The False Economic Promise of Mineral  Extraction

From: Thomas Michael Power
Dept. of Economics
University of Montana
Missoula, MT  59812
(406) 243-4586
e-mail: tmpower@selway.umt.edu

 I was born and raised in Wisconsin and spent my teenage years paddling the
rivers of northern Wisconsin.  The threat of Exxon's proposed Crandon mine
to the Wolf and Wisconsin Rivers both saddens and outrages me.  My thirty
year experience as an economist living in Montana, the "Treasure State," a
state with a very long experience with the environmental legacy of copper
mining, leads me to offer the following comments on the promises made by
mining companies to local communities.
 
 One of the most powerful arguments that mineral companies can muster in
their endless quest for access to more of our landscape for their extractive
purposes is that they offer rural communities and households something that
they desperately need:  high paying jobs.  While most of our nonmetropolitan
areas have watched their traditional economic bases deteriorate while new
minimum wage jobs appeared to proliferate,  the mineral extraction companies
offer communities a prize that is very difficult to refuse:  family-wage
jobs that support blue collar access to a middle class lifestyle.  Local and
state government officials, chambers of commerce, and local civic
organizations typically see these jobs as a godsend.

   Given the massive environmental destruction that typically accompanies
mineral extraction, such communities and their citizens appear to face a
stark, tragic choice:  accept the degradation of the natural environment and
enjoy the prosperity the jobs bring or turn down those high-paying jobs and
enjoy the resulting higher environmental quality but live in relative
poverty.  The "jobs versus the environment" dualism cannot be presented in
starker terms.
 
 But something is seriously missing in this characterization of the choices
our communities face.  Review in your mind the mining towns you are familiar
with.  How many of them, if any, are prosperous?  Most of our mining and
smelter towns are run-down and decrepit.  The communities that depend upon
them have average incomes well below the national average.  Poverty rates
and unemployment are higher.  Almost any measure of socioeconomic health,
child abuse, alcoholism, spouse-battering, school accomplishment, etc.
indicate anything but healthy communities.
  The promise of high-paid jobs in mineral extraction does not materialize in
community health and prosperity.  Quite the opposite: Reliance upon these
industries systematically undermines the community's ability to create a
secure social and economic environment for its citizens.
 
 How can we explain this dramatic and systematic failure of resource
extraction's promise of a prosperous future for communities willing to
embrace it?  The answer lies in the other economic characteristics of these
industries, besides their relatively attractive wage levels.  First is the
instability that is endemic in mining industries.  In modern chemical
mining, mine lives can be as short as 5 to 10 years.  Even those short run
operations can be interrupted by dramatic declines in metal prices on
international markets.  Second, these industries are "mature" economic
activities that have been with us since before the industrial revolution.
We have had decades, even centuries, to adapt technology to natural resource
extraction.  The result has been dramatic and impressive gains in labor
productivity.  With each passing year, a smaller and smaller labor force is
needed to extract larger and larger quantities of raw materials and process
them.  This has meant that the employment opportunities provided by these
industries are steadily declining.

 The result of these common characteristics of mining industries is that the
employment and income associated with them are very uncertain, despite the
relatively high wages.  Workers do not know how long they will collect those
high pay checks.  Local merchants do not know how long the income associated
with those industries will circulate within the local economy.  Both workers
and local merchants react rationally to this instability and uncertainty:
They reduce their investment in the local community.  They do not buy or
build new homes; they do not expand their businesses.  Local officials are
hesitant to invest in local public infrastructure too, since a mine or mill
shut down could leave them without the ability to pay off the bonds, pay for
the up-keep, and afford the salaries of the additional public employees.
Workers do not even move to the mining towns; they commute very long
distances, carrying away their paychecks from the community.

 The result of this rational adaptation to these objective characteristics
of the natural resource industries is what we observe in our mine and
smelter towns:  economic and social depression, the opposite of prosperity.

 But this is just the beginning of an economic unraveling.  Mining tends to
have dramatic negative impacts upon the natural landscape: trees are
stripped away, the topology is radically changed,  streams are poisioned and
silted up, fisheries are destroyed, wildlife habitat is fragmented, the
recreational potential of the land is degraded, scenic beauty is lost,  and
air and water quality deteriorates as a result of both the extraction and
the processing of the raw materials.  This is not just an environmental or
aesthetic concern.  It is also an economic disaster.
  Over the last half century people, businesses, and economic activity have
increasingly shifted in the direction of perceived high quality living
environments.  People, indisputably, care where they live and act on those
preferences.  As they do, economic activity shifts, too, because businesses
have to pay attention to where the labor supply and markets for their
products are located.  This means that an area's ability to attract and hold
people and businesses is crucial to its economic development.  The
locally-specific qualities of the social and natural environment that make
it attractive are central features of the area's economic base.

 Mining can systematically undermine that part of an area's economic base as
it sacrifices the natural landscape for the unstable, short term, and
declining employment opportunities mining offers.  Long before the mineral
deposit gives out, the layoffs tied to technological change or instability
on international commodity markets steadily shrinks the employment base.
The community is left with an increasingly ravaged natural landscape and an
impoverished community that cannot hang on to its people.  The long decline
and decay evident in most of our mining towns sets in.

 This negative and depressing scenario can be read as a positive economic
development scenario for those communities who see through the promise of
high-paid jobs and confront the economic reality of reliance upon these
destructive and unstable industries.   Preserving the quality of the natural
environment in which a community is embedded protects an important part of
the community's current and future economic base.  Focusing upon
diversification and stability lays the basis for household, business, and
public investment.  Encouraging local entrepreneurial solutions to problems
rather than passively seeking salvation in the facilities of a large
international corporation also builds a resilience into the local economy
and community that no company town ever has.

 When natural resource industries make their "offers that cannot be
refused,"  we have to keep in mind the powerful images of  Butte, Montana,
Kellogg, Idaho, Lead, South Dakota, the copper towns of Arizona, the iron
fields of Minnesota,  the coal fields of Appalachia.   Part of our brain
knows that the economic offer being made to our communities is not anything
like what it appears to be. This is not speculative doom-saying; it is
economic reality. Rather than retreating to the environmental moral high
ground when these economic promises are made, we need to confront the false
promises on their own terms, with hard economic facts.

[Thomas Michael Power is Professor of Economics and Chairman of the
Economics Department at the University of Montana.  He recently published
two books, Lost Landscapes and Failed Economies:  The Search for a Value of
Place (Island Press) and Environmental Protection and Economic Well-Being:
The Economic Pursuit of Quality  (M.E. Sharpe).]