The real price of gold

Submitted by Matthew on 10 September, 2014 - 1:55 Author: Kieran Miles

The pursuit of gold has led to great exploitation throughout history.

From the demands of the Pharaohs to be buried with enormous wealth; the use of slaves in mining operations in the Roman Empire; the genocide of indigenous peoples, first by the Conquistadors, then Columbus and the colonisers of the Americas, continued in the Californian Gold Rush, the “Scramble for Africa” by the major imperialist powers, and the Klondike; the Boer Wars, fought over the Witwatersrand mines; the use of forced labour in the gold mines of the Kolyma gulag; the list continues.

Gold is often used in important places of worship – the Harmandir Sahib, the Dome of the Rock, the Wat Phra Kaew, the Sripuram Golden Temple, Saint Mark’s Basilica, and so on. Regal pomposity has long demanded the use of golden carriages and crown jewels, and gold is used as a signifier of personal achievement, from the Oscars and the Nobel Prize, to Olympic gold medals.

Gold has long been prized as a commodity, but by 564 BC, both the Ancient Chinese and the Lydians started to use gold for currency as well. This was because of gold’s easy divisibility (it is far easier to divide a piece of gold into ten equal parts than say, a cow or a clay bowl), and because of its value in terms of human labour.

But most of all, once refined, gold has a universal regularity — unlike most commodities. If you trade, for example, a pair of shoes for some linen, or a piece of furniture, there are so many variations in the quality, provenance, and craftsmanship of all of these items as to make setting a national or global standard impossible; trading terms can only remain at the level of barters between individuals. One ounce of 18 carat gold is identical the world over. So gold was made a universal means of exchange, its use becoming more and more widespread as class society grew globally*.

Although bank notes have existed for centuries, and most currencies are now depegged from the gold standard, gold is still used in some parts of the world to trade with.

For example, in India, gold is so often used as an alternative currency that the government has restricted its import. And about 10% of the world’s gold supply is still used in official coinage.

Gold mining is hugely environmentally damaging. Every gold ring produced makes about 20 tonnes of waste. Every year an estimated 180 million tons of toxic waste is dumped into rivers, lakes and reservoirs by gold miners. The most commonly used method (90% of all gold produced today) of separating gold from ore uses cyanide, most of which is dumped into the water supply.

The Roșia Montană mines in Romania — first mined by the Romans — are set to become Europe’s largest. Many Romanians are rightly concerned by the growth of the mine.

In 2000, the Baia Mare mine flooded rivers and reservoirs with cyanide used in extraction, including the Someș River and the Danube. Drinking water for some 2.5 million Hungarians was contaminated, and 80% of the aquatic life in the Serbian part of the Tisza was killed. Similarly, the Grasberg mine in West Papua (the largest gold mine in the world) produces some 230,000 tonnes of waste a day. Most of this waste is dumped straight into the Aikwa River, killing most of the fish in the river.

In the mountainous regions of Tragadero Grande, near Cajamarca in Peru, the mining company Minera Yanacocha has started opening a gold and copper mine (Minas Conga). It will be around 20 square kilometres and the largest single investment in mining history in Peru, at US$ 4.8 billion. The site will destroy four mountain lakes: two will be completely depleted for use in mining operations, and two will be turned into tailing ponds for mining waste.

Each single gram of gold from the mine, will take ten thousand litres of water. In the Minas Conga area, an average campesina family will use 30 litres of water a day, in contrast to a small mine, which will use 250,000 litres of water in just one hour. One single small mine will use as much water in an hour as a local family will use in 22 years! And keep in mind there are multiple mines owned by Minera Yanacocha, the new Minera Yanacocha will be a lot bigger than the extant small mines, and there are dozens of multinational companies mining all over the world. To make just one tonne of gold takes some 260,000 tons (not litres) of water.

The scale of water use is obscene, especially when 3.4 million people die each year from lack of access to clean drinking water or from a sanitation-related disease.

Mining has also devastated large areas of forestry. 40,000 hectares of Peru’s Amazon has been lost. The Cassandra mines in Greece, sold to Eldorado Gold, an operation which will produce 380 million tons of gold ore — over ten times as much as has been mined there in the last two millennia — will destroy 180 hectares of forest and farmland. In Ghana, approximately 140 hectares of tropical forest, including a quarter of the Ajenjua Bepo Forest Reserve, has been destroyed since 2009.

On top of these environmental catastrophes comes a long list of violations of workers’ rights, and mass displacements. Fears over cyanide leaks into the Amazon led to huge protests in Peru, and operations were temporarily halted in late 2011. But in December 2013, operations restarted after the military was used to forcibly displace the largely peasant-farmer population. Those who refused to sell their homes to the mining company were arrested and dragged through the courts for “occupying” their own land. Another mine in San Juan de Kañaris, Peru, will displace 10,000 people.

In Tanzania, as elsewhere, the multinational companies hold a monopoly on legal mining. Many people, desperate for money, mine illegally.

The local police force runs a racket, turning a blind eye to illegal miners — for a bribe. In the last three years, 69 people have been killed near the North Mara mines, presumably those who were unable to pay off the police. This is not an isolated incident – there are 20 to 50,000 illegal miners in Ghana, under frequent threat of arrest and assault.

The list of environmental damages and attacks on workers’ rights is endless: destruction of large parts of the Indonesian fishing industry because of poisoned waters, causing birth defects from irreversible mercury poisoning; displacement of Gobi desert herders in Mongolia; 9,000 indigenous Akyem people in Ghana displaced by gold mining; use of “conflict gold” in the DRC. And then, not least, problems faced by all miners — terrible working conditions, high risk of death and injury, low pay, long working days, union busting...

Many of the easily available sources of ore have been used up. Now mining companies are searching in extremely low-grade sites — causing huge amounts of environmental damage for smaller and smaller amounts of gold. Some mines find as little as one gram of gold in one ton of ore.

In 2013 Business Insider estimated that just 9% of gold was used for socially necessary purposes (1% for dentistry and 8% for electronics and medical equipment). 49% was used for jewelers, 10% in official coinage, 27% in bar hoarding, and 5% for ETFs (investment funds).

The small amount of gold we need for things like dentistry and electronics already exists above ground, and unlike, say, fossil fuels, gold that has been mined does not get used up, it just changes hands!

Hand-wringing speculation about whether your personal necklace or rings should be gold or silver, when there is enough gold above the ground for more than just human need is unnecessary. We can recycle the existing gold used in coinage and bank hoarding for the production of jewellery. There is no less exploitation in silver or copper mining.

The world should urgently cease all gold mining operations. But what should we say about the workers in the mining industry in the here and now?

There are broadly two approaches to the immediate problems caused by gold mining. Oxfam set up the “No Dirty Gold” campaign.

The campaign tried to source gold which was not mined in environmentally degrading ways, or by violating workers’ rights. Over 100 jewellery stores and chains signed up. But the campaign has many problems. Most reporting on ethical gold is done by auditors in the pay of the mining companies, who naturally underestimate the damage of the mining. Not all Fairtrade or Alliance for Responsible Mining gold is chemical-free. Mercury and cyanide are still used in certified “clean gold”.

This approach neither helps workers improve working conditions, nor halts the environmental damage in any meaningful way. Whilst well-meaning, the logic of this kind of campaign is fundamentally liberal: any small improvement in working rights comes not from workers organising, but from appealing to the compassion of mine owners, which has proved to be in short supply.

The socialist approach means supporting mining workers in their struggles for safer working conditions and higher pay. At the same time we argue for cleaner methods of extracting gold from ore, such as the use of hydroxylamine hydrochloride in gravimetric processes. Support for Spanish and South African mining unions, new links with unions in Peru, Greece, and other countries should be our priority.

The environmentally destructive nature of gold mining logically points to its eventual abolition. But miners involved in gold mining should not lose their jobs; they should be employed in other mining industries, reskilled (at the company’s expense) for alternative work.

Then there is the question of who controls the above-ground supply of gold. Lenin wrote in Pravda in 1921: “When we are victorious on a world scale I think we shall use gold for the purpose of building public lavatories in the streets of some of the largest cities of the world.”

I appreciate the sentiment, though there are enough smartphones and dialysis machines to warrant some use of the world gold supply. There is more than enough gold sitting around in banks for such use – we should seize those banks!

* For a more in depth analysis of the use of gold as money, read this article and also Chapter 2 of A Contribution to the Critique of Political Economy by Karl Marx. For an extremely detailed analysis of money in general, see Chapter 3 of Capital.

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