Tag Archives: scarcity

A World of Chinese Boxes

“Total use for greater wealth.” That was the triumphant banner under which the newly formed Bureau of Reclamation would parcel out and industrialize the water resources of the western United States at the beginning of the twentieth century. Now, as we are forced to appreciate just how scarce and precious freshwater and other resources really are, and as industrial civilization itself verges on collapse, it reads more like a fool’s epitaph.

We are, of course, still in the grip of the old industrial-era logic. I see it clearly in the arguments advanced in support of Lake Superior mining. When not pushing the jobs argument — or when an economist like Thomas Power calls their bluff — mining industry proponents and apologists regularly appeal to the utility (and the necessity) of mining around Lake Superior.

“These minerals,” one Michigan labor leader explained to me, “are gonna be extracted at some time. They have to be,” he continued, because they are “important for a lot of uses.” An imperative, mining carries certain duties with it: “The world needs the minerals” of the UP, he went on to explain, “and I think we have a responsibility to develop it right, extract it right, and share it.”

At least he acknowledges that the ore extracted from Lake Superior mining operations is destined for international markets. On the Public Television show Almanac a couple of months ago, at the start of the comment period on the Polymet EIS, Executive Director of Mining Minnesota Frank Ongaro asked us to pretend that mining Minnesota “copper, nickel, platinum” would somehow make us less “import-dependent” on those metals “for everything we use, every day in our life.” That was pure jingoism, and these arguments are misleading.

Just consider the news lately around the falling price of copper, which hit an eight-month low last week. The biggest story by far has to do less with slowing Chinese demand for manufacturing and building, and more with the “use” to which copper imports are now put by Chinese players in the commodities market. According to a Reuters story focusing on these “secretive” Chinese funds, “traders estimate more than half of copper imports into China were to raise funds using the metal as collateral over the past two years.” In a tweet that Aaron Klemz shared with me, CNBC’s Deirdre Wang Morris said it was more like sixty to eighty percent of all Chinese copper imports that were being “used as loan collateral.”

A March 13 Reuters article on the last week’s sell-off of copper by Polly Yam, Fayen Wong and Melanie Burton quotes “traders who structure financing deals” saying that “the selling of copper was due to speculators not breaches of financing deals. ‘Speculators are the main driver.'” I suppose that’s meant to be reassuring.

In a typical copper financing deal, an importer puts down nearly the full value of the copper in yuan as a deposit to a bank for a letter of credit.
The importer resells the copper into the domestic market to raise cash that can be used for other investments such as real estate.
The importer can also strike a hedged deal where the metal is stored in a bonded [or LME] warehouse in China or overseas in return for a loan from a foreign bank. In both cases, the importers no longer are exposed to the copper price.

And in all cases, copper — mined everywhere at great risk to water, watersheds, wetlands and the surrounding environment — is not being put to anything like the productive uses that most people imagine, or mining companies promote. From this angle, Polymet looks like Glencore’s bid to bring Minnesota into a Chinese collateral game. Things get even weirder when you consider the case of Eagle Mine in Michigan, where Lundin Mining has secured a $600 million credit facility to mine Lake Superior copper that will ship to LME warehouses owned by big commodity players and banks, and then serve as an object of financial speculation or as collateral in return for loans. It’s a world of Chinese nested boxes: credit swaps and derivatives will be spun around loans to mine copper to back loans in a huge urbanization scheme designed to move the Chinese toward a consumer society — and so on. It’s an unsustainable scheme, and after last week some analysts believe it’s already unraveling.

Orwell wrote in the industrial era about the critical role of mining in the “metabolism” of civilization. Now, in our post-industrial world, it appears that new mining will only hasten the cancer of financialization.

Update, 19 March 2014: For more on this theme, see Tyler Durden’s discussion of copper and “hot money” flows into China, here and here

A Great Commons Narrative for the Great Lakes

A few days ago, the International Human Rights Law Clinic at UC Berkeley School of Law released its report on the Human Right to Water Bill in California. Directed at State agencies, the report discusses the obligations these agencies have to consider the human right to water, as required by California Assembly Bill 685. Specifically it outlines what the duty “to consider” entails, discusses the human right to water, and offers some guidelines for implementation of AB 685.

Not every state has California’s water problems, but all states need to recognize the human right to water and put it on the public agenda. “The human right to water,” in the words of the UN’s Committee on Economic, Social and Cultural Rights, “is indispensable for leading a life in human dignity” and (to continue with the language of General Comment No. 15) “a prerequisite for the realization of other human rights.”

And yet even where water is abundant, we find this basic right threatened and compromised when it should be respected and protected. As I’ve noted elsewhere, the UN High Commission on Human Rights expressed concern on a recent visit that in some regions of the United States, mining and extractive industries are compromising the human right to water; that concern now must extend even to the Great Lakes area, where one of the biggest mining operations in the world is about to be staged around Lake Superior, one of the largest freshwater lakes in the world.

A 2011 report issued by the Council of Canadians finds that “the human right to water is being violated in a number of communities around the Great Lakes,” especially but not exclusively in indigenous communities. The report, entitled Our Great Lakes Commons [pdf], lays out “a people’s plan” to remedy this situation and to save and protect Lake Superior and all the Great Lakes as our “common heritage.” I came to the report after reading an op-ed in the May 1 edition of the Milwaukee Journal-Sentinel by its author, Maude Barlow, National Chairperson of the Council of Canadians and Chair of the organization Food and Water Watch. In her thought-provoking piece for the Journal-Sentinel and in this passage from her 2011 report, Barlow roots the human right to water in what she terms a broad “narrative” of the Commons:

The notion of the Commons is a very old one. A Commons narrative asserts that no one owns water. Rather it is a common heritage that belongs to the Earth, other species and future generations as well as our own. Because it is a flow resource necessary for life and ecosystem health, and because there is no substitute for it, water must be regarded as a public Commons and a public good and preserved as such for all time in law and practice. Embracing the Commons helps us to restore to the centrestage a whole range of social and ecological phenomena that market economics regards as “externalities.” A language of the Commons would restore more democratic control over the Great Lakes and establish their care and stewardship the joint responsibility of citizens and their elected governments based on the notions of social equity, ecological survival and governance by the people most impacted.

The Commons approach is based on the belief that just by being members of the human family, we all have rights to certain common heritages, be they the atmosphere and oceans, freshwater and genetic diversity, or culture, language and wisdom. In most traditional societies, it was assumed that what belonged to one belonged to all. Many indigenous societies to this day cannot conceive of denying a person or a family basic access to food, air, land, water and livelihood. Many modern societies extended the same concept of universal access to the notion of a social Commons, creating education, health care and social security for all members of the community. There are many working examples of Commons in North America today that include systems of national, state and provincial parks, cooperative fishing compacts to protect local stocks from depletion, and public libraries.

A Great Lakes Basin Commons would reject the view that the primary function of the Great Lakes is to promote the interests of industry and the powerful and give them preferential access to the Lakes’ bounties. It would embrace the belief that the Great Lakes form an integrated ecosystem with resources that are to be equitably shared and carefully managed for the good of the whole community. In a Commons framework, water is a fundamental human right that must be accessible to all. Private control of water cannot address itself to the issues of conservation, justice or democracy, the underpinnings of a solution to the crisis of the Great Lakes. Only citizens and their governments acting on their behalf can operate on these principles. Under a Commons regime, all private sector activity would come under strict public oversight and government accountability, and all would have to operate within a mandate, whose goals are the restoration and preservation of the waters of the Basin and water justice for all those who live around it.

At the same time, it is not a return to the notion that the Great Lakes are indestructible due to their size, or what has come to be known as “the tragedy of the commons.” It is rooted rather in a sober and realistic assessment of the true damage that has already been unleashed on the Great Lakes as well as the knowledge that they must be managed and shared in a way that protects them now and for all time.

Race You To The Water

The other day I expressed some misgivings over the word that Earthworks chose to apply to water in the first sentence of its report, Polluting the Future: their characterization of water as an “asset,” I said, made me uneasy. The water flowing from springs and brooks, the water of rivers, lakes and streams, the raindrops that fall from the sky and the dew on the morning grass, the water in our bodies, in plants and trees, the water in dogs, flowers, bugs, fish, elephants, walruses and caterpillars, the water in everything that is alive on earth — water is and will always be something greater, more wondrous and something other than a mere entry in the accounting ledgers of some grand business enterprise, which is all that the word “asset” conjures for me.

greatlakesoilI came across the word again today as I was reading an editorial in The Detroit Free Press. I am in complete sympathy with the position it takes against plans to build a huge network of oil pipelines carrying diluted bitumen (or dilbit) across the Great Lakes region, and to transport crude oil by barge across Lake Superior. These are reckless, irresponsible ideas. The threat they pose to the integrity of the Lakes and the life the Lakes sustain is only made worse when you consider a couple of salient facts. First (and it is curious that the editorial does not mention this), the new mining around Lake Superior — as I’ve noted repeatedly — is already going to put pressure on Lake Superior and the Lake Superior watershed; the shipping of oil by barge would bring even more industrialization and greatly heighten the risk of environmental catastrophe. Second, the company building and running the pipeline (the Canadian company Enbridge) has already been responsible for an environmental disaster in Kalamazoo, Michigan — the worst inland oil spill in US history, in fact.

The editorial takes the position that these plans betray a “deep misunderstanding of the true value of the lakes,” but when the editors try to say what that value is, they run into trouble:

It’s easy to wax poetic about the value of the Great Lakes to Michigan and the other states they border. The beauty of the lakes, the wildlife and fish that dwell in and around the lakes, the environmental benefits the lakes present — they’re incalculable.

But let’s get practical: Clean freshwater is one of the scarcest commodities there is. And it’s only going to get worse. Clean water will be an asset that’s worth far more than oil. Jeopardizing the Great Lakes isn’t just morally and ethically wrong. It’s financially foolish, as well.

It’s interesting how the argument here moves, in just a couple of short paragraphs, from the “incalculable” to the crudest of calculations — the “worth” of clean water. This is tantamount to arguing that what is “morally and ethically” right should take second place to what is financially sound — as if finance should have more claim on the imagination and intellect (and the heart) than morality, and monetary value should be privileged over moral and ethical considerations.

I suppose that’s the way it goes nowadays, and I just need to get real. Still, there’s a great swirl of confusion in these two paragraphs, and I have a number of questions about the concept of morality being invoked here, how we’re to distinguish it from ethics, and why those things don’t seem to figure into what are called “practical” considerations. Practice and finance here are unmoored from and unrestricted by moral and ethical concerns; it’s precisely that kind of thinking that got us into the precarious situation we’re now in.

One remedy for all this confusion may lie in the perspective that holds water to be a basic human right — a perspective I also found missing from the Earthworks report. But even then we need to go beyond talking about assets and recognize the limitations of the argument that “clean freshwater is one of the scarcest commodities.” Why? Follow the link from The Detroit Free Press editorial to the National Geographic site on the “Freshwater Crisis.” There you enter a Malthusian world:

While the amount of freshwater on the planet has remained fairly constant over time—continually recycled through the atmosphere and back into our cups—the population has exploded. This means that every year competition for a clean, copious supply of water for drinking, cooking, bathing, and sustaining life intensifies.

bilquaszwaterchildHere, all of humanity is engaged in a contest or race. More and more people enter every year to compete for the same, limited resources. This is one reason why it’s imperative to recognize freshwater as a human right. Otherwise, history becomes a death match, or a big, global reality TV show: intensifying “competition” over this scarce “commodity” means that there will be winners and losers in the water game. The winners are fully vested with their rights; the losers struggle to survive in arid, toxic regions, or simply die of thirst.