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