Sunday, August 28, 2011

What Should We have Known? (First of Several)

None of the people responding critically to my op-ed in the NYT letters section or the blogosphere denies its principal claim: that the law has immiserated a million or so highly vulnerable people. None of them, however, suggests this information has spurred them to reconsider their support for the law, slow their efforts to see it implemented, or make any effort to help the miners whose livelihood the law has all but eliminated. In fact, with one exception, none of them discuss the plight of the miners and their families at all: it's as if they don't exist.

Several critics seem to suggest that we shouldn’t judge the law by its consequences. That, at any rate, is the only sense I can make of Margot Wallstrom’s assurance that the law’s "intentions were admirable" and that “inaction is not an option.” Nor can I otherwise interpret Jason Stearns’ repeated insistence that Dodd-Frank doesn’t mandate an embargo—that “nothing in the law inherently calls for one.”[1]

I find that inadequate. Knowledgeable people on the ground and students of the region worried about the possibility of an embargo from the beginning, and gave increasingly urgent voice to those concerns:

·         In April 2009, the British group Resource Consulting Services published a study on conflict minerals funded by the British government, the London School of Economics and Belgium's Ghent University. Its co-author said this about Enough’s support for (what became) Dodd-Frank: "Most miners choose to mine for lack of livelihood alternatives, so stopping or disrupting the trade in minerals will hit the most vulnerable the hardest, and in all likelihood exacerbate conflict dynamics and retard development."
·         In October, 2009, Eric Kajemba, the well-respected chief of the Observatoire Gouvernance et Paix, observed that the UN December 2008 Group of Experts’ report stigmatized the mining sector in North and South Kivu for sustaining the armed conflicts in Congo. He continued:
         Since then, the actions of certain advocacy groups could entail dramatic consequences for the majority of actors in the cassiterite supply chain, from the miners to the buyers, and ricochet through the entire economy of South Kivu. Given the number of people who depend on the artisanal mining sector, and the amount of income they derive from it, it is quite simply dangerous to boycott this sector. This approach risks increasing fraud and smuggling into neighboring countries not under similar “due diligence” requirements. This will result in a reduction in tax revenues and make it even harder to implement good governance.

·         In June 2010, Assheton Stewart Carter of the American non-profit PACT, which was working with the tin industry to implement a tracing program for artisanal miners in eastern Congo, said this: “Restrictions or bans on conflict minerals may cause business to abandon the country, leaving many Congolese citizens who depend on mining for their livelihood even more vulnerable.” Later, Karen Hayes of PACT added this: “We fear that the timing [of the conflict minerals legislation] will mean that responsible companies will have no choice but to withdraw [from the DRC]. If they leave, the trade will get left to the warlords and the charlatans.”

·          In July, 2010, Dominic Johnson of the highly respected Pole Institute, a Congolese NGO based in Goma that specializes in the mining sector, wrote this:
There is in our opinion a real danger that initiatives like this will, through trying to eradicate illegal trade which feeds armed actors in the DRC, kill the entire trade. The efforts and costs involved in tracing, disclosing and verifying the exact source of mineral components and submitting to an independent aufit will lead international enterprises to either ignore the law or to turn their backs on the Great Lakes Region in order to reduce risk. Even if business plays by the rules, the legislation will make Congolese resources more expensive without any benefit to the Congolese themselves. The only beneficiaries will be the international consultants who carry out verifications, audits and mappings. It must be stressed that the economy of Kivu would collapse if mineral export revenues dried up… This situation may be deplorable, but Kivu's population will not find peace by losing its only own sources of revenue - in fact, quite the opposite is likely.

·         Even the International Crisis Group, which co-founded the Enough Project, warned about the danger of focusing on technical solutions like Dodd-Frank instead of dealing with the underlying governance issues: “No technical solution will stop the trade in minerals from promoting conflict. Only governance based on the rule of law will make the proposed technical solutions feasible. In the event of failure, there is a risk that one of the economic engines of the Great Lakes region will quite simply grind to a halt.”

 Although I’m quoting from close students of the region, it hardly took detailed knowledge of local conditions to worry about what might happen once Dodd-Frank passed. This was basic economics, as a post from Daniel Hamersh at Freakonomics observed: “I noted [when Dodd-Frank passed] the very simple economic point that it would create a surplus that would drive prices down, mostly harm local miners, but benefit buyers/countries without U.S.-level scruples about these purchases. I shouldn’t brag—any Econ I student could have seen this point.” (Amanda Taub makes this point more humorously at Wronging Rights, with a visit to Crazy Bob’s House of Tantalum.)

Over the age of seven or so, we become responsible for the predictable consequences of our actions, not just for their intent. Dodd-Frank’s consequences were not merely predictable, in the Monday morning quarterback sense of that word. (“He should have seen the rush coming.”) They were predictable in the sense that they were widely predicted. People who knew the region, people who thought about the issues for any length of time, immediately realized the danger Dodd-Frank would pose to the local miners and did all they could to make their concerns known. Yet that in no way deflected the advocates from their mission, nor did it move them to press for ways to mitigate the harm the law would cause to highly vulnerable people.

[1] Stearns also suggests that the electronic companies imposed the embargo as part of a cynical maneuver to get the law watered down. One has only to think for a moment to realize what a grave allegation this is. It would certainly transform my interpretation of what happened. My own op-ed, for example, would have lead something like this: “Electronic companies are holding hostage the livelihoods of a million miners in eastern Congo in an attempt to extort concessions from the SEC and to force advocacy groups to back off their campaign against conflict minerals.” I think Stearns needs to come forward on this. If he has evidence for the allegation he ought to present it, but if it's no more than speculation or chatter he ought to tell us that too. No one is served by putting forward this kind of allegation without further elaboration. 

(This is the first of several responses I'll be publishing over the coming days.) 


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  2. David:

    Your arguments are well-crafted and convincing. I just want to point out one thing that hasn't come up yet in the ongoing conversation you're having with other Congo experts--as it is outside the purview of Dodd-Frank and well out of the thread of this discussion.

    DRC Rural areas that rely on the main on mining for their livelihood have seen a sharp increase of school dropouts. This was (and still is) a fact under Mobutu in rural areas of Katanga, Kasai, Orientale, and other mineral-rich provinces. In those regions, most school-age boys go to the mines to seek a livelihood. In my view, this deleterious trend is as damning as child soldiering. And this trend goes hand in hand with youth alcoholism and prostitution. Moreover, in regions where artisanal mining is widespread, agriculture is neglected and the little money these small-time miners make is spent on food the region can no longer produce.

    Therfore, if one of the unintended consequences of Dodd-Frank in those areas is a rediscovery or a reconversion to agriculture, then it is a positive development.

  3. As one of these 'close students of the region' who has lived in East DRC for several years, I feel this is as selective and biased as the original article. I feel you deliberately misrepresent the views of critics.

    I certainly would question your principal claim - that the law has immiserated a million or so vulnerable people. It is based on an exaggeration of numbers of people involved, extremely anecdotal evidence and a misunderstanding of coping mechanisms.

    Hundreds of thousands of people live in areas with a primary source of income to their economies being from mining, in North and South Kivu.

    However the idea of immiseration depends on the idea that this is an unexpected shock to the economy and that there are no coping mechanisms.

    Since Kabila's mining ban of September artisanal miners have already been forced to develop other means of subsistence. The Kabila ban has been linked to Dodd-Frank by many pro-mining anti-DF but I haven't seen any convincing evidence that the one had anything to do with the other. So aside from the brief period in April of getting rid of stocks between the end of the Kabila ban and coming into force of DF, no artisanal mining has been pretty much the status quo.

    Secondly assuming that mining is the only means of support of these communities is to neglect often deep and well-developed multi-faceted coping mechanisms. Artisanal mining is a relatively new thing in many of these areas, at least to the scale that it is - since the 90s or even later. Many of the miners are recently arrived from surrounding territories.

    While alternative livelihoods are not abundant, often young men choose mining because it offers quick and easy rewards. Alternatives are harder work, but also safer and healthier - there's a difference between a 'let them eat cake' type argument that they should all just go back to farming - which might not be an option for some - and an understanding that these individuals within their households chose to be artisanal miners often based on poor information around health and safety risks, since the rewards were quick and obvious. Reliance on artisanal mining has had very negative effects on community cohesion, education, and safety in mining areas. Some of these people will likely go back to farming, some might sign up to armed groups, some might re-migrate to cities and towns to look for work, some might go into business. This is not to say that everyone will be better off or worse off, I would love to see some serious evidence either way but so far it has all been speculation, and your op-ed was speculation of the most one-eyed sort, which is why you might get questions around your motivation - articles that strong certainly raise questions as to whether you are a witting or unwitting stooge of the mining industry.

    I'm not one of the do-nothing brigade who want to watch East DRC continue along its miserable path. Certainly these changes could have been introduced more gradually and with more attention to the people affected. Certainly some people have been negatively affected, at least in the short term. The burden of blame, as usual, lies principally with the Congolese State. We need to stop seeing everything and everyone as simple agents of the West and US policy.

  4. I spoke at length with the miners about the impact of Kabila's ban. They told me they were able to circumvent it more or less completely by about December or so, which was why Kabila gave up on the ban by March. But they couldn't circumvent Dodd-Frank, because there was no way to work-around the fact that they didn't have buyers for their minerals.

  5. That's interesting, I haven't heard that argument before. There certainly was some circumvention of the ban, and such a claim is difficult to evaluate, but that does not correspond with conversations I have had with people in mining areas or with secondary evidence - much reduced trading of food, beer, etc in mining-supported communities, influxes of ex-miners into areas such as South Walikale and Kalehe. There were clearly no flights to the major mining areas such as Walikale, which means minerals would have had to be transported by truck, but by what road? Why were there no reports of trucks being stopped when they would have had to pass through so many potential checkpoints? As with the mining ban having devastated the communities, it would be much more valuable to have a proper study rather than anecdotal evidence.

  6. One possible outcome of DF is that other buyers, particularly the Chinese will come in. Is there any evidence that this has happened? Thx,Mungwa Pierre