Academic journal article Journal of Australian Political Economy

Boom: The Underground History of Australia, from Gold Rush to GFC

Academic journal article Journal of Australian Political Economy

Boom: The Underground History of Australia, from Gold Rush to GFC

Article excerpt

Malcolm Knox

Boom: The Underground History of Australia, from Gold Rush to GFC

Viking, Melbourne, 2014, pp. 395, paperback edition, $34.99.

At a time when the mining boom has come to a close, Malcolm Knox surveys how, throughout their history, Australians have been effected socially and culturally by the mining industry. He shares the common view that, whereas mining once had not been seen as a source of national development, over the last decade or so Australia's economic fortunes have been linked to the price of iron ore, when China has replaced Japan as the dominant market, to the detriment of manufacturing and agriculture. However, because his purpose is to demonstrate that mining has been a permanent driver of economic development, Knox emphasises the ongoing role of prospecting and exploring for mineral deposits, of infrastructure in support of mining projects, of speculative investment and corporate entrepreneurship, of mining communities and regional towns, such that the distinctive causes and consequences of mining booms are submerged within the continuous flow of his narrative.

Nevertheless, reading Knox against the background of recent historical studies and basic statistics, it is possible to discern four major mining booms of unusually rapid capital accumulation and exceptionally high investment. In the nineteenth century, these booms included the gold rushes of the 1850s, whereby mining comprised about 35% of Gross Domestic Product (GDP) and exports of gold exceeded exports of wool for around 15 years. Next, the gold and metal discoveries in the late 1880s and the 1890s generated another boom, so that mining contributed about 10% of GDP, of which 50% came from gold, 20% from coal and the rest from metals such as lead, zinc, silver, copper and tin, while minerals provided 35% of export receipts.

Australian mine production declined in both absolute terms and as a share of GDP after 1900, until the mining boom of the 1960s and early 1970s reversed this trend when the output and exports of the mining industry soared. The recent boom, which was driven by iron ore, coal and gas projects, accounted for more than 50% of export income and resulted in a surge in the mining industry from about 4% of GDP in 2004 to around 11% in 2011.

When discussing the economic effects, like other mainstream authors, Knox assumes neoclassical concepts of comparative advantage and natural endowment, of factor costs and factor prices, of linear production functions and diminishing returns, whereby combinations of capital, labour, land and technological innovation produce outputs. An alternative approach can draw on the historical materialist concepts of the organic composition of capital and the rate of profit which refer to the ratio of constant capital (plant and equipment) to variable capital (manual and mental labour). This involves measures by corporations to widen the difference between socially necessary labour-time and surplus labour-time in order to raise the rate of surplus-value, by means of absolute surplus-value based on low wages and extended working hours and by relative surplus-value based on labour productivity. The latter occurs in accordance with the application of less labour to produce each ton of ore because the share of constant capital increases relative to variable capital.

In turn, as surplus-value passes through the circuits of industrial, money and commodity capital, it takes the form of profit of enterprise, of interest, and, in the case of land-based production, of ground-rent, whereby a quite stable absolute ground-rent is secured by holders of title to land and a differential ground-rent arises from variations in the productivity and profitability of mineral deposits once constant capital and variable capital are applied to them. During the mining booms, differential ground-rent can be said to approximate "super-normal" profits from mineral sales at market prices equal to revenue less "outlays" where "outlays" include royalties as absolute ground-rent and the long-term rate of return to capital calculated as a percentage of net cash flow, so that the differential ground-rent is conceptualised as surplus-value as a kind of imputed return on total assets over and above the long-term rate of return to capital. …

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