Extractive Industries and Local Communities
By Lyuba Zarsky
World Politics Review
August 6, 2013
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For mineral-rich countries, large-scale extractive industry projects are a double-edged sword. On one hand, mining royalties and taxes provide funds that can be invested in infrastructure and social services. Mining projects can also create local jobs and spur demand for locally produced goods and services, supporting livelihoods and spurring economic growth.
On the other hand, mining revenues can be—and there is plenty of evidence that they routinely are—spirited or frittered away, leaving little to show by way of long-term productive investment or better living standards. Moreover, mining booms undermine growth in other industries by skewing labor demand and swelling the exchange rate. Adding injury to dashed hopes, mining operations often leave a legacy of massive and long-lived environmental damage. Rather than receiving what amounts to manna from heaven, mineral-rich countries seem to suffer a “resource curse”—economic growth rates lower than those of countries without mineral resources.
For communities that live near mining projects, the stakes and trade-offs are particularly acute. A large mine might offer locals well-paying jobs, as well as social investment funds provided either by the government or by mining companies. But in practice, the share of mine revenues received by local communities tends to be very small. Moreover, jobs disappear when the mine closes or reduces production due to a commodity price bust.
While economic benefits tend to flow to national capitals, foreign shareholders and corrupt elites, local communities suffer the brunt of the environmental damage, as well as the social upheaval, caused by large-scale mining projects. Unless properly monitored and managed, environmental impacts tend to get worse over the life of the mine and even after it closes.
Despite its dismal record, mining investment continues to be championed by governments and development agencies as a route toward sustainable development. But the rubber hits the road at the local level. Given its myriad environmental, economic and social challenges, is it possible for mining to promote the sustainable development of local communities?
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The Global Development and Environment Institute’s Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.