Extractive industries

Extractivism is the process of extracting natural resources from the Earth to sell on the world market. It exists in an economy that depends primarily on the extraction or removal of natural resources that are considered valuable for exportation worldwide. Some examples of resources that are obtained through extraction include gold, diamonds, lumber and oil. This economic model has become popular in many Latin American countries but is becoming increasingly prominent in other regions as well.

Many factors are involved in the process of extractivism. These include but are not limited to community members, transnational corporations (TNCs) and the government. Trends have demonstrated that countries do not often extract their own resources; extraction is often led from abroad. These interactions have contributed to extractivism being rooted in the hegemonic order of global capitalism. Extractivism is controversial because it exists at the intersection where economic growth and environmental protection meet. This intersection is known as the green economy. Extractivism has evolved in the wake of neo-liberal economic transitions to become a potential avenue for development to occur. This development occurs through stabilizing growth rates and increasing direct foreign investment.

However, while these short-term economic benefits can be substantial, extractivism as a development model is often critiqued for failing to deliver the improved living conditions it promises and failing to work collaboratively with already existing programs, therefore inflicting environmental, social and political consequences. According to economists Andrea Cori and Salvatore Monni extractivism perpetuates a resource curse, a phenomenon that causes countries rich in natural resources to have slow economic growth, low development, corrupt governments and unequal distribution of wealth, since the wealth produced with the resource is exported to other countries or oligopolic companies, which use a part of the wealth generated to bribe local governments to increase extractivism, creating a positive feedback for unequal wealth distribution.

Environmental concerns of extractivism include; climate change, soil depletion, deforestation, loss of food sovereignty, declining biodiversity and contamination of freshwater. Social and political implications include violation of human rights, unsafe labour conditions, unequal wealth distribution and conflict. As a result of this, extractivism remains a prominent debate in policy related discourse because while it sometimes delivers high economic gains in the short term, it also poses social and environmental dangers. Case studies in Latin America demonstrate these policy gaps.

Background

Definition

Extractivism refers to the process of removing large quantities of raw or natural materials, particularly for export. Most extracted resources are exported abroad because there is a lack of demand for these raw materials in their country of origin. The term may also be applied more broadly to refer not only to the unsustainable exploitation of minerals, metals, and fossil fuels, but also of humans, water, and land itself. Regardless of its range of application, the concept of extractivism may be essentially conceived as "a particular way of thinking and the properties and practices organized towards the goal of maximizing benefit through extraction, which brings in its wake violence and destruction".

History

Extractivism, on a large scale, has been occurring for over 500 years. During the extended era while the West was colonizing Africa, Asia and the America’s, the extraction industry took off. At this time, colonizers exploited resources from their colonies to meet the demands of their home cities. The colonies typically specialized in the production and extraction of the raw materials while the colonizers manufactured the goods – the colonies were exporters and the colonizers were importers. Today, the industry remains largely unchanged in the shadows of decolonization. However, since then, extractivism has evolved in the wake of neo-liberal economic transitions to become a potential avenue for development to occur. This pattern has been termed “neo-extractivism”.

Neo-extractivism refers to a set of growth-oriented development paths. This transition to neo-liberal economies is rooted in a nation’s subordination to an emphasis on free trade. In contrast to older forms of extractivism, neo-extractivism regulates the allotment of resources and their revenue, pushes state-ownership of companies and raw materials, revises contracts, and raises export duties and taxes. Neo-extractivism has transformed the industry into a specific growth-oriented development path. This path involves three components. First, extracting the raw natural materials. Second, exporting these extracted raw materials. Third, using the revenue from these exports to improve living conditions for those in the countries where extraction occurs. However, the third step’s success is debatable as the communities at the sites of extraction rarely experience improved living conditions. More commonly, the people at these sites experience worsened living conditions, such as in the cases of extraction from Indigenous communities in Canada’s boreal forest. Neo-extractivism has similarities to older forms of extractivism and exists in the realm of neo-colonialism.

Philosophy

Extractivism is a result of colonial thought which places humans above other life forms. It is rooted in the belief that taking from the earth will create abundance. Many Indigenous scholars argue that extractivism opposes their philosophy of living in balance with the earth and other life forms in order to create abundance. Leanne Betasamosake Simpson, a Michi Saagiig Nishnaabeg scholar and writer, compares these ideas of destruction versus regeneration in her book A Short History of the Blockade. She references the Trent Severn Waterway, a dam in Canada that caused major loss of fish, a major source of food for her people. She quotes Freda Huson in saying, “Our people’s belief is that we are part of the land. The land is not separate from us. The land sustains us. And if we don’t take care of her, she won’t be able to sustain us, and we as a generation of people will die.” She also defines extractivism in another work, stating it is “stealing. It’s taking something, whether it’s a process, an object, a gift, or a person, out of the relationships that give it meaning, and placing it in a nonrelational context for the purposes of accumulation.” The colonial action of theft goes beyond only extracting from the earth. This philosophy of entitlement is the cause behind colonization itself, and we are watching the continuation of theft in real-time through practices such as extractivism. Naomi Klein also touches on this in her book "This Changes Everything: Capitalism vs. The Climate." She writes, "Extractivism ran rampant under colonialism because relating to the world as a frontier of conquest- rather than a home- fosters this particular brand of irresponsibility. The colonial mind nurtures the belief that there is always somewhere else to go to and exploit once the current site of extraction has been exhausted."

Actors

Transnational corporations (TNCs) are a primary actor in neo-extractivism. Originally, as TNCs began to explore raw material extraction in developing countries they were applauded for taking a risk to extract high-demand resources. TNCs were able to navigate their way into a position where they maintained large amounts of control over various extraction-based industries. This success is credited to the oftentimes weak governance structure of the resource dependent economies where extraction is taking place. Through complex arrangements and agreements, resources have slowly become denationalized. As a result of this, the government has taken a “hands-off” approach, awarding most of the control over resource enclaves and the social responsibility that accompanies them to TNCs. However, the government still plays an important role in leading development by determining which TNCs they allow to extract their resources and how thorough they are when it comes to enforcing certain standards of social responsibility.

Resources and techniques

Some resources that are obtained through extraction include but are not limited to gold, diamonds, oil, lumber and food. This occurs through techniques such as mining, drilling and deforestation. Resources are typically extracted from developing countries as a raw material. This means that it has not been processed or has been processed only slightly. These materials then travel elsewhere to be turned into goods that are for sale on the world market. An example of this would be gold that is mined as a raw mineral and later in the supply chain manufactured into jewellery.

Impacts of extractivism

Economic benefits

Neo-extractivism is seen as an opportunity for successful development in many areas of the developing world. Demand for extracted resources on the global market has allowed this industry to expand. Since the year 2000, there has been a substantial rise in global demand and value for raw materials – this has contributed to steadily high prices. Neo-extractivism has therefore been seen as a tool for economically advancing developing countries that are rich in natural resources by participating in this market.

It is argued that the emergence of this industry in the neo-liberal context has allowed extractivism to contribute to stabilizing growth rates, increasing direct foreign investment, diversifying local economies, expanding the middle class and reducing poverty. This is done by using surplus revenue to invest in development projects such as expanding social programs and infrastructure. Overall, extraction based economies are seen as long-term development projects that guarantee a robust economic foundation. It has created a new hegemonic order that closely intertwines with the dominant capitalist system of the world. The green economy has emerged as an economic model in response to the arising tensions between the economy and the environment. Extractivism is one of the many issues that exist at this intersection between the economy and the environment.

Increasingly, policy tools such as corporate social responsibility mechanisms and increased government involvement are being used to mitigate the negative implications of neo-extractivism and make it a more effective development model.

Environmental consequences

One of the main consequences of extractivism is the toll that it takes on the natural environment. Due to the scale extraction takes place on; several renewable resources are becoming non-renewable. This means that the environment is incapable of renewing its resources as quickly as the rate they are extracted at. It is often falsely assumed that technological advancements will enable resources to renew more effectively and as a result make raw material extraction more sustainable. The environment often must compensate for overproduction driven by high demand. Global climate change, soil depletion, loss of biodiversity and contamination of fresh water are some of the environmental issues that extractivism contributes to. As well, extraction produces large amounts of waste such as toxic chemicals and heavy metals that are difficult to dispose of properly. To what degree humans have a right to take from the environment for developmental purposes is a topic that continues to be debated.

Social impacts

In addition to the environmental consequences of extractivism, social impacts arise as well. Local communities are often opposed to extractivism occurring. This is because it often uproots the communities or cause environmental impacts that will affect their quality of life. Indigenous communities tend to be particularly susceptible to the social impacts of extractivism. Indigenous peoples rely on their environment to sustain their lifestyles as well as connect with the land in spiritual ways. Extractivist policies and practices heavily destroy the land as explained above. This changes game populations, migration patterns for animals, pollutes rivers and much more. Doing so, does not allow Indigenous populations to practice their culture and ways of life because the environment they depend on to hunt, fish etc. is drastically changed. In addition, this destruction hinders the practice of Indigenous culture and creation of knowledge making it more difficult for Indigenous individuals to pass down their traditions to future generations.

While employment opportunities are brought to local communities as a pillar of neo-extractivism projects, the conditions are often unsafe for workers. TNCs can take advantage of more lenient health and safety conditions in developing countries and pay inadequate wages in order to maximize their profits. As well, foreigners usually fill the highest paying managerial positions, leaving local community members to do the most labour intensive jobs. Frequently, the enclaves where extractivism occurs are distanced from government involvement, therefore allowing them to avoid being subjected to the enforcement of national laws to protect citizens. This can result in widespread human rights violations. It is argued that prolonged social transformation cannot thrive on export dependent extractivism alone therefore making neo-extractivism a potentially flawed development method on its own.

Political implications

Due to the fact that the state is a prominent actor in the extractivism process it has several political implications. It pushes the state into a position where they are one of the central actors involved in development when recent decades have seen a shift to civil society

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