Should Bolivia condemn extractivism?

An interview with Dr. Ha-Joon Chang from Cambridge University

Extractivism is a mode of economic accumulation that consists of the removal of raw materials from the natural environment. European colonialism entailed the mass-scale extraction of natural resources from various regions, providing for the development of the world economy. In his book, Indian Givers: How the Indians of the Americas Transformed the World, the anthropologist Jack Weatherford reveals how the intensive extraction of gold and silver from Latin American mines, particularly that of Cerro Rico in Potosí, Bolivia, made possible for the large supply of precious metals for coinage in Europe, thus providing for the development of capitalism.

The case of Bolivia

Most former colonies rich in natural resources have inherited extractivism as their cornerstone for development. However, the Bolivian government, together with other governments of the “New Left” in Latin America, have referred to their continued dependence on resource extraction as “social” extractivism or “neo” extractivism. They justify their model of development under the premise that, unlike past versions of extractivism, through the nationalisation of said resources coupled with the political and development ideology coined “Vivir Bien”, or to “live well”, revenues are primarily destined towards poverty reduction strategies.

The “Vivir Bien” political rhetoric emphasizes realization of human happiness through the complementarity of the rights of peoples, persons, states and Mother Earth and is based on a clear-cut rejection of neoliberalism. However, since 2011, the Bolivian government’s plans to explore and extract oil and gas in protected ecological areas have raised questions as to whether the “Vivir Bien” version of development can indeed be carried out avoiding the destruction and depletion of the environment and promote sustainable socioeconomic development.

Critics of the current Bolivian government, such as the philosopher Luis Tapia and the sociologist Silvia Rivera Cusicanqui, argue that Evo Morales and his political party MAS (Movement Towards Socialism) represent a “replica of the neo-colonialist development project of the past”.

Despite the Bolivian government´s condemnation and rejection of neoliberalism, the economy continues to rely on the extraction of natural resources. Bolivia’s top ten main exports continue to be raw materials (accounting for more than 70% of its net exports). The continued resource-dependence has generated deep tension and conflict within Morales´ political party, particularly among those who seek to reconcile poverty reduction and ecological preservation.

Proponents of anti-extracivism argue that no real change in colonial patterns of domination, and thus capitalism, can be overcome if the mode of accumulation does not itself change.

According to these strands of thought, extractivism continues to function within the logic of capitalism. However, at the core of this debate lies the notion of an unavoidable and negative understanding of capitalism, essentially, that of exploitation of the workforce, environmental depletion through the ideology of endless economic growth, growing inequality, and the list goes on.

Dr. Ha Joon Chang on extractivism

In the bestselling book 23 Things They Don’t Tell You About Capitalism, Dr. Ha-Joon Chang argues that it is not capitalism itself which inevitably leads to these outcomes, but rather, free-market capitalism. It is the lack of planned economic resource extraction, industrialisation and markets, rather than the mere presence of these themselves, that leads to the undesirable consequences of capitalism.

In a recent interview with WIB, Dr. Chang said that extractivism is not essentially good or bad. “All countries, in the beginning, have to extract things from nature, whether it’s mining, growing asparagus or catching fish in the sea,” and ultimately, the outcome of this extraction will depend on what you make of it; “if you are just pumping oil out or extracting copper from the ground without really developing, for example, a petrochemical industry or an electric cable industry, then you have a problem”. Basically, for Dr. Chang, a key strategy to ensure the long-term and sustainable socio-economic development of any country is to move away from resource dependence. This is primarily done through reinvesting the revenues from resource extraction towards the development of industry and manufacturing.

The extractivism versus anti-extractivism debate is unhelpful; he says that “We need to redefine this debate: rather than focusing on whether or not we should extract resources it must be centred around how to best use the extracted resource, for what purpose, to build what, how to best share the revenues equitably”. Countries must focus on how to manage the rents made from the export of these resources so as to ensure a sustainable long-term future for the country that does not depend on the volatility of global market prices.

During the last decade, aside from the nationalisation of natural resource extraction and some poverty reduction strategies and interventions which some experts have qualified as ineffective, scarce attempts have been made in the development industries to transform raw materials. For example, a natural gas liquids separation plant in 2013 and a urea ammonia plant in 2016. Thus, fruits and benefits in terms of the development of industries and the diversification of the Bolivian economy are scarce.

As that old saying goes: you should not put all your eggs in one basket. In the case of depending entirely on the export of raw materials, countries such as Bolivia experience high economic volatility as their Gross Domestic Product (GDP) growth is highly dependent on international oil and gas prices. By diversifying their economy through investing revenues in alternative industries and investing in manufacturing industries related to their resource extraction, Bolivia would no longer have all of its eggs in the same basket.

It may sound ‘capitalist, but “It all depends on what you make of it” Dr Chang adds. If the revenues made from the extraction are shared equitably and to the long-term benefit and welfare of the society, then it can have positive results. However if the revenues end up in a Swiss bank account, extractivism will be seen in a bad light.

According to Dr. Chang, governments can establish their roles as official custodians through nationalisation policies, as the case of Bolivia. However ,the proof of the pudding is in the eating, “Is the government investing in new industries, education, welfare projects… or in large airports, infrastructure projects, football pits or other vanity projects?” he asks.

Bolivian extractivism at a crossroads

For over ten years, with stable oil and gas prices in the global market, Bolivia has enjoyed economic growth and stability. But where has all the money from these revenues been invested other than towards a handful of industries? Some examples range from the construction of building big football pitches (in remote localities which lack basic sanitation services), large hospital infrastructures which lack the adequate human capital, and, most recently the “Evo Morales Museum”, which cost more than $US 7 million.

The lack of a clear mandate of the Bolivian government’s role as custodian of the natural resources has meant that for over ten years the country has essentially reproduced the colonial logic of capitalist accumulation with little vision for the long-term sustainable future of the country. Insofar as raw materials continue to be Bolivia’s primary export, the country will inevitably depend on the volatility of the global market prices. And even if global prices were to remain stable, the relevance of investing in the industry is not only tied to the need for economic stability but also, its positive benefits for society, in terms of technological innovation and its spillover effects onto other areas of society.

Moving away from resource dependence, as Dr. Chang pointed out, has the benefit of decreasing environmental depletion. Bolivia is at a crossroads, where, it is not too late for the current government to prove that extractivism can have positive results.

In Bolivia, the debate revolves on whether the revenues will be reinvested into diversifying the economy and moving away from resource dependence, and whether this will inevitably entail the destruction and depletion of protected areas such as the TIPNIS and Tariquía.

The welfare of the majority of Bolivians depends not only on cash transfers to escape poverty but also on the possibility to look forward towards a long-term and sustainable future which no longer depends on natural resource extraction. Cash transfers and some scattered industries do not consist the adequate reinvestment of the high rents received from the extraction of natural resources and the destruction of nature.

Furthermore, and in line with the “Vivir Bien” rhetoric, the welfare of Bolivians requires greater investment in intangible elements such as education, healthcare, and the preservation of nature.

Maria Jose Oomen Liebers

María José is an interdisciplinary social science researcher. She holds an MPhil in Social Anthropology from the University of Cambridge and an MSc in Public Policy and Human Development with a focus in Migration Studies from the Maastricht Graduate School of Governance and UNU-Merit (the Netherlands). In the past, she has worked for the International Organization for Migration (IOM) and for the United Nations Development Programme (UNDP), covering a range of topics such as women’s labour conditions in urban areas, south-south migration flows in the regions of Africa, the Pacific and the Caribbean, post-disaster recovery and the role of women, and strategies for upward social mobility among middle-income population strata. Currently, she holds a research position at the Institute of Criminology of the University of Cambridge, supporting the set-up of a planned multi-site longitudinal study exploring violence against children.
    One Comment
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    23 May 2018 at 1:38 am
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    Due to the lack of investments in infrastucture the urea-ammonia plant in the middle of the huge coca-producing area of Cochabamba is bound to fall through. If there exists a market for a huge urea production in Bolivia, it is not where the plant has been constructed. There are no roads to the main market: Mato Grosso in Brasil. Nowadays the Bolivian urea market is being supplied by Peruvian and Argentinian urea-pruducers: not by the state-owned Bolivian urea-plant.

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