Monday, July 24, 2017


Untended Consequences in The Congo

A story of unintended consequences created by people who believe they can control complex systems.

The Democratic Republic of the Congo has vast mineral reserves; the value of their reserves is estimates at 24 Trillion Dollars. Needless to say, this has attracted financial predators, militias who act like the Mafia at mining sites, demanding payment for access to work sites and portions of paychecks to allow the miners to work. The products of these mines are bought and used by sophisticated electronics companies.

In 2010, the Dodd-Frank Bill--eager to do good for all men everywhere--included a provision that mandated the purchasing company note where the minerals came from and who benefitted. The hope was to shame the companies or to influence them from outside criticism so they might influence the banditry. So exposing the sources of Apple's or Intel's  tantalum, tin, tungsten and gold would somehow influence the criminal militias. Rep. Barney Frank (D., Mass.) famously said at the time that the bill was supposed to “cut off funding to people who kill people.”

So what happened? The companies could not be sure of their sources or the local economics so, fearful of coming under government criticism and action, they abandoned the Congo and went to other states. Companies avoided the extra costs and red tape by boycotting tantalum, tin and tungsten mined in the Congo and instead looked to suppliers in Australia and Brazil. Congolese mineral exports plunged by 90% in the wake of the legislation, according to DRC mining officials. Consequently, income to militias from such mines either plunged or vanished entirely.

In a   study in the Journal of the Association of Environmental and Resource Economists Dominic Parker and co-author Bryan Vadheim document that while the law may have cut off one source of revenue to armed groups, it led them to intensify their plundering of civilians in the region—exacerbating the humanitarian crisis. By their estimates, violent incidents more than doubled after the law was implemented. Impact on miners was not included.

The economists assert that before Dodd-Frank, Congolese militias acted as “stationary bandits.” The idea is that a strongman who seeks to rule for years won’t use his iron fist to crush the people entirely—and he may even invest a bit in roads, security and other provisions to ensure he avoids an uprising that could loosen his control. Messrs. Parker and Vadheim stress that stationary bandits are no saints, but the arrangement “may be safer and more economically productive than anarchy.” Messrs. Parker and Vadheim found that armed groups specifically targeted farmers during harvest time—especially after bumper crops.

But certainly the politicians rest comfortably with the assurance they have done their part to improve the state of mankind. At least they tried.

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