David R. Henderson  

CBS's Propaganda on Gold

China's Allocation of Capital... The Party of No...

In the lead segment of "60 Minutes" last night, CBS did the unusual: it presented an incoherent story. The topic was gold being mined in the Congo, many of the proceeds of which are used for war.

That was how CBS pitched it, and I'll get to the problem with that part of the story shortly. But CBS started off in a weird way and, only by the end, did I figure out why.

The first quarter is devoted to how hard the workers in Congo gold mines work for low wages that amount to a dollar or two a day and which--are you ready?--include "no health care." Gee, a third-world country in which the employer doesn't pay for people's health care. I turned to my wife when we watched this part and said, "What does that have to do with the lead ad with the second hand ticking--about how the gold is used for war? This is incoherent."

This is standard bad reporting: decrying low wages that none of watchers of "60 Minutes" would accept without considering whether these workers are better off with or without those jobs. Most viewers probably watched that segment and said, "Isn't that awful, those poor workers having to work in those awful conditions."

The next part dealt with a former Clinton official, John Prendergast who said:

It's chaos that is organized in order to exploit the gold and other minerals for the enrichment of these armed groups and it just keeps the cycle going and going until we break that cycle and begin to address the root issue here which is the gold and the other conflict minerals.

Prendergast sees the root issue as gold and other minerals rather than as the bloody conflict in the Congo. But if the root issue were gold, then Canada, a major gold producer should be having similar problems. It's not. The root issue surely must be the war between the various factions and the underlying causes of the war, rather than how the war is paid for.

Then Scott Pelley, the "60 Minutes" reporter, shows the horrible destruction of lives that the war has caused. Then in the last segment, he interviews a representative of a jewelry trade group who has to go down as one of the least articulate spokesmen who has ever been paid to be a spokesman. Then the bottom line: we should stop buying gold from those places because the funds from that gold go to finance a war. But wait. What about the fact that if we could succeed in stopping or even reducing the flow of gold from the Congo, the people in those jobs would be worse off. As I pointed out in the sweatshop debate in Fortune in 1996, people in low-wage jobs tend to take them because they don't have our alternatives: they are choosing the best alternatives they have. And Ben Powell has put empirical meat on these theoretical bones by looking at wages in so-called sweatshops compared to general wages in those same countries. He finds that the "sweatshop" jobs pay quite well compared to the alternatives.

Now you see why "60 Minutes" led with the lousy wages and no health care. They want us to think that those are crumby jobs anyway so that we don't worry about the fact that those people will lose their crumby jobs.

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COMMENTS (16 to date)
Methinks writes:

My friend declared that she is hoping to become a vegetarian because she opposes the meat industry.


Well, wages are low and working conditions are unpleasant. This is unacceptable to my friend.

I pointed out that we're in America and these people aren't forced to work in meat packing plants.

She claimed the meat packing company was pretty much the only employer in town (I think she had a specific town in mind).

They could move.

It's not so easy to move.

So, you're telling me you want to become a vegetarian to deny these people the only job they can reasonably obtain? How are they going to feed their families?


My friend's IQ is well above average. What hope is there for the rest of the population? Just as in the case of the gold miners, it is assumed that if children weren't working, they would be going to school and playing outside. That's not the alternative for children in third world countries. The alternative is starvation.

Eric H writes:

Rick Steves, the PBS travel guru, interviewed David Beckmann of Bread for The World on Saturday. A caller to the show advocated something like wage parity for third-world workers, and Beckmann was quick to point out that jobs considered "low wage" by inhabitants of developed countries are preferable by far to the alternatives. He also repeatedly mentioned that open markets are the best way to increase the options for the world's poor.

I'm glad I missed the Sixty Minutes segment. Seeing it would have demolished my elation at hearing advocacy for open markets on PBS!

David R. Henderson writes:

Eric H,
Thanks so much. That's great news about Steves. What I've found over the years is that people who travel a lot and pay attention on their travel come back much more sympathetic to the plight of those poor people and are more thoughtful about various "solutions."

Tom West writes:

I'm not certain the final logic is that poor.

If the mines are producing money for the gangs that allow them to live well enough that gang warfare is worthwhile to many people, and they can now buy enough weapons to threaten and kill large amounts of the population, then I would say that gold production is a net negative to everyone except those involved in the gold industry directly (even at poor wages) and the gangsters.

I pity the workers, but I'd also be willing to put a number of poor Afghans who earn money by building IEDs out of work, if possible. Sometime a person's job is a net negative for society as a whole.

As for sweatshop jobs, I suspect people's views are colored by the suspicion (real or not) that there's an enormous amount of surplus that's entirely captured by the owners because of the mismatch in bargaining power.

This suspicion only grows greater when attempts to raise workers wages through unionization is met with official or unofficial violence.

Josh W. writes:

If those people aren't voluntarily working the gold mines, then the gangsters will enslave people to mine the gold. You can't get everyone in a country to agree to ignore a precious natural resource.

In terms of surplus, don't demand a mile from someone who offers an inch. If there wasn't a surplus, the factory owner wouldn't set up shop there.

Jack A. writes:

The mine owners & middlemen are taking advantage of a lack of free information flow and unfairly exploiting the mine workers. They should unionise to improve wages & working conditions.

Rick writes:

As with anything involving human rights, this is an issue. Especially within an industry that cares so little about the impact of their sources.

There is not much sympathy coming from the handful of professionals over at National Jeweler. Look at the comments on the left side. Some retailers are complaining that 60 Minutes was only talking about one percent of gold’s resource, so what is the big deal? Well, it is a big deal if you are a person that lives in the region that supplies the one percent, and your life is affected by death, rape or poverty. Just further proof that most people in the jewelry industry do not belong to MENSA.

Read more at - http://www.nationaljewelernetwork.com/njn/content_display/independents/market-developments/e3i7a35e791d5c3a26058f9d4a0747ecaf6



[Link fixed; second link added.--Econlib Ed.]

Pacemaker writes:

Won't the union leaders become the expensive middlemen then? And what happens to potential mine workers who would be better off accepting the lower wages than staying unemployed or in even lower-paying jobs?

Robert Matthews writes:

You do not know what you are talking about looking at your blog i assume you you have about 15 minutes of knowledge on the subject minus adverts.

You cannot cover the subject well in that time so all they had time to do was just highlight the general problems (and dumb it down a bit for most viewers).

If you realized the report could have been better you should have took the time to find out about the subject rather than just criticize.

You may have experience in sweatshop debates but what is going on in the DRC is a slow burn holocaust.

How many millions have to die hundreds of thousands raped and villages burned to the ground would you say are enough of a excuse to deal with the problem?

As for comparing it to Canada that is just a joke how about comparing it to all the other conflicts which have been fueled by natural resources.

Suggest you actually find out something about the subject.



guthrie writes:

Robert, you ought to be upset with the CBS segment producers, who chose to frame a complex, horrible situation in such a simple, ideologically slanted fashion.

While you may have more specific information as to what's going on over there, your objection here doesn't address Prof. Henderson's concern, that gold, and purchase of said gold, is NOT the core issue, as John Prendergast (and the broadcast) suggest.

In fact, 'natural resources' is never the core of conflict. They're just an excuse. The human tendency to take by force, rather than trade is at the core. Religion, tribalism, closed borders, and a whole host of other irrationalities factor in as well, but none of these things constitutes 'natural resources'.

If everyone stopped buying Congo gold, would the conflict stop? My guess is the various factions would just find another way to fund the conflict, and continue raping and killing. One really doesn’t need to have expert information to see that...

Jack A. writes:

One would think that fighting over natural resources which can be turned into wealth would be the most 'rational' thing to fight over. One example would be European imperialist adventures in the 19th century which surely would have been mainly motivated by grabs for natural resources?

Where is the evidence that this is not the case and, as I take it this is an important plank of the free market libertarian positions promulgated here, why is that such an important position to hold?

Rachel writes:

The argument that gold mining is bad for the Congo is actually simple:

1) Gold mines are owned by the government;
2) The Congo government is evil and harms the people (on average)
3) Giving the government more money makes it worse.

Obviously, 60 Minutes isn't going to accept 2), so their story is incoherent. But it isn't unreasonable.

sourcreamus writes:

The issue of the worker's condition is totally seperate. The real issue is lack of ownership rights. As long as the value of the mine is greater than the cost of the weapons needed to conquer the mine, it is rational (though evil) to buy the weapons and take over the mine. The more factions competing for the mine the more is wasted on weapons to take over the mine. Rendering the mine valueless could be an efficient outcome if what is spent fighting for the mine exceeds the value of what comes from the mine.

Josh W. writes:


Who has the authority or capability to render the mine valueless? The value is in consumer preferences.

I guess you could say destroy the mine, but do you really think that will improve conditions? Gangsters will look for more ways to fund their warring lifestyles.

David C writes:

John Prendergast's argument is valid.

"In these societies, the assets of the rich are in land or natural resources, which are much easier to tax than machinery or human skills. The rich thus have much more to lose from a democratic majority deciding on taxes. ... Thus perpetual oligarchy is more likely in unequal agrarian or mineral societies than in more equal industrial societies, as Latin America demonstrated for most of the nineteenth and twentieth centuries. ... Leonard Wantchekon documented systematically the association of resource wealth with autocracy in Africa, as others did using worldwide patterns."

- The White Man's Burden by William Easterly, pgs. 123-125

His references:

William Easterly, "The Middle-Class Consensus and Economic Development," Journal of Economic Growth 6, no. 4 (December 2001): 317-36

Nathan Jensen and Leonard Watchekon, "Resource Wealth and Political Regimes in Africa," Comparative Political Studies, 2005.

Michael Ross, "Does Oil Hinder Democracy?" World Politics 53 (April 2001): 325-61.

Paul Collier and Anke Hoeffler, "Democracy and Resource Rents," Department of Economics, Univ. of Oxford, April 26, 2005.

Robert Matthews writes:

Guthrie as i said CBS had to squeeze what information they could into the broadcast and dumb it down. John Prendergast said gold and other minerals which include tantalum tin and tungsten and others.

Not going to blame CBS for their coverage considering the situation has been largely ignored for years by the media it would not be surprising if the coverage was not of the highest quality. That is not the same as CBS pumping out propaganda.

Anyone who knows any history knows natural resources are often the core of conflict or the major factor. "The human tendency to take by force, rather than trade is at the core." This statement does not make much sense at all these minerals are being traded that's the problem and where the groups are getting the vast majority of their funds from.

"Religion, tribalism, closed borders," Talking about closed borders with connection the DRC is a joke the borders are very porous. "Religion, tribalism" you have government troops selling rebels supplies and guns and doing deals.

Different groups and people are quite happy to do deals in the DRC religion and tribalism are not the major factor if it were the fighting would not happen so much in the mineral rich area's.

"My guess is the various factions would just find another way to fund the conflict, and continue raping and killing" Even if they found another source of funding it is likely to be tiny in comparison to the sources they have now and what would they be fighting over?

"One really doesn’t need to have expert information to see that..." read up on the subject blaming it on human nature and irrationalities is the language of despair when positive things can be done to improve the situation.


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