Thursday, March 20, 2014

A good idea from NZFirst

From an environmental economics perspective, mining is a wealth transfer, shifting public wealth (in the form of minerals in the ground) into private profits of mining companies. Along the way, it creates jobs, but it is basically spending capital, like living off the savings in your bank account. And in regions like the West Coast, we see what happens when the resources run out or become unprofitable to extract: the jobs disappear, and a regional economy geared solely to resource extraction withers and dies.

The way to solve this is to invest some portion of those mining profits into economic development, so that the economy grows and diversifies. At the moment, this is done privately, and usually elsewhere, by the mining companies and their shareholders reinvesting their profits, so there's no benefit to the extracting region. But NZFirst has hit on a policy to change that, by requiring a portion of government mining royalties to be returned to the region they were extracted from for economic development:

New Zealand First will deliver a share of mining royalties to target development on the West Coast, says New Zealand First Leader Rt Hon Winston Peters.

“We will ensure 25 per cent of the royalties paid for mining are placed in a regional development fund, and not absorbed into the Beehive’s piggy bank,” Mr Peters told an audience in Greymouth.

While the press release is focused on the West Coast, the full speech makes it clear that this is a scheme for all regions, with royalties going to regional council controlled regional development funds. And so they should: its their wealth after all.