Blood diamonds and do-gooders

Tim Worstall on conflict minerals – good economics, bad politics.

Earlier this week, Global Witness, the organisation behind restrictions on blood diamonds, called for an EU law to restrict the use of conflict minerals. This would match a US law, called the Dodd-Frank Act, which requires companies to trace the origin of certain metals through their supply chain to ensure they don’t come from known conflict zones.

To be clear, conflict minerals are both horrible and, unfortunately, in most of our electronics. Few would defend them, but the call for a new law was immediately met by criticism. "There are times when the actions of do-gooders makes [sic] me want to kneel down and weep bitter tears of pain," exclaimed Tim Worstall in Forbes, who wrote a riposte to the call for the new law. This isn’t because Worstall supports conflict minerals – he doesn’t – but because he thinks that we can prevent conflict minerals from being used for 300-400 times less money. Fundamentally, this is a debate about how best to create supply chain transparency, an essential component of resource resilience.

In essence, Worstall’s solution is to regulate smelters rather than manufacturers. Because the mineral ores used to create metals have a unique "fingerprint", they can be tested prior to smelting to ensure the fingerprint doesn’t match that of mines from known conflict areas. As there are only around 500 smelters capable of processing the majority of conflict metals, it would only cost around $10m to set up a certification scheme. In contrast, supply chain transparency is expensive: the Dodd-Frank Act is expected to cost $3-4bn.

It’s a neat idea, and the economics certainly stack up. But the politics and policy don’t. Here’s why:

First, public concern matters. As "do-gooders" know, regulation creates the risk of buck-passing. At worst, it invites unethical consumer companies to accept tick box certification and look the other way when this proves meaningless. This disadvantages ethical companies and doesn’t chime with public opinion about the responsibility companies should bear for their supply chains: when the issue of suicides at Foxconn or sweatshop labour arose, the response wasn’t to call for regulation of manufacturing facilities in China or elsewhere, but to put pressure on Apple and western clothing brands. A regulator’s job is infinitely easier when they know that a company breaching regulations will face consumer backlash. The activities of smelters are effectively invisible to the public.

Second, the location of the smelters matters. As Worstall admits, the vast majority are outside the EU and, therefore, outside the jurisdiction of European regulators. Because it’s economically advantageous to smelt conflict minerals, there’s a strong incentive for fraud. We have a readymade example of what this might look like: in Shetland, a fish processor fraudulently avoided EU fishing quotas by using a "secret specially-built underground pipeline which allowed illegally-landed fish to be pumped into the factory from fishing boats, undetected by regulators." If we have difficulty policing illegal fish processing in the UK, it’s hard to believe that EU protestations will affect non-EU smelters. In contrast, business relationships span regulatory boundaries. It makes sense to regulate at the consumption end.

Tim Worstall suggests that we should adopt "the vastly cheaper way that the industry is already addressing the problem." What he doesn’t say is that this programme doesn’t "require members or their supply chains to purchase from the compliant smelter list." This isn’t a conspiracy to promote conflict minerals. Instead, it stems from the fact that smelters are invisible and without public pressure, it’s easier and cheaper to not have to reconfigure sourcing and supply chain relationships. The inability of voluntary regimes to deliver sustainable outcomes across a whole host of globalised supply chains is feeding a wider change in consumer preferences. As one of the company members of the Circular Economy Task Force said, "Five years ago, our customers where asking for recycled content in packaging. Today, they’re asking about the origin of the materials in our products."

Supply chain traceability may not be cheap, but it’s increasingly a condition for good business. Global Witness could bolster its campaign by pointing to the upside of traceability: businesses that understand their supply chains can foresee resource constraints. There’s already evidence that mining companies which report their water use across their supply chains outperform those which don’t. Indeed, much of the economic opportunity in the circular economy lies in better connections across supply chains. Rather than trying just to minimise costs, we should be designing regulation with an eye to the opportunities of more visible supply chains.

Photograph: Getty Images

Dustin Benton is a senior policy adviser at Green Alliance, leading the Resource Stewardship theme.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.