It has been said that while mining may not be everything, nothing else would be possible without it. Critical resources have come to be used as shorthand to mark human progress; from the Stone Age, to the Bronze Age, to the Iron Age, to the Information Age. When technology reached a point where the smelting of steel became widespread, economies grew rapidly and humanity shifted from the prehistoric era to the modern. Interestingly large parts of the artisanal mining sector have never moved much beyond these pre-modern advancements. Therefore a great deal of the minerals and metals that make the most sophisticated technologies possible today, are still obtained in a way that would not be unrecognizable to a miner from thousands of years ago.
Control over resources and dominance of their trade have been important to the economic foundations of societies since the beginning of human civilization. Whether they were precious resources like gold, diamonds or other precious gems or more critically strategic resources; like obsidian, iron and copper. Control over their dominion was almost always an essential ingredient for civilizational success. The Maya and Inca in the Americas developed vast trading networks and riches, which the Spanish conquistadors were so keen to dominate and plunder upon discovery. The medieval southern African kingdom of Mapungbwe grew into a wealthy city-state, trading mineral resources and other goods throughout the continent and as far away as Arabia, India, and China from the 10th-14th century AD.(1)
Later resource booms feverishly lifted cities and whole regions from obscurity to prominence, sometimes in a matter of months. San Francisco’s population was less than 500 in 1847, but by the end of 1849 following reports of the gold strike at Sutter’s Mill it had swelled to near 25,000. Critical minerals have always played a role in these booms, and their overexploitation, or a sudden crash in value can cause harsh bust cycles to quickly follow. Leaving newly minted communities just as suddenly desolate, abandoned ghost towns, again in the span of mere months. It can be a head spinning whirlwind, as towns like Bodie, CA will attest. A place where people seemingly just up and left in a hurry, mid-meal or on a whim one day, without even bothering to pack.
Gold still holds quite a bit of allure and more value than ever but strategically over time its importance has waned. With the advent of the automobile age and a shift away from gold standards, oil quickly vaulted to the top of the list of commodities considered most critical. Wildcatters, first in Pennsylvania then later in Texas, staked everything on risky ventures and a freewheeling, gambler’s mentality held sway. Wars were waged in pursuit of oil or over its access. Somewhere between a quarter and a half of all interstate conflicts since 1973 can be connected to oil, and secure supply chains have come to be considered crucial for national survival. Oil is ostensibly the lifeblood of any modern economy. It was even the US oil embargo on Japan that likely presaged their attack on Pearl Harbor. Access to oil is still an essential fixture of national security and drives policy decisions in capitals the world over. However, with the world on the cusp of an unavoidable and well overdue shift toward renewable energy, the balance of power is moving away from hydrocarbons and towards a new set of critical minerals. Necessary for semiconductors and microchips, satellites and lasers, and critical in every way for computing and data storage, there is no future without critical minerals. If oil is the blood that keeps an economy pumping, critical minerals will be the air it breathes going forward. A question worth pondering is, will the stakes over these newly critical resources be as high and become as contentious as past conflagrations over oil have proven to be?(2)
Everyone is generally familiar with the minerals that have powered the world since the onset of the industrial revolution, first coal and oil and more lately nuclear and natural gas. These are ubiquitous the world over, known to be reliable sources of concentrated energy and basically understood, as far as impacts and sustainability are concerned. Less understood are the new class of critical minerals that have gained importance in the last 30-40 years. As the ICT revolution accelerates and the world pivots towards green economies, these unsung minerals have almost invisibly become the crux-point in global commerce and a functioning of modern society. So many of the devices and conveniences taken for granted rely on these minerals. So what are they exactly and what challenges are posed in obtaining ample supplies of each?
Not so Rare Earths
While the term ‘rare earths’ is often misconstrued by many to mean the elements themselves are lacking in abundance, they are not actually all that rare and can be found in great quantities in many places around the world. They are just rarely mined, and not easy to process. Processing is highly energy and water intensive and quite damaging to the environment in the long term.
Rare earth elements or REEs are a grouping of 17 minerals that occur together in deposits and are therefore mined in conjunction. Four of the most important of these for the green energy transition are neodymium, dysprosium, praseodymium and terbium. China not only dominates the processing of these elements into usable forms, but in some cases like dysprosium 100% of the supply is sourced from China. China also contains substantial REE deposits of its own. In 2010 they controlled approximately 95% of the market in REEs, that is down to somewhere around 60% today, as more production has come online in Australia and elsewhere. The Mountain Pass Mine in California was reactivated in 2018 and is the only current REE mine in the US, providing about 15% of global REE supplies, but it still relies wholly on China to process what it digs out of the ground.
China currently controls 90% of the processing capacity for light REEs and 100% of the processing capacity for heavy REEs. Processing is notoriously dirty, as the byproducts are radioactive tailings, and a lot of them since so much ore must be refined to produce significant quantities of the various minerals. One other concern is the price fluctuations of the various minerals in the group. Since they are mined in conjunction, spikes in demand in a few may not necessarily equate to higher profits for mine operators if prices for others remain low, a leveling out effect can happen since they don’t all rise or fall in tandem.
Some 20 new REEs projects in the next few years should begin operations in the US, Canada and Australia which will put further downward pressure on prices as more midstream production capacity opens up. There is also some interesting potential to process coal waste in a way that allows efficient and more environmentally friendly extraction and processing of REEs, recycling what’s now just a toxic byproduct of coal mining and turning it into usable REEs.(7-8,10-16,30)
Copper Still King
Copper is surely much more familiar to the non-geologists out there, but its criticality is likely underestimated. It is still a superior and irreplaceable element, prized for its electrical conductivity and malleability. With a long history of being mined and active sites with ample deposits in Peru, Chile, China, the DRC, Zambia, Australia and the United States there wouldn’t, on the surface, appear to be any supply chain problems. Dig deeper though and it becomes apparent that given the upward trajectory of demand and the downward trajectory of productivity, due to the declining quality of the ore and the increasing difficulty in accessing what is available, there could be trouble ahead. China leads by far in both refining and demand for copper, accounting for around 50% of both. Supplies seem strong based on current projections but given the long lead time for projects and the lack of any new mines being planned beyond the late 2020s, concerns exist about long term supply outlooks. Current output meets current demands, but as these supplies inevitably shrink due to productivity loss, and with demand only expected to grow exponentially, finding new sources of ore is imperative or else supply shortages may arise. There’s also the matter of how water intensive copper mining happens to be, coupled with the harsh reality that most deposits are found in arid and already water stressed areas.(16-17,30)
Cobalt is one of the most crucial elements going forward as the world turns towards renewable energy. It is actually retrieved as a by-product of copper and nickel mining. Their fates are therefore inextricably linked. Currently close to 70% of cobalt is mined in one country, the Democratic Republic of Congo or DRC. A major component of electric vehicle batteries, and with demand for it set to skyrocket, possibly by as much as 40x in the next 20 years, secure supply chains will be essential for any successful green transition. The DRC is a difficult case, seemingly beset by every intractable issue a country could face and a classic reminder of the ‘resource curse’. Facing conflicts both internally and externally, climate threats, predatory business partners, corrupt government officials and a massive land area that is 1/4th the size of the US with very little internal infrastructure. It is a difficult place to navigate in all respects, so the DRC is an unlikely focal point for so much of the globe’s future success to hinge, but the world will depend on it. Artisanal mining accounts for a great deal of the current cobalt supply, around 20% by official metrics, but the unknown-unknowns of the Congo are legendary, so any number is a guess at best. A pair of large multinational companies do the rest of the mining, one Swiss and one Chinese. Artisanal mining or ASM presents many challenges, child labor is rife, environmental standards are nonexistent, safety is an afterthought, and infiltration by transnational crime organizations is rampant. It’s also often the best or only economic opportunity for isolated communities and industrious individuals. Given the taint associated with ASM, many companies rightfully steer clear of supply chains that originated in Congo (or at least make a claim to). Given the increasing reliance on ever rarer supplies though, this isn’t a long term viability. It’s likely impossible to declare, even now, with any true confidence that minerals from the Congo, minerals surely in some part mined by child labor, aren’t already deeply embedded in supply chains. Most experts believe some part of every phone, computer, electric car, etc has at least some minerals that would be considered ‘conflict’ as a major component. Blood diamonds are high in the public imagination but blood smartphones or laptops or EVs not so much.(29-30,16-17)
Double Nickel on a Dime
Nickel is another mineral concentrated in particular geographic regions, making supply chains potentially unreliable. Indonesia and the Philippines currently represent 45% of the world’s supply. Used mainly in stainless steel production but also increasingly a major component of electrical vehicle batteries, it’s also a key source of cobalt. Indonesia has shaken up the supply chain the last few years with its sudden ban on exports of raw ore at the beginning of 2020, two years earlier than previously announced. This set in motion a scramble to set up processing plants within Indonesia in order to maintain uninterrupted flows for China’s voracious steel industry.
Indonesia had tried a similar plan in 2017 but had to relent due to inadequate smelter capacity, as soon as enough operators became operational the ban was swiftly put back in place, to the seeming surprise of commodity markets. Successfully pulling in billions in new foreign capital, Indonesia sparked consternation from buyers but ultimately capitulation, as there are not any better options than meeting their stipulations. They’ve also begun to implement export taxes on various types of processed nickel as well, in an effort to further expand their industrial base and revenues. Their current control over nickel allows them this leeway, since alternatives to their supply are nonexistent. Diversifying this supply chain in the long term is an important step, but as it stands no projects are on the horizon outside of Indonesia, so for now they will remain the only nickel game in town.(30,33-36)
Nicknamed ‘white gold’, lithium’s prospects have never looked better as it has the highest demand among any of the critical minerals. Prices are up over 700% since the beginning of 2021. The key component in the efficient lithium-ion battery revolution that has truly changed the world. Making everything from the original iPod possible to the latest Tesla models so fast. Chile and Australia currently have the most active lithium mining sectors and China once again dominates the processing sector, handling about 75% of the total and over 80% of a particular high-end type that is most coveted by battery makers, while also hosting significant reserves of their own. The US has one functioning mine right now, in Silver Peak, NV but reserves are thought to be plentiful. Demand is being met currently but looking ahead beyond 2030 it’s likely given the emissions targets being set, and the amount of electric vehicle adoption necessary to get there, supply compared to demand will get much tighter in the medium to long term.(21,30-32,37-39)
The Middle Kingdom’s Ground
China has many advantages making it possible for it to maintain dominance of the whole spectrum of critical mineral supply chains, from production to processing. The country itself is blessed with an abundant supply of various minerals. What it lacks in domestic oil potential it more than makes up for with access to the whole gamut of critical minerals. Lax regulations and government incentives allow processing to be done far more cheaply than anywhere else. Not only are domestic sources abundant, but China has also aggressively pursued mining opportunities in many corners of the globe whether in Africa or Australia, Indonesia or South America. Unafraid to source from regions and countries that most Western corporations don’t take a risk on, due to the prevalence of conflict, corruption and unregulated ASM mining, which makes them no-go zones legally. Chinese dominance is no accident, it has been a concerted effort, arching over many decades of development policy. As far back as 1975 China had a serious state policy in place regarding critical minerals.(10-12,14-17)
It was in 1975 that China founded the National Rare Earth Development and Application Leading Group or simply the RE office. Recognizing the national importance of these elements to future economic development, an aggressive multi-pronged approach was instituted to guide China’s nascent industrial policy and eventual expansion into a global behemoth. The first years offered support to the infant-industry, to help operators gain a foothold in global value chains and to inject much needed cash into the country’s economy. Exports were encouraged and export-tax reimbursements were available to rare earth producers, Japan and the US were both early customers. This led to a doubling in production from 1985-1990. The late 80s and early 90s saw a shift in priorities and policies in the West and Japan, which led to less processing capacity globally and more concentration within China. Concerns over environmental degradation and radioactive runoff were high in Europe and elsewhere. Japan set about offshoring its processing to China as well, in a move to gain more steady access to supplies and cheaper overall production costs due to subsidies, while also sparing its own environment. At this stage the Chinese policy was working incredibly well, an abundance of supplies and processing and lack of oversight led to a steady drop in prices. Concern began to grow as time went on over illegally mined elements entering the supply chain though, as these eroded prices ever further. Producers in China would eventually engage in collusion in the early 90s to help stabilize prices.(10-12, 14-17)
At this point in the early 90s the strategic value of the minerals began to be reconsidered, and recognized as more than just a source of foreign capital for China. Foreign investment in upstream production started to be scrutinized and disallowed in most cases, meanwhile investment in downstream production was still actively encouraged. Previously granted mining licenses were revoked, the minerals were officially designated as critical to national security and strict export controls were put in place. This was meant to help tamp down what was considered over investment in the mining sector and over supply, but considering the amount of illegal mining this only went so far as a preventative measure. As growth overall in China began to skyrocket in the 90s central planners foresaw issues with their earlier rare earth strategy. Environmental damage, long term sustainability and local impacts were already on their radar, as the previous rush for economic development at any cost had caused quite a bit of unchecked exploitation and environmental damage. Foreign investments in mining were further restricted throughout the 90s, stricter production quotas implemented and export quotas and taxes were introduced. This led to major advantages for processors in China, who now had access to cheaper raw materials, which then encouraged foreign firms to shift even more processing to China. At this point close to 60% of mined rare earth material came out of China, around this same time they were admitted to the WTO, further strengthening ties to global supply chains.(10-12, 14-17)
The late 90s and early 2000s saw increased emphasis on export quotas to rein in illegal suppliers and stricter production quotas in a complicated, firm by firm, region by region policy. This pushed consolidation in the industry and led to greater state control over time. Foreign investments were even further curtailed in mining and processing, as concerns over the environment and over-exploitation of the non-renewable resources gained attention, from both regional authorities and locals on the ground, who voiced concerns over rampant pollution.
Illegal mining also continued to plague Chinese regulators. The success of prior policies actually incentivized illegal miners to continue unabated since prices increased dramatically. Estimates vary over the size and impact of illegal mining, and given the opaque nature of Chinese statistics and the obfuscation inherent to all illegal enterprises, nailing down exact figures is impossible. What is known is that it is not an insignificant source of rare earth elements in China. Some put the number at 25-40% of total national output prior to 2013, coming from illegal sources and that’s from the leader by far in global output. As stricter reforms were enacted some claim that number fell below 20% after 2014 but others say illegal sources still constituted over 50% of the supply chain post-2017. As an example of how blatant this illegal supply was, reported imports of REE from China by various countries, like Japan, South Korea and the United States were consistently higher than official Chinese export quotas for years at a time. 2009 was actually the only year where the reported export/import numbers aligned worldwide and that was amidst a global financial meltdown and a sharp decline in commodity demand and prices. In any case, China controlled around 97% of the REE markets in 2010, whether or not all sources from the country were accounted for, or all its policies were successful.
In 2010 export quotas were lowered significantly causing a spike in prices that left many international customers of China unable to afford the minerals crucial to their production. China’s two month ban on exports of rare earths to Japan over a dispute involving a fishing boat captain near the Senkaku Islands the same year, was meant as a shot across the bow at a regional competitor, but it was perhaps too effective. In the end it seemed to serve as a wake-up call to every country with regards to the implications of Chinese dominance of this critical sector. In some ways this move jump started the global race for rare earths and other critical minerals. Demand for smartphones exploded in this era too and the electric vehicle industry also began in earnest. Two cases were brought before the WTO over China’s export restrictions around this time, and in both cases the challenging parties prevailed, a new era of competition was certainly underway.(10-11, 14-17)
The Beautiful Country’s Landscape
Starting in 2018 the United States began compiling a list of commodities considered critically important to national security. According to Tanya Trujillo, Assistant Secretary of the Interior for Water and Science, “Critical minerals play a significant role in our national security, economy, renewable energy development and infrastructure.”
Updated yearly the list, as of 2022, contains over 50 minerals and metals. From the familiar like aluminum, graphite, lithium, platinum, and tin. To the more obscure and less readily available like cobalt, cesium, dysprosium, and all the so-called rare earths. There is only one active rare earth mine in the US, at Mountain Pass, CA and it was only brought back online in 2018. It is still working towards being able to process what it mines though, with most all processing for rare earths done overseas. All of Mountain Pass’ output so far has gone to China for final processing and the US obtains around 78% of its rare earths from China currently. The 50 odd minerals deemed most critical have a wide variety of uses; nuclear power, missile guidance, fiber optics, LED/LCD screens, solar cells, batteries of all kinds, magnets and steel production, are all impossible without stable and consistent supply chains of these elements.(3-4)
Biden’s Executive Order no. 14017 was released early in his term and put a clear emphasis on securing the US supply chain for critical minerals and drastically increasing both mining and processing in the country. His order built upon others from prior administrations and is among a basket of proposals to build out a reliable US-based supply chain. Covid-19 exposed vulnerabilities to an over-reliance on extended supply chains and just-in-time shipping. Especially with regards to such essential base minerals. While they are basically invisible, without them none of the modern amenities we take for granted like smartphones, electric vehicles, powerful computers, widespread internet connectivity or even electricity would be possible. The recently released National Security Strategy may not have explicitly mentioned mining and minerals and their fundamental importance, but reading between the lines most of the goals and strategies revolve in some way around ready access to them. One recent example of this obvious criticality was the temporary halting of F-35 production due to concerns over a magnet alloy sourced from China.(5-9,27)
US policymakers want to reformulate industrial policy and jump start a mining boom within its borders, but high level thinking and big plans don’t often translate to practical solutions. China’s head start has allowed it to build out all the necessary infrastructure and tweak policy as they’ve gone along, making it ever more effective and precise. The US is a tortoise joining the race late, with a Chinese hare that has a huge head start. While the US is most certainly starting from far behind it can’t allow this factor to cause it to be overly strident or make imprudent plans. At the same time the US does need to start running, since it already missed the starting gun, relying solely on tripping China as a way to catch up is not a sensible strategy.
Recent legislation such as the Inflation Reduction Act and CHIPs Act and use of the Defense Production Act by the Pentagon, squarely target a new brand of industrial policy for the United States.. Targeting something, versus actually hitting the mark though, are two very different things. It takes steady effort and careful aim to make the right impact. The US may want to drastically diversify supply chains for critical minerals but there’s several hurdles standing in the way.
First there’s the matter of the outdated mining laws which were drafted 150 years ago, so obviously fail to factor in modern needs or technologies. There’s also the exceptionally long lead time for mining projects that needs to be considered. Plans of this magnitude, with so much upfront investment ($10s of billions) and scale of work (years of assessments and approvals before ground can be broken), take well over a decade to bring fully online. Delays in permitting in the US can add years to already years-long initiatives and the pendulum swing of political priorities make venturing into a mining project that much more risky and costly in the US. While quotidian corruption may not be the issue it is in other countries, operators in the US still face a monumental morass of red tape before ever breaking ground. Ensuring environmental responsibility obviously needs to remain a top priority but interminable delays can’t be allowed to stymie such a critical industry. More focus should be put on shovel-ready projects, many of the proposals being put forth are still for pilot or demonstration programs.
There is however positive progress being made on various fronts and the significant incentives being offered appear to already be paying dividends. Nearly $7 billion is being invested to increase battery production within the US. With companies like MP Materials being one of the beneficiaries. Having recently reported a doubling in earnings and making ambitious plans to onshore all processing of REE mined at Mountain Pass, to a California plant by the end of 2022. The company is also about to finish a magnet factory in Texas as well. Other mines and processing facilities are in the works, with more lithium mines planned in Nevada, North Carolina and Imperial County, California and processing plants in the works in Arizona, Minnesota and Michigan. Apple and Tesla have also announced plans to onshore much of their supply chains to the US in coming years. The same thing is happening with semiconductors with several large manufacturing facilities in the works in Ohio and other parts of the Midwest. All of these will need consistent and secure access to dozens of critical minerals.(5,21-25,31,37,40)
Recycling is another area the US is emphasizing. It’s possible to keep the critical minerals we already do have, in our pockets or castoff in closets and drawers, out of landfills and continue to reuse them for decades to come. On that same front, stockpiling of strategic minerals for lean times and to counter wild market dynamics is another pillar of the Biden plan.(22,28)
Another comparative advantage the US has is its strong network of allies and trading partners. The Pentagon has been pushing partnerships with Australia and the United Kingdom to develop more processing capacity to diversify supply chains with mixed success. It has also called on Australia to review foreign (i.e. Chinese) investment in its mining sector, which it has recently vowed to do. One concern the US has beyond China’s domestic dominance of the critical mineral supply chain, is all the various ownership stakes and mineral rights it has acquired globally. Chinese companies often have significant stakes in overseas mining and processing ventures, whether in Africa, Australia, South America or Indonesia. This complicates matters with the new laws requiring Chinese-free supply chains. Entanglement is such and supplies of certain minerals are so concentrated geographically, that total decoupling is all but impossible. This cuts both ways though, even with China’s overall dominance there are critical facets of the industry that they don’t control, but still rely upon, so export bans as a weapon won’t work for either side except as a way to shoot yourself in the foot.(43-45,25-29)
US partnerships in the EU and elsewhere, with both governments and corporations, can prove to be fruitful, yet also need to be continually nurtured. France is already expressing concerns over Biden’s new industrial policy, likening it to the Chinese one that led to their early lead, but seemingly that is exactly the point. Biden’s new policies have even raised the ire of Chinese commentators, who criticized Canada for doing the “bidding” of the US (again) in an ironic turnabout.(20,46)
On the sidelines of the recent G-20 meetings in Indonesia it appears that many of the concerns surrounding critical minerals were addressed. Leaders grappled with the implications of Biden’s legislative victories over the summer that brought to life his nascent industrial policy. The Partnership for Global Infrastructure and Investment (PGII) was touted as part of a global plan to tackle climate change and meet Sustainable Development Goals. Some projects under its rubric include moves towards more efficient grids, sustainable mining projects, and increasing digital access and financing for SMEs in the developing world.(41)
The EU, as a bloc, needs to reckon with its own divisions and come to a consensus on a path forward to maintain critical mineral supplies. The newly hawkish attitude from Washington towards Beijing has certainly raised eyebrows in Germany. National security concerns from the US side have forced many companies that export to the US market to make hard and often expensive choices, since the Chinese market is also a critical one for them as well. Some are resorting to siloing of their supply chains to serve both simultaneously, but this is costly and leaves SMEs at a supreme disadvantage, margins are often thin so building out multiple supply chains isn’t an option for many companies. SMEs are the backbone of the German and therefore EU as a whole’s economy, so this figures into the political calculus in Berlin and Brussels. Keeping their own industrial bases humming and people employed is of the utmost concern. There’s also a lot of rightful skepticism regarding US reliability, as many companies and governments who had been solid partners got burned badly by the Trump administration’s abnormal geopolitical gyrations. Questions about the outcome of the 2024 US election and the direction it will take weighs heavily on decision makers and potential partners, leaving many no choice but to hedge their bets with China, just in case.
On the Ground
China’s overwhelming success with critical minerals and their commanding lead as both a global supplier and consumer would not be possible without large amounts of overseas investments in infrastructure and aggressive pursuit of new supplies near and far. While being a top down approach on the one hand, on the other it unleashed a torrent of chaotic and sometimes overlapping/unproductive projects, so waste was unavoidable. Western investors tend to approach large-scale investments like mines quite cautiously and then respond quickly to market conditions. Commodity markets by their nature are subject to wild fluctuations, so counting on consistent returns is just not possible, but try telling that to shareholders. The Chinese investment approach to mineral extraction differs in that when they come to town, they are in it for the long haul. Domestic demand is such in China that even with a downturn in price they still need raw materials, so they will continue operations through a recession or sudden swing in a particular mineral’s price. Whereas Western companies will pull back on production or shut down altogether if the market is not in their favor. This whipsaw retrenchment approach, tied to market swings, is hard on the local labor force. Chinese mines on the other hand will keep operating so their local employees stay employed.(17)
A lack of oversight and more independence allows Chinese operators to be more flexible with local demands as well. A Swiss manager in Africa, for instance, is held in check by a board, obligations to shareholders, and a strong regulatory regime at home, so they just cannot possibly get done what a Chinese manager freed from all these strictures can. Chinese brokers in Africa are also open to buying artisanally mined minerals and then just plugging them into the supply chain. Western companies are bending over backwards to make sure their supply chains don’t even come close to touching these minerals, at least not while they are in the problem countries. Run the same ore through a few midstream processors and muddle its origins, thereby making it impossible to tell what minerals are from where, and with enough inured blindness no one is the wiser. Chinese mining operators are also being backed by a concerted cyber campaign against competitors. The Australian company Lynas reports battling bot attacks on a daily basis, in what is a new front in back-handed business tactics.(17,19)
In the Ground
Artisanal mining (ASM) and its impacts are difficult territory to navigate, moral quandaries abound and many a philosophical paradox is brought forth to ponder. There’s no doubt that mining of any kind is a dirty and dangerous business. Whether in the best regulated and safest mine, run by the most responsible multinational corporation or not. ASM makes up a major proportion of the economy of some countries and many regions rely almost solely on it. At the same time it can have absolutely devastating effects on communities. Environmental damage goes unchecked and unmitigated, child labor and other forms of exploitation are rampant, and safety is not of any concern. It is also an inefficient use of resources and can leave viable mining sites unusable in the future due to improper mining practices. The amount of ASM going on currently and the percentage it already makes up of global output, perhaps 25% or more with some minerals, makes it an undeniable reality in any post-carbon world.(17,29,49)
Liminal Spaces & Criminal Cases
Transnational crime is another undeniable fact of the global mineral supply chain that must be considered. Given the amount of artisanal mining, the exploding value of the minerals and the easy obfuscation possible in mineral supply chains, criminal actors are almost certainly already deeply enmeshed. Gold has long been used in money laundering schemes and that has only become more prevalent as prices have spiked in the last two decades. Many of the critical minerals have seen massive spikes in value the last few years, which opens the door to opportunists of all kinds. Private military contractors like Russia’s ‘Wagner’ group are known to be operating in and around artisanal mines in Africa, extracting value and exploiting people in every way possible.
In South America drug smugglers operate brazenly in the mineral supply chain. Through complicated schemes involving shell companies and forged documents, gold is shuffled seamlessly into the global supply chain and cash comes back clean. Cartels are even known to be operating the ubiquitous “We Buy Gold” stores that have cropped up in nearly every town in America since the Great Recession of 2008, turning dirty money into gold and then back into clean money when the gold is resold to processors. Theft of catalytic converters from vehicles is another crimewave sweeping the US that can be connected directly to the demand for critical minerals. There is very little reporting currently on criminal activity in critical mineral supply chains outside China (or inside for that matter), but gangs there have long controlled black markets and illegal mines. To think the same won’t happen in other countries and regions with poor governance and a lack of oversight as the value and scarcity of these minerals continues to increase would be naive.(12,18)
The Race with No End
The framing for the pursuit of minerals is often put into the context of a ‘race’ but that presupposes winners, losers and a finish line. The rush to go green and develop renewable and more efficient sources of energy and ever faster more powerful computers, is just the way forward. The climate connection ties everyone on the globe together, in hopes of a victory or in a shared loss, because the alternative is an untenable planet on which to dwell. The US may be starting late but at least the recognition of the necessity for swift action is now an imperative.
The complexities and interconnections of mineral supply chains and the needs for renewable energy will only increase exponentially going forward. Managing an industrial policy that encompasses so many moving parts, spans all points of the compass, involves highly technical processing at every level, and exceptionally long lead times will not be a simple task. China has a nearly 50 year head start and has been tweaking policy to fit the moment all along. Leapfrogging to play catch-up is not impossible though. As technology improves, rapidly moving forward with the latest advancements and utilizing what the Chinese have learned from decades of policy will give new operators an advantage of sorts. Chinese BRI investments in overseas infrastructure have actually fallen off since 2017, except in the realms of ICT and security/surveillance technology which remain strong. A recent move away from the BRI towards the Global Development Initiative (GDI) and Global Security Initiative (GSI) represent a shift, somewhat, in Chinese policy. What that will mean for investments on the ground and supply chain security overall remains to be seen, their notion of “indivisible security” is very vaguely defined currently. So much capital has been committed and plenty of projects have broken ground already in Africa, Australia, and Indonesia that there will not be a significant shift anytime soon away from a China-led supply chain.(47-48,50)
For US policymakers and corporations the path forward is clear. Given current deficits in both upstream, midstream and downstream production, building out a resilient ecosystem of raw ore supplies all the way through to finished workable alloys and metals is crucial. Efforts are underway to map US geologic deposits for the various critical minerals to get an idea of how much actually exists within the US. Some projections of global supplies over the next 20-40 years for the most critical minerals seem to indicate there may not be enough of these minerals in existence to even meet future demand. Reliance on technologies yet to be invented is the gamble the globe must make going forward it seems. There are promising experiments ongoing to recover minerals from deposits on the seafloor. It is possible enough minerals exist at the bottom of the ocean to power a planetary transformation into a post-carbon future. There are also some scientific advancements in recycling coal ash waste and using that as a source for critical minerals. Combined with aggressive e-waste recycling programs many of these minerals can be recovered and reused repeatedly, eliminating the need for costly and environmentally damaging mining projects.(16)
In the meantime it behooves the US, and every country for that matter, to develop a realistic plan of action in the face of these facts. Finding more sources of minerals that can be sustainably obtained is one pillar. Another is education; ensuring the engineers, geologists, and chemists needed for this transition exist and are being educated in universities is key. Education of the general public is necessary as well, since many have no idea of the stakes but everyone is a stakeholder now. Developing new sources of ore is important but so is proper management of the known deposits and active mining sites. Locking whole regions and countries out of the value chain due to the presence of artisanally mined minerals is not a sound or even feasible policy. It stymies the people living there unfairly and merely opens the door to illegal mining with no rules or standards whatsoever. The vacuum left in these areas when major multinationals leave, is a void that is quickly filled by militias, criminals, or jihadists. Coherent strategies with realistic outlooks on ASM and its inevitability need to be adopted.
The new US industrial policy is a promising start, it seems as if there is finally recognition from both Democrats and Republicans that ceding the whole space to China is not a workable approach. There was no actual strategy from the West until very recently with regards to critical minerals, other than letting market forces play out and the chips fall where they may. Covid-19 disruptions and China’s recalcitrant stance of late has thrown into sharp relief the need for a diversification of supply chains of all kinds. From advanced microchips to basic medicines, an overreliance on just-in-time shipping and stretched supply chains led to severe shortages.
As the US now shifts towards what looks to be a divided government, with Republicans in control of the House, the question for our partners and allies becomes will the US continue clearly on the path of progress. Or is divisiveness once again going to divert attention away from the true threats facing the country and the world. Debates over the debt ceiling could lead to a long shutdown of the government much like in 1994, this will only serve to further shake the confidence of US allies. Demands for austerity at any cost from the right over deficits and the desire to chalk a win of any sort, could deflate the impact of Biden’s recent legislative victories. While hawkishness against China may be overblown on both sides it does represent the one arena where there is some agreement. Countering a perceived threat and bolstering national security are major parts of the new US industrial policies, whether this can be kept separate from partisan politics remains to be seen. A lot of trust in the sanity of centrist Republicans has evaporated both here in the US and abroad, and no one perceives the extremes of either party as viable. Restoring faith in the US as a reliable partner will take time and demonstrating to potential partners a bipartisan commitment for future endeavors is essential.
China isn’t immune to uncertainty either, while Xi Jingping coasted into a third term seemingly effortlessly, keeping the trajectory of growth moving ever upwards will increasingly be a challenge. The situation in Hong Kong just prior to the pandemic has not been forgotten. Many Western businesses have been moving on to more friendly and predictable locales in Asia, and millions of Chinese citizens have left or are planning to. The competition for China will therefore be coming from both internal and external forces for the time being. The US may not even need to bother trying to “trip” China in an effort to catch up as it seems to have erected many self-limiting stumbling blocks of its own already.
We are certainly nowhere near the ‘end of history’, as a whole new great game gets underway, this time with more and far bigger players. Yet with the US enacting sweeping industrial policy and widespread recognition of the stiff headwinds the West faces going forward, this could very well be the end for neo-liberalism as an overarching strategy of world order. Especially if China has anything to say about it.
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11~ Shen, Y., Moomy, R., & Eggert, R. (2019, March 19). China’s public policies toward rare earths, 1975–2018. https://link.springer.com/content/pdf/10.1007/s13563-019-00214-2.pdf
12~ Wenyi Yan et. al. Criticality Assessment of Metal Resources in China. June 2021, Criticality Assessment of Metal Resources in China. June 2021
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16~ Sanderson, Henry. Volt Rush: The Winners and Losers in the Race to Go Green. Oneworld Publications, 2022.
17~ Lee, Ching Kwan. The Specter of Global China: Politics, Labor, and Foreign Investment in Africa. Illustrated, University of Chicago Press, 2018.
18~ Weaver, Jay, et al. Dirty Gold: The Rise and Fall of an International Smuggling Ring. PublicAffairs, 2021.
19~ “China-linked Bots Attacking Rare Earths Producer ‘Every Day.’” The Japan Times, 27 Aug. 2022, www.japantimes.co.jp/news/2022/08/27/business/china-bots-rare-earths.
20~China Daily. “Canada Does US Bidding Again: China Daily Editorial.” Chinadaily.com.cn, https://global.chinadaily.com.cn/a/202211/04/WS63650cbaa3105ca1f227423d.html
21~ Kaplan, Deborah Abrams. “How The US Plans to Transform Its Lithium Supply Chain.” Utility Dive, 1 Nov. 2022, www.utilitydive.com/news/us-strengthening-lithium-supply-processing-ev-batteries/635338.
22~“Biden-Harris Administration Announces Nearly $74 Million to Advance Domestic Battery Recycling and Reuse, Strengthen Nation’s Battery Supply Chain.” Energy.gov, www.energy.gov/articles/biden-harris-administration-announces-nearly-74-million-advance-domestic-battery-recycling.
23~ Sloustcher, Matt. “MP Materials to Build U.S. Magnet Factory, Enters Long-Term Supply Agreement With General Motors.” MP Materials.com, 9 Dec. 2021, https://mpmaterials.com/articles/mp-materials-to-build-us-magnet-factory-enters-long-term-supply-agreement-with-general-motors/
24~ “MP Materials Profit More Than Doubles on Higher Rare Earths Prices.” Reuters, 4 Aug. 2022, www.reuters.com/markets/commodities/mp-materials-profit-more-than-doubles-higher-rare-earths-prices-2022-08-04.
25~ “Biden Administration, DOE to Invest $3 Billion to Strengthen U.S. Supply Chain for Advanced Batteries for Vehicles and Energy Storage.” Energy.gov, www.energy.gov/articles/biden-administration-doe-invest-3-billion-strengthen-us-supply-chain-advanced-batteries.
26~ Scheyder, Ernest, and Ernest Scheyder. “Pentagon Asks Congress to Fund Mining Projects in Australia, U.K.” Reuters, 12 May 2022, www.reuters.com/markets/commodities/pentagon-asks-congress-fund-mining-projects-australia-uk-2022-05-11.
27~ Trump Administration. “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.” commerce.gov, 2020, www.commerce.gov/sites/default/files/2020-01/Critical_Minerals_Strategy_Final.pdf.
28~ Timmer, John. “Toxic Cleanup Technique Can Get More Rare Earth Metals Out of Ores.” Ars Technica, 3 Nov. 2022, https://arstechnica.com/science/2022/11/toxic-cleanup-technique-can-get-more-rare-earth-metals-out-of-ores/
29~ Pecquet, Julian. “US Looks to Africa to Diversify Supply Chain for Critical Minerals.” The Africa Report.com, 10 Oct. 2022, www.theafricareport.com/243847/us-looks-to-africa-to-diversify-supply-chain-for-critical-minerals.
30~ “The Role of Critical Minerals in Clean Energy Transitions – Analysis.” IEA, www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions.
31~ “NATIONAL BLUEPRINT FOR LITHIUM BATTERIES 2021–2030.” energy.gov, June 2021, www.energy.gov/sites/default/files/2021-06/FCAB%20National%20Blueprint%20Lithium%20Batteries%200621_0.pdf.
32~ Whitehouse, David. “European Governments in ‘Dreamworld’ on Lithium Supplies, Africa Has the Solution Says AfriTin.” The Africa Report.com, 5 Oct. 2022, www.theafricareport.com/246292/european-governments-in-dreamworld-on-lithium-supplies-africa-has-the-solution-says-afritin.
33~ The National Bureau of Asian Research. “Indonesia’s Nickel Export Ban: Impacts on Supply Chains and the Energy Transition.” The National Bureau of Asian Research (NBR), 18 Nov. 2022, www.nbr.org/publication/indonesias-nickel-export-ban-impacts-on-supply-chains-and-the-energy-transition.
34~ Listiyorini, Eko. “Export Ban Triples Nickel Investment in Indonesia’s Morowali.” Bloomberg, 29 Sept. 2022, www.bloomberg.com/news/articles/2022-09-29/export-ban-triples-nickel-investment-in-indonesia-s-morowali.
35~ Gupta, Krisna. “Indonesia’s Claim That Banning Nickel Exports Spurs Downstreaming Is Questionable.” The Conversation, 30 Mar. 2022, https://theconversation.com/indonesias-claim-that-banning-nickel-exports-spurs-downstreaming-is-questionable-180229
36~ Nangoy, Fransiska, and Bernadette Christina. “Indonesia to Issue Nickel Export Tax Rules in Q3 -official.” Nasdaq, 1 Aug. 2022, www.nasdaq.com/articles/indonesia-to-issue-nickel-export-tax-rules-in-q3-official.
37~ Stevens, Pippa. “Inside the Only Lithium Producer in the U.S., Which Provides the Critical Mineral Used in Batteries by Tesla, EV Makers.” CNBC, 14 Oct. 2022, www.cnbc.com/2022/10/14/lithium-for-tesla-evs-batteries-touring-silver-peak-nevada-.html.
38~ CBS News. “Batteries and the New ‘Lithium Gold-rush.’” CBS News, 7 Nov. 2021, www.cbsnews.com/news/batteries-and-the-new-lithium-gold-rush.
39~ Rushton, Kim. “Demand for Lithium: Is Nevada’s Modern Mining Industry the Answer?” Innovation News Network, 5 Aug. 2022, www.innovationnewsnetwork.com/demand-lithium-nevadas-modern-mining-industry/24125.
40~ Energy.gov, www.energy.gov/articles/biden-administration-doe-invest-3-billion-strengthen-us-supply-chain-advanced-batteries.
41~ House, The White. “FACT SHEET: Presidents Biden, Widodo, Von Der Leyen, and G20 Announce G20 Partnership for Global Infrastructure and Investment Projects.” The White House, 15 Nov. 2022, www.whitehouse.gov/briefing-room/statements-releases/2022/11/15/fact-sheet-presidents-biden-widodo-von-der-leyen-and-g20-announce-g20-partnership-for-global-infrastructure-and-investment-projects.
42~ Energy.gov, www.energy.gov/articles/biden-harris-administration-announces-nearly-74-million-advance-domestic-battery-recycling.
43~ Caminiti, Susan. “After the CHIPS Act: U.S. Still Has a Long Road Ahead to Rival Asia in Semiconductor Manufacturing.” CNBC, 2 Aug. 2022, www.cnbc.com/2022/08/02/after-chips-act-us-has-long-road-to-rival-asia-in-semiconductors.html.
44~ “Inside the Only Lithium Producer in the U.S., Which Provides the Critical Mineral Used in Batteries by Tesla, EV Makers.” CNBC, 14 Oct. 2022, www.cnbc.com/2022/10/14/lithium-for-tesla-evs-batteries-touring-silver-peak-nevada-.html.
45~ “Pentagon Asks Congress to Fund Mining Projects in Australia, U.K.” Reuters, 12 May 2022, www.reuters.com/markets/commodities/pentagon-asks-congress-fund-mining-projects-australia-uk-2022-05-11.
46~ Horobin, William, and Arne Delfs. “France Accuses US of Pursuing China-Style Industrial Policy.” Bloomberg, Nov. 2022, www.bloomberg.com/news/articles/2022-11-22/france-accuses-us-of-pursuing-china-style-industrial-policy#xj4y7vzkg.
47~ “Xi Kicks off Campaign for a Chinese Vision of Global Security.” United States Institute of Peace, October 2022, www.usip.org/publications/2022/10/xi-kicks-campaign-chinese-vision-global-security.
48~ “China’s Global Security Initiative.” GMFUS, August 2022 www.gmfus.org/news/chinas-global-security-initiative.
49~ Skrdlik. “Duplicity and Destitution: Sierra Leone’s Artisanal Diamonds Fail to Benefit Local Communities.” The Mail & Guardian, 22 Nov. 2022, https://mg.co.za/africa/2022-11-22-duplicity-and-destitution-sierra-leones-artisanal-diamonds-fail-to-benefit-local-communities/
50~ Chinese in Beijing manage cobalt mines in Africa by remote control: study. (2022, December 7). South China Morning Post. https://www.scmp.com/news/china/science/article/3202385/chinese-using-mobile-phone-beijing-effectively-manage-cobalt-mines-africa-remote-control-study
How getting dollars from IMF, World Bank would make the borrower country’s situation worse off
As globalisation and international trade continue to increase, countries are becoming increasingly dependent on one another for economic support. While the idea of receiving financial assistance from other countries may seem beneficial, it is essential to consider the long-term consequences of relying on foreign funding. In this article, we will explore the reasons why obtaining dollars from other countries may not improve a nation’s situation.
One of the major issues with relying on foreign aid is the potential for a cycle of dependency. When a country becomes reliant on external aid, it can lead to a situation where it is unable to sustain its own economy without outside support. This is a dangerous situation because it can create a vicious cycle where the country continually needs more and more aid just to stay afloat.
For example, if a country receives aid in the form of a loan, it will need to repay the loan with interest. This can be difficult if the country is not generating enough revenue to meet its existing financial obligations, like the case with Pakistan where IMF has given $6.52bn as per 2019 according to al Jazeera news.
accepting foreign aid can result in a loss of autonomy for the recipient country. When a country accepts financial aid, it must adhere to the stipulations of the donor country or organization. These stipulations can range from structural adjustments to changes in the recipient country’s policies or systems. These changes may not necessarily align with the values or beliefs of the recipient country and can have unintended consequences.
For instance, a country that accepts aid from another nation may be required to implement specific economic policies to align with the donor’s interests. While the donor may have good intentions, these policies may not be suitable for the recipient country’s unique economic conditions. This loss of autonomy can have significant long-term consequences for a nation’s economic and political stability.
Furthermore, foreign aid can also create an incentive for the recipient country to focus on producing goods that are exportable to the donor country. This focus can lead to the neglect of domestic industries that could potentially contribute to the country’s long-term economic growth.
when a country relies on foreign aid and loans, it can create a cycle of dependency that is hard to break. Instead of developing its own economy, a country that is dependent on foreign aid becomes trapped in a cycle of always needing more aid to survive. This can lead to a lack of innovation and productivity, as well as a lack of incentives for the government to implement necessary economic reforms.
For example, many African countries have been receiving foreign aid for decades, but their economies remain stagnant, and their people continue to live in poverty. The reason for this is that the aid has created a culture of dependency that has prevented these countries from developing their own economies and becoming self-sufficient. As a result, they continue to rely on foreign aid, and the cycle of dependency continues.
Secondly, foreign aid and loans can also lead to the creation of a debt trap. When a country borrows money from other countries or international institutions like the World Bank or IMF, it is required to pay back that money with interest. If the country is unable to pay back the debt, it can become trapped in a debt cycle that can be difficult to break.
For example, many developing countries have borrowed large sums of money from China to fund infrastructure projects like roads and ports. While these projects have helped to improve the country’s infrastructure, they have also left the country with a large debt burden. In some cases, the debt has become so large that the country is unable to pay it back, and it becomes trapped in a debt cycle that can be difficult to break.
As a nation, it is natural to seek foreign investment and aid to support its economic growth and development. However, it is essential to realize that getting dollars from other countries may not always be the best solution to address a country’s economic challenges. In fact, it can lead to plenty of problems that may exacerbate the current situation.
Foreign aid can create a dependency culture, where a country becomes reliant on the help of others to sustain its economy. This often leads to the abandonment of initiatives that would have driven growth in the economy, as it is more comfortable to rely on handouts rather than working towards self-sufficiency. A dependency culture also makes a nation vulnerable to the whims of other countries, who may withdraw their support without warning, leaving the country with a sudden and severe economic downturn.
Another challenge with getting dollars from other countries is the exchange rate risk. When a country borrows money in a foreign currency, it becomes susceptible to fluctuations in the exchange rate. For instance, if a country borrows money in US dollars, and the US dollar appreciates against the local currency, the debt burden becomes more significant, and it becomes harder to pay back. This can create a vicious cycle of borrowing to pay back previous loans, leading to an unsustainable debt situation.
foreign aid and investment can create a situation where the recipient country becomes a dumping ground for substandard goods and services from the donor countries. For example, in Africa, there have been reports of donated clothes from western countries causing local textile industries to collapse, as people prefer the cheap second-hand clothes from the west. This creates a vicious cycle of dependency on foreign goods, leading to the closure of local industries, job losses, and an erosion of local culture.
Another challenge with getting dollars from other countries is that it may lead to the exploitation of natural resources. For instance, foreign investors may demand favorable policies that allow them to extract resources from the host country at minimal cost, leaving the country with minimal benefits. This creates a situation where the host country is merely an exporter of raw materials, and the foreign investors reap the benefits.
Critics argue that the loans provided by the IMF and other entities often comes with strict conditions attached. Such as imposing austerity measures or liberalizing markets.
whether IMF and World Bank lending helps poor countries or not depends on a variety of factors, including the specific terms and conditions of the loans, how the funds are used, and the broader economic and political context in which the lending takes place.
The Complex Relationship Between Populism and the Economy: A Delicate Balancing Act
Populism on both the right and left has spread like wildfire over the world. The drive reached its apex in the United States with Trump’s election, but it has been a force in Europe since the Great Recession threw the European economy into a lengthy tailspin. Populism is a political philosophy that demonizes economic and political elites while lionizing ‘the people.’ Populists of all shades argue that the people must recapture power from the unaccountable elites who made them impotent.
Populism has emerged as a powerful force in contemporary politics, challenging long-held political norms and institutions. The appeal to economic concerns and complaints is a crucial feature of populist movements. The link between populism and the economy, on the other hand, is intricate and diverse. During periods of economic instability or stagnation, populism frequently arises, tapping on the frustrations and worries of marginalized people. the economic instability refers to an economy that lacks certainty or equilibrium, such as high unemployment rates, poor economic development, or unpredictable financial markets. Populist leaders and groups are skilled at exploiting economic complaints and presenting them as the consequence of an inefficient or corrupt elite. They present themselves as defenders of the “common people” or marginalized groups who have been left behind by the current political and economic elite. They provide simplified solutions to complicated economic problems, vowing to protect people’s interests against perceived dangers presented by global entities such as globalization, immigration, or multinational businesses.
It is crucial to remember that economic insecurity or stagnation does not always result in the emergence of populism. Other variables, such as cultural fears, identity politics, and a lack of faith in institutions, all contribute to the creation of a climate favorable to populist movements. The economic factor, on the other hand, is frequently a substantial motivator since it directly affects people’s livelihoods and ambitions.
Populist policies and language can have serious consequences for economic stability, development, and long-term viability. To understand its implications for society and policymaking, this delicate balancing act between populism and the economy must be carefully examined.
Economic Dissatisfaction and the Rise of Populism
Populist groups frequently garner support by focusing on economic dissatisfaction in society. These complaints may be the result of a variety of issues, including wage stagnation, job insecurity, economic inequality, and the belief that conventional political elites have not effectively addressed these issues. Populist leaders are skilled at capitalizing on these resentments by pledging quick and dramatic fixes that appeal to disenchanted people.
Populist economic policies
Populist economic policies are frequently put in place once populist politicians are in charge in order to solve the issues that brought them to power. These regulations might be very varied from one country to another, reflecting the diversity of populist movements worldwide. Protectionism, trade restrictions, and more government involvement in the economy are some characteristics of populist economic policy. These actions are frequently justified as defending the rights of the “common people” in the face of multinational companies and powerful global elites.
Long-Term Economic Effects and Short-Term Populist Gains:
Populist measures may improve the short term and placate disenchanted people, but they can harm the economy in the long run. For instance, protectionist policies may shelter domestic sectors from competition in the near term, but they eventually stifle effectiveness, innovation, and competitiveness. Increased government involvement may result in corruption, inefficiency, and a suppression of the expansion of the private sector.
The Effects on Investor Confidence and Market Stability
Populist discourse and actions may also significantly affect investor confidence and market stability. Populist politicians frequently take on established financial and economic institutions like central banks, which can increase volatility and uncertainty. When political factors appear to be driving policy decisions rather than strong economic realities, investors may be reluctant to commit capital.
Inclusive growth vs. Protectionism
If it is feasible to achieve inclusive economic development while assuaging populist attitudes, that would be a key question in the populist-economic nexus. Opponents contend that populist policies frequently priorities instant gratification and protectionism, which may eventually impede broad-based prosperity and deepen inequality. For nations battling populism, striking the correct balance between addressing valid economic concerns and pursuing long-term, sustainable economic policy is a vital task.
The Importance of Education and Economic Literacy
A diversified strategy is needed to address the complicated link between populism and the economy. Increasing economic literacy and spreading education on the advantages of free trade, open markets, and globalization might help dispel the oversimplified myths sometimes spread by populist groups. Societies may promote a more educated and nuanced public dialogue by providing people with the means to comprehend and critically analyses economic concerns.
The complex interrelationship between populism and the economy emphasizes the need of having a thorough grasp of the motivations and outcomes of populist movements. Because it plays on the frustrations and worries of marginalized groups who feel left behind by the current political and economic system, populism frequently gains support during periods of economic instability. Populist leaders can appeal to disillusioned people by capitalizing on economic concerns and promising quick, radical answers.
Economic stability, growth, and societal well-being may be significantly impacted in the long run by populist economic policies and rhetoric. While populist initiatives may temporarily alleviate problems and placate irate people, they frequently overlook factors like long-term sustainability, effectiveness, and competitiveness. Economic development, investment, and innovation can be hampered by protectionist trade policies, increasing government interference, and a contempt for economic competence.
In conclusion, it is important to carefully evaluate and take a balanced approach to the topic of populism and the economy. While economic resentments might contribute to the growth of populism, the economic effects of populist measures must be considered over the long run.
A broad strategy that tackles both the underlying economic complaints and supports sustainable economic policies is necessary to handle the complex problems surrounding populism and the economy. Here are some tips for overcoming these obstacles
Addressing Economic Inequality
Governments should implement policies that promote inclusive economic growth and reduce income inequality.
Upholding the integrity and independence of democratic institutions is crucial in countering populist tendencies. Strong institutions can help rebuild trust and confidence in the political and economic system, mitigating the appeal of populism.
Promoting Dialogue and Engagement
To address the concerns of marginalized groups, it is essential to engage in open and constructive dialogue.
Strengthening Economic Literacy
Enhancing economic literacy among the general population is critical.
Promoting International Cooperation
Global challenges such as climate change, pandemics, and economic interdependence require collaborative solutions. Governments should prioritize international cooperation and engage in constructive dialogue to address these challenges collectively. By demonstrating the benefits of global engagement and cooperation, societies can counter the isolationist and protectionist tendencies often associated with populism.
Societies may overcome the problems presented by populism while supporting sustainable economic development and social cohesion by resolving economic complaints, advocating inclusive policies, and creating a feeling of economic security and opportunity.
From Bullets to Development: Rethinking Military Expenditure in Favour of Official Development Assistance
International assistance has achieved remarkable accomplishments in reducing global poverty, supporting girls’ education, addressing hunger, ensuring safe childbirth, nearly eradicating polio, combating female genital mutilation (FGM), providing food rations for Syrian refugees, constructing schools and sanitation facilities in Kenya, and delivering crucial relief supplies to Afghan villagers affected by an earthquake.
However, despite the current combination of global crises, some of the wealthiest nations in the world are planning to significantly reduce their life-saving aid budgets in 2022-23. These decisions are made by political elites who are sheltered within the safety of their privileged positions, yet the consequences of these choices are acutely felt by the most vulnerable individuals across the globe.
Official Development Assistance (ODA) plays a vital role in supporting the development and welfare efforts of low- and middle-income nations. The United Nations has set a target for countries to allocate 0.7% of their Gross National Income (GNI) towards ODA. However, recent estimates indicate that a significant portion of foreign aid is being directed towards Ukraine, accounting for 7.8% of all ODA in 2022. Meanwhile, aid provided to least-developed countries and countries in sub-Saharan Africa has actually decreased. Donors continue to fall short of their targets to contribute at least 0.7% of their GNI to ODA. When considering a long-term perspective, it is evident that aid may still be experiencing a downward trend in comparison to what countries can reasonably afford.
.Despite its importance, the global levels of Official Development Assistance (ODA) have experienced minimal growth in the last ten years. This lack of progress in fulfilling the commitment to increase ODA to 0.7 percent of gross domestic product (GDP) places a burden on low- and middle-income countries. As a result, these nations are compelled to devise alternative development strategies that are less reliant on external aid. This situation presents them with difficult choices regarding the allocation of their scarce domestic resources undermining development in social sectors.
On the contrary, Military expenditure reached record level in the second year of the pandemic and world military spending continued to grow in 2021, reaching an all-time high of $2.1 trillion. This was the seventh consecutive year that spending increased, research published by the Stockholm International Peace Research Institute (SIPRI).
In light of the Monterrey Consensus on Financing for Development adopted in March 2002 and the 2015 Addis Ababa Action Agenda (AAAA), which outlines spending priorities, states are encouraged to set appropriate targets for essential public services like healthcare, education, electricity provision, and sanitation. However that might not be the case. The latest figures from the OECD will provide further support to the argument. Although there was substantial funding for Ukraine in 2022, Official Development Assistance (ODA) to some of the world’s poorest countries experienced a decline.
The data reveals a decrease of approximately 0.7% in bilateral flows to the group of nations categorized as the least developed countries, comprising 46 countries ranging from Afghanistan to Zambia. The total amount of aid provided to these countries amounted to $32 billion. In simpler terms, the data demonstrates that development aid to numerous developing countries actually contracted.
This leads to an abrupt reordering of budget priorities, where military expenditures, and humanitarian aid take precedence, while other critical needs like education and social services are likely to be deprioritized. Meanwhile, the convergence of droughts and conflicts causes immense human suffering and widespread hunger in several nations, and despite the urgent nature of these crises, UN humanitarian appeals for assistance consistently suffer from inadequate funding.
Assistance allocated to Ukraine, as well as any future major crises that require global attention, should be supplementary to the existing humanitarian and development budgets rather than compromising one for the sake of the other.
As we already knew, in 2021 the ODA budget was reduced to 0.5%, a drop of £3bn compared to 2020 to £11.4bn. The starkest impact of these cuts is on “least developed countries” (LDCs). The amount of bilateral ODA going to LDCs dropped by £961m in 2021, a cut of 40% taking it to a total of £1.4bn.
Yoke Ling, the Executive Director of Third World Network, commented that the increasing military expenditure will undoubtedly have a direct influence on various types of spending that developed countries have committed to providing for developing nations. This includes Official Development Assistance (ODA) and climate finance, which are legal obligations under climate treaties.
Furthermore, Yoke Ling highlighted that even prior to the Russian-Ukraine conflict, developed nations had already been reducing their financial support for development. Therefore, it is anticipated that this decline in development financing will further deteriorate in the future.
Given the climate-change-triggered floods in Nigeria and Pakistan, the severe food insecurity affecting millions in Nigeria, Ethiopia, South Sudan, Yemen, Afghanistan, and Somalia, the unfolding humanitarian crisis in Afghanistan resulting in widespread starvation and desperate measures such as selling body parts to provide for families, the ongoing refugee crisis in Syria where millions remain in displacement camps even a decade after the conflict started, and the devastating famine gripping Tigray, advocates concur that there is an urgent need to uphold and potentially enhance international aid more than ever before.
According to a UN report titled “2022 Financing for Sustainable Development Report: Bridging the Finance Divide,” the Official Development Assistance (ODA) experienced a remarkable growth, reaching its highest-ever level of $161.2 billion in 2020. However, despite this record growth, the report highlights that 13 countries reduced their ODA contributions, and the overall amount remains insufficient to meet the significant needs of developing countries.
The UN expresses concern that the crisis in Ukraine, coupled with increased spending on refugees in Europe, may result in reductions in aid provided to the poorest nations. The majority of developing countries require urgent and proactive support to get back on track towards achieving the Sustainable Development Goals (SDGs).
According to the report’s estimates, a 20 percent increase in spending will be necessary in key sectors within the poorest countries.
If certain developed nations allocate generous resources to military expenditures while simultaneously reducing funding for other aid programs, are they implying that security interests take precedence over long-term public needs? Without question, the rights and necessities of people in Ukraine, Asia, and the rest of the Global South should be prioritized over military spending. Moreover, apart from the conflict in Ukraine, developed countries have already failed to fulfil their commitment of providing $100 billion of climate finance by the year 2020.
By compromising development aid budgets and climate finance, the consequences of poverty, inequalities, adverse climate impacts, and exclusion in the global South will be exacerbated. Such a lack of ambition risks reinforcing the economic and political grievances that lie at the core of armed conflicts in various regions, including Asia.
In order to uphold solidarity and justice, there is a pressing need for synergized political will and ambition.
We should challenge developed countries to honour their existing aid commitments, which include allocating a minimum of 0.7% of their Gross National Income (GNI) as Official Development Assistance (ODA). Additionally, we also call upon them to provide new funding to address the needs of the people in Ukraine. It is imperative to identify new avenues for grants-based climate finance to compensate those most affected by climate change, including communities experiencing losses and damages.
The UN report on Financing for Sustainable Development also highlights the stark contrast between rich countries, which were able to support their pandemic recovery through substantial borrowing at very low interest rates, and the poorest nations that had to allocate billions of dollars to service their debts, hindering their ability to invest in sustainable development.
As we approach the midpoint of funding the Global Sustainable Development Goals, the discoveries are deeply concerning. We cannot afford to be inactive during this critical moment of shared responsibility, where our aim is to uplift hundreds of millions of individuals out of hunger and poverty. It is indispensable that we prioritize investments in equitable access to decent and environmentally friendly employment, social protection, healthcare, and education, leaving no one behind.
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