GENEVA – Resource nationalism, now on the rise from Mongolia to South Africa to Argentina, has long been positively correlated with commodity prices. In boom times, windfall revenues encourage governments to demand a bigger slice of the pie, and often press for greater control. When prices fall, governments back down and return equity and concessions to global companies in exchange for continued investment and employment. But today, resource nationalism is on the rise, even though commodity prices have begun to slip.
Consider South Africa, where the police recently killed 34 striking miners. While the recent labor unrest has complex origins, it boils down to South Africa’s reliance on the mining industry, which has underpinned its development into the continent’s richest economy and accounts for one-fifth of GDP. Although rising labor and energy costs have eroded the industry’s competitiveness, the government continues to demand more. That means offsetting lower prices by digging deeper to increase output – thus creating more dangerous working conditions.
Many mistakenly dismiss resource nationalism, and the populist rhetoric that accompanies it, as a fig leaf for rent-seeking by ruling elites, or the coincidental fallout of domestic political infighting. In fact, resource nationalism is more fundamental: it is state capitalism in economic thought.
For decades, neoliberal thinking had dominated economic policy. Now, thanks to the recent success of China and other emerging economies, national planning, industrial strategy, and state ownership of strategic industries are back in vogue. Indeed, while China’s infamous five-year planning cycle may prove unwieldy and ineffective in other countries, it undoubtedly signals the state’s return to the market – and poses a serious challenge to trade liberalization.