Oil and gold prices are at historical highs. Reserves that with low prices were out of reach now attract attention. Scientists disagree on why the price of oil keeps increasing. Some say it is because we are running out of oil. Others say it is because of growth in India and China. Some think that Arab countries deliberately underinvested in new wells to drive the price up. Yet others point to financial deregulation and speculation in the oil market. What is certain is that, like the 1970s, it was the rise in gasoline prices in 2008 that popped the credit and housing bubbles, first in the U.S and then through financial contagion to Europe. Gold and other commodity prices, including oil itself, sky-rocketed as panicked investors searched for safe havens.
Mineral prices may be high but we have already eaten the low-hanging fruit. The new reserves are in remote places and are dirtier. Think of the oil in the Amazon forest or the tar sands in Alberta in Canada. New technologies develop to drill deeper for oil or capture less concentrated gold ores, but their costs are high. Localised economic crises then come as good news for investors. “The poor sell cheap” as the saying goes. Royalties and taxes are a main cost for multi-national investors. Indebted countries, such as Greece or Cyprus, are willing to give their rights away as if in a “fire sale”. Environmental and health regulations are seen as costs and circumvented with “fast-track” and other extra-legal processes. Low wages are an added bonus for investors (though probably not the most important since extractive industries are mostly capital-intensive).
As Jeremy Wrathall, chairman of Perth-based Glory Resources told Bloomberg about gold investments “it is bizarre that Greece is virtually unexplored because of the political situation that prevailed before the crisis”. It is hard to see which political situation he is referring to. Why would the, admittedly corrupt, Greek governments not want to make some extra bucks from gold in the past? The “bizarre political situation” was probably what we used to call democracy and rule of law – the features of any dignified developed nation that is not willing to sell itself at a discounted price. Probably Manhattan is also unexplored but it wouldn’t occur to Mr Wrathall to look for gold there. What Greece experiences today is a regression from a developed to an extractivist state, similar to the process many Latin American countries underwent in the 1980s. Extractivist is a State whose sole function is to provide the global economy with cheap raw materials, often at the cost of its own people and its own development.
It´s a small consolation that there might be little oil actually in the Aegean. Gold prices also may soon bust and citizen resistance in Chalkidiki make it too expensive to dig gold out of the soil. Yet the saddening fact remains the ease with each the Greek political elite and a substantial part of the population ran to the extractivist dream. Ready to risk everything of value for the sake of waking up back to the blissful and meaningless prosperity of the 90s. Lesson learnt from the crisis? None. It´s all about easy money, stupid. It was the stocks before, now it is gold and oil. It is easier to imagine taking the risk to turn the Aegean into a huge oil spill (and changing the colour of the flag from blue to black after?) than working hard in common and sufficing with what this country has to offer in plenty.
Intellectuals and indigenous groups in Latin America, experiencing firsthand the “benefits” of extraction have gone beyond extractivism, beyond even alternative development and talk today of “alternatives to development”. They don’t want growth, but “buen vivir”, a term with ancient Greek roots. Unfortunately we might have to endure the same level of suffering that the Latin Americans did the last 30 years to reach the same degree of wisdom.
This was originally posted on Greeklish in May 2013, and is republished here with permission as part of our Special Report Fool’s Gold : How a Canadian minin multinational from Canada is avoiding taxes in Greece through mailbox companies in the Netherlands.