Consonant with the predatory surplus value extraction done by mining corporations in the Chilean copper sector, one can observe the rising shareholder value of companies in the stock market. BHP, for example, is a mining company operating the Escondida copper mine in the Atacama desert which produces 5% of the world's copper. This company has a copious history of waging a brutal offensive against copper workers. Leo Gerard, International President of the United Steelworkers, has termed BHP's activities in the Escondida copper mine as "shameless exploitation of its Chilean workforce". This statement came following BHP's attempts "to slash wages 14 per cent, increase working hours to more than 12 hours per day, and impose a two-tier benefit system for current and future workers." When workers began striking and "agreed in near unanimity to protest against a series of abuses and violations by the company, and to show solidarity for the demonstrations against economic and social policies that affect us as workers", BHP illegally withheld the last-year's bonuses of the striking workers. All this happened in 2019 which can be regarded as the apogee of the capitalist combativeness of a financialized mining company. With the heavy financialization of BHP, the company was ruthlessly reducing unit labor costs to pay out greater dividends to shareholders and for consecutive years, it was successful in achieving its objective. In 2018, it paid out dividends of $6.3 billion (118 cents per share), representing an increase of 42% from FY2017. In 2019, it paid out dividends of $11.9 billion and pegged it total cash returns to shareholders at $17.1 billion.
The shareholder value maximization strategy followed by BHP was not entirely smooth and it involved an intensified exploitation of labor. According to the company, its Escondida unit costs declined by a steep 22% in the period 2012-13, suggesting the implementation of a wage squeeze policy by BHP. Along with wage squeeze, BHP also began massive layoffs, affecting 3% of the operation's workforce. Water scarcity imposed by mining companies is another important factor which has indirectly impacted workers. In the age of financialized companies, the problem of water scarcity becomes acute because the "rapid extraction of large volumes of resources becomes a primary driver of firm strategy." Since the price elasticity of supply in copper production is low due to "the capital intensity of production and long lead times for new capacity", there is the "potential for price spikes related to under-supply, and prolonged price slumps when excessively optimistic capital expenditure creates a glut." When companies get heavily dependent on equity financing and follow the logics of shareholder value maximization, this potential for over-supply gets aggravated. Whenever there is an inkling of demand increase, copper companies intensify resource extraction with the hope of increasing cash flows, increasing dividends and making one's company attractive for investors.
BHP too has internalized the "rapid extraction" strategy and in 2018, its production increased by 34%. This productivity increase was in part driven by the demand for EVs which are expected to consume more copper than internal combustion engines: "while typical internal combustion engine cars require around 23kg of copper, a hybrid electric vehicle uses 40kg of copper, a plug-in hybrid electric vehicle uses 60kg, a battery electric vehicle 83kg, and a hybrid electric bus 89kg. A battery-powered electric bus can use between 220kg and 560kg of copper, depending on the size of battery used. In total, copper demand from passenger car EVs is forecast to be nearly 1.9 million tonnes of copper per annum by 2035, overtaking demand from internal combustion engine cars."
As argued before, BHP's rapid extraction strategy proved to be unsustainable and in 2016, it was "accused by some Chilean environmental organisations of illegally extracting water from a local water system, the Salar de Punta Negra. They allege that this is causing damages such as the disappearance of animals and insects that support life in the driest desert in the world". In response to growing opposition, BHP developed desalination as an effective strategy in 2018 to continue its water-depleting operations in new forms. As explained by Maria Christina Fragkou and Jessica Budds, "the replacement of existing freshwater sources used for drinking water with desalinated water serves to create a freshwater surplus that can be diverted to dominant local industries. Furthermore, that the surplus comprises freshwater is also important, because this entails extraction (mainly groundwater pumping) costs, as opposed to production costs in the case of desalinated water, and is thus cheaper." Desalination, apart from providing BHP with cheap fresh water, is disadvantageous for Chilean copper workers because "as a produced (rather than extracted) source, desalinated water is more expensive, and production costs depend primarily on the costs of materials and consumables (e.g., membranes), and energy". Furthermore, transferring the entire urban water supply to desalination exposes the system to power cuts, mechanical failures, algal blooms, or damage from seismic events."
While it may seem that BHP was unantagonistically progressing through its agenda of dividend appreciation and destructive copper mining, the strikes staged by workers presents a different scenario. In 2018, a 44-day strike by copper workers at the Escondida mine raised copper prices to more than $7,000 a tonne [a four-and-a-half year high] and in this way, the workers "rattled the global copper market." In 2019, BHP acknowledged that "Escondida unit costs increased by seven per cent to US$1.14 per pound" due to "labor settlement costs" or what can be alternatively and less euphemistically called "counter-capitalist class struggle".
Workers at the Escondida mine derived the power to exponentially raise copper prices in a short span of time due to the globalization and financialization of copper production. A result of the financialization of copper mining companies has been the increased inter-imbrication of a wide range of financial actors in the production of copper. The inclusion of financial actors in the copper production process greatly increases the fragility of the entire process as market fluctuations in copper prices start occurring "on variations of confidence on the part of the investors, on current belief as to the probable policy or tactics of the business men in control, on forecasts as to the seasons and the tactics of the guild of politicians, and on the indeterminable, largely instinctive, shifting movements of public sentiment and apprehension." In this way, a worker's strike gains increased potency as the anticipated effects of a strike are greatly magnified by financiers who, instead of assessing material facts, "observe other's observation of the market". Further, through the collapse of the equity financing edifice, copper mining corporations lose their foundational pillars of resource extraction and are compelled to negotiate with workers.
Another effect of the financialization of copper mining companies has been the increase in the organic composition of capital. As mentioned before, due to the prioritization of shareholder value, mining corporations sought to increase their cash flow through increased productivity and lower costs. While the latter has been achieved through off-shoring, the former has been actualized through the increasing use of machinery. It is pertinent to note that in financialized mining, the objective is to not only drive down input costs but also to expand the output for increasing the shareholder value through tactics such as share buybacks. Copper mining companies enlarge their output by deploying more machinery and increasing the organic composition of capital.
In Chile, the most recent large-scale mechanization of copper production happened in 2019 in which Codelco replaced a third of its workforce at Chuquicamata with the introduction of mega-machines. While the mechanization of copper production does lead to the creation of a reserve army of labor, it also provides the proletariat with the power to control greater productive forces and therefore, stall production on a larger scale. As Leon Trotsky once wrote, "[The working class's] social power comes from the fact that the means of production which are in the hands of the bourgeoisie can be set in motion only by the proletariat". This position gives the proletariat the power to hold up at will, partially or wholly, the proper functioning of the economy, through partial or general strikes. From this it is clear that the importance of the proletariatgiven identical numbersincreases in proportion to the amount of productive forces which it sets in motion."
With the increasing financialization of copper mining companies, Chile is witnessing an intensified antagonism between labor and capital. The disproportionate enrichment of financiers in New York and London is being violently driven by the accelerated assault on the existential conditions of the Chilean working class. But the finance-driven exploitation of Chilean copper workers is not unavoidable and as we have seen, the proletariat has gained enormous power to destabilize and destroy the fragile scaffold of capitalism. What remains to be done is the initiation of an organized class war against the capitalists which will finally bring an end to the structural brutality of copper mining.
First published in ZNet
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