Why natural resources should help end poverty

The BP crisis in the Gulf of Mexico has laid bare the harm caused by the plunder of natural resource

Natural assets can be hugely valuable for the poorest countries. In Afghanistan, the Americans have used new aerial prospecting technology to scour the country for natural resources. So far they have found $1trn's worth. Properly used, this would be enough money to transform Afghanistan into a land of prosperity. It could finance the security, schools and infrastructure that are the foundations from which ordinary people can earn a decent living.

But natural resources can also generate huge liabilities. The distinctive feature of BP's catastrophe in the Gulf of Mexico is not its physical scale - over the years, the Niger Delta has been similarly wrecked - but that, for the first time, the environmental costs of extraction have occurred within a jurisdiction where the perpetrator has legal liability for them. And environmental costs are a pinprick compared to the social costs that the struggle for control of natural assets can run up if it turns violent. Instead of attaining prosperity, Afghanistan could find itself repeating the history of Sierra Leone. Its $1trn of natural assets could merely morph the violence, turning it from being driven by a warped ideology into the probably more secure motivation of raw greed.

In the coming decade, the poorest societies in the world - home to the bottom billion - will need to manage the huge opportunities and risks posed by natural resources. Central Asia and Africa are the last frontiers for resource extraction, and with high global commodity prices and new prospecting technologies, the natural assets hidden beneath their territories will be discovered. Whether this leads to environmental degradation and violent plunder or a meteoric ascent out of poverty depends on the choices that these societies make. Not only are the stakes high, but the choices involved are complex. Harnessing natural assets for environmentally responsible prosperity is not just a matter of "good governance": the decision-makers need to know the underlying economics along a whole chain of decisions.

The chain starts with how resource extraction rights are sold. Past and present practices of secretly negotiated deals expose societies to the acute technical problems of agency, information asymmetry and time inconsistency. The agency problem is the simplest: ordinary citizens cannot readily control what their representatives, politicians and officials get up to. Information asymmetry is about the huge advantages that companies have in knowing the true value of prospecting rights and the many ways in which they can conceal true profits.

Time inconsistency is the most complex: it is about the difficulty that governments have in making credible commitments, and the consequences from companies not trusting the deals that governments offer. Or, as an industry insider recently put it to me, given the reputation of the government of the Democratic Republic of Congo, the Chinese offer $6bn of infrastructure in return for $60bn of resource extraction rights was "quite reasonable".

Share and share alike

The next link in the chain is avoiding disasters such as that of the Niger Delta, in which neglect has generated a violent response. Risks must
be kept to a minimum by a combination of regulation and legal liability - whichever is the more effective and credible option in practice. Unavoidable environmental damage, which will often be extensive, should be compensated for generously. Extraction companies are tempted to give local communities a share in ownership of natural assets. This can be dangerous; a fairer use of natural assets should be for the benefit of an entire society, not just lucky local people. A commitment by a local popu­lation to participate fully in national sharing of the benefits is essential, but privileged local ownership can be a slippery slope.

For all citizens to benefit from resource extraction, a government must be able to collect rents through taxation. At present, national tax systems are often so poorly designed that this does not happen. Zambia is exporting some $3bn of copper, yet tax revenues from these exports are a mere $100m. The global copper boom has benefited the Chinese who own the copper company far more than it has benefited ordinary Zambians.

Effective taxation is difficult, more often than not because the extraction companies hire first-rate accountants, part of whose job is to conceal true profits. Such information asymmetry can be countered either by governments hiring the accountancy expertise they lack, or by redesigning the tax system to target things that are more easily possible to observe than profits - such as gross revenues.

Once a government succeeds in taxing resource rents, its next decision is what to do with the income. Because revenues are unsustainable, generated by depleting a natural asset over which the current generation has only limited rights, the ethical imperative is that they should not all be used up in the present day. This is the legitimate ethical insight from environmentalism - future generations have rights over natural assets that the present generation must not infringe.

The plunder of nature takes two distinct forms: the few expropriating what should belong to the many, and the present expropriating what should belong to the future. Both matter. But where romantic environmentalism goes awry is in insisting that respecting the rights of the future must take the form of preserving nature as it is. We are not, ultimately, curators of natural artefacts. Defining ethical behaviour in that way would be to put environmentalism in conflict with the struggle to end global poverty.

Natural assets are special, but that is because the future has rights over their value. When a poor society can rise out of poverty by using some of its natural assets, it is ethical to do so. The important political struggle is not to preserve nature, but to harness it for the benefit of future generations in the poorest societies. That takes us back to the decision chain.

The final link in the chain is what to do with revenues that are not used up. They should be invested in the domestic economy, not used to build up foreign exchange in a future generations fund - but the issue is how to do it. Too often in the past, attempts to have a big investment push have foundered on corruption and inefficiency in public projects. During the oil boom of 1974-85 the Nigerian government spent heavily on infrastructure, but it did not get much infrastructure for its money. The capacity to invest large amounts of money productively has to be built, within both the public and the private sector. I call this "investing in investing". Although it is the final link in the decision chain, it needs to be done early,
because without it revenues cannot be spent sustainably.

So, how is this complex decision chain to hold fast, not just once, but repeatedly for two or three decades (the minimum time needed for a poor society to achieve modest prosperity)? There is no substitute for the hard task of building a critical mass of informed citizens, society by society.By that, I mean a group sufficient in size to get these decisions right. Sometimes it may require a voting majority, but more usually in poor societies it will involve the few thousand people who directly or indirectly influence how senior officials and politicians think.

Taking on the tiger

Modern communication technology has vastly lowered the costs of knowledge and also enhanced the ability of citizens, once informed, to organise themselves collectively into pressure groups. The Extractive Industries Transparency Initiative (EITI) shows what is possible. Less than a decade old, it has already shifted practice on transparency and is sure to achieve much more: for example, the new finance minister of Afghanistan was previously the EITI representative for the country. I realised the scope for reaching people when my 2007 book, The Bottom Billion, was translated into 15 languages and a related talk was posted on a website that had 35 million hits.

That is why I have written The Plundered Planet. The EITI, which focused on transpar­ency of revenues, was the right place to start - without such transparency, there is little hope that decisions will be got right. But it would be the wrong place to stop: citizens need to understand the entire decision chain, not just scrutinise revenues. The Natural Resource Charter, described in the book, is a civil society initiative that builds on the EITI and complements it. It is a website being built by a wide group of stakeholders, designed for citizens and governments of resource-rich countries.

In trying to break out of the history of plunder, initiatives that create specialist international organisations, books and websites may be peashooters aimed at a tiger. Or they may prove to be the stone that slew Goliath. Rather than mock our efforts, help to strengthen them.

“The Plundered Planet: How to Reconcile Prosperity with Nature" by Paul Collier is published by Allen Lane (£20)

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The French millennials marching behind Marine Le Pen

A Front National rally attracts former socialists with manicured beards, and a lesbian couple. 

“In 85 days, Marine will be President of the French Republic!” The 150-strong crowd cheered at the sound of the words. On stage, the speaker, the vice-president of the far-right Front National (FN), Florian Philippot, continued: “We will be told that it’s the apocalypse, by the same banks, media, politicians, who were telling the British that Brexit would be an immediate catastrophe.

"Well, they voted, and it’s not! The British are much better off than we are!” The applause grew louder and louder. 

I was in the medieval city of Metz, in a municipal hall near the banks of the Moselle River, a tributary of the Rhine from which the region takes its name. The German border lies 49km east; Luxembourg City is less than an hour’s drive away. This is the "Country of the Three Borders", equidistant from Strasbourg and Frankfurt, and French, German and French again after various wars. Yet for all that local history is deeply rooted in the wider European history, votes for the Front National rank among the highest nationally, and continue to rise at every poll. 

In rural Moselle, “Marine”, as the Front National leader Marine Le Pen is known, has an envoy. In 2014, the well-spoken, elite-educated Philippot, 35, ran for mayor in Forbach, a former miner’s town near the border. He lost to the Socialist candidate but has visited regularly since. Enough for the locals to call him “Florian".

I grew up in a small town, Saint-Avold, halfway between Metz and Forbach. When my grandfather was working in the then-prosperous coal mines, the Moselle region attracted many foreign workers. Many of my fellow schoolmates bore Italian and Polish surnames. But the last mine closed in 2004, and now, some of the immigrants’ grandchildren are voting for the National Front.

Returning, I can't help but wonder: How did my generation, born with the Maastricht treaty, end up turning to the Eurosceptic, hard right FN?

“We’ve seen what the other political parties do – it’s always the same. We must try something else," said Candice Bertrand, 23, She might not be part of the group asking Philippot for selfies, but she had voted FN at every election, and her family agreed. “My mum was a Communist, then voted for [Nicolas] Sarkozy, and now she votes FN. She’s come a long way.”  The way, it seemed, was political distrust.

Minutes earlier, Philippot had pleaded with the audience to talk to their relatives and neighbours. Bertrand had brought her girlfriend, Lola, whom she was trying to convince to vote FN.  Lola wouldn’t give her surname – her strongly left-wing family would “certainly not” like to know she was there. She herself had never voted.

This infuriated Bertrand. “Women have fought for the right to vote!” she declared. Daily chats with Bertrand and her family had warmed up Lola to voting Le Pen in the first round, although not yet in the second. “I’m scared of a major change,” she confided, looking lost. “It’s a bit too extreme.” Both were too young to remember 2002, when a presidential victory for the then-Front National leader Jean-Marie Le Pen, was only a few percentage points away.

Since then, under the leadership of his daughter, Marine, the FN has broken every record. But in this region, the FN’s success isn’t new. In 2002, when liberal France was shocked to see Le Pen reach the second round of the presidential election, the FN was already sailing in Moselle. Le Pen grabbed 23.7 per cent of the Moselle vote in the first round and 21.9 per cent in the second, compared to 16.9 per cent and 17.8 per cent nationally. 

The far-right vote in Moselle remained higher than the national average before skyrocketing in 2012. By then, the younger, softer-looking Marine had taken over the party. In that year, the FN won an astonishing 24.7 per cent of the Moselle vote, and 17.8 per cent nationwide.

For some people of my generation, the FN has already provided opportunities. With his manicured beard and chic suit, Emilien Noé still looks like the Young Socialist he was between 16 and 18 years old. But looks can be deceiving. “I have been disgusted by the internal politics at the Socialist Party, the lack of respect for the low-ranked campaigners," he told me. So instead, he stood as the FN’s youngest national candidate to become mayor in his village, Gosselming, in 2014. “I entered directly into action," he said. (He lost). Now, at just 21, Noé is the FN’s youth coordinator for Eastern France.

Metz, Creative Commons licence credit Morgaine

Next to him stood Kevin Pfeiffer, 27. He told me he used to believe in the Socialist ideal, too - in 2007, as a 17-year-old, he backed Ségolène Royal against Sarkozy. But he is now a FN local councillor and acts as the party's general co-ordinator in the region. Both Noé and Pfeiffer radiated a quiet self-confidence, the sort that such swift rises induces. They shared a deep respect for the young-achiever-in-chief: Philippot. “We’re young and we know we can have perspectives in this party without being a graduate of l’ENA,” said another activist, Olivier Musci, 24. (The elite school Ecole Nationale d’Administration, or ENA, is considered something of a mandatory finishing school for politicians. It counts Francois Hollande and Jacques Chirac among its alumni. Ironically, Philippot is one, too.)

“Florian” likes to say that the FN scores the highest among the young. “Today’s youth have not grown up in a left-right divide”, he told me when I asked why. “The big topics, for them, were Maastricht, 9/11, the Chinese competition, and now Brexit. They have grown up in a political world structured around two poles: globalism versus patriotism.” Notably, half his speech was dedicated to ridiculing the FN's most probably rival, the maverick centrist Emmanuel Macron. “It is a time of the nations. Macron is the opposite of that," Philippot declared. 

At the rally, the blue, red and white flame, the FN’s historic logo, was nowhere to be seen. Even the words “Front National” had deserted the posters, which were instead plastered with “in the name of the people” slogans beneath Marine’s name and large smile. But everyone wears a blue rose at the buttonhole. “It’s the synthesis between the left’s rose and the right’s blue colour”, Pfeiffer said. “The symbol of the impossible becoming possible.” So, neither left nor right? I ask, echoing Macron’s campaign appeal. “Or both left and right”, Pfeiffer answered with a grin.

This nationwide rebranding follows years of efforts to polish the party’s jackass image, forged by decades of xenophobic, racist and anti-Semitic declarations by Le Pen Sr. His daughter evicted him from the party in 2015.

Still, Le Pen’s main pledges revolve around the same issue her father obsessed over - immigration. The resources spent on "dealing with migrants" will, Le Pen promises, be redirected to address the concerns of "the French people". Unemployment, which has been hovering at 10 per cent for years, is very much one of them. Moselle's damaged job market is a booster for the FN - between 10 and 12 per cent of young people are unemployed.

Yet the two phenomena cannot always rationally be linked. The female FN supporters I met candidly admitted they drove from France to Luxembourg every day for work and, like many locals, often went shopping in Germany. Yet they hoped to see the candidate of “Frexit” enter the Elysee palace in May. “We've never had problems to work in Luxembourg. Why would that change?” asked Bertrand. (Le Pen's “144 campaign pledges” promise frontier workers “special measures” to cross the border once out of the Schengen area, which sounds very much like the concept of the Schengen area itself.)

Grégoire Laloux, 21, studied history at the University of Metz. He didn't believe in the European Union. “Countries have their own interests. There are people, but no European people,” he said. “Marine is different because she defends patriotism, sovereignty, French greatness and French history.” He compared Le Pen to Richelieu, the cardinal who made Louis XIV's absolute monarchy possible:  “She, too, wants to build a modern state.”

French populists are quick to link the country's current problems to immigration, and these FN supporters were no exception. “With 7m poor and unemployed, we can't accept all the world's misery,” Olivier Musci, 24, a grandchild of Polish and Italian immigrants, told me. “Those we welcome must serve the country and be proud to be here.”

Lola echoed this call for more assimilation. “At our shopping centre, everyone speaks Arabic now," she said. "People have spat on us, thrown pebbles at us because we're lesbians. But I'm in my country and I have the right to do what I want.” When I asked if the people who attacked them were migrants, she was not so sure. “Let's say, they weren't white.”

Trump promised to “Make America Great Again”. To where would Le Pen's France return? Would it be sovereign again? White again? French again? Ruled by absolutism again? She has blurred enough lines to seduce voters her father never could – the young, the gay, the left-wingers. At the end of his speech, under the rebranded banners, Philippot invited the audience to sing La Marseillaise with him. And in one voice they did: “To arms citizens! Form your battalions! March, march, let impure blood, water our furrows...” The song is the same as the one I knew growing up. But it seemed to me, this time, a more sinister tune.