This Section of Dodd-Frank Actually Kills People
If you’re having trouble getting to sleep, I recommend reading the Dodd-Frank Wall Street Reform and Consumer Protection Act. You can think of this as the financial version of the Patriot Act — that is, a broad, ambiguous power sweep by the federal government in the aftermath of a crisis. Wonks and pundits can argue for days about the problems stemming from such a complicated bill, ranging from unenforceable “proprietary trading” laws to crude social engineering. Few would lose too much sleep over default swap regulations or the Volcker Rule.
We ought to be outraged, though, over a rarely-mentioned part of Dodd-Frank: Section 1502. This five-page-long monstrosity, designed to shut down the “conflict mineral” industry in the Congo, actually destroys the lives of the people that it is trying to help.
The story begins with metals inside the machines you’re probably reading this article with. Pretty much all consumer electronic products, medical devices, and hardware gadgetry contain "the three Ts": tungsten, tin, and tantalum. To have all of these products we know and love, we need to do some serious importing with the help of our African friends.
The Democratic Republic of Congo is a huge player in the metals industry, but not without a cost. Millions of Congolese depend on the industry that brings in almost 15% of national income, but profits from mining feed into a violent civil war that has claimed more than five million lives. Mining sites, which are heavily concentrated in the eastern part of the country, are regularly extorted by violent militia groups.
But if metal money is feeding the payroll of violent psychopaths like Sultani Makenga, then shouldn’t we just stop buying from the war zones? That’s been the thinking of groups like the Enough Project, which has encouraged companies to list their metal sources for years. The idea is that by consistently shaming companies like Nintendo with blood in their pockets, the transition will be made away from “conflict minerals.” Advocacy groups celebrated the passage of Section 1502 of the Dodd-Frank Bill, which requires companies purchasing these metals to file a report stating the sources. In practice, the complexity of this process is enough to dissuade companies from taking their business to Congo altogether. The 2009-2011 period saw a business exodus away from the war-torn country; local prices for the “three Ts” plunged as U.S. demand went down the drain.
With less profit available for thugs to extort, you’d expect Congo to be getting far less violent. You’d be wrong. As it turns out, the conflict is considerably more complicated than the black-and-white picture offered to Congress by well-meaning activists. It’s true that a lucrative funding source for militia groups is drying, but this violently alters the behavior of some of the biggest thugs out there.
Think like famous mob men Vito Corleone or John Gotti for a minute. An industry or neighborhood solidly under “mafia” control with a profitable future needs to be kept peaceful, otherwise that profit would dry up. Any investment you make can’t be bloodied up too much, or it won’t be of use to you in the future. If a mineral mining site you “own” through extortion will be of little value in the future, you are free to violently bleed it dry and walk away. This is called “scavenger” behavior, and researchers Parker and Vadheim document a spike in violent behavior toward workers at these mining sites after the Dodd-Frank virtual ban was enacted.
Miners that survive with limbs and lives intact see their paychecks vanish, as demand for their product rapidly deteriorates. For men and boys alike, what other response is there but to join the local militia? As much as one fifth of the country lives off metal revenue; taking up arms is the alternative.
Legislators and activists only have the best intentions, but they’re unintentionally doing the work of the devil. Millions of Congolese have lost their only source of income, and have suffered dearly. Meanwhile, new militia groups are emerging and an increasing proportion of violence is directed toward civilians. We can save more mundane debates about Dodd-Frank for another day, but Section 1502 needs to go.