The Economics of Mining
Or, 'We take your resources and profit from them; you get to clean up the mess."
Mining companies like to claim that they will bring economic salvation to rural communities struggling through hard economic times. "People need jobs," goes their mantra, "and we can provide them while protecting the environment." Gogebic Taconite has variously claimed that the Penokee Mine will provide 400, 600, or 700 permanent jobs for 20, 50, or 100 years (the numbers they say keep going up).
But a closer look at mining economies shows a different picture--one of negative correlation between the presence of mining and broad economic prosperity. Bob Tammen, a retired iron worker from Minnesota's Mesabi Range, writes:
"The economic theory of the 'resource curse' documents the fact that economies dependent on natural resource exploitation generally grow at a slower rate than economies that rely only upon the creative abilities of their citizens. Just look at mining regions in the coalfields of Appalachia, the Ozarks lead district, Idaho’s Silver Valley, Arizona and Montana’s copper towns, New Mexico’s uranium district, Michigan’s Upper Peninsula iron and copper ranges and Minnesota’s own Iron Range for examples.
"This generation of mining no longer creates enough jobs to maintain healthy schools and vibrant main streets over the long-term. Any short term gain from a construction boom in mining is soon offset by the realities of a modern mining economy. The realities are expensive environmental clean up and long-term declines in employment."
Automation and productivity in mining countinue to increase, having doubled in the past 30 years. Rapid advancements in robotic mining technology are being implemented in the world's largest iron mines in Australia and Brazil, and would likely be used in Wisconsin should a project like the Penokee Mine move forward. This means fewer and more specialized mining jobs. Local residents do not have the training to perform most of the jobs that G-Tac promises, and it would be cheaper for them to hire laid-off miners from other states than train Wisconsinites.
At the same time, open-pit mining's impacts on fish, wildlife, wild rice, ground water, and surface water imperil sustainable local economic activities like small farming, hunting, gathering, and tourism. There is also a spiritual impact when self-subsistence by these means is less possible for local residents and the unspoiled beauty of an area like the Penokees is destroyed.
Dr. Thomas Michael Power, Professor of Economics at the University of Montana, conducted a study in 2007 of mining's economic impact in Minnesota. He found:
Employment in the Minnesota iron ore industry declined by 83% since 1979, reaching an all-time low in 2005, despite similar levels of ore production in 1979 and the early 2000s.
Mining relies on volatile international minerals markets, resulting in a boom-bust cycle of employment
Economic vitality is driven more by high quality of life than industrial expansion
While mining is a relatively temporary activity, the environmental damage from mining is generally "significant and permanent."
Minnesota's mining economy trends fit with the picture of mining internationally. In its 2001 report Extractive Sectors and the Poor, Oxfam America found that in developing nations, economies based on mineral development had poor performance on the UNDP Human Development Index and every standard-of-living indicator identified by the Wold Bank as challenges to eliminating poverty. According to the report:
"Extractive sectors [oil and mining] tend to be capital-intensive, and use little unskilled or semi-skilled labor; they are geographically concentrated, and create small pockets of wealth that typically fail to spread; they produce social and environmental problems that fall heavily on the poor; they follow a boom-and-bust cycle that creates insecurity for the poor; and they are generally run by the state, or by large corporations, in ways that lead to high rates of corruption, repression, and conflict."
(One might be tempted to argue that the U.S. doesn't have these problems--but just look at the favors-for-cash deals brokered between the mining corporations and Minnesota's Iron Range Resources and Rehabilitation Board (IRRRB) or Wisconsin's Walker Administration to see the corruption issue in practice here).
The Oxfam report goes on to find that:
The greater the level of mineral dependence of a community, the greater the fraction of the population that lives in poverty.
Mineral dependence tends to reduce economic growth even after all other factors that influence economic performance are taken into account.
States that are dependent on exporting their natural resources have difficulty diversifying their economy to include other sectors like agriculture and manufacturing, which provide greater direct benefits to the poor.
Economies that are dependent on natural resource exports are more vulnerable to trade shocks ("boom-bust" economics)\
States with large resource extraction sectors tend to be abnormally corrupt and less democratic. The periodic flood of tax revenues from mining create heightened opportunities for the misuse of funds.
Mining companies respond to the price of iron ore on the world market, the volatility of which is especially acute right now. Iron ore prices are expected to crash due to a glut and reduced demand from China and India, the lead consumers of ore over the past decade. Mines in Michigan and Minnesota are planning for upcoming layoffs and shutdowns.