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Kevin Rudd & the politics of mining

Kevin Rudd’s return has prompted questions about policy changes, including in the area generally seen as his downfall: the mining tax. Rudd has however already been ‘warned‘ by industry spokespeople not to tinker with the watered-down Minerals Rent Resource Tax.

Beyond the political drama it unleashed, the Resources Super Profits Tax proposed in 2010 brought to light deep-rooted struggles about the ownership of resources, the roles of the public and private sectors, and the distribution of the nation’s wealth.

Guy Pearse noted in his Quarterly Essay Quarry Vision that as ‘mostly foreign-owned, capital-intensive businesses’, mining companies have historically lacked electoral clout, so ‘the only real ace in their pack was to threaten to take operations elsewhere’. The ‘best way’ for such companies ‘to avoid regulation or to attract government support was to confuse the national interest with their own’.

Pearse was writing in 2009. History repeated itself shortly afterwards. Recall the suddenly omnipresent cry of ‘sovereign risk’: the Coalition, the industry and the conservative press argued a profit-based tax would cause companies to flee to the relative safety of South America or Africa. That this exodus has not eventuated (and that Australia still tops mining analyst firm Behre Dolbear’s list of safe places to invest) has not swayed the narrative of inevitability: if companies are not given a ‘friendly’ policy environment, our prosperous days will end.

A belief in the inherent benefits of mining is, in radical sociologist RW Connell’s terms, one of Australia’s ‘economic facts of life’. Yet in the background questions of ownership, power and rights fester.

In May last year, Julia Gillard addressed the Minerals Council of Australia, stating: ‘You don’t own the minerals. I don’t own the minerals. Governments only sell you the right to mine the resource, a resource we hold in trust for a sovereign people’. MCA head Mitch Hooke promptly agreed, saying ‘we pay the taxes and royalties for the privilege of developing … Australia’s natural endowment’. There is a gap between is and ought, though, and there has been muted debate about not the lawfulness but the legitimacy of public ownership: consider Gina Rinehart’s recent suggestion that wealth is being ‘drawn’ from the miners rather than the earth.

Beneath the surface, then, are ideas that go beyond the law – notions of moral rightness and entitlement. What rights and responsibilities accompany public ownership? What privileges should be accorded to developers? Are there limits on Australia’s management of its minerals?

The rhetoric of ‘sovereign risk’ suggests the existence of limitations, as do repeated suggestions that nations need to deal with their resources ‘responsibly’ – recall that in a 2010 speech, Rio Tinto chief executive Tom Albanese used Australia as a cautionary tale, suggesting ‘policymakers around the world can learn a lesson when considering a new tax to plug a revenue gap, or play to local politics’.

Before Rudd and Gillard, another Labor administration stood as a salutary ‘lesson’. As I’ve noted elsewhere, Whitlam’s government sought to change Australia’s generally laissez-faire approach to mineral investment: it attempted to implement the Petroleum and Minerals Authority to act in partnership with the private sector to develop resources, imposed export controls and foreign investment guidelines, and commissioned the Fitzgerald Report on the mineral sector’s contribution to national welfare.

Although this ambitious program was cut short in 1975, the period of change unnerved some within the industry, who sought to deter policymakers from emulating Whitlam’s ‘resource nationalism’. In a 1980 study, Will She Be Right?, funded by fourteen corporations including several mining companies, Herman Kahn and Thomas Pepper argued ‘Australia would do better to err on the side of lower … taxes’, and cautiously referred to the nation state as a ‘steward’ of minerals, a term which seemed to convey an interest in resources short of a right not to develop them.

(Parenthetically, the term ‘stewardship’ has a history in our political lexicon when it comes to contested ownership: it was initially used to describe the relationship between Aboriginal and Torres Strait Islander peoples and the Australian land mass in the doomed preamble drafted by John Howard and Les Murray before the 1999 republic referendum. The sentence honouring Indigenous people for ‘their ancient and continuing stewardship of their lands’ was apparently later altered by Cabinet to replace the last four words with ‘cultures’, even less suggestive of possession or ongoing rights).

For Kahn and Pepper, mineral wealth came with duties, failure to adhere to which might produce consequences even direr than loss of investment. In a paragraph so extraordinary it bears quoting at length, they argued Australia needed to show ‘itself to be a responsible steward over its vast endowment’, for:

Nearby Asian countries might easily resent Australia’s good luck in living on such rich land with so few people to share the wealth. If Australians show other countries that they are in fact managing their endowment responsibly, then there is much less chance that some indignant, harder-working Asians would come to regard them as pushovers, or that the country might become a tempting target for some ambitious power that would justify an invasion on the grounds that Australians no longer deserve their continent.

This passage is redolent of the nation’s traditional paranoia about its proximity to Asia. It also presents a stark decision: Australia could either grant access to resources and be rewarded in growth, or hoard minerals (or seek to extract greater benefits therefrom) and risk foreign domination.

Governments have largely favoured the former ‘choice’, even against the looming threat of climate change: Bill McKibben argued recently that ‘Australia’s massive deposits of hydrocarbons [are] a menace to the planet, and … have to be left in the ground if the world [has] any hope of avoiding catastrophic global warming’.

When asked last week whether he would reconsider the form of the mining tax, Rudd said: ‘I don’t foreshadow anything dramatic on it.’ Perhaps the past few years have once again imparted a harsh lesson about the limits of public ownership and the perils of seeking a greater return on the common wealth.

Sarah Burnside is a freelance writer with experience in law and policy. She blogs sporadically at Maintain the Beige (sarahburnside.com) and tweets cautiously at @SarahEBurnside

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  1. This may be slightly tangential, but from Richard Denniss in the Fin Review June 18, 2013:

    “For every million dollars invested in community services, an average of 21.2 jobs is created, while the same amount invested in mining or agriculture would create 4.7 or 11.1 jobs, respectively.”

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