False Economy - Alan Beattie [59]
Diamonds, in particular, are a near-perfect mineral with which to fund freelance rebel movements or alternative governments. They act almost like a global currency, being small and light and holding their value well. Despite the attempts of an international campaign—the Kimberley Process—to register their source, they are also very hard to trace. The civil war in Sierra Leone dragged on for a decade, starting in 1991, after the Revolutionary United Front, the main rebel movement, gained control of diamond mines and used the wealth to fund their operations. Gold is heavier but also useful. Oil is bulkier and harder to extract but, like Visa or MasterCard, also widely accepted.
Minerals do not just help prolong civil wars, they also attract unwelcome attention from outside. One of the misfortunes of the beleaguered Democratic Republic of Congo (formerly part of Zaire, which was itself a byword for corruption and mismanagement in Africa) is to have deposits of coltan, a mineral used in the manufacture of mobile phones. It also has diamonds, copper, and gold. Several countries, including Uganda, were widely reported as having sent troops over the border to plunder the resources during the DRC's civil war between 1997 and 2003. Uganda's protestations of innocence were not helped by the fact that it was openly exporting minerals not naturally occurring in Uganda.
Another useful, and hence disastrous, aspect of minerals is that governments with them find it easier to borrow. Now, it is hard to seize the assets of a state that defaults on loan repayment (though some "vulture funds" suing Latin American and African nations for defaulted sovereign debt have had a go at it). So lenders to governments in effect usually have to extend credit without collateral. They are much keener to lend to those they know have minerals in the ground that can be sold for hard currency. In fact, in some cases, borrowing has been collateralized directly on the oil revenues themselves, meaning that the foreign lender can seize the proceeds to ensure repayment.
Many developing countries have built up spectacular debt burdens from borrowing recklessly from reckless lenders, but it is hard to top the oil producers. By the time Saddam Hussein's regime fell, in 2003, Iraq had accumulated, and defaulted on, debt somewhere between two and four times the size of the entire economy, estimated to equal around $6,000 for each Iraqi. Getting the government financially back on its feet involved the biggest debt relief in history. Similarly, while dozens of African countries had their debts to other governments and official institutions like the World Bank written off as part of an international scheme, oil-rich Nigeria was by far the largest. It needed a write-down of $18 billion to give the government financial room to move.
Those working in the mines, at least if they have the right to organize collectively, also often spend a lot of time trying to divert a higher proportion of the revenue toward themselves. If the workers know that the company is making money hand over fist, the incentive for them to try to grab some of it for themselves becomes much higher. Trade unions that can halt production, particularly at times when mineral prices are high, are in a position similar to that of bandits blocking a mountain pass. This applies in spades if the mineral produced, such as oil or coal, is essential to the running of the wider domestic economy.
It is not surprising that across history and the world, mining frequently produces the most militant trade unions. Harold Macmillan, the Conservative