In An Inquiry Into the Nature and Causes of the Wealth of Nations, Adam Smith anticipated a reality I encountered frequently this week while in Papua New Guinea.
"If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept."
"Gold and silver, as they are naturally of the greatest value among the richest, so they are naturally of the least value among the poorest nations. Among savages, the poorest of all nations, they are scarce of any value".
In the 238 years since his racist tract was published, I find it extraordinary that neither the public nor private sector has elected to challenge the core assumptions that underpin the callous inhumanity evidenced in his essays. Smith's celebration of the derogatory treatment of non-Occidental races (including his celebration of the extermination of local communities for the theft of their land's resources) enjoys the same benign neglect now as in the slave trading heyday of his contemporary thought. Smith could not point to a single colonial trade success that did not rely on theft of land from its inhabitants and slavery or near-slave labor. With explicit disregard for his celebrated "labor" and "rent" calculus, we continue to persist in economic models that require the same inhumanity in 2014 as they did in the middle eighteenth century.
Over the past 5 years, I've engaged in public inquiries into the wholesale corruption of several mining and energy companies around the world. Some of the more recent cases in which I've been engaged have enjoyed promotion by international investor and 'development' advocates that bear more similarity to white supremacists in the era of the slave trade than to an economic development promotion agency. Echoing the mercenary advocacy of a celebrated Fellow of State, Society & Governance in Melanesia at Australian National University, Mr. Anthony Regan LLB, architect of the most recent blight on the colonial legacy of Australia, the Commonwealth and the United Nations, advocates for continued expropriation ignore what Adam Smith observed regarding the very pursuit they promote.
"Of all those expensive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none, perhaps, more perfectly ruinous than the search after new silver and gold mines. It is, perhaps, the most disadvantageous lottery in the world, or the one in which the gain of those who draw the prizes bears the least proportion to the loss of those who draw the blanks; for though the prizes are few, and the blanks many, the common price of a ticket is the whole fortune of a very rich man. Projects of mining, instead of replacing the capital employed in them, together with the ordinary profits of stock, commonly absorb both capital and profit. They are the projects, therefore, to which, of all others, a prudent lawgiver, who desired to increase the capital of his nation, would least choose to give any extraordinary encouragement, or to turn towards them a greater share of that capital than what would go to them of its own accord. Such, in reality, is the absurd confidence which almost all men have in their own good fortune, that wherever there is the least probability of success, too great a share of it is apt to go to them of its own accord."
"But though the judgment of sober reason and experience concerning such projects has always been extremely unfavourable, that of human avidity has commonly been quite otherwise. The same passion which has suggested to so many people the absurd idea of the philosopher's stone, has suggested to others the equally absurd one of immense rich mines of gold and silver. They did not consider that the value of those metals has, in all ages and nations, arisen chiefly from their scarcity, and that their scarcity has arisen from the very small quantities of them which nature has anywhere deposited in one place, from the hard and intractable substances with which she has almost everywhere surrounded those small quantities, and consequently from the labour and expense which are everywhere necessary in order to penetrate, and get at them."
When universities and foundations divested shareholdings in Apartheid South Africa, the foundation of racism was dealt an important blow in that country. By disrupting share capital invested in racist companies, the economics of oppression became less desirable and the seeds of integration were planted. Why student activists in Australia and across the Commonwealth don't rise up to give voice to their neighbors to the north in Papua New Guinea where mine after mine despoils land and civilization is perplexing. Consider Adam Smith's offhand observation in 1776 which is the premise for policy today: "The colony of a civilized nation which takes possession either of a waste country, or of one so thinly inhabited that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society." Now ask yourself: If my country's economic success is predicated on such sociopathic a foundation, wouldn't it be in my moral and ethical interest to loudly advocate for change?
Most pernicious in Papua New Guinea is the degree to which the national law is neglected even when adjudicated in accordance with commonly accepted standards. In 2013, the National Court of the country found that New Guinea Gold (TSX-V: NGG; audited by Brisbane's Lawler Hacketts Audit) had illegally obtained mining leases and, as a result, were not lawfully authorized to conduct gold mining or sales in the country. Not only did they continue to operate with impunity but no securities regulator batted an eye at material misrepresentations falsifiable with public press. When landowners sought enforcement of the law, the company appealed to and received police protection for their illegal activities. For years, St. Barbara (current corporate cover for its predecessor Allied Gold) operated without a legal Memorandum of Agreement conforming to the laws of Papua New Guinea. Neither they nor their auditors - KPMG - nor any securities regulator have ever concerned themselves with their blatant disregard for the 1992 Mining Act that governs their behavior. In the face of the Provincial and National government's allegations of numerous serious civil and criminal acts, St Barbara persists under the accommodation of government officials and agencies who have been notified, in writing, that the company's behavior fails to conform to the laws they're sworn to uphold. When countries are rated for their corruption, governance, or rule-of-law, I would strongly advocate the applications of those self-same ratings on the multi-national corporations acting within their borders. After all, no bribe has ever materialized from the ether. Corruption only proliferates where illicit advantage is sought for personal gain.
Which brings me back to my opening quote from Adam Smith. "If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept."
What have kept profitable the abuse of Papua New Guinea and its citizens are secrets and distance. In August of 2013, I sent a letter detailing a series of material misstatements made by Bougainville Copper Ltd and Rio Tinto - audited by PricewaterhouseCoopers - to regulators in Australia, the U.K., and the U.S. along with numerous extractive industry associations. I was particularly intrigued to receive, from one regulator, the response that compliance was impractical because of the great distance the regulator was from the wrongful behavior. And, if we were subject to the fates of Adam Smith's wind-driven masted ships and scurvy, I suspect that this justification for flagrant abuse would have some quarter. However we now have cameras on the ground that can record corruption and post it to YouTube. We now have communications infrastructure that can afford crystal clear communication between anywhere and any other where. Anonymous tyranny can now be met with identified accountability. But all of this is meaningless if we continue to act with the insensitivity befitting an 18th century bigot.
I was delighted to see the growing resolve among some public servants and elected officials to hold open the possibility that, a generation after nominal independence from Australia's custody imposed by the international community after the Second World War, some embers of sovereignty may be taking flame. And who knows, Australia (if acting in an ethical manner) may offer the world an example of Adam Smith's most impossible proposition.
No nation ever voluntarily gave up the dominion of any province, how troublesome soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expense which it occasioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation; and, what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it, who would thereby be deprived of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province, seldom fails to afford. The most visionary enthusiasts would scarce be capable of proposing such a measure, with any serious hopes at least of its ever being adopted. If it was adopted, however, Great Britain would not only be immediately freed from the whole annual expense of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys. By thus parting good friends, the natural affection of the colonies to the mother country, which, perhaps, our late dissensions have well nigh extinguished, would quickly revive. It might dispose them not only to respect, for whole centuries together, that treaty of commerce which they had concluded with us at parting, but to favour us in war as well as in trade, and instead of turbulent and factious subjects, to become our most faithful, affectionate, and generous allies; and the same sort of parental affection on the one side, and filial respect on the other, might revive between Great Britain and her colonies, which used to subsist between those of ancient Greece and the mother city from which they descended.
Imagine how many on both sides of the Coral Sea would thusly be freed!