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Mining Corporations Loot The Global South-No Consequences

  • Nate Singham
  • July, 2019
  • 236
  • The Economy & Innovation

THE PROCESS OF CORPORATE PLUNDER IN THE GLOBAL MINING INDUSTRY IS AGGRAVATING SOCIAL AND ECONOMIC INEQUALITY

The meek shall inherit the Earth, but not its mineral rights.” - J. Paul Getty

The big driver of the world economy is a plundering process where powerful corporations loot the natural resources of low-income countries.

These highly influential multinational corporations (MNCs) facilitate the expatriation of profits and natural assets from resource-rich but capital-poor countries by engaging in a wide range of morally egregious profit maximization practices, such as:

Intentionally establishing operations in countries where it is possible to exploit low-wage workers

Investing in locations where it is possible to take advantage of regressive tax codes

Ensuring business-friendly production-sharing agreements with local governments

These predatory practices carried out by MNCs deprive developing countries from being able to benefit equitably from their own natural resource supply and ultimately undermine their pursuit of emancipatory economic development policies.

EXTRACTIVE INDUSTRIES

Extractive industries are the starting point of the main drivers in the global economy. They deal with the development, extraction, and sale of exhaustible (nonrenewable) natural resources such as the mining of metals and minerals and the extraction of oil and natural gas, according to the Encyclopedia of Environmental Change, edited by John A. Matthews.

Global extraction of primary materials more than tripled to 92 billion tonnes in 2017 from 27 billion tonnes in 1970, an annual average growth of 2.6 percent, according to a 2019 report conducted by the United Nations Environment Programme-hosted International Resource Panel (IRP).

For many countries in the Global South, extractive industries are an important aspect of their economy; yet, in many instances, low-income countries only retain a small fraction of the total wealth that is generated from their domestic natural resource production.

The highly capital-intensive nature of the extractive industry requires expensive upfront costs as well as ongoing investment to replace, modernize, and expand equipment and facilities, which forces communities and governments of poor countries to rely on foreign firms for financial assistance.

The continent of Africa has historically accounted for a significant portion of global extractive production and supply, serving as a catalyst for the economic development of the Global North through low-wage labor and corporate ownership of the region’s natural resources.

Who Controls the Global Extractive and Mining Industries?

Over the past several decades, multinational corporations have emerged as the primary actors in facilitating global trade and natural resource extraction, yielding tremendous profits.

Large corporations, which account for the bulk of international trade and resource extraction, have experienced rising rents under hyperglobalisation, leading to heightened profits. This was confirmed by empirical analysis of the largest 2,000 MNCs, which revealed that the share of profits of extractive MNCs rose from 9.3 percent in 1996 to 13.3 percent in 2015.

The trade, production and ownership of the extractive industries have become particularly concentrated among a small number of exporters, importers and MNCs.

Recent evidence of rising market concentration among MNCs within certain sectors of the extractive industry, particularly the mining industry, has prompted concerns among some economists regarding the links between increased market concentration, income inequality, and rent-seeking.

The term “rent-seeking” is used by economists to describe a type of profit-making scheme, the sort made possible when individuals or corporate entities are granted exclusive or majority rights to natural and/or non-natural assets.

Thus, the phrase is frequently associated with monopoly (or quasi-monopoly) rent, a form of “unearned” income, which can be generated when large corporate entities exclude competitors from entering the market for the services or products that they supply.

MONOPOLY RENTS IN THE GLOBAL MINING INDUSTRY

A potential entrant into the global mining market would have to invest at least several billion U.S. dollars to launch a competitive, large-scale mining operation.

Large-scale mining, which accounts for 95 percent of global mining production, is carried out by private corporations with various ownership structures (from publicly traded to state owned) and sizes: companies range from 150 or so “senior” minin...

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