Auty - Mining Enclave to Economic Catalyst: Large Mining Projects in Developing Countries

Auty R., Mining Enclave to Economic Catalyst: Large Mining Projects in Developing Countries, (Brown Journal of World Affairs, 13.1, 2006)

 

In recent years, multinational mining companies have faced mounting criticism of their operations in developing countries. The criticisms are rooted in the perception of a political imbalance between large global corporations and weakened political states, which confers dubious long-term economic benefits on host countries. More specifically, large mineral investments are perceived to have an adverse impact on sovereignty, government ethics, local communities, and macroeconomic performance in the host countries. Critics of mining rallied around a recent internal review of World Bank policy toward mine lending that argued both for tighter regulation of mining companies’ activities in order to protect “the weak” and for the cessation of lending for hydrocarbon projects due to their impact on global warming. 

This paper begins by evaluating these criticisms in the context of major shifts in post-war policies in developing countries and the emerging evidence of a resource curse. It argues that mining’s alleged adverse impact is in fact rooted in misguided post- war policies that led developing countries’ governments to overextend their economic interventions. Despite perceptions to the contrary, the potential benefits from mining projects are substantial, although their capital-intensive nature does strongly skew their economic contribution. The next section identifies ongoing pressures for corporate policy to add the social sustainability of mineral projects as a third criterion for mineral investment in developing countries, along with economic return and environmental sustainability. The following section argues that current trends can transform multinational mineral companies into catalysts for much-needed welfare-enhancing reform of the political economies of developing countries, many of which remain badly distorted by past domestic policy errors. The final section summarizes the argument and briefly notes potential obstacles to its successful implementation. 

 

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