The Effect of Government Involvement on the Economics of the Base Metals Industry

Abstract

The correctness of the statement that surplus production and depressed prices in the base metal industries are the result of state ownership in the mining industry is examined by analyzing the production figure of publicly and privately owned companies. The conclusion is that for some metals the statement is true. But it is equally true that, for some, privatelyowned mining companies have also maintained high levels of production in the face of depressed demand. The reasons why both state and privately owned mining companies have not been able to rationalize production are examined. For privately owned companies it is suggested that a shift in the method of financing mineral projects, i.e. from retained earnings to bank loans, is an important factor.