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Begin forwarded message:
> From: James W Mickens
> Date: October 26, 2005 6:43:40 PM EDT
> To: mjste Æ umich.edu
> Subject: Re: NYTimes.com: Behind Gold's Glitter: Torn Lands and
> Pointed Questions
>
>
> You are correct - this is a fascinating article. As in any story about
> economics, there are two basic themes: supply and demand. To meet
> supply
> requirements in the face of dwindling gold deposits, gold producers
> must
> rely on environmentally unfriendly extraction methods. The supply is
> driven by cultural expectations about the value of gold. For example,
> governments see gold as a safe investment against the volatile dollar,
> and individuals see gold as an important part of societal rites
> such as
> marriage. I find the demand aspect of the article much more
> interesting,
> since it involves the psychological aspects of gold's
> attractiveness. It's
> difficult to encourage governments to abandon gold reserves, but I
> think
> that individuals could be moved away from gold and towards some
> (hypothetical) substitute through advertising. For example, nobody
> in the
> Western world cared about diamonds until De Beers started its
> "Diamonds
> are Forever" marketing campaign. In the span of a decade, diamonds
> became
> synonymous with quality and upper-class style. Supposing that there is
> some other metal besides gold that's shiny, reasonable rare, and
> could be
> extracted in an environmentally friendly way, the current gold
> manufacturers could agree to migrate from gold to this new metal. Note
> that it's really only necessary for the new metal to be shiny and
> extractable in an environmentally safe way - the "rare" aspect
> could be
> imposed from above by giving the gold companies a monopoly on the
> extraction process. This might seem somewhat unfair, but this is
> what De
> Beers has done for years, keeping diamond prices artificially high
> through
> vertical control of the manufacturing process. Allowing monopolies on
> non-essential items in exchange for less environmental damage seems
> like a
> good tradeoff to me.
>
> [For a reference regarding De Beers and marketing, see:
> http://en.wikipedia.org/wiki/De_Beers
> ]
>
> The article makes some trenchant observations about the local
> impact of
> large-scale World Bank projects. The following line is pretty
> stunning:
>
> ". . . the mine will create just 450 full-time jobs. More than 8,000
> people will be displaced."
>
> There are several reasons for this. First, gold mines don't require
> 8,000
> employees, and the World Bank has to be wise to this. Second, the gold
> companies manage to seduce the local governments into accepting
> deals that
> increase tax revenue but don't require *direct* corporate
> investment in
> the local economy. The result is that corporations pocket large
> amounts of
> money as direct profit, and the government is left with large
> amounts of
> money without having to face problems of corruption and financial
> ineptitude. The only solution is to have the World Bank adopt more
> hardball negotiating tactics with the gold companies. An individual
> government doesn't have the power to do this---if poor country A
> negotiates hard, poor country B will see this and offer the gold
> company a
> better deal, leaving country A high and dry with nothing to show for
> taking the moral high ground.
>
> For years, a persistent (and I think proper) criticism of the World
> Bank
> has been that it focuses on improving GDP at the expense of reducing
> wealth disparities and improving basic services. Its relations with
> the
> gold companies seem to follow this general trend. This could
> change, but
> it would require a sea-change in the supply-side framework that
> America
> typically applies in its approach to international aid. Such a sea
> change
> might happen if Obama wins the 2008 Presidential election. We'll
> have to
> wait and see . . . ;-).
>
> ~j
>
>
>
Michelle Sternthal
Joint Doctoral Program in Sociology & Public Policy
University of Michigan
734-709-6650 (cell)
mjste Æ umich.edu
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Begin forwarded message: From: James W Mickens < jmickens
Æ eecs.umich.edu > Date: October 26, 2005 6:43:40 PM EDT
To: mjste Æ umich.edu Subject: Re: NYTimes.com: Behind
Gold's Glitter: Torn Lands and Pointed Questions You are correct -
this is a fascinating article. As in any story about economics, there are two
basic themes: supply and demand. To meet supply requirements in the face of
dwindling gold deposits, gold producers must rely on environmentally
unfriendly extraction methods. The supply is driven by cultural expectations
about the value of gold . For example, governments see gold as a safe
investment against the volatile dollar, and individuals see gold as an
important part of societal rites such as marriage. I find the demand aspect
of the article much more interesting, since it involves the psychological
aspects of gold 's attractiveness. It's difficult to encourage governments to
abandon gold reserves, but I think that individuals could be moved away from
gold and towards some (hypothetical) substitute through advertising. For
example, nobody in the Western world cared about diamonds until De Beers
started its "Diamonds are Forever" marketing campaign . In the span of a
decade, diamonds became synonymous with quality and upper-class style.
Supposing that there is some other metal besides gold that's shiny,
reasonable rare, and could be extracted in an environmentally friendly way,
the current gold manufacturers could agree to migrate from gold to this new
metal. Note that it 's really only necessary for the new metal to be shiny and
extractable in an environmentally safe way - the "rare" aspect could be
imposed from above by giving the gold companies a monopoly on the extraction
process. This might seem somewhat unfair, but this is what De Beers has done
for years, keeping diamond prices artificially high through vertical control
of the manufacturing process. Allowing monopolies on non-essential items in
exchange for less environmental damage seems like a good tradeoff to me.
[For a reference regarding De Beers and marketing, see : =A0
http://en.wikipedia.org/wiki /De_Beers ] The article makes some
trenchant observations about the local impact of large-scale World Bank
projects. The following line is pretty stunning: ". . . the mine will
create just 0 full-time jobs. More than 8,000 people will be displaced."
There are several reasons for this. First, gold mines don't require 8,000
employees, and the World Bank has to be wise to this. Second, the gold
companies manage to seduce the local governments into accepting deals that
increase tax revenue but don't require *direct* corporate investment in the
local economy. The result is that corporations pocket large amounts of money
as direct profit, and the government is left with large amounts of money
without having to face problems of corruption and financial ineptitude. The
only solution is to have the World Bank adopt more hardball negotiating
tactics with the gold companies . An individual government doesn 't have the
power to do this---if poor country A negotiates hard, poor country B will see
this and offer the gold company a better deal, leaving country A high and
dry with nothing to show for taking the moral high ground. For years , a
persistent (and I think proper) criticism of the World Bank has been that it
focuses on improving GDP at the expense of reducing wealth disparities and
improving basic services. Its relations with the gold companies seem to
follow this general trend. This could change, but it would require a
sea-change in the supply-side framework that America typically applies in its
approach to international aid . Such a sea change might happen if Obama wins
the 2008 Presidential election. We'll have to wait and see . . . ;-). ~j
Michelle Sternthal Joint Doctoral Program in Sociology &
Public Policy University of Michigan 734-709-6650 (cell) mjste Æ
umich.edu
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