Rare Earth Mania
Rare earth metals have been in the news quite a bit due to growing concerns about China’s ability to exploit its market dominance in the production of these important inputs to electronics. Leonid Petrov recently created a stir with a piece in the Asia Times titled “Rare Earths Bankroll North Korea’s Future” which argued that the country’s rare earth deposits could allow North Korean leader Kim Jong-un to enrich the country without reforming and that South Korea is cooperating with North Korea to exploit its rare earth deposits. Petrov envisions a future in which “The export of rare earth metals will replenish the state coffers; stimulate the loyalty of the elites to Kim Jong-Un's autocratic rule; and secure the growth of consumption among the ordinary people,” nicely encapsulates the resource curse issue that I addressed in an earlier post. Petrov concludes that “Although the political regime will remain dictatorial, the idea of unification with the South by war or absorption will soon become meaningless. The purges of political elites and the mass starving of ordinary people inNorth Korea will cease. Gradually the level of prosperity in the two halves of the divided Korea will start equalizing, opening more opportunities for greater exchange and cooperation.”
Having already been asked by one journalist to comment on the story, I asked my colleague Gary Hufbauer, who has been following the rare earth metals story for some time for a reaction. He struck a somewhat more skeptical note, observing that the processing technology for rare earths metals is “extremely complicated” with only China, Japan, and a few places in Europe having processing plants. So while North Korea might have substantial deposits, it will probably be several years before it can acquire the processing technology. Meanwhile, any shipments will be exported as relatively low value ore and probably require complementary investments in the dilapidated transportation infrastructure.
And until that occurs, it might be a little early to celebrate Rare Earth….