Primary Resources and Energy in the Third World

John Soussan

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000007534
• Edition: 1
• Topic: Business
• Subtopic: Energy Industry
• Index: Business

Originally published in 1988. In this clear yet stimulating introductory text John Soussan explores the issues and arguments involved using a variety of case studies from across the Third World, including the tin mining industry, Rio Tinto-Zinc and fuelwood in Kenya.

1

Development and
resources

This book is about resources and development. It looks at these two concepts (both of which are broad, and each of which has many definitions) within the context of the contemporary Third World. This context is familiar; news of the problems facing these countries is with us daily and concern is widespread. The basic problem is poverty (and the common, and misleading, image is starvation – in the Third World few people are really starving, most are ‘just’ poor), but issues such as inequality, economic stagnation, environmental destruction and others go hand in hand with it. These problems breed conflicts which in turn lead to greater inequalities, stagnation and destruction and hence worsening poverty. The gap between the ‘haves’ and the ‘have-nots’ of the world’s system widens all the time and, whilst the proportion (as a percentage of total population) of the Third World’s population which lives in absolute poverty has fallen in recent decades (the development success story), their absolute number has increased (the continuing development tragedy).

Of course, not all is gloom and doom. Some Third World countries have achieved significant increases in the living standards of most of their populations. These include such diverse countries as proudly socialist Cuba and unashamedly capitalist South Korea. In some other countries success is more patchy but still notable – India, most of South-east Asia and several Latin American countries could be described in this way. For some of these countries, however, there has been a false dawn of rapid economic growth followed by economic stagnation or decline. Elsewhere the story is of widespread deterioration of living standards and of the resource base surrounding small islands of progress or prosperity.

Economic growth may occur, but development which is truly sustainable, and which both reaches the poor and is ecologically sound, is less common. As we shall see in this book, many forms of economic growth are based on patterns of resource exploitation which create as many problems as they solve. The idea of ‘sustainable development’ is currently highly fashionable and is indeed a worthy goal to strive for. How it can be achieved, when so many forces operate against it, is a more challenging problem. A recent BBC television series and accompanying book (Timberlake 1987), ‘Only One Earth’, sought and found examples of sustainable development, but only with difficulty and under special circumstances which must limit the extent to which such models could be generalized. Despite this, the forceful arguments put forward by the Brundtland Commission (1987), in their report Our Common Future, lead to inescapable conclusions: current trends in the world economy are not sustainable and, in particular, the way we view both development and resources must change if the current bleak outlook is to improve and genuine, sustainable progress for all of the world’s people occur.

The above comments form the context within which this book is placed. In the following sections we look at two of the many resource issues which confront the Third World today. These are mineral exploitation in section 1 and energy in section 2. Both are vitally important, and the trends in the development of each of them are widely considered to have adverse impacts upon the countries involved.

Part I, which looks at mineral resources (including fuel minerals such as oil) is mainly focused at an international level, exploring the ways in which mining activities integrate mineral producers into the world economy and examining who benefits from this industry and why. Part II is concerned primarily with the way in which energy affects the welfare of people at a local level and, in particular, describes the complex interrelationships of economy and environment and the place of energy within these complex relationships. The two sections consequently deal with very different scales of operation. This provides an opportunity to discuss both questions of resource exploitation and wider development theories at these different scales, and through this, one hopes, to illustrate where and how the problems facing the Third World originate.

Before discussing in greater detail the distribution of the worlds’ mining industry, it will be useful to look at some definitions of the concepts we shall be considering.

The nature of resources

A resource is anything that contributes to the process of production. As we shall see, resources take many forms, but all reflect a relationship between human wants, abilities and appraisal of the physical universe. In other words, a resource is a resource only within the confines of the needs and objectives of a given economic system, and more specifically of the social, technological, economic and institutional characteristics of that system. In an economic sense, resources do not exist; they are created.

Resources can be classified in a number of ways. There is not room here for a full discussion of these issues (see Blunden 1985, Fernie and Pitkethly 1985), but a first useful distinction can be made between flow resources (resources, such as soils and forests, whose availability can be depleted, sustained or increased by human actions), stock resources (non-renewable except over geological time – basically minerals) and continuous resources (which are available on a continuous basis and independent of man’s action – resources such as solar and tidal power). This three-fold categorization is based on the physical properties of the resources. A second way of classifying resources is on their basic economic characteristics. Here it is crucial to distinguish between resources which are commodities (that is, subject to private property rights or possessing ‘exchange value’) and those which are free goods (non-commercial, or having no exchange value and not owned by anyone).

There is a degree of overlap between these two ways of classifying resources. Most continuous resources (such as sunlight) are free goods, whilst most stock resources and many flow resources are commodities in the modern world. However, this varies between places and over time. For example, forests in some places are subject to property rights and in others are not. In the past many more resources were free goods, but the extension of the global capitalist economy has led to the ‘commodification’ of many previously free resources. In other words, resources which previously had no exchange value have become commercialized as the world’s economic system has developed and changed. Their commodification is a direct consequence of changes in the economic system of the place in which they are found. As an area becomes absorbed into the international economic system, the ways in which resources are used, owned and controlled changes as the local economic system changes. What was free now has value. This change in the nature of control of resources reflects the ‘transition in modes of production’ occurring throughout the modern Third World.

In this book the first part deals exclusively with minerals (stock resources), and in particular with the international markets for these commodities, the structure of the mining industry and the impact of this industry on Third World countries.

Part I

Minerals and development

2

Minerals: basic issues

Resources, reserves and recovery rates

Mineral resources are, as we have seen, stock resources; their supply is finite and in principle the global stock of a mineral diminishes as it is used. These stocks occur in finite quantities in fixed places – gold, as they say, is where you find it. So is oil, copper, cobalt, coal … This has a number of implications:

1 Mineral deposits exploited now will not be available in the future. This introduces the concept of scarcity associated with resource depletion.

2 There are unavoidable costs associated with finding, recovering, processing and transporting minerals. These vary according to the quality, location and geological characteristics of the deposit, as well as the labour costs and the technology available for its exploitation.

3 The price of minerals on the world market reflect both the purpose for which they are needed (their use value) and perceptions of the quantity available both now and in the future (their scarcity or exchange value).

This picture makes predicting the future of minerals all sound very straightforward. Unfortunately the story is not that simple. In principle, there is a finite amount of a mineral resource available in the earth’s crust, but in practice the extent of that quantity is a matter of conjecture. This is partly because most of the earth’s crust has not yet been fully explored, measured and inventoried, partly because minerals are not found in nice neat, homogeneous packages, but are rather mixed in with all sorts of other materials and partly because economic and technical constraints limit the proportion of a mineral deposit which can be exploited (the ‘recovery rate’). All of this leads to massive uncertainty over the quantity of the various mineral resources which is likely to be available – they are finite, but how finite?

There are three standard definitions of the quantity of a mineral. These definitions measure very different things and are frequently confused. This is particularly true of many of the more pessimistic predictions of the world’s future (the notorious Club of Rome report, The Limits to Growth, is a classic example of this). The definitions are as follows:

Proven reserves

These are deposits of a mineral which have been explored, measured and inventoried, and which are both recoverable with current technology and economically viable at current prices. In other words, proven reserves are deposits which we know are there and we know we can get at. For all minerals, proven reserves constitute only a small fraction of the material in the earth’s crust.

Resource base

This is the opposite end of the spectrum: an estimate of the total quantity of a given material contained in the earth’s crust. It is a highly theoretical concept which, for many minerals, provides no indication of the quantity which is likely ever to be available to man. For example, on average a cubic kilometre of rock contains 239 million metric tons of aluminium, 149 million metric tons of iron, 62 million metric tons of magnesium, nearly 3 million metric tons of manganese, 239,000 metric tons of zinc, 155,000 metric tons of copper and smaller quantities of many other minerals. The problem is that most of these minerals are normally present at concentrations which are less than a thousandth of those necessary to make their extraction viable. It is only where higher concentrations are found that mining is feasible and the deposits can be considered an ore. Nevertheless the notion of the resource base for minerals does give some indication of the abundance of many supposedly scarce minerals.

Ultimately recoverable resource

This concept is the most useful of the three as an indicator of the quantity of minerals which will be available to man. The meaning is clear: the amount of a mineral which will be recovered, given certain assumptions about future extraction and processing technologies and future costs and prices. The concept originated from the us Geological Survey, who defined it as 0.01 per cent of the material in the resource base. Since then the concept has been refined. The key issue in measuring the ultimately recoverable resource is the set of assumptions about future discovery rates, technological developments, commodity prices, etc. on which the estimate is based. As such the concept is highly elastic and technical. Given this, it is hardly surprising that forecasters and policy-makers tend to prefer proven reserves – they dislike the uncertainty and prevarication which surround ultimately recoverab...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Contents
• Acknowledgements
• 1 Development and resources
• Part I Minerals and Development
• Part II Energy, survival and development
• Review questions
• References
• Index