Metals boom awaits global prosperity Bad governance fuels poverty

The recent slump in metals demand is taking a heavy toll on mining companies, and with Western politicians conceding that their economies may take longer to recover than expected, producers are hunkering down for a lengthy stay in the trenches. The North American economy is flat, the European Union is not the powerhouse it was supposed to be, and the Asian tigers are doing what big cats do best — napping. The real downer though, is that the developing world is doing precious little developing. And until it does, metal demand isn’t likely to improve beyond modest increments even after the mature Western economies are back on track.

Helping poor nations become prosperous is not a core concern of the mining industry, yet nothing is more critical to its long-term survival. After all, the industry’s greatest boom-time came after 1945, when the rapid pace of industrialization and dramatic increases in productivity established a prosperous middle-class, first in North America, and later in Japan and Germany. Returning soldiers lined up to buy the latest cars rolling off the assembly lines, and housewives raved about their new homes, complete with washing machines and other labour-saving appliances. The mass-production model of industrialization was copied by envious countries, including Korea, which quickly transformed itself from a war-torn, impoverished rural nation into a powerful Asian tiger.

Other parts of the world flatly rejected the model, notably the communist nations, whose political leaders mocked the West’s consumer society in an ultimately vain effort to convince their citizens, and the rest of the globe, of their ideological superiority. The ensuing Cold War that raged between leftist and capitalist regimes ultimately consumed the economies of many developing nations, particularly in Central and South America. Africa, meanwhile, was liberating itself from the yoke of colonialism, though all too often the new rulers were more interested in self-enrichment than the betterment of their citizens. As a result, prosperity came only to the fortunate few in the developing world, if it came at all.

Today, almost half the world’s 6 billion people live on a few dollars a day, while one-fifth barely survive on less than US$1 per day. The poorest of the poor live mostly in sub-Saharan Africa and South Asia, though parts of the former Soviet Union are rapidly becoming ghettos for a growing number of unemployed and impoverished citizens. The average income in the richest 20 countries is 37 times the average in the poorest 20 — a gap that has doubled in the past 40 years.

It has become fashionable to lay blame for the disparity between rich and poor nations on capitalism, or on “greed” and other alleged vices of wealthy nations. This is utter nonsense, given the thousands of desperate souls who flee their impoverished homelands for a better life in developed nations. The deepest root of poverty is bad governance. Study after study has shown that poverty is largely created by political instability and strife, ill-defined and unfairly enforced property rights, corruption and lack of investment in education and basic infrastructure, and misguided economic policies that stifle, rather than encourage, private-sector investment and trade.

Mining projects have the potential to generate revenue, create jobs and business opportunities, and to bring roads and access to power and water to poorly developed nations. Yet all too often, the host countries fail to manage and distribute resource benefits in an equitable and socially responsible manner. And all too often, mining companies — and capitalism in general — are blamed for the resulting inequalities. Corporations then try to compensate by becoming surrogate governments, a strategy that can lead to confrontations with citizens and non-governmental organizations, who have increasingly unrealistic expectations about the nature and extent of corporate responsibility.

It is no small irony that while everyone agrees that bad governance is a serious impediment to global prosperity, wealth-generating corporations end up bearing the brunt of criticism for the growing disparities between rich and poor. It’s time blame was placed where it belongs — on incompetent and misguided political leaders who value their self-aggrandizement and/or personal bank accounts more than their citizens. It’s time to cure the disease, not kill the cure.