The Unintended Congo “Catastrophe” of Dodd-Frank Conflict Mineral Provision

A number of months ago I wrote a blog entry on the requirement in the Dodd-Frank bill, put in by then-Senator (and now Kansas governor) Sam Brownback, prohibiting the purchase of “conflict minerals”—those that might be used to finance warfare in Africa, particularly the Congo. I noted the very simple economic point that this would create a surplus that would drive prices down, mostly harm local miners, but benefit buyers/countries without U.S.-level scruples about these purchases.

I shouldn’t brag—any Econ I student could have seen this point; but it is nice, albeit depressing, to see this prediction come true. From David Aronson in the New York Times:

Unfortunately, the Dodd-Frank law has had unintended and devastating consequences, as I saw firsthand on a trip to eastern Congo this summer. The law has brought about a de facto embargo on the minerals mined in the region, including tin, tungsten and the tantalum that is essential for making cellphones.

The smelting companies that used to buy from eastern Congo have stopped. No one wants to be tarred with financing African warlords — especially the glamorous high-tech firms like Apple and Intel that are often the ultimate buyers of these minerals. It’s easier to sidestep Congo than to sort out the complexities of Congolese politics — especially when minerals are readily available from other, safer countries.

For locals, however, the law has been a catastrophe. In South Kivu Province, I heard from scores of artisanal miners and small-scale purchasers, who used to make a few dollars a day digging ore out of mountainsides with hand tools. Paltry as it may seem, this income was a lifeline for people in a region that was devastated by 32 years of misrule under the kleptocracy of Mobutu Sese Seko (when the country was known as Zaire) and that is now just beginning to emerge from over a decade of brutal war and internal strife.

Brownback’s provision has harmed precisely those it was designed to protect, the small-scale miners in the Congo, but it has certainly lowered the price faced by Chinese processors for these inputs. Law of unintended, but what should have been perfectly expected, consequences.

 

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  1. johnadamsxii says:

    A transparent free market beats any politician or economist.

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  2. Eric M. Jones. says:

    “prohibiting the purchase of ‘conflict minerals’ ”…

    And this differs from buying oil from dictators, princes and kings…how?

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  3. Rahul says:

    I don’t know why the Brownback provision was put in. But if it cuts the flow of cash to the Government and the rebels, it will be a very significant positive, one that will outweigh the losses to these individual miners. Who probably are, under their own laws, stealing from common property.

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    • Frank Johnson says:

      They will simply acquire arms and help from other nations who seek to have an influence there while the poor people will suffer. It is like boycotting a country because they allow some children to work and pay low wages to others—any money is better than NO money.

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  4. Jason says:

    There is no WIN when the Government get’s involved in economics. Just another point proven here by this write-up. Thanks for showing!

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  5. Brookie_d says:

    Does Barney Frank EVER do anything that doesn’t have devastating consequences? Hello??? He is at least partially responsible for the entire collapse of the housing market.

    Hot debate. What do you think? Thumb up 17 Thumb down 14
  6. Dan says:

    It is quite obvious that this would be the short term consequence of such a decision. The question, however, is whether the “embargo” and thus reduced financing available for the Warlords (the intended consequence of this provision) will weaken them to the point that a legitimate government can be established in the long run. If this happens (or can happen) than the provision will have worked perfectly. Seems to me to be a simple case of delayed gratification.

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  7. Georgette says:

    Interesting.

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  8. Frank Johnson says:

    Why should anyone be surprised? It continues on. Congress and this administration have no clue on the real effects of laws and regulations passed. They are clueless. Until we get individuals who outlook is longer than 1 inch or 3 seconds we will continue to get these types of legislation and laws which harm the very people they propose to protect–look at the comsumer protection aspects of the law, look at the regulations which prohibit oil and gas drilling, the encreased milage standards which will guarentee much less safe autos, the epa rules which decrease our ability to compete on the world market while we subsidize countries which are our enemies. All I can say is WAKE UP FOOLS!!!

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