How to Defeat the New Era of Extractavism

In 2002, as the price of gold was soaring and the government of El Salvador was incentivizing foreign investors, a group described as “white men in suits” entered the country in search of gold. They represented a small Canadian-based mining corporation called Pacific Rim, known as Pac Rim. They zeroed in on an area in northern El Salvador where gold was known to be.

Local residents began to study possible consequences of a large gold mining effort in their community. Residents of the region concluded that gold mining would be a threat to their water supply due to its use of toxic cyanide, its diversion of water needed for farming, and the potential release of arsenic at the mining site.

Pac Rim initially offered bribes to the growing group of anti-mining activists and their neighbors — everything from money to prostitutes. When that failed, the assassinations began. A key organizer was tortured to death and three other activists were shot to death. But the anti-mining organizing continued unabated.

The war of big gold against the people of El Salvador began in 2004 and continued until 2017. The fight to save El Salvador’s water not only cost many protectors their lives, but the resulting corporate backlash threatened to bankrupt the nation of El Salvador itself.

In the face of violence and repression, El Salvador’s water protectors achieved something monumental: a national ban on metal mining. But the story didn’t end there. Taking advantage of investor-friendly laws written into trade agreements, Pac Rim sued El Salvador for a vast sum — a stark challenge to the sovereignty of the impoverished country.

In turn, El Salvador’s water protectors ended up challenging the very foundations of neoliberal capitalism. They successfully fought back against a global institution designed to remove all obstacles to capital’s ability to go where it pleases, whatever the consequences for local communities.

Robin Broad and John Cavanagh’s The Water Defenders offers a front row seat for an incredible and successful struggle by these courageous and politically savvy local water defenders against “big gold” corporations.

The Local Movement That Fought International Capital — and Won

The Water Defenders, by Robin Broad and John CavanaghBroad and Cavanagh are able to water defenders coveroffer us such an intimate look at this important struggle because they participated in it. They marshaled international support for these locally led organizing efforts while conferring regularly with Salvadoran activists.

Their book reads like a page-turning mystery novel. Even though I knew what the outcome of the struggle would be, I found myself devouring the chapters with great anticipation as I read. For me, the book and the struggle it unpacks is vitally important for three reasons.

One is that it offers the anatomy of a local struggle that grew into a national struggle before leaping to the world stage. Documenting the organizing of the water defenders and their international allies — and the machinations of global capital intent on getting their way — is important to all of us who seek an end to the destruction of the environment and are looking for paths to a just and sustainable society.

Second, this book is the best account I have read of the workings of an obscure global institution designed to undermine any obstacles to the mobility of global corporations. I am referring to a provision of nearly all bilateral and multilateral trade and investment agreements known as the “investor-state clause,” under which corporations can sue governments over public interest laws, such as environmental or worker safety and health provisions, that could potentially lower their profits.

Third, The Water Defenders points to a key fork in the road as global capital as a whole seeks a way to overcome its own crisis-ridden trajectory. Mining is part of a global trend of “extractivism” that also includes building dams and other infrastructure and logging forests to accommodate the relentless growth of the global system. The reliance on such “extractivism” harkens back to the very beginnings of capitalism — what Marx called “primitive accumulation.”

The second and third points regarding the importance of this book require further explanation.

A Special Court System for Corporations

I first learned of the “investor-state” mechanism when I worked in a coalition called the Hemispheric Social Alliance (HSA) opposing the North American Free Trade Agreement (NAFTA).

The negotiations between the U.S., Mexico, and Canada to draft NAFTA were for the most part secret, although the U.S. Business Roundtable and Chamber of Commerce managed to get seats at the table. After a negotiating session that was held in Dallas in 1993, the text of the positions of the three nations was leaked.

An anonymous staffer gave the secret draft of NAFTA to HSA representatives. The so-called “Dallas Draft” gave us the first concrete picture of the details of what was to become NAFTA. The HSA immediately called a meeting in Mexico City and did a “tri-national citizen’s analysis” of what we saw.

The investor-state clause in the “Dallas draft” was of particular concern. The clause gave foreign investors the right to sue governments over any national or local laws that might limit their profits. Two opaque dispute resolution tribunals, one within the United Nations and the other in the World Bank, would adjudicate such lawsuits — and their decision would supersede the authority of domestic laws and national courts.

Prior to NAFTA, dispute resolution rules simply protected foreign corporations from expropriation. But NAFTA greatly expanded the use of the investor-state concept as well as the authority of the secretive tribunals. As a result, NAFTA and future trade and investment agreements based on it threatened environmental and worker health and safety standards all over the world.

The investor-state clause in NAFTA became a lightning rod for a widespread organizing effort to stop the so-called “trade agreement” in its tracks. But NAFTA was enacted anyway and signed in 1994. And NAFTA, in turn, became a model for a variety of bilateral and multilateral investment and trade agreements from that time on.

El Salvador Goes to Court — in Washington

El Salvador’s mining ban is exactly the sort of protection for local communities and their environment that these provisions are designed to jeopardize.

As local, national and international forces launched a rigorous campaign to protect El Salvador’s water, Pac Rim began to falter. But that wasn’t the end of the struggle. Instead, Pac Rim was taken over by a bigger, even more powerful Australian-based firm called OceanaGold, which then pursued the investor lawsuit against the government of El Salvador.

The process of adjudication is described in detail in The Water Defenders. It was carried out by a tribunal of corporate lawyers employed by the International Center for Settlement of Investment Disputes (ICSID), one of the entities that make up the World Bank group. The hearings were held in their Washington, D.C. offices.

By the time the hearings began in 2009, investor-state laws were well established. But the struggle being waged by local, national, and international activists and lawyers put up a vigorous challenge. Still, fighting these suits is expensive. Broad and Cavanagh demonstrate how the corporate parties in investor-state suits are able to delay the process with the objective of imposing huge costs on small and poor states like El Salvador.

OceanaGold’s suit against El Salvador went on for over seven years. El Salvador was forced to accrue legal costs and forego other needed investments in the nation. In many other cases that have been adjudicated since 1994, governments have had to settle by giving the corporations what they wanted.

But one valuable aspect of The Water Defenders is that it specifies not only how corporations can use the investor-state mechanism as a weapon against people like the water defenders, but also how a small group of activists and a poor nation like El Salvador can fight back. In the end, OceanaGold suffered a rare defeat in the tribunal over the relatively narrow issue that the company had not gained title to much of the land where the mine was to be built.

Extractivism Goes Global

The role played by the World Bank’s ICSID court in the water defenders’ struggle points to another reason why this is such an important book.

The World Bank was created at the end of World War II to rebuild a devastated world. The Bank gave loans to facilitate industrialization and the movement of resources from colonies or former colonies to industrialized nations. But in the 1960s, this system, for a variety of reasons, began to falter. It was challenged as colonial nations waged wars of national liberation and the working classes and various oppressed groups in the industrial nations waged their own wars at home.

These developments brought about a shift in the broader system of global capital accumulation that is known today as globalization or global neoliberalism. Its aim was to enable hyper mobility for capital and the use of finance as a commodity in its own right. To achieve these aims, many of the institutions designed to promote the failing system were repurposed. The World Bank is one of these, and the adjudication of investor-state disputes is one manifestation of the repurposing. The Bank became part of a “new world order.”

In the post World War II era, a system of “Fordist” mass production in industrialized nations prevailed. But beginning in the 1980s and 1990s, new technologies enabled a single product to be produced in different countries and assembled someplace else. That, plus the terms of trade and investment agreements, enabled deindustrialization in countries like the U.S. and industrialization in formerly “less developed” or “underdeveloped nations.” The purpose of the institutions like the World Bank was directed at facilitating the new system.

At this point, global neoliberalism itself is beginning to falter. A newer world order is likely in the making, and we will see some new directions and new or repurposed institutions in the near future. There is no way of knowing exactly what this will look like, but one aspect may well be a renewed emphasis on “extractivism” in a different context than has previously existed. That context includes a climate crisis and a global “surplus population” not needed for the world order.

El Salvador’s struggle against big gold is one of a number of struggles where extractivism threatens livelihoods and environmental destruction. Extractivism generally contributes to global warming, the poisoning of our water and air, and the release of new viruses. Mining, oil pipelines, logging, clearing land for rapid urban development, and the building of hydro-electric dams are all being driven by the needs of capital for growth to keep the system going.

In capitalism’s early days, peasants were displaced from their land and turned into wage laborers who could be a source of value. Marx termed that “primitive accumulation.” In many ways, extractivism is a modern form of primitive accumulation.

Big Gold was more than willing to use the investor-state mechanism to poison the water of much of El Salvador and possibly neighboring Honduras for their mining operations. Some of those who would be displaced by the process were, as The Water Defenders reveals, offered jobs. But as today’s environmental activists teach us, “there are no jobs on a dead planet.”

Extractivism is driven not only by potential profits but by the need of global capital for growth and sources of value to be accumulated and distributed. That is why global institutions like trade and investment agreements and a repurposed World Bank were created.

Another Way Forward

A global order dependent on extractivism threatens the planet itself. But if a transition away from fossil fuels is built on the need for rare earth metals for “clean” energy — and an infrastructure that requires hydrocarbons for their construction — we are left with the same global problem. So the destruction of peoples’ lives and lands through extractivism may well multiply around the world and generate multiple struggles.

The struggle of the people of El Salvador against Big Gold can be seen as a portent of more to come. But we can learn from it. And what we learn of that struggle through Robin Broad and John Cavanagh’s account will likely become even more critical to those seeking a just and sustainable world well into the future.

This first review appeared on FPIF.

David Ranney is Professor Emeritus of Urban Planning and Public Policy at the University of Illinois Chicago. His most recent books include: Global Decisions, Local Collisions (2003); New World Disorder (2014); Living and Dying on the Factory Floor (2019); and a play with Donna Russell, Dear Rhoda (2021).