On October 10th, we published an article from US businessman Chuck Blakeman criticising the Dodd-Frank Act’s section on conflict minerals, saying it was against the interests of the people of the DR Congo. Today, we publish a reply from Prince Kihangi Kyamwami, Secretary-General of BEDEWA, the agency in charge of development in the Walikale region of the DRC, supporting Dodd-Frank.
Everybody seems to think (mistakenly) that they can say: “I’ve been to the Congo and met the local communities. These communities live mainly by exploiting minerals. Section 1502 of the Dodd-Frank Act affects their means of living, and the economic stability of the region is threatened by a de facto ban. This law deprives thousands of people of their livelihood, etc.”
To be frank, this simplistic view is irritating. People who share it shouldn’t believe they’re helping us. On the contrary, they’re destroying us and working against the interests of Walikale. Have they really met local communities, or are they just interested in the minerals and, given the difficulty in getting to the communities, limited themselves to talking to city-based mining interests? Interests that will exploit such talk in their own interests to make official declarations that engage local communities for no reason at all.
Anybody claiming to defend a people should first get to know that people – its history, culture, way of life – and know where to find it. Otherwise, you’re only mocking this people. Experience has shown how tricksters pass themselves off as the people’s champion. They show the world the people’s misery and highlight the need to improve its well-being. But at the end of the day, you realise they’re looking after their own interests.
Who can seriously claim that before the mining sector was liberalised, Walikale’s population went hungry? Mineral resources aren’t Walikale’s only source of wealth: it also has vast tracts of very rich farmland. It’s a territory made for agriculture .
Before 1985, Walikale had numerous pasturelands. Apart from abundant rice crops, there were also many plantations producing high quality coffee, cocoa, plantains and maize, to name only the main cash crops, as well as market gardening, vegetables and palm oil.
These haven’t all disappeared, and the population won’t starve just because mining has been suspended. Artisanal miners with no plots of land complain about mining being stopped, not the local communities.
As everyone knows, over the past decade, the great powers, dictators, private firms, criminal networks and rebel forces have ruthlessly exploited our wealth, plunging most of the population into extreme poverty. The profits from mining haven’t helped local development or local communities. These minerals were exploited with nothing given back in return. Taxes and state levies rarely if ever reach the local community. This windfall didn’t go unnoticed by the DRC’s neighbours, who helped themselves.
These minerals don’t just create conflicts and wars, they help to sustain them, with armed groups fighting for control of mining areas, as happened in Kaseke in July 2011, when a large share of the population had to flee fighting between two groups. We suffer more from having to watch passively how our minerals are exploited than from leaving them buried for the good of future generations.
Mineral resources are by definition non-renewable, making it urgent to find solutions for the harmonious, viable and sustainable development of the mining sector. And Walikale is ready to support the suspension of mining activities for another five years to help reform the sector.
To this end, Walikale’s local communities renew their support to national indicatives (ITIE/RDC, Revision of the Congo Mining Law) sub-regional ones (CIRGL) and those at international level (ITRI/OECD). And in particular, we reaffirm our support for Section 1502 of the July 2010 Dodd-Frank Act, because it marks a break. It contributed to implementing solutions allowing for the traceability of resources from the mine to the point of export in view of local development.
The communities are therefore placing all their hopes in this law. Thanks to this law, they stand to benefit from their natural resources one day. As well as that, this law intends to cut the link between trade in these minerals and the conflicts that bring grief to the people of the Congo daily. Walikale’s local communities there call for the application without further delay of the regulations based on the Dodd-frank Act concerning conflict minerals. This is what we need now.
Desirable economic transformation of this wealth requires good governance, transparency and a stable socio-political climate. It is the state’s responsibility to ensure that this natural mineral wealth is exploited in the most beneficial, efficient and best way. The state must ensure that due diligence in minerals supply is observed and discourage campaigns against the citizens’ interests.
A well-regulated mining sector governed with transparency, and well organised and supported can help lift the Congo’s people out of extreme poverty, restore public finances to help the state function properly, and contribute to regional and international development, as is the case for many other countries in the world.
The above is a translation. The original article in French is here
Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011
In October 1929, with storm clouds gathering, economist Irving Fisher warned against blind panic. “There may be a recession in stock prices, but not… a crash” since “Stocks have reached what looks like a permanently high plateau.”
A bit earlier, President Hoover could claim with pride that: “Given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.”
The working man would be the first to profit, with the US Department of Labor’s New Year’s Forecast promising that “1930 will be a splendid employment year.”
Entrepreneurs were buying their rose-tinted glasses from the same shop as politicians and academics. Thomas Watson, founder of IBM looked forward “with confidence to the progress of business in 1929“.
Then came Black Thursday, October 24th 1929, with the New York Stock Exchange down 11% on opening. Things improved temporarily in later trading, but a whole series of Blackdays lay in store and the stock market crash would soon provoke the worst depression the world had ever known.
It seems astonishing in retrospect that the optimism mentioned above seems to have been crash proof. The Chairman of the Continental Illinois Bank of Chicago stated that “This crash is not going to have much effect on business“. Away from the grubby world of wheeling and dealing, the Harvard Economic Society’s Weekly Letter dated January 18, 1930, agreed. “With the underlying conditions sound, we believe that the recession in general business will be checked shortly and that improvement will set in during the spring months.” The Letter went bankrupt shortly afterwards.
And today? You may remember the bemused question about the latest crisis Queen Elizabeth asked at the London School of Economics in November 2008: “Why did nobody notice it?”
For Professor John Kay of the London Business School and Oxford (and visiting Professor at LSE) one of the reasons is the dominant approach of the profession itself. “If much of the modern research agenda of the economics profession is thus unconnected to the everyday world of business and finance, this is also largely true of what is taught to students [who] could import data on GDP and consumer prices into a statistical package … but would be little better equipped than the person in the street to answer questions such as ‘why were nationalised industries more efficient in France than in Britain?’”
The Institute for New Economic Thinking asked a number of economists to respond to Kay. You can find their replies here.
What do you think? Have the economists and analysts got any better since the Great Depression, or is their main preoccupation explaining why their last forecast was wrong, but we should trust the new one?
Today’s post comes from Rachel Chen, Jessica Na and Darren Yang, three students at Peking University High School’s International Division, which recently hosted a visit by the head of the OECD’s PISA programme, Andreas Schleicher.
Following Shanghai’s success in PISA last year, the student-assessment programme became much better known in China, and many journalists now want to know more about it. To answer some of their questions, Andreas Schleicher, the head of PISA, recently visited the International Division of Peking University High School and held a press conference.
First, however, Mr. Schleicher arrived at the kitchen of our International Division and had breakfast with some of us students. We were all excited about his visit and got up early to wait for him. Mr. Schleicher was a tall and amiable man. He was curious about our experiences as students here, so he asked us a lot of questions such as “How did you choose your courses?” and “What do you do in your free time?”. We were so absorbed in the conversation that we barely ate.
After breakfast, Mr. Schleicher attended the conference, where he showed he had a lot of thoughts on education. We were really impressed by two points he made.
The first was that as the world develops, getting knowledge becomes easier. So, the ability we should foster is not only how to collect knowledge, but how to select knowledge that is true and useful to us and apply it to solve problems. For instance, nowadays, most students know how to use computers and collect knowledge on the Internet; they can use it to get the answer to a math question if they want. However, students may find different answers on the Internet, and they need to think about which one is the right one. Most students can do that, but not so many can really use the math knowledge they’ve got to solve real-life problems.
The second point is that learning should be life-long. In other words, school is just the beginning of learning. Nowadays, a lot of people stop learning once they leave school, which is a sad thing to say. Educators can change this by motivating students instead of forcing them to learn, because only students who are motivated can keep learning in their lives. For example, if a teacher shows students how enjoyable reading is, some students will become interested in reading and will read more by themselves. Eventually it will become a life-long habit.
Mr. Schleicher thought China’s education didn’t do well on motivating its students, but he did think that the serious attitude of China’s government toward education is laudable. Though there are still some problems with China’ education system, he is glad to see the effort that China’s government had put in to solving the problems.
Mr. Schleicher’s visit made us think more on education. We feel lucky to study in a school where the teachers motivate and encourage us, and where the resources for learning are abundant. We hope we will be able to go on learning all the way through our lives and be successful.
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The mathematician Stanislaw Ulam did not have a high opinion of the social sciences. He once challenged Paul Samuelson, Nobel laureate in economics, to name one social science proposition that was both true and non-trivial. Samuelson nominated comparative advantage: “That this idea is logically true need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”
Samuelson was right. The absolute advantage Adam Smith talks about is simple and intuitive: it makes obvious sense for France to export wine to Scotland and import Scotch whisky. Comparative advantage is much more complicated. Ricardo introduced the notion in his 1817 book On the Principles of Political Economy and Taxation, using the example of England and Portugal and the production of cloth and wine. Portugal is more productive than England in both. Intuitively, you’d say that it makes sense for Portugal to export both, and that English industry would have little to gain from trade.
However, no country can develop a comparative advantage in everything because comparative advantage is a concept of the relative costs of doing things, so some things have to be comparatively more or less advantageous. Moreover all countries must have a comparative advantage in something. (You can find a good explanation of why this is the case here).
Ricardo demonstrated numerically that in fact if England specialised in one of the goods and Portugal in the other, total output of both goods would rise, allowing both countries to gain from trade.
Two centuries after Ricardo, can comparative advantage still provide useful guidance to policy makers? A new working paper from OECD’s Przemyslaw Kowalski argues that it can. Kowalski looks at what determines comparative advantage today, as part of the OECD project on The Effects of Globalisation: Openness and Changing patterns of Comparative Advantage. Kowalski analyses the bilateral trade of 55 OECD and selected emerging market economies and 44 manufacturing sectors covering the entirety of merchandise trade He examines physical capital, human capital, financial development, energy supply, business climate, and labour market institutions as well as import tariff policy.
Comparative advantage is still an important determinant of trade, but the OECD countries’ economies are more similar than they used to be, so the possibilities of trade driven by comparative advantage differences within the OECD grouping aren’t as great as they once were. However there are still marked differences between OECD and non-OECD countries, while the differences among non-OECD countries don’t seem to be diminishing much. That means that comparative advantage is more important for North-South and South-South trade than for North-North trade.
If you look at OECD and non-OECD countries as a whole, it’s interesting to see where differences have been decreasing and increasing. these differences decreased (although there are still big variations) as regards physical capital, average years of schooling, tertiary education, primary energy supply, and availability of credit. On the other hand, cross-country variation increases for regulatory quality, rule of law, control of corruption as well as import tariffs.
Most of these factors can be influenced significantly by policy. The trick is to make sure that trade and other policies don’t cancel each other out, but with so many factors interacting it’s not easy. Luckily for government policy makers, help is at hand from this year’s Nobel laureates in economics, Thomas J. Sargent and Christopher Sims.
Working separately, but in a complementary fashion, they’ ve developed methods for analysing causal relationships between economic policy and what happens in the economy. Sargent has mainly studied the effects of systematic policy shifts – such as attempts to reduce fiscal deficits – while Sims looks at how shocks spread through the economy.
Even if you’re one of those important and intelligent men who can’t grasp comparative advantage, you can probably see why the Sveriges Riksbank gave Sargent and Sims the prize this year.
Globalisation, Comparative Advantage and the Changing Dynamics of Trade collects OECD work that builds on recent contributions to the theory and empirics of comparative advantage, emphasising the role of policy in shaping trade. Click on the image to find out more and browse the book.
On July 15, we published Conflict Minerals: Hands-Off Is Not a Solution by Stephen P. Groff, former Deputy Director of the OECD Development Co-operation Directorate, now Vice President of the Asian Development Bank. Today, we publish a reply from Chuck Blakeman, founder of the Crankset Group, who recently visited the Democratic Republic of Congo to promote small business growth.
Stephen Groff’s article Conflict Minerals: Hands-Off is Not a Solution is remarkably naive and removed from the actual problem, and represents a pervasively uninformed and simplistic view of what is going on in the DR Congo. As a result of the Dodd-Frank Act’s demonization of minerals instead of criminals, exportation of the four minerals covered by the Act has nearly evaporated from the Congo.
A recent article in The Economist says that 95% of mineral exports have evaporated, while Motorola’s Solution for Hope Project argues that “Tens of thousands of people in the DRC depend on artisanal mining, many operating in regions where conflict is not present. Their livelihoods and the economic stability of the region have been threatened by the de facto ban.”
Personal experience backs this up. Our company, Groupe Weyi, has 50 tons of coltan from a local tribe sitting in a warehouse. Six weeks ago we had a buyer. Today we can’t find anyone buying coltan from DR Congo, anywhere in the world.
Our export process is well documented, government approved and done through a highly visible process that tracks it from the mine to the ship – but no one is buying. The smelters all say that minerals coming out of the Congo are “radioactive” now. Why buy from there when they can buy from a dozen other places on the globe without risking misperception? They have simply left the area.
So while all of those who are thousands of miles away pontificate about how great this solution is, honest miners all across the Congo are now starving because they can’t find a buyer.
Everyone likes to say this isn’t impacting people on the ground. But please note who everyone is quoting – giant NGOs, giant organizations, giant corporations and giant governments. Nobody seems to have spoken to anyone on the ground. That should say something very powerful to us. Why don’t the supporters of Dodd-Frank produce a poll of people in the Congo to tell us how much they love this law? Because the only support they can find is people who don’t live there.
I can produce chiefs and whole tribes who have been devastated by this demonization of minerals instead of criminals. Dodd-Frank is like blaming houses for the presence of a burglar. It burns down every house in the town so the burglar has nothing to steal. The burglar will simply move on to steal from stores instead of houses. Meanwhile 1 million people in the Congo who depend on mining for a living are being devastated by the universal collateral damage of this “nuclear” option.
The militias existed long before they found minerals as a source of revenue. What in the world makes anyone think that burning down the entire mining industry in the Congo will put the criminals out of business? What an incredibly naive and simplistic solution. The criminals will simply find something else to steal.
These minerals are mined in six regions – five of which are hundreds to a thousand miles from the conflict zone and aren’t even connected by a road. Dodd-Frank burns all of them down, too. The very people you think this is supposed to protect are being destroyed.
Get the United Nations to grow a backbone and go in and root out the militia. Or require Kinshasa to grow a backbone. Do anything we can to rid the world of those militias, but don’t do it at the expense of every man, woman and child throughout the Congo related to mining. A nuclear option that demonizes minerals instead of criminals is not acceptable.
Groups like ours are the solution, not another bureaucratic process that will only make it difficult for honest people to export while the criminals scoff and pay a bribe to make it all go away.
Groupe Weyi is not a mining company, not a multinational, but a company incorporated in the DRC, majority owned by a Congolese, that works with local tribes to build a local, sustainable economy and solve poverty within 5-10 years in the Congo and 10-20 years in Africa. Exporting minerals is what the tribes feel right now is their best, most stable and sustainable source of income, and one that can create higher wages almost immediately.
Mining will also generate revenues for creating other longer-term, much better local economic options at a much higher level than micro-financing could achieve, including agriculture, herding and husbandry, aviation and water transportation. We are already building our first commercial river barge. We will also use profits to rebuild infrastructure, water, schools, clinics and other necessary services.
A local economy will never be built on the backs of large corporations or multi-national entities, but by the emergence local businesses throughout the Congo creating a sustainable local economy that is not dependent on large corporations or mining for their existence.
And it won’t be built by depriving people of their livelihood. Unconscionable is the best description of Dodd-Frank’s 1502 provision.
Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011