How the nationalisation of metal recycling may save our electricity and communications infrastructure from destruction

The ABC Radio National Background Briefing program, "Metals, money and madness" (2 Nov 2008), discussed the growing problem of theft of metals, particularly copper, often entailing the vandalism of electrical, rail or telecommunications infrastructure or any readily accessible artifacts, such as public statues and bronze medallions on gravestones.

In the words of John Seabrook of the New Yorker magazine:

"Well, there is a kind of apocalyptic aspect to it -- I would say a 'Mad Max' aspect ... of metal theft, and not only in the States, but in Europe, too, in the sense that the very infrastructure is being torn out -- ripping up lines from railway yards, taking bronze statues out of parks ... and melting them down, bronze medallions on grave stones, storm drains -- anything made out of metal that you can get away with -- manhole covers ... In the Ukraine a whole suspension bridge was stolen, railroad tracks are stolen. ... Round the world it's a big problem."

Other instances of metal theft include:

• In Victoria, in October, a truck pulled up at a new housing estate. The cover over the Telstra underground cable housing was removed, the cable was lifted out and hooked onto the truck, and the truck drove off, dragging 300 metres of cable. Evidently, the people in the truck believed the cable was copper and had not realised that Telstra now used cables made of less valuable aluminium.
• In South Australia, theft of copper power lines resulted in 30,000 homes being blacked out.
• In South Africa, a special police unit, known as the "Copperheads", has been formed to combat the theft of metal.
• In the U.K. the copper conducting wire, necessary to power trains, is regularly stolen.
• In Serbia, about a year ago, a large part of a communications network was crippled through theft of copper cable.
• In the U.S. theft of copper gas piping caused a gas leak and a house to blow up.
• A sculpture with a scrap metal value of only AU$200 was stolen from outside an art Gallery in Penrith NSW recently. In the U.K. a sculpture by Henry Moore has vanished.

In the U.S. and South Africa, drugs such as crystal methamphetamine, also known as "ice", have been deliberately supplied to metal thieves in order to make them oblivious to the risks entailed, such as the removal of live high voltage copper electricity transmission lines.

Such crimes have been driven, in part, by a reduction in output from the world's copper mines. Scarcity has driven up the price of copper. Copper currently sells for US$4,000 per tonne, but not so long ago, shot up to around US$8,500 per tonne or US$8.50 per kilogram, because of strikes by miners in some of the world's major copper mines.

#GovtVsMarket" id="GovtVsMarket">Managing essential resources: The role of government vs the market

About three years ago, when I argued on an online discussion against our excessive consumption of natural resources, particularly petroleum, the #comment-38089">inevitable argument came back to me from neo-liberal ideologues, that 'price signals' would fix everything and that any government intervention would only make our predicament worse.

"Governments will only be able to 'guide' the market where they have more wisdom than the sum of the governed. It may happen one day, but it has not happened yet. ..."

...

"At the moment there is no substitute (for petroleum). 50 years ago there was no substitute for bakelite. Before telephony there was no substitute for hiring someone to deliver messages (other than walking them around yourself). ... There may be large reserves of oil as yet undetected. The point is that no one knows; so trying to run around as Chicken Little did is senseless. Make sure the price signals are allowed to get through and the problem will be solved."

It is hard to believe that a thinking mature adult could espouse such ideas, yet most public policy over the last two decades or so has been, and continues to be predicated on such simplistic rationales.

Today, the 'price signals' that we were promised would solve everything for us are, in many parts of the world, driving a new crime wave that has the potential to destroy the basic infrastructure needed to keep civilisation functioning.

This comprises only part of the whirlwind that was sown when we were 'persuaded' to allow our destiny to be decided two or three decades ago by 'price signals', rather than by our collective human intelligence, as expressed through our elected political representatives.

In 1974 Minerals Energy Minister Rex Connor attempted to borrow money by unconventional means in order to buy back Australia's energy and mineral wealth in order to make Australia energy-independent. It is a matter of historical record that this was subject to a beat-up by the hostile newsmedia. It became known as 'the Khemlani affair', and led to the downfall of the Whitlam Labor Government in 1975.

Afterwards, Liberal Party Prime Minister Malcolm Fraser started a process which led to breaking down of limits to foreign companies owning Australia's mineral wealth. This has led to the circumstances of today where most of our one-off endowment is in the hands of foreign companies and is being flogged off at an accelerated rate to overseas countries. Our own production of petroleum has passed its peak and we can expect to become ever more dependent upon increasingly expensive petroleum imports.

Of course, the neo-liberal ideologues still insist that Australia is better off because the Whitlam Government was restrained from intervening in our mineral wealth sector and thereby prevented from impairing the claimed efficiency of the free market for all those years.

Across the world, other governments, guided by the same dogma, similarly stood back, as mining and petroleum companies largely helped themselves to their countries' mineral resources and encouraged accelerated consumption of those resources for commercial reasons.

Now the supply of many metals, as well as fossil fuels, that were treated then as either infinite, or easily replaceable, is now dwindling and we are beginning to suffer the consequences.

#PublicCost" id="PublicCost">Public cost and private profit

Strong evidence supports a view that some metal recyclers actively encourage the theft of copper. In view of the disruption and the enormous cost of replacement and repair of infrastructure destroyed by copper thieves, can we afford to leave the management of supply and recycling of essential materials to the market?

At the moment, the scale of the problem may seem manageable, at least in Australia. This is because, for many potential thieves, the risk involved in stealing copper, despite the high prices, probably well outweighs the few hundred dollars to be gained. However, in coming times of increasing economic hardship and scarcity-driven increases in the costs of metals, the rewards may be much higher and the desperation so much greater.

If we leave supply and demand to the discretion of private operations, as now, we stand to see much of our infrastructure destroyed as a result of theft.

Greater regulation of the metal recycling business has been proposed to combat metal theft. One proposal for metal has been a "tag and hold" system, similar to what now operates in the U.S., where scrap metal is tagged and held for up to 28 days after it has been bought to provide an opportunity for anyone who may have had that metal stolen to come forward and identify it. A similar system is also applied to second hand goods dealers prevent theft.

However, Luke Parker, the Managing Director of metal recycler Sell and Parker, objected to greater regulation of the industry. He argued:

I don't think it's fair to blame the scrap industry for advertising the fact that we recycle scrap, much as I don't think it's fair to blame Cash Converters ... for stolen video recorders, or stolen jewellery. That's not really the case, We advertise that we pay cash for scrap so people will recycle it. By far the bulk of scrap that's recycled is legitimately sourced, and we need to tell our legitimate customers that we're paying for scrap. However, it's fair to say as well that just as we're advertising to our legitimate customers some of the non-desirables also see the advertisements and think, "Well, there's a good deal there; I can get some cash for scrap regardless of how they acquire the scrap." But I'd be hesitant to say that because we operate in a competitive market and we have to market the fact that we recycle and we pay for the metal, and we do pay a handsome price for it, that we are somehow to blame for it.

Whether or not the scrap industry as whole is to blame, there is clearly a problem which can only get worse over time. Background Briefing reported, "In Victoria 33 people have been charged with copper theft, 16 scrap metal yards investigated and just under 49 tonnes of stolen copper reclaimed."

Of the 'tag and hold' method", Luke Parker objected,

"... Tag and Hold works fine for a hock shop that's holding jewellery, or holding video recorders, they don't get many in, they don't take much space, they're all very unique. But everyone that's walked through our site ever discussing promoting tag and hold, once you actually get into a scrap metal yard, have a look at what happens, have a look at the volume of materials coming through, tag and hold just wouldn't work. It would destroy the economics of the industry, it would make it impractical to do a lot of recycling and for very, very little benefit."

#CaseForPublicOwnership" id="CaseForPublicOwnership">The case for a publicly owned metal recycling service

Indeed, regulation could be costly. Perhaps then, the solution may lie in completely removing any incentive for scrap metal dealers to accept stolen metals. In other words, make metal recycling a government responsibility that is to be performed as a public service and not for profit.

This suggestion would almost certainly be dismissed out of hand by this society's opinion moulders as 'socialism'.

However, should such an objection prevent us from making a democratic choice to adopt, as a society, what may prove to be the only measure likely to prevent the eventual destruction of our electrical and communications infrastructure, which, together with with petroleum-fueled internal combustion engines, virtually defines industrial civilisation?

Obviously the idea of nationalising the scrap metal recycling industry is fraught with a number of political, economic and moral difficulties. Two of these are:

• What do we do about those people who worked hard to build up businesses which put to good use material which would have otherwise been wasted?
• How might such useful businesses be preserved in some form?
• How can we guarantee that the recycling of metals can be operated efficiently and not become a burden to the taxpayer?

In regard to the first two questions, it would be appropriate for the Government to offer fair compensation, that is within its means, for taking over the businesses. It should also see to it that the owners, manager and current employees of those businesses are employed by the Government Metal Recycling Service in appropriate capacities with wages and working conditions that are at least commensurate with what they currently enjoy.

To address concerns that employment by the Government will automatically lead to feather-bedding, there should be reasonable work performance benchmarks for all employees, but these should allow work to be conducted at a civilised pace and preferably for considerably fewer hours than today's norm of 38-40.

The charter of the Government Metal Recycling Service should be to recycle as cheaply as possible for the taxpayer, the suppliers of scrap metals and the consumers. The charter should also specifically include proactive discouragement of the theft of metals. In any case, without the profit motive, the crude economic incentives for operators to accept stolen metals would not be present.

For the Government Metal Recycling Service to run as efficiently as possible, its processes should be totally transparent to the public, except where this might encroach unreasonably upon the personal privacy of employees. There should be almost no business secrets and no "commercial in confidence" clauses in any contracts signed with the Government Recycling Service.

If the full nationalisation of recycling is considered too politically difficult for the moment, there should however be no reason, other than the usual blanket objections of 'free market' ideologues, why we could not at least set up a such a service to operate alongside private recyclers, with greater regulation of the latter. If that should prove insufficient to prevent metal theft and the destruction of our infrastructure, then we should look again at full nationalisation at some time in the future.

See also: transcript of ABC Radio National Background Briefing program "Metals, money and madness" (2 Nov 08).