Dangerous booms

Geoff Bertram warns that the NZ west coast mining boom could be dangerous. Because booms end.

There is some evidence for that areas with primarily extractive resource bases have lower growth rates; in the development literature, it's called the "resource curse": rents from mining are dissipated through rent-seeking corrupt governments, with little ongoing benefit for the population. And, there's some evidence for it in U.S. county level data too: Stratford Douglas finds that Appalachian counties with more coal fared worse than others in later growth.

But this is hardly an argument for barring resource development on the West Coast; we could as usefully tell Lotto winners to tear up their tickets because a lot of them wind up bankrupt. Rather, it says we need to ensure that collected royalties are used sensibly and that government infrastructure investments should recognize the potentially transitory nature of the boom.

Bertram also worries about effects on other industries via exchange rates - the "Dutch Disease". Again, this, I think, provides more argument for sensibly banking the royalties so it's easier to adjust when the boom ends.

It's also a bit odd that Bertram reckons mining on the Deniston Plateau would really hurt tourism. We were there the summer before last. There's a whole ton of tourism around the region's mining history. We visited a coal museum; we drove up the top of a small mountain to check out the old mining equipment. It was great. And my parents went to see the working mine; we abstained 'cause it wouldn't have worked out with the kids. The Buller region markets itself on that coal mining tourism. You might as well say that gambling really makes Las Vegas less attractive to tourists. Is an open cast mine in an area already marketed for mining tourism really that damaging for international tourism?