Monday, May 17, 2010

A Tale Of Two Nations

The following images come from Norway. Norway is a large country in the Northern hemisphere, notable for regularly and routinely clocking into the top ten for life expectancy, quality of life, education, health, air quality, water quality, environmental quality and pretty much every other positive aspect of a decent human existence that ever gets polled and turned into a pretty graphic for the UN.

Pretty, aren't they?

Of course, Norway has an unfair advantage. When they realised they were sitting on a truly fucknormous oil field, the Norwegian government of the 1970s set up the State Oil company (Statoil) to handle the resource. The capital investments required to become a major oil producer and exporter were so great that the oilfields didn't actually become revenue positive until somewhere in the 1980s... but for some reason the Norwegians felt it was reasonable for their national government to bear the costs, develop the infrastructure, and do all the things that privately owned oil companies do elsewhere in the world.

Possibly they thought this was okay because they saw the oil as a national resource, which could be used for the benefit of the whole nation. Possibly they felt that a democratic government was more likely to look after the environment and not just the bottom line. Either way, the outcome was pretty good. Although Statoil was privatised in 2001, the Norwegian government - and hence, the people of Norway - remains the single largest shareholder. According to Wikipedia, Norway is the the third richest (in monetary terms) country in the world, and has the highest capital reserves of any country.

From inception, the profits from Statoil have been turned to the use of the Norwegian government: for infrastructure, for social welfare, and as a safety margin against the unknowns of the future. And today, by practically any standard of decent human living that you care to apply, Norway is one of the very best countries of the world in which to live.

So much for Norway. Now, let's take a look at a few more images. These come from the South Pacific island nation of Nauru:

Unlike most other green and lovely South Pacific island nations, Nauru looks like a pile of shit. And while poverty is endemic amongst the smaller nations of the South Pacific, Nauru is an outstanding case. Things have been so bad for them that in the 1990s, they tried becoming a tax haven, and a front for all kinds of exciting money laundering and banking operations run by (most notably) the Russian mafia. When the global financial heavies got together and shut down these operations, Nauru turned to Australia. More specifically, they turned to John Howard, who paid them all kinds of interesting monies and "aid" in exchange for acting as a concentration camp for boatloads of refugees trying to get to Australia.

Of course, with the unstable governments in the region, one might well think this is par for the course - just a blip, an outlier on the curve of marginalisation caused by factors like isolation and small size. But there was a time, once, when Nauru was wealthy. No, not wealthy: stinking, filthy rich. For a time in the 1960s and 1970s, Nauru boasted the highest per-capita income of any sovereign state on the planet. Including Saudia Arabia, yes. And other small-sized nations like Lichtenstein, Luxembourg and Monaco, where banking has brought wealth.

So... what happened?

Well, it was all about the phosphate rock. Phosphate is vital to agriculture, and very handy in munitions, and Nauru was pretty much made of the stuff. Throughout the 20th century, various corporations and nations pulled an unbelievable amount of phosphate out of Nauru. Just -- ripped it out of the earth underfoot, packed it into boats, and shipped it off. And as the figures and the historical facts show, a rather incredible profit was made.

But not by the people of Nauru, no. They now rank among the poorest on the planet. There's literally nothing left in Nauru that anybody wants. In fact, what with the damage left by the mining operations, there's hardly a Nauru to speak of. Just a fringe of green around a wasteland. Just the kind of place where a real bastard might send boatloads of helpless and vulnerable refugees from a range of war-torn countries -- a place so utterly dispiriting in aspect that places like Afghanistan and Iraq were supposed to look good in comparison.

So. Two countries. Each with a (proportionately) massive fortune in natural resources. In one country, the development of those resources was wholly managed by the state, and the profits were put back into the country. In the other, the exploitation of the resources was handled by corporations and the free market, and the profits went... where profits go.

And the point of this discussion?

Simple. I live in a large but isolated South Pacific country, with what is a rather marginal ecological structure. This particular country has truly enormous assets in the form of mineral deposits: iron, coal, aluminium, magnesium, copper, lead, tin, zinc, gold... you name it, we've got it.

Our Prime Minister has just suggested that we should tax the profits -- not the gross, mind you, but the profits -- of mining companies operating in this nation at 40%. Our Prime Minister seems to believe that the government of the country, and therefore the people of the country, and their inheritors, deserve a 40% share in the bonanza being reaped by the corporations currently getting fat on the natural wealth of this land.

For some reason, the mining companies don't like this idea. Well, fine. But oddly, there are a lot of otherwise sane and normal people who seem also to dislike this idea. And to me, that's just beyond bizarre.

Nauru versus Norway. I know where I'd rather live. And if the mining companies really don't like it -- why, they can fuck off out of my country completely, because it looks to me as though the Norwegians had it right.


  1. Wow, a new and interesting perspective. Working in Finance, I see a particulat point of view. This is the first I've heard/read a perspective quite like this. Thank you, you've given me something to think about. Goes to show we've all got plenty to learn.

  2. You will get no argument from me, Dirk. Leaning towards the Norwegian option seems - to me at least - like a complete no-brainer.

  3. Socialist.

    I never new about Norway having a nationalised oil industry. Bet the right wing dead hand of the markets mavens hated that example being raised given how Norway measured on the liveability scales.

  4. I'm not surprised you didn't know about the Norwegian oil industry. I mean - who owns the newspapers? You really think Uncle Rupert is going to make 'news' out of a highly successful and incredibly useful state-run industry?

    As far as I'm concerned, the lack of world awareness of Norway's success is an indicator that the Left isn't nearly as smart or as well-organised as it thinks. Because - well, yeah. When you put Norway and Nauru side by side, it's kind of hard to come to any conclusion but the glaringly obvious, no?

  5. It only makes sense to me that a government runs the natural resources of the country they long as you don't get someone like Magabe doing the governing.

  6. Thank you sir, well, put, reposting on my blog.

  7. Dirk,ignoring for a moment the fact that norways slaughters whales, the issue of the soveriegn fund is very good and overall they've not made too many screw ups in managing it.

    It is an excellent idea and could be run in parrallel with the future fund (if that survives the next electoral cycle).

    The problem is that the Ruddbot does not intend to set up a similar fund and also is deeming anything over about 5.75% profit as being 'super'
    Also up north of here it's only the mining companies who've spent any money on infrastructure on regional development for most of the last 50 years....

    AS is usual for our current lords and masters they've had a good idea and created a crap policy decision.

  8. Chaz: you're right. The mining companies have spent money on infrastructure that they and their employees use. And you're right. Ruddy boy's scheme isn't perfect.

    In reply, two points. 1) Big companies always spend money on things they can use, and that's nice insofar as their interests align with local needs. But the truth is a shitload more like Nauru than it is Disneyland, and we both know it. If you really want, I can start citing the massive, intolerable, unbelievable list of corporate ass-fuckings of human society around the world. I could mention Bhopal, where Union Carbide still hasn't coughed up. Or I could talk Erin Brockovich and hexavalent chromium. Or I could talk about BHP loaning the Papuan government its own lawyers to help write the legislation limiting the damages payable by BHP to the people of the Ok Tedi and the Fly rivers as a result of piss=poor BHP safety measures in gold mining. Maybe I should mention BP in the Gulf of Mexico.

    Or... nah, fuck it. Corporations exist to make a profit, not to make nice for the people who live in the countries they profit from. Don't bother talking up the infrastructure built by northern mining companies. If they didn't need it, they wouldn't have done it.

    Second point: you accept the value of the Norwegian model, and query Ruddy's tax because it's not a full Norwegian. Um. Yeah. You really expect me to believe that any government in modern Australia could get away with going the full Norwegian?

    Unlike Norway, we don't have a state-owned apparatus for mining. And there's no way in hell we're going to get it. So we cannot do what the Norwegians are doing. What we can do is take a serious fucking bite of the profits for ourselves. 5.75% is considered a decent return in banking and finance, so what's the big problem with setting it as a benchmark in mining? After all, nobody's stopping higher returns: just taking a decent chunk for the people who live here.

    I do have a problem with 40%, to be honest. I think it should be more like 80%.

    I don't want my kids to live in a gigantic version of Nauru, thanks.

  9. Dirk, what I'm criting is that fact that the extra revenue is being used now to offset the current governments finance vows. It's not being used to set up a futre fund clone.

    I can't see anyone going for a nationalisation of the mining sector even on the hard left of the ALP. OK the greens might go for it just to close the industry down but thats it.

    No-one starts mining without being leveraged. If you start taxing perofits over a certain amount by 40 or 80% in a wider economic cycle it will effect the credit rating of mining companies and will effect their ability to raise stake money for future projects.

    This is why Canada for exmaple is rubbing its hands with glee as it can see more projects happening up there because they'll be seen as more industry friendly.

  10. Great post Dirk.

    Chaz - if you want to see the sort of infrastructure that the mining industry leaves when everything is pulled out of the ground - visit Mary Kathleen in Queensland:

    Just think son one day all of this will be yours...

  11. Isn't this a tax on profit? So why don't the companies simple reinvest the profit back into infrastructure, or is that more money than they can spend?

  12. Beeso... if they reinvested it, it wouldn't be profit. They couldn't give it to the shareholders. And the whole point of the exercise would be lost.

    Chaz - I accept your point that the money's not going to the right place. But at least it's going to a LESS WRONG place under this model. It's a step. And honestly? I'd rather the mining companies funded Kevvie's promises, rather than you and I doing it.

    Who knows? If we set this up and we keep lobbying, maybe a future government can be pushed into setting up a future fund. Unlikely, I know. But even if they're only taking revenue from the mining companies to reduce the load on human-being taxpayers, it's a step in the right direction.

  13. 成功等於目前,其他都是這句話的註解。.............................................

  14. Who can argue with the Chinese spammer? He/she/it is correct: Dirk, your post reeks of on socialistic sympathies. Also, our Chinese friend has pics of hot babes.