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Section 1502 of the Dodd-Frank Act requires companies that sell cell phones and other electronic devices in the United States to disclose the geographical source of the minerals—the so-called “3T’s”: tin, tungsten and tantalum—used in the manufacture of their products.
This is a well-meaning effort to quell the flow of “conflict 3T minerals” from Africa. Before the provision, many 3T minerals came from regions under the control of warlords in the Democratic Republic of the Congo. It was estimated that hundreds of thousands of local “artisanal miners” mined the minerals in an open-pit, labor-intensive process. The warlords had exclusive access to the miners’ output at undoubtedly exploitive wages. They sold the minerals on world markets and used the profits to fund their militias. Back in 2010, congressman Barney Frank heralded 1502 as a way to“cut off funding to people who kill people.”
So what happened? There is good news and bad news. First, the good news. Section 1502 of Dodd-Frank, along with a subsequent boycott by a socially responsible trade association, led to the wholesale collapse of sales of 3T minerals from the DRC. Because it was costly for big companies to certify minerals, they simply stopped buying minerals from the DRC. This effectively stopped the flow of 3T minerals from that country and reduced the warlords’ income.
However, subsequent research by economist Dominic Parker of the University of Wisconsin-Madison and colleagues tells the dark side of the story. African militias are not run by nice guys. Nevertheless, the militias had a strong incentive to ensure the mining areas they exploited were peaceful and productive. But when the regulation and boycott cut the militias off from the world market and dried up their income, the militias pursued their next-best option: looting from residents in mining regions and the surrounding areas. The stationary bandits became roving bandits—spreading violence and havoc throughout the larger region.
Parker’s research also indicates there was an increase in infant mortality in the mining regions. Deaths for children under 1 year old in 3T mining areas rose from 60 per 1,000 before the mineral market collapsed to 143 per 1,000 after.
It is hard to argue that supporting warlords is a good thing, but we must consider the alternatives. We are not calling for a repeal of 1502. Just offering a simple economic lesson in unintended consequences.•
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Bohanon and Curott are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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