Demonized Extractors

Article excerpt


Extractive industries - oil, gas, and mining - characteristically evoke economically wayward shrillness or myopia born of popular suspicion.

In 2001, for example, the World Bank began a comprehensive evaluation of its lending to the extractive industries . The exercise culminated in an Extractive Industries Review (EIR) recommendation by independent adviser Emil Salim, former Indonesian state minister for population and environment, to phase out oil-related loans by 2008 in favor of "investments in renewable energy development."

Last Tuesday, the World Bank prudently parried the proposal as a cure worse than the disease, but nevertheless raised investment standards for extractive industries on the zany assumption a barrel of oil or lump of coal has a special burden of alleviating poverty or promoting the rule of law.

Extractive industries are not economic mutants. They respond to the same profit motive and supply and demand curves as other lines of commerce. Community attitudes toward business, however, are driven more by passions than by Adam Smith's "Wealth of Nations," a bible of free enterprise.

History has made extractive industries scapegoats of demagogues or populists for a mixture of deserved and undeserved reasons.

Oil has been associated with foreign imperialism or colonialism. Iran's democratically inclined Mohammed Mossadegh was overthrown by the British MI6 and the American Central Intelligence Agency because of his nationalization of the Anglo-Persian oil company. President Lazaro Cardenas of Mexico nationalized American oil companies thought to embody foreign domination in 1938 to great domestic applause. Libya's Col. Muammar Gadhafi followed Cardenas' instruction.

Oil also symbolizes environmental pollution, for example, the staggering Exxon Valdez oil spill, rig explosions in Santa Barbara, and contamination of the Niger River delta by a major American oil company. Citizen rescue missions to save fish and fowl from oil slicks provide ocular and indelible evidence of an allegedly irresponsible industry. Coal mining conjures up images of devastated landscapes and lethal floods from broken dams.

Oil and gas are regularly implicated in monumental governmental corruption. Nigeria, Angola, Guinea Bissau, Chad, Azerbaijan, Kazakhstan, and Iraq are illustrative. Halliburton has become synonymous with unholy industry-government flirtations or marriages.

Diamond mining has become associated with bloody civil wars in Liberia, Angola, the Democratic Republic of Congo, Congo Brazzaville, and Sierra Leone. Diamond trading also is suspected of bolstering al Qaeda's financial nimbleness.

The oil and gas industry is perceived as exceptionally greedy because of high profit margins when a commercially viable discovery is made. The public generally fails to consider the enormous sums expended on dry wells, which should be included in assessing the profitability of striking a gusher. …