mining and local economic well being: weighing benefits and costs thomas michael power the...
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Mining and Local Mining and Local Economic Well Being: Economic Well Being: Weighing Benefits and Weighing Benefits and
CostsCostsThomas Michael PowerThomas Michael Power
The University of MontanaThe University of MontanaEconomics DepartmentEconomics Department
andandPower Consulting, Inc.Power Consulting, Inc.
[email protected]@powereconconsulting.com
June 18, 2013 Duluth and Ely, MNJune 18, 2013 Duluth and Ely, MN
Why the Controversy over Why the Controversy over New Mining?New Mining?
• The Promise of Mining– New High Paying Jobs– Significant Wealth Extracted from the Earth– New Income to Households and Governments– Pure Benefits?
• That is what “economic impact” analysis often suggests.• “Free Lunch Economics”?
Real Economic AnalysisReal Economic Analysis
• Weigh benefits against costs– Consider the tradeoffs that any real economic
choice involves.– Are their substantial net benefits?– Proceed with mining only if there are.
• That is how mining companies look at mineral deposits.– They do not mine every single mineral deposit– Most mineral deposits are left in the ground.
Why Might We Suspect That the Why Might We Suspect That the Costs Associated with Mining Can Costs Associated with Mining Can
Be Quite High?Be Quite High?
• Look at the Past Economic Impacts of Mining – in Minnesota, the Upper Peninsula, and
Wisconsin.– across the Nation and Around the World
Mining and Local Prosperity• Many mining areas are synonymous with
lagging economies and, even, persistent poverty and unemployment– Appalachia, Ozarks, Four Corners– Copper Towns of Butte, MT, Silver City, NM,
Globe-Miami, AZ, the Upper Peninsula of MI.– Iron Range, MN– Uranium belts of New Mexico and Western
Colorado– Gold and Silver Mining Towns: Silver Valley,
ID, and Lead and Deadwood, SD
The Economic Anomaly of MiningThe Economic Anomaly of Mining
• The Economic Promise:– Tremendous Wealth Extracted– High Wages Paid
• Frequent Economic Outcome:– Depressed and Rundown Towns & Regions– Lower average incomes, higher
unemployment, and higher poverty– Mining Regions Are Often Economically
Depressed Regions
Why Are Mining Areas Not Uniformly Prosperous?
• “The Economic Anomaly of Mining—Great Wealth, High Wages, Declining Communities,” T.M. Power, New Mexico Bureau of Geology and Mineral Resources, 2005
• Lost Landscapes and Failed Economies: The Search for a Value of Place,” T.M. Power, Island Press, 1996
Explanations for the Failure of Explanations for the Failure of Prosperity to Follow MiningProsperity to Follow Mining
• Unstable demand and prices• Labor displacing technologies• Landscape Intensive: Environmental damage to the
region. This is a serious economic problem.• Limited economic connection between mining and rural
economies. Value flows out of the local economy• Mining can displace other economic activities
– Visitor economy– Amenity-supported in-migration of people and businesses
• Ultimate exhaustion of any particular mineral deposit
Clearly We Need to Weigh Both Clearly We Need to Weigh Both Benefits and CostsBenefits and Costs
• Should not just display apparent spectacular positive “benefits.”
• Mining Companies Regularly Weigh Private Benefits and Costs and Often Decide Not to Mine.– That is why Minnesota’s known copper deposits have
not been developed for over a century.• The Public and Government Agencies Need to
Do the Same Thing– They, too, may rationally decide not to proceed with
mining when the costs exceed the benefits.
A Framework for Weighing A Framework for Weighing the Costs and Benefits the Costs and Benefits
of Copper Miningof Copper Mining
• Carefully and critically evaluate the expected monetary consequences, both positive and negative.
• Carefully and critically evaluate the non-market environmental consequences.
• Consider requiring mitigation measures that maximize benefits and minimize costs.
• Make an informed judgment about whether the benefits justify the remaining, unavoidable costs.
This Time Will Be Different!This Time Will Be Different!
• Be very skeptical of such assertions.
• They haven’t proved to be true over a century and a half of actual experience with mining.
• It is a form of collective wishful thinking to which all of us are susceptible.
Non-Mining Sources of Economic Non-Mining Sources of Economic Vitality in the Northeastern MNVitality in the Northeastern MN
• Emergence of a 21st Century Economy• Ongoing development of professional
service sectors– Especially Health Services– Services are not all low wage, “lousy” jobs
• Retention and attraction of retirees– Income that follows people’s location choices
• Retention and attraction of residents and small businesses (local “amenities”)
• Recreation and Tourism
A New Part of theA New Part of theLocal Economic BaseLocal Economic Base
• The attractiveness of the area– Social environment: small cities, safe, un-
congested, good schools and services.– The natural environment: clean water and air,
wildlife, outdoor recreation, scenic beauty.
• Attract and hold residents and the economic activity associated with them.
• Undermining environmental quality undermines economic vitality
The Public Policy Challenge of the The Public Policy Challenge of the Proposed New Copper MiningProposed New Copper Mining
• How to support the ongoing revitalization of the mining areas that was well underway when the current national economic meltdown struck?
• How to avoid stepping back onto the economic “roller coaster” that mining tends to create?
• How to avoid further damaging the natural environment of mining areas and extending that damage to surrounding rivers, lakes, and wetlands?
• How to protect the water resources that are the current and future economic base of Northeastern Minnesota?
