Natural Resources

Extractivism – BC as third world economy

First published in 2014. Updated as to recent revenue numbers but still relevant in 2019:

In British Columbia’s natural resource sector, public revenues decreased while quantities and values produced increased.

Not long ago, BC thrived on resource based industries. Today, extractors do well but the public—putative owners of natural resources—gain little for the assets, except through personal income and sales taxes paid by individuals employed.

In fiscal year 2001, the BC government earned $4.2 billion from natural resources, which is more than $5.8 billion in 2019 dollars, double the average revenue in the four fiscal years 2016 to 2019.

Although resource returns in BC have similarities to those of third world nations, we are not like Bolivians. That South American country is no longer governed by people in the pockets of industrialists so it is improving values realized from resource assets. In Canada’s two westernmost provinces, the opposite objective is in place.

After spending time in Bolivia a few years ago, I’ve followed that country’s political situation and the David and Goliath situation it is in. One writer that I follow is Fedrico Fuentes, author of the blog Bolivia Rising. Following are excerpts from a recent work. There are points that British Columbians should ponder:

Bolivia: Beyond (neo)extractivism? by Federico Fuentes, Telesur, August 2014:

Extractivism generally refers to an economic model centred on the large-scale removal (or “extraction”) of natural resources for the purposes of exporting raw materials. The term usually covers industrial-scale agriculture, forestry and even fishing, along with more traditional extractive industries such as mining and hydrocarbons.

…extractivism is not a new phenomenon. It emerged as a mode of accumulation with the colonization of the global South (Africa, Asia and Latin America) and has been determined ever since by the demands of the metropolitan centres of nascent capitalism.

…extractivism has been a mechanism of colonial and neocolonial plunder and appropriation.

…In the global South, a dependency on exporting raw materials that are then imported back into the country as expensive processed goods has become the norm. For example, many oil-producing nations still find themselves having to import petrol.

Extractivism also has the effect of fragmenting local economies into highly specialized extractive industries geared towards the global market (and therefore vulnerable to its vicissitudes), alongside backward, low-tech domestic industries and a bloated informal sector.

The capital-intensive nature of extractive industries means they provide little in terms of jobs, and are highly dependent on transnationals…

This ensures that along with the country’s resources, most of the wealth generated by these industries is also extracted out of the country.

…the end result of extractivism is high levels of underemployment, unemployment and poverty, while the distribution of income and wealth [becomes] even more unequal. This also leads to a shrunken domestic market, thereby entrenching the economy’s dependency on export markets.

…The reality is that almost no one proposes closing down all extractive industries. Even a keen critic of extractivism such as Uruguayan ecologist Eduardo Gudynas acknowledges the need for what he terms “sensible” and “indispensable” extractivism.

…Certainly, moves by the Evo Morales government [of Bolivia] have led to increased state control over the gas and mining sector. This has involved the nationalization of gas and mineral deposits and re-negotiation of new contracts that mean the state now takes the lion’s share of profits generated in these sectors.

This has facilitated a seven-fold increase in social and productive spending by the government since 2005, which in turn has allowed the government to make some headway in overcoming the social debt it inherited.

…However, it is important to note that unlike under extractivism, poverty reduction has gone hand in hand with decreased income inequality. For example, the disparity in income between the richest 10 percent and the poorest 10 percent has closed from a ratio of 128 to 1 in 2005, to 60 to 1 in 2012.

Decreased inequality is also evidenced by the improvements in Bolivia’s Gini Coefficient and Human Development Index, which take into account the expanded access to education and healthcare made available under the Morales government.

…Firstly, increased state revenue has facilitated a sharp drop in public debt, making the state less dependent on foreign loans. It has also allowed the government to expand its nationalization program into such other areas as telecommunications, electricity and water and ensure that more Bolivians have access to these basic services.

Secondly, wealth redistribution has helped boost the domestic market, with the economy expanding three-fold within seven years. Higher incomes for most of Bolivia’s population resulted in greater domestic demand, which averaged 5.2% per year between 2006 and 2012, and became the main driving force for economic growth…

Categories: Natural Resources

16 replies »

  1. Good, thought-provoking article, Norm.

    While I was reading it, I had a thought: “What if 'Wang Ho Minerals' had a made-offshore machine that could mine and process ore with the use of robots and remote-controlled conveyer belts? Would the BC government allow it — and would the province get any royalties out of the activity?”

    We're not at that stage yet — but when the benefits to our citizens are few, we need to say “No.”


  2. I'm glad to see people are beginning to get the picture. Sadly, I also believe it is too late. With each passing year Canada is less and less industrialized, and more and more reliant on exporting resources. It is our proximity to the U.S. that kept us from slipping into 3rd world status until now, but as they loose ground, we shall do so even faster. It's ironic that we are counted on to support the emerging nations, we are about to drown ourselves.


  3. What if 'Wang Ho Minerals' decided to mine LNG and processed it with foreign made stations (barged in from S. Korea) and employed TFW's (British Columbians would not qualify as it would be necessary to speak Korean or Chinese to be employable) to operate it. Since there is no royalty paid to BC for NG, and the TFW's would not pay income tax, where would our $1 trillion come from?


  4. I agree with G.Barry Stewart. This could begin a dialog that is worthwhile but it won't happen outside the blogosphere because regular media serves corporations, not citizens.


  5. Thanks Norm for your points of view. I may not always agree but I always appreciate the sincerity of your expressions.


  6. If we can neither enforce laws we do have, prevent their virtual defanging nor replace them for better ones, then we're not a free democracy. If we can't stop the globalists from gleefully glomming onto and making off with our stuff, then we have nothing. If it's really true that it's not really our stuff in the first place, then we have no state. What is to be done, then, with a powerless, impoverished and stateless people as the extractors pluck the nuggets of wealth from their midsts? The indigents who have no use to the wealthy will eventually become their enemies, those who have, their slaves. And slaves, even stripped of everything, have, nonetheless, the simplest dilemma: submit or not. The alternatives are to become a subversive who fears outing, a fugitive panicked by pursuit or an exile in a global world where there is no exile except for money. Either the pharaohs are reincarnating (they promised they would) or the one- per-centers have truly deluded themselves that a quasi-mercantile system of global slavery and want could exist amongst global greed and paranoia in some kind of stasis. It's no wonder the holy rapture cult is so self-righteous—Armageddon is perfectly counterbalanced by the sensible conclusion that mass penury and conspicuous greed cannot long persist.

    The new world received the malaria Columbus had lanced from the bubo of European stagnation. The freedom, democracy and prosperity so afforded to the masses of once restive European peasantry was taken from others. I attended a protest over ferry policy at the BC Assembly where a spokesman from a First Nation also negatively affected by BC Liberal ferry service cutbacks reminded the mostly non-aboriginal crowd, “Now you know what it feels like to be an Indian!”—and he wasn't joking: He was talking about how it feels to be disempowered from protecting your own stuff and becoming poorer as other interests take it from you.

    There being no more frontiers, no new New World, to lance our own self-toxification into, a smaller array of solutions present to us. As frustratingly slow the law has seemed from First Nations' point of view, once enfranchised they've made huge steps toward the expression of nationhood they want and deserve. Of note is the fact that the best fruit grew by legal and Constitutional avenues rather than political ones, a lesson mainstream Canadian society seems to miss. Politics isn't the only game in town, neither is it the most effective and often it's the worst—multiply that by some factors peculiar to BC and one should be inclined, if not totally eschew it, to at least prepare activism that puts provincial politics into some perspective with regards other approaches, whether those be municipal politics, Aboriginal treaties, court challenges, Constitutional Amendment, social activism, Citizens' Initiatives and even direct appeal to the Sovereign (why not?…our sovereignty is being diminished with each global-corporatist-favoring trade deal).

    Having to accept toxic mine-tailings spills as the price of prosperity is as false as flat earths. Trade deals being sealed primarily to insulate a hegemony of profiteers have to be challenged or we're doomed to revert to a modern medievalism. What, for example, would an abrogation of, say, the NAFTA or TILMA (or whatever its called now) entail? What are the steps to consider? If this question is really sacrosanct or forbidden, I'd be afraid it might already be too late. The recent successes of First Nations, on the other hand, should give us all reason to hope there's a way forward. If this is really our country, we should be able to enforce what laws we choose and benefit from whatever resource belongs to us. If we can't, we got nothing.


  7. Great piece. Minor quibble: the photo is of a diamond mine in the NWT – you should be able to find a free photo of a BC mine…


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