Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Conflicted Minerals – Predictable Disaster
It is something of a truism that the Road to Hell is paved with good intentions. I think if it is paved with such, the mortar between the paving stones must be made of NGOs. It would be hard to argue, for instance, that NGOs in Haiti in recent years have been especially helpful, considering there is a good argument that they are responsible for the death of local industry there and the spread of cholera, and their track record in many other endeavors is decidedly a mixed bag of horrible waste and fraud concocted of economic ignorance and meddling do-gooderism. So it is with no small bemusement on my part that yet another of their mad quests is now bearing fruit far different than they claimed to have desired. In this case, their crusade against mining in central Africa, ostensibly to shut down funding for a prolonged civil war, now appears to have made it far worse. That this would happen was, of course, predictable at the time.
This holy crusade combined, for these NGOs, what should have been all of their favorite checkboxes: a patronizing view of Africans as being unable to look out for their own interests (and therefore needing Western help), plenty of photo opportunities with impoverished peasants and thuggish militias, and moral proof that our modern lifestyle (in particular, our electronics) are murdering people and raping the planet. All that was needed was a catchy phrase. The practically poetic “blood diamonds” was already taken, and it being a bit of a mouthful to say “Bloody Tin, Bloody Tantalum, etc.”, they instead used the phrase “Conflict Minerals”, though as @midge rightly pointed out this does rather sound like a PC way of saying “a cage match between pet rocks”. So “Conflict Minerals” it is.
The claim was that the mining of 4 elements, Tin, Tantalum, Tungsten, and Gold (3TG, in the industry parlance), was directly funding the never-ending Congolese Civil War. These 4 elements are all found in abundance in the region, are all reasonably easily mined and smelted (coltan, the mineral form of tantalum, is commonly found just laying around in the area), and are all critical to modern electronics. And it is (or rather was) true that the militias were selling the stuff to buy desired weapons, ammunition, and supplies, but they were not the only ones selling.
The thinking of the NGOs was that an effective shaming campaign would force the major electronics manufacturers to source these materials elsewhere, and thus end the warfare. These international protest groups particularly singled out high-profile companies like Nintendo and some of the major cell phone makers in the mid 2000s. Consumers rightly ignored the pleadings of the NGOs, so the NGOs turned to trying to shame various governments into forcing some action or another. In the European Union they found a ready partner, especially since the EU had already shown itself to be scientifically ignorant in its ban on the use of lead and cadmium (often with there being not any viable replacements for these metals) just a few years before (look up RoHS – the Reduction of Hazardous Substances). In the US, though, there was no interest prior to 2009.
2009 and 2010 were high water marks of Democratic Party control, and they were filling the wish lists of many an international busybody, so in went the Conflict Minerals provision. Congress did not actually ban the use of Conflict Minerals, but it instead mandated that publicly-traded US corporations had to publicly declare, as part of their annual Securities and Exchange Commission (SEC) findings, that their products were either “DRC Conflict Free”, or else declare that their goods were funding the Congo Civil War. The corporations were also required to declare exactly how much products contained of Conflict Minerals. The declaration provision was, thankfully, struck down by the courts, but the actual content declaration still is law.
Well, US corporations do not want to be known for funding a civil war, and quite frankly divestment and supply-chain changes would mean less paperwork, so since this law went into effect (first reports were due in 2013) the world’s electronics component manufacturers have pulled out of Africa as quickly as they could. As the law not only stigmatized 3TG sourced from the Democratic Republic of the Congo, but also from neighboring countries too (since they might merely have been conduits), mining in the entire region has collapsed.
In the November 14, 2016 issue of the Wall Street Journal, Tate Watkins lays it out: (emphasis my own)
In a forthcoming study in the Journal of the Association of Environmental and Resource Economists, my colleague Dominic Parker and co-author Bryan Vadheim document that while the law may have cut off one source of revenue to armed groups, it led them to intensify their plundering of civilians in the region—exacerbating the humanitarian crisis. By their estimates, violent incidents more than doubled after the law was implemented.
The economists assert that before Dodd-Frank, Congolese militias acted as “stationary bandits.” The idea is that a strongman who seeks to rule for years won’t use his iron fist to crush the people entirely—and he may even invest a bit in roads, security and other provisions to ensure he avoids an uprising that could loosen his control. Messrs. Parker and Vadheim stress that stationary bandits are no saints, but the arrangement “may be safer and more economically productive than anarchy.”
…
Dodd-Frank upset the stationary-bandit equilibrium because, rather than spending resources to scrutinize a fragmented and opaque supply chain, many U.S. companies simply stopped purchasing minerals from the Congo. The Commerce Department admitted in a 2014 analysis that it did “not have the ability to distinguish” whether specific mineral purchases funded militias, and in August a Government Accountability Office report found that 97% of companies that filed disclosures “couldn’t determine whether the conflict minerals financed or benefited armed groups.”
Companies avoided the extra costs and red tape by boycotting tantalum, tin and tungsten mined in the Congo. They instead looked to suppliers in Australia and Brazil. Congolese mineral exports plunged by 90% in the wake of the legislation, according to DRC mining officials. Consequently, income to militias from such mines either plunged or vanished entirely.
None of this stopped the militias from killing. Some of them pivoted and became “roving bandits,” expanding their looting to make up for lost mining revenues. Mancur Olson, the late Nobel laureate in economics who outlined the theory of both types of bandits, wrote in a 1993 American Political Science Review article that the anarchy and theft wrought by the roving sort destroy “the incentive to invest and produce, leaving little for either the population or the bandits.” Messrs. Parker and Vadheim found that armed groups specifically targeted farmers during harvest time—especially after bumper crops.
All of this weighs heavily on my mind this time of year as this is the time when I, and many other manufacturers, begin our annual slog through thousands of declaration databases, bringing our own supply chain information up to date for another year. The workload is immense, and while my own small company does not have to declare per se, many of my customers are publicly traded and must declare. If I can’t provide them with my own supply chain data, they’ll switch to another company who can. But at least I’m not having to worry about some bandit group kicking in my door.
Published in Culture
One of the things that galls me about NGOs is that you cannot become a UN approved NGO unless you sign on to all of the agenda of the UN. The NGOs promote UN positions, and if you disagree with any part of that agenda, you’re not allowed to participate.
Conflict minerals is to blood diamonds as kinetic military action is to war.
“It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress.”– Mark Twain
There probably isn’t a way, but I’d like to see how much non-value-added time and money was spent on this ridiculous activity. I know our company’s corporate office spent millions of dollars on a consultant to do the job of contacting all our suppliers for their reports, collating the data, and presenting Corporate with what ever final report they came up with. I remember sitting in more than one Purchasing staff meeting thinking…this really sucks, and we get NO benefit. Not one of the high-level staff thought to question the worth of this activity-if the all-mighty Government requires it, it must be good. What a waste!
Fascinating, Skipsul, and depressing. Good luck with compliance.
As an old Dilbert strip said, “You can’t spell compliance without liance.”
The Road to Hell Is Paved With Good Intentions….
The Potholes in The Road To Hell are Regulations From Washington DC…
Fixing The Road To Hell is Tied Up In Committee….
Ok, who’s the chain gang on the road to hell?
I believe that is composed of the Usual Suspects.
Welcome Titus!
If the road to hell is paved with good intentions, what’s the Jersey turnpike paved with? Chopped liver?
– Robert Klein
Isn’t that a road in hell?
I understand Hell gave it back. They have standards.
Hell was full. That’s why I lived in Jersey.
Had a conversation with a coworker today. He brought up Trump’s promise to cut two regulations for every new one as an eminently sensible idea. I agreed, provided that we actually see that happen.
As this is mandated by Sarbanes Oxley, the reporting requirement is more of a law than a regulation, but it should still be high on the chopping block.
The taxpayers?
Seawriter
Taxpayers.
I obviously need to read all of the comments before getting an itchy trigger finger on the comment button.
It was too obvious an answer.
Seawriter
But that never stopped us before.
What does one expect? National and international NGOs are generally run by self serving liberals. Their goal is to raise money. We must simplify and reduce tax rates so that we can eliminate charitable deductions and we need to expose the bad ones. But we can’t police all of them so just don’t give them any tax supported money nor give charitable givers deductions, especially not corporate donors. What little positive many do is done to generate photo ops, stories for fund drives or to enhance a declining celebrity. There are exceptions such as church run operations and local knowable specialized efforts to help real people close enough to home to know about them.
The documentation headache of Dodd-Frank is real. Best of luck with the craziness.
So, how do we throw out the bathwater and keep the baby?
I always knew NGOs sucked but this is worse than I thought.
Abolish the charitable deduction.
Show of hands. Everyone who donates money to a charity for just the tax deduction, raise your hand. Now everyone who donates money to a charity because it does good work and you think it worthwhile raise your hand.
The charities collecting money from those only interested in the tax breaks will go under. They likely will not be missed. The charities collecting money from those who believe in the charity’s mission will survive.
I would give the same money to my church or my charities regardless of any tax breaks I get. I suspect I am not alone. Worthwhile charities (the baby) would survive. Virtue-signalling charities whose main function is a good living for their employees (the bathwater) would die. This includes most NGOs.
Seawriter
It could in theory go up! I’m a radical on tax reform – no differentiation between sources of income, no deductions, no corporate tax, 10% income rate regardless of income with the one exception of having no estate tax.
Imagine all the people suddenly having a lot more money to give in charity.
I like this suggestion. Probably worth a post in itself too as we are nearing the end of the year and charities are all hammering away at the solicitations.
I’m not so sure about this. It’s not like the deduction saves more than the charitable gift, unless one is right at the margin of a bracket. What does one save? 39.6¢ on the dollar at most? Would people stop giving to what we consider bad causes if there were no deductions? Maybe they would give less, since they would only have 60.4¢ at the highest rates, but would it stop them?
Those giving to the ones we don’t like probably value them just as much as we value our churches. Am I missing something big in the tax code?
Corporate giving.
Seawriter
But, aren’t those often dictated by extortion? I mean, Al Sharpton, Jesse Jackson, et al. The corporations don’t just give to be giving; they give with a purpose.
My company matches my Hillsdale donation, up to $1000, and my husband’s company matches both our donations. So, due to “corporate giving”, my donation is tripled. His company matches most of the rest of our donations, and the Curtis Institute of Music, Seattle Chamber Music Society, and Seattle Repertory Jazz Orchestra are pretty pleased about that.