth has a long history of fueling conflict in unstable countries, such as Sierra Leone, Nigeria, and the Democratic Republic of Congo. The DRC’s mining laws – which, like Afghanistan’s, were designed by the World Bank – have not prevented violent struggle to control the country’s valuable resources, as described by John Katunga in ECSP Report 12.
How can Afghanistan’s newly discovered mineral resources be developed without funding insurgents or fueling new conflicts? USAID’s Minerals and Conflict Toolkit offers a start with a set of recommendations and discrete steps that development agencies should take to avoid exacerbating the links between mining, valuable resources, and violent conflict.
Stay tuned for more analysis on Afghanistan’s development, resource curse dynamics, and what this all means for the continuing conflict.
Sources: Foreign Policy, National Public Radio, The New York Times, Public Radio International, Wired.
Photo Credit: “Remote Sensing Survey 2006” courtesy of the U.S. Geological Survey. -
Natural Resource Frontiers at Sea
›As burgeoning populations and growing economies strain natural resource stocks around the world, countries have begun looking to more remote and difficult-to-access resources, including deep-sea oil, gas, and minerals. The UN Convention on the Law of the Sea (UNCLOS) guarantees exclusive access to these resources within 200 nautical miles of a nation’s sovereign territory – called an exclusive economic zone (EEZ). TD Architects’ “Exclusive Economic Zone” illustrates this invisible global chessboard and highlights some examples of disputed areas, such as the South China Sea, the Mediterranean, the Falkland/Malvina Islands, and the Arctic.
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‘The Plundered Planet’: A Discussion With Paul Collier
›Who owns the planet’s natural wealth found underwater, below ground, and in the air? How do we reconcile our use of these assets with that of future generations? Such questions are the subject of Oxford Professor Paul Collier’s latest book, The Plundered Planet: Why We Must–and How We Can–Manage Nature for Global Prosperity, which he discussed at a recent Wilson Center event.
The author of The Bottom Billion and Breaking the Conflict Trap, Collier called Plundered Planet “the most important book I’ve written.” Resources are a “one-shot game,” he said; if we waste them, they’re gone. The next 10-20 years are “vital” to preserving natural assets as new technologies for removing them proliferate. We’re sucking fish up like “hoovers,” he said, and a combination of technology and economic growth are rapidly pushing mineral extraction into the few remaining frontiers.
Because time is short, Collier hopes his work will bring economists and environmentalists together. He said the two groups are largely at each other “cat and dog,” yet their objectives–environmental preservation and economic development–are not fundamentally opposed. In fact, to overcome polarization and produce key policy decisions, development and conservation must become partners.
Becoming Custodians, Not Curators
Collier said resource plunder can take one of two forms: “Where the few expropriate what belongs to the many”; and “where nature is expropriated by the present generation and burned up rather than benefiting future generations.” Both forms of plunder not only impede development, but are also unjust, he said.
Unlike other assets–such as books or records, which are typically owned by their authors or artists–natural assets have no human creators. A system whereby “natural assets are owned by the people who are lucky enough to live on top of them” creates “staggering inequality,” said Collier. Instead, resources must be shared equally among all citizens of a nation, including those not yet born.
Yet sharing nature’s wealth with generations to come does not mean leaving all fish in the sea, all trees on land, or all minerals underground. “We are not curators of natural artifacts,” Collier said. “We’re custodians of natural value.”
For the one billion people living in poverty, the development of natural resources can provide a path toward development, growth, and better lives, Collier argued, when properly and justly managed.
Filling the Gaps in Governance
Why have we largely plundered, rather than invested in, our resources thus far? What can be done to change the current principles of resource management? Collier’s short answer: governance.
For the poor countries in the “bottom billion,” Collier said the “broken decision chain” must be mended. The chain has six steps:- Discovering natural assets;
- Avoiding appropriation by a few at the expense of the many;
- Ensuring local inhabitants receive generous compensation for unavoidable environmental damage;
- Consuming in a way that benefits both the present and the future;
- Investing in the absorptive capacity of government; and
- Investing in domestic development.
Igniting a Movement
“There is no substitute…for building a critical mass of informed opinion,” Collier said. While technology enables plunder, it also creates a way for people to share knowledge at tremendous speeds and with wide audiences. The challenge, he said, “is to ignite the information transformation process.” A shift from plunder to sustainable management of transnational and developing country resources is a historic opportunity to benefit the world’s poor. “If these resources are harnessed for sustained development,” he said, “they can drag themselves decisively from poverty to prosperity.” The window of opportunity, however, is closing. -
VIDEO: Paul Collier On Romantics and Ostriches
›June 4, 2010 // By Dan Asin“I’m trying to build common ground between environmentalists and economists. Those two groups are being cat and dog for a long time,” author and Oxford professor Paul Collier, speaking about his new book The Plundered Planet, tells ECSP.
Collier says the interests of the two groups have thus far been dominated by their “fundamentalist” wings: On one side the environmental “romantics,” who value nature over people, and on the other the economic “ostriches,” who deny that nature’s a priori existence endows it with unique characteristics.
Work toward resolving two of the world’s most pressing challenges, environmental degradation and poverty, demands collaboration and mutual recognition by both sides. “If you take that romantic view of nature,” says Collier, “we will never feed a world of 9 billion people–we will never lift the poorest people out of poverty.” At the same time, nature does not belong exclusively to those living today, and its value must be preserved for future generations. “Those rights of the future have to be respected,” he says.
“The romantics and the ostriches, between them at the moment, are winning,” says Collier. “[I]t’s very important they start to lose.” -
Visualizing Human and Natural Resources
›In the policy world, statistics, percentages, and budgets on the order of millions and billions are routinely thrown around. But what do six and a half billion people, 957 tonnes per second, or three trillion dollars really look like?A visualization of London’s natural resources – grass, trees, and water only – by Adam Nieman.
Visual artist Adam Nieman recently received attention from The New York Time’s Dot Earth Blog for his illuminating scale models of hard-to-envision quantities such as the volume of oil being leaked from the Deepwater Horizon wells, global carbon emissions as measured in “UN Building units per second,” and the relatively small amount of air and water on Earth.
Demographers and sustainability experts often warn about the increasingly smaller allotment of natural resources per capita, but few have illustrated that reality at such a human scale as Nieman does.On a global level, Nieman’s work shows the tremendous population density of the world’s “urban island.” Over half of the global population now lives in cities, which is represented by the grey dot, just 616 km across in “Land-Cover Islands.”
Others seeking to improve quantitative visualizations include David McCandless of the site Information Is Beautiful. Among other things, McCandless has tackled the daunting task of accurately comparing spending in an age of trillion dollar budgets, with his “Billion Dollar Gram.”
Another group, the Dutch firm TD Architects, highlights the disparity between global demographics and the distribution of wealth with “Walled World.”
Nieman’s blog examines the confusion that often occurs at the interface between the political and scientific worlds. This confusion is amply demonstrated by debates over contentious issues such as budget priorities, population growth, and climate change.
Politicians often ask that complex problems be distilled into simple bullet points for speeches and policy documents. However, when it comes to problems of such complexity and scale, pictures like these may be worth a thousand bullet points.
Sources: New York Times, Reuters.
Photo Credit: “Green London (wide)” and “land cover islands” courtesy of flickr user JohnJobby. -
Securing Food in Insecure Areas
›May 25, 2010 // By Dan Asin“Of the 1 billion people who are in food-stressed situations today, a significant proportion live in conflict-ridden countries,” said Raymond Gilpin of the U.S. Institute of Peace at last Thursday’s launch of USAID’s Feed the Future initiative. “Most of them live in fear for their lives, in uncertain environments, and without clear hope for a better tomorrow.”
According to data from the World Food Programme and the UCDP/PRIO Armed Conflict Database, of the countries with moderately to very high hunger rates in 2009, nearly a quarter experienced violent conflict in the previous year, and nearly half in the preceding two decades.
Gilpin said those working toward food security need to develop “conflict-sensitive” approaches, because “a lot of fundamentals that underlie this problem have a lot to do with conflict.” He noted several points, from production to purchasing power, at which conflict enters to disrupt the farm to mouth food cycle:- Production: Be it forced or voluntary, internal or external, conflict often results in displacement. Farmers are not exempt, and when they’re not on their land they cannot produce.
- Delivery: “Food security isn’t always an issue of food availability; it’s an issue of accessibility,” he said. “When violent conflict affects a community or a region…it destroys infrastructure and weakens institutions.”
- Market access: In conflict zones, it is solitary or competing armed contingents, rather than the market’s invisible hand, that control access to supplies. “Groups who usually have the monopoly of force, control livelihoods and food and services,” he said.
- Purchasing power: Conflict disrupts economic activity, degrading both incomes and real wealth. Those remaining in the conflict area suffer from fewer opportunities to conduct business, while those choosing to migrate relinquish their assets. In instances where food is available to purchase, conflict reduces the number of individuals who can afford it.
Photo Credit: World Food Programme distribution site in Afghanistan, courtesy Flickr user USAID Afghanistan.
