Regional development, redistribution and the extraction of mineral resources: The Western Australian Goldfields as a resource bank

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Applied Geography 45 (2013) 365e374

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Applied Geography

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Regional development, redistribution and the extraction of mineralresources: The Western Australian Goldfields as a resource bank

Matthew Tonts*, Kirsten Martinus, Paul PlummerSchool of Earth and Environment, The University of Western Australia, 35 Stirling Highway, Crawley, Western Australia 6009, Australia

Keywords:Regional developmentMineral resourcesStaples thesisAustralia

* Corresponding author.E-mail address: [email protected] (M. To

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a b s t r a c t

The first decade of the twenty-first century was one of the most prosperous in Australia’s history. Theboom was led by a buoyant minerals and energy resource sector, contributing to high levels of economicgrowth, rising real wages and low unemployment. Yet, as with the nation’s previous resources booms,there were marginal transformations in the economies of those regions from which the minerals wereextracted. Overwhelmingly, the wealth generated by the resource boom has concentrated in the cities.Moreover, public expenditure in resource regions also remains comparatively low, and indeed tend toreproduce a development framework oriented towards extraction rather than diversification. This paperemploys elements of Innis’ staples thesis to help explain this pattern of regional development, and inparticular the relatively low levels of reinvestment in resource peripheries. Drawing on the notion of a’resource bank’, we contend that resource regions are often viewed as a reserve of latent wealth that canbe drawn upon for the benefit of the urban ’core’. Yet, we also highlight emerging strategies aimed atovercoming this and that seek to return a greater proportion of wealth to those regions from which itwas extracted.

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Introduction

Natural resources have played a defining role in the evolution ofAustralia’s economy, contributing substantially to export earnings,gross domestic product, foreign investment and employment.Arguably, at no time has this been more apparent than during thefirst decade of the twenty-first century, when the nation rode awave of prosperity largely as a result of the exploitation of sub-stantial natural resource endowments (Cleary, 2011). In the 2011financial year alone, the combination of mining and energy re-sources contributed 55 per cent of export earnings and 8.4 per centof gross domestic product (Australian Bureau of Statistics, 2012). InAustralia’s most resource dependent economy, Western Australia,the economy grew at an average annual rate of 4.5 per cent be-tween 1991 and 2009 (Battellino, 2010), with the major mineraland energy commodities contributing 78 per cent (A$95 billion) ofexport earnings in 2012 (Department of State Development, 2012).Indeed, Western Australia provides an exemplary case of aresource-led economy. In the 1890s, the discovery of gold helpedkick-start the economy and enabled the Colony to escape the eco-nomic depression that affected much of eastern Australia (Crowley,

nts).

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1960). Moreover, major iron ore projects in the 1960s, nickel andbauxite discoveries in the 1970s, and oil and gas exploitation fromthe 1980s have created an overall picture of economic prosperity,wealth and abundance (Bolton, 2008).

Conceptually, Western Australia appears to fit closely with thestaples thesis, which emphasises the development trajectories ofperipheral places dependent on the export of raw materials (seeBertram, 1963; Hayter & Barnes, 1990; Walker, 2001; Watkins,1963). While this body of work points to the potential for rapidgrowth and industrial diversification to occur around the exploi-tation of export staples, it also stresses that there is nothing auto-matic about these processes (Hayter & Barnes, 2001). Indeed, localabundance can often lock in resource dependence, as opposed togenerating diversification, ultimately making such places suscep-tible to boomebust cycles that are ‘cyclonic’ in their speed anddevastation (Keeling, 2010; Walker, 2001). Much of the empiricalresearch inspired by staple theory has tended to show that thoselocalities from which resources are extracted are often economi-cally and socially vulnerable, and subordinate to economic andpolitical ‘cores’ (Barnes, Hayter, & Hay, 2001; Bunker, 1989; Gunton,2003).

Many of the challenges elaborated in staple theory are evidentin processes of regional development in Western Australia. At amacro-level, the State has tended to avoid the sharp booms and

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busts often associated with resource dependent economies,largely because of the diverse range of commodities produced(Department of Treasury and Finance, 2004). However, at regionaland local scales, where diversity is generally less characteristic,volatility and vulnerability are the norm (Tonts, Plummer, &Lawrie, 2012). As Barnes et al. (2001, p. 2132) have pointed outin a Canadian context, while there are periods of rapid growthand/or stability, “destruction and bedlam are always waiting inthe wings”. The micro-geographies of these places are oftenshaped by forces operating at wider spatial scales, includingfluctuating global commodity prices, geopolitical circumstances,and the vagaries of national and state policy. Indeed, on this latterpoint it is often the case that policy frameworks in stapleseconomies have tended to reinforce vulnerability. For Markey,Halseth, and Manson (2008), resource dependent regions areoften seen as a store of latent financial capital that can be used forinvestment in a range of publically funded projects, includinginfrastructure, services and land development. In effect, theseregions represent a ‘resource bank’ from which to withdrawcapital. However, as Markey et al. noted, this rarely results insignificant investments in those regions from which resourceswere extracted. Indeed, they suggest that the benefits tend toaccumulate in cities and ‘core regions’, with disinvestment andmarginalisation often characterising those regions providing thecapital, thereby reinforcing the nature and degree of the geogra-phy of uneven development. Not surprisingly, this often manifestsitself as a tension between local interests that regard themselvesas marginalised, and the wider governmental and private sectoragendas.

While this type of uneven development is not new, and has longbeen of interest to geographers, regional economists and othersocial scientists, it continues to raise policy relevant questionsabout the nature of spatial redistribution and cross-subsidy. In thecase of Western Australia, there is a longstanding concern on thepart of regional industries, residents and politicians that, despitetheir significant role in the generation of economic prosperity forthe State, their interests and needs were not being met (Tonts &Jones, 1997). Recent policy developments have begun to see thischange, with a return to what some describe rather colourfully as‘bush socialism’. At the heart of this is a challenge to the central-isation of capital investment, and a reconsideration of the role ofredistributive policies that attempt to recognise the geographicalorigin of capital and wealth.

This paper examines the ways in which staples dependence isshaping processes of regional development in an Australiancontext, focussing in particular on the issue of spatial redistri-bution. It begins by exploring the ways in which staple theoryprovide insights into the nature of regional development inresource dependent economies. This conceptual scheme providesan interpretation of the economic centrality of resource depen-dent regions as a source of latent financial capital that, at thesame time, renders these places marginal in terms of govern-ment investment and expenditure. The paper then applies thisframework in an interpretation of the development of theGoldfields region of Western Australia. It traces the evolution ofthe Goldfields resources industry and its role in the widerWestern Australian economy, giving consideration to how gov-ernments and society have long regarded the region as aresource bank. The paper then considers the patterns of eco-nomic performance, state revenue generation, and public ex-penditures in the region, unpacking the nature of redistributionand cross-subsidy. Finally, the paper considers recent politicaland policy shifts that, at least rhetorically, begin to challengediscourse of resource led economies as the marginalised resourceperipheries.

Natural resource exploitation, capital accumulation andredistribution

In many ‘new world’ economies, the exploitation of natural re-sources has been an essential component of development. AsWalker (2001: 167) points out, the ‘plunder of nature’ in the formsof agriculture, forestry, fishing and mining was essential to theemergence of nations such as the United States, Canada andAustralia. Yet, within these nations there is considerablegeographical variation in the economic, social and environmentalimpacts of this resource-intensive development. While someprovinces and localities have managed to sustain growth andprosperity (Walker, 2001), there are numerous examples ofresource regions experiencing economic collapse, stagnation andmarginalisation (Freudenberg, 1992; Halseth, 1999; Markey et al.,2008; Wilson, 2004). As Hayter and Barnes (2001) suggest, theexperience of these regions is ultimately tied to the ebbs and flowsof global capitalism. However, it is also clear that particular insti-tutional frameworks, policy approaches and political sensibilitiesshape the fortunes of resource dependent regions. A distinctfeature of such regions is that they are largely sites of capitalextraction, rather than meaningful investment (Markey et al.,2008). From the perspective of public policy and expenditure, thisrepresents a significant redistribution of capital from resource‘peripheries’ to urban ‘cores’.

A particularly useful conceptual lens through which to under-stand the role of natural resources in processes of regional devel-opment is staple theory, developed by Canadian economic historianHarold Innis (see Innis, 1930; 1933). In essence, staple theory is anexport-led model of growth based on the exploitation of naturalresources and external economic linkages (Altman, 2003; Hayter,2000; Wellstead, 2007). It assumes that resources are the leadingexport given relatively low domestic demand and relative abun-dance of land to labour and capital. In its optimistic form, stapletheory holds that economic development occurs as the resourcesector stimulates other industries, eventually leading to diversifi-cation (Watkins, 1963). As a counterfactual, it is presumed that aregion would have been significantly poorer if it were not for in-vestment in its resources and if factors of production were reallo-cated to non-staple production (Altman, 2003; Wellstead, 2007).This implies that success in production depends upon comparativeadvantage in ‘resource endowment, international commodity pri-ces, transportation costs, and relationships with internationaltrading systems’ (Bertram, 1963: 163).

While the staples thesis is an export-led perspective on eco-nomic development, Altman (2003: 234) argues that understand-ing supply-side factors is critical, as not doing so ‘in investigatingand identifying sources of export-led growth tends to paint anincomplete and misleading picture of the growth process’. He ar-gues that the supply-side aspect leads to a form of government-industry collaboration aimed at decreasing production costs. Thecentral imperative is to minimise the costs of resource exploration,extraction and transport to market. Indeed, government invest-ment in transport systems has been a central feature of stapleseconomies, and is a direct reflection of the imperative to managethe cost of production (Watkins, 1963).

The economic histories of Canada and Australia are testament tothe significant interest of the state in the development of transportcorridors and hubs, primarily as a means of moving raw materialsfrom peripheral regions to the industrial core (see Glynn, 1975;Hayter & Barnes, 1990). This has a number of implications forregional development. First, a highly developed transport networknot only removes commodities quickly from a region, but meanstechnology can be easily imported from elsewhere (Barnes &Hayter, 2005). Second, the speed at which the raw resource is

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exported from resource regions has profound implications for itscapacity to engage in downstream processing. This runs counter tothe optimistic form of staple theory that suggests regional eco-nomic development will be stimulated by direct investment in thenatural resource and through ‘spread effects’ operating at regionaland local scales (Altman, 2003; Gunton, 2003; Keay, 2007;Watkins,1963; Wellstead, 2007). These spread effects include forward,backward, final demand and fiscal linkages, all of which arehypothesised to contribute to local and regional growth anddiversification (see Altman, 2003).

However, as Barnes and Hayter (2005) have observed, eachstaple has the potential to build up particular institutional, socialand geographic structures that, in turn, shape development tra-jectories that ultimately can result in little economic benefitaccruing in the producing region. At the heart of Barnes and Hay-ter’s thesis lies the unequal power relationship between the core,which controls or processes the staple, and the periphery, whichproduces it. There are a number of reasons for the existence of thisunequal power relationship. First, the high capital costs involved instaple production mean that large firms, external to the region, areoften the key players in development. Such firms tend not to formstrong local linkages (Freudenburg, 1992), and generally viewresource regions simply as sites of extraction (Markey et al., 2008).Second, institutional structures focused on regulation, infrastruc-ture development, and investment are normally centralised, min-imising political control within staples regions. As Barnes et al.(2001: 2132) suggested, “power and decision-making are alwaysvested in the metropole, and the consequence is that the localresource sites over which power is wielded necessarily become themargin”. For Innis (1930), these intertwined core-periphery re-lationships can lead to excessive levels of regional specialisation, inwhich the staple region becomes subordinate to the needs anddemands of the centre. Third, political and business interests tendto focus on promoting the staple and not necessarily wider forms ofeconomic development (Markey, Pierce, & Vodden, 2000;Wellstead, 2007). Markey et al. (2000) attribute this to the lack ofdefined economic benefits outside of a resource (i.e., overly-focusedon short-term profits). Coupled with inadequately identifiedregional differences, this may lead to distortion in governmentassessment and analysis frameworks aimed at distributing fundingfor long-run capacity building and development (Markey, Halseth,& Manson, 2006). This becomes of particular importance given thecentral role that political power can play in redistributing wealth togenerate domestic sources of capital for economic growth, ratherthan relying on foreign sources.

There is also evidence to suggest that the changing geographicorganisation of both firms and labour markets has exacerbated thiscore-perhiphery tension. In the case of mining, no longer arecompanies internalising services and functions, but are makingincreasing use of sub-contracting arrangements (Pritchard, 2003).Thus, activities such as transport, maintenance, geotechnical ser-vices, recruitment, finance, catering and laundry are often sub-contracted to specialist businesses based in capital cities. Thesearrangements ultimately reduce the level of meaningful invest-ment, economic activity and employment in resource regions(O’Connor & Kershaw, 1999). Moreover, labour arrangements arebeing transformed radically as a result of fly-in/fly-out and drive-in/drive-out work (see Houghton, 1993; Storey, 2001). Under sucharrangements, workers live in or near the capital cities and simplyuse these forms of long distance commuting to access mine sites.Such has been the concern about the impacts of these practices inAustralia that the Federal government established a ParliamentaryCommittee to investigate the impacts of these practices. The title ofthe report is tellinge Cancer of the Bush or Salvation of Our Cities? eand highlights some of the tensions associated with uneven

development (see House of Representatives Standing Committeeon Regional Australia, 2013).

According to dependency theorists, the challenges facing thestaple region are exacerbated by the nature of demand (Gunton,2003). Since staples are generally export-oriented, they are sub-ject to volatile global commodity markets, contributing to consid-erable instability and declining terms of trade. Indeed, Freudenburgand Wilson (2002) suggest that the rises and falls in commodityprices can contribute to processes of ‘flickering’ in which there areperiodic shutdowns of operations as prices fluctuate above andbelow the costs of operating in specific locations. This has signifi-cant implications for local communities, where unemployment,low incomes and poverty are widely reported during the ‘off’ pe-riods, while problems such as labour scarcity and housing short-ages present problems during the ‘on’ periods (Freudenberg, 1992).Nonetheless, a far more significant challenge facing resource pe-ripheries is the finite nature of most non-renewable resources.Ultimately, as these resources are exhausted, regional economiescan face major social and economic upheaval (see Bradbury &Sendbeuler, 1988; Keeling, 2010; Randall & Ironside, 1996; Tonts,2010; Wilson, 2004).

The potential volatility and vulnerability within resourcedependent regions is not simply the outcome of market in-teractions. As Innis (1933) was at pains to point out, institutions,culture and social norms all play a role in shaping the nature ofstaples dependency. Indeed, with reference to the role of the statein Canadian development, he observed that government had ori-ented itself squarely toward the exploitation of the staple, andtherefore played a critical role in the peripheralisation process. Asgovernments become increasingly financially dependent on thestaple, their support of its further development is cumulative(Gunton, 2003). This includes: guaranteeing firms’ access to sta-ples; developing subsidised infrastructure to facilitate ease ofexport; supplying social infrastructure and housing to sites ofextraction/production; and, engaging in a range of labour marketprograms aimed at supporting resource industries. The outcome isa staples trap, in which governments become increasingly finan-cially tied to a particular form of economic production, and aretherefore unable to move beyond resources dependence (seeAltman, 2003; Hayter & Barnes, 2001; Watkins, 1963; Wellstead,2007). In the long run this is likely to lead to the abandonment ofresource sites when resources run out.

In this context, the staples trap is not simply an economicphenomenon, but a cultural one; where a set of norms, principlesand acceptedwisdoms emerge that help to reproduce high levels ofdependence and a narrow economic base. This is perhaps mostevident during ‘boomtimes’ when public and political discoursefocus on the benefits of the production of particular staples, andencourage further cumulative investment and dependence. In arecent paper, Markey et al. (2008) also suggest that the staple isoften imagined by both government and wider society as a sourceof stored financial capital that can be drawn upon for benefit of thecentre. Their view is that the control of the assets of this ‘resourcesbank’ by the metropole leads to a concentration of benefits in thecentre, to the detriment of the periphery. This problem is exacer-bated by the geographical setting of resource dependent regions,which are often spatially isolated from decision makers, the bulk ofa state’s population, and major media outlets. For Markey et al.(2008), by being hidden, the experiences and problems of suchregions are often overlooked or misunderstood. Consequently, thewealth generated by these regions tends to be reinvested in pro-jects focussed on the metropolitan core, resulting in a risingsentiment that “governments and industry are simply drawingdown from the resource bank, without making adequate rein-vestment deposits” (Markey et al., 2008: 412).

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The resource bank metaphor is closely linked to notions ofeconomic redistribution. While the regional development litera-ture often invokes notions of spatial redistribution from core toperiphery, a number of scholars suggest that the reverse is true,with peripheral regions underscoring the development of themetropolitan core (Gunton, 2003; Markey et al., 2006; 2008). Suchconcerns are a feature of the Australian economic and politicallandscape with resource peripheries long being drivers of the na-tional economy, from the nineteenth century when the country‘rode on the sheep’s back’, to the development of extensive min-erals and petroleum industries in the late twentieth century. Yet,according to staple theory, much of the wealth generated by theseassets accumulates in State capitals. Of course, from a widerperspective, these capitals are largely hubs through which unpro-cessed commodities are transferred to global markets and are,themselves, somewhat marginal in the world economy (O’Connor,Stimson, & Daly, 2001; Tonts & Taylor, 2010, 2013). Nevertheless,within the nation, this process of uneven development has oftenled to the marginalisation of resource dependent regions.

The title of Pritchard and McManus’ (2000) collection on theproblems facing regional Australia in the late 1990s, Land ofDiscontent, neatly captures the sentiments of many living inwhat is,on one hand, the engine room of the national economy and, on theother, the socio-economic poor relation. Despite primary industries(including mining, agriculture, forestry ad fisheries) contributingsome 65 per cent of the nation’s exports (Australian TradeCommission, 2011), on a range of social and economic indicators,including incomes, access to essential services, health and educa-tion status, housing quality and affordability, such places performless well than their urban counterparts (Baum, O’Connor, &Stimson, 2005). However, even within regions there are signifi-cant cleavages on social and economic indicators. Pritchard (2003),for example, points out that in the Kimberly region of northern

Fig. 1. The Goldfields c

Western Australia two quite distinctive circuits of capital operate e

one linked to the resources sector, and the other linked to publicwelfare for Aboriginal communities. That these circuits rarelyintertwine has given rise to considerable discussion about thechallenges associated with uneven development within regions(Langton, 2010). These developmental challenges have given rise togrowing popular and political calls to reconsider the nature of aredistribution of capital from the periphery to the centre, towards amodel that better recognises the geographical origin of wealth andthe broader socio-economic needs of people living within regions(Beer, Stimson, & Pritchard, 2003; Langton, 2010; Pritchard &McManus, 2000). While this is not an unreasonable ambition, itultimately does little to challenge the notion of a limitless supply ofcapital from the natural resources bank, and is unlikely to liberateresource peripheries from the staples trap.

The evolution of the Western Australian Goldfields

The Goldfields of Western Australia is one of Australia’s mostimportant and enduring resource regions (Fig. 1). Prior to the dis-covery of gold in the region, Western Australia’s economic devel-opment had been modest, relying on a small agricultural sector,timber resources and whaling. Development had been constrainedby a combination of isolation, a lack of private and public sectorinvestment, and a small population (Bolton, 2008). The discovery ofgold in 1892 near the town of Coolgardie proved to be an economicwatershed, stimulating considerable foreign investment,improving the creditworthiness of the colonial administration, andcontributing to rapid population growth (Bertola, 1992). Indeed,between 1891 and 1911, Western Australia’s gold productionincreased from less than one tonne per annum to over 45 tonnes(having peaked at over 60 tonnes in 1903). Over the same periodthe population grew from just under 50,000 to more than 287,000

ase study region.

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(Bolton, 2008). Much of the migration was from Australia’s easterncolonies, where a severe economic depression saw a substantialtransfer of monetary capital across to the West (Lourens, 1979).Moreover, as a means of controlling the intentions of individualfortune-seekers who were seen as contributing little capital,Western Australia introduced laws that encouraged ‘deep mining’(Department of Treasury, 2004). This set a historic and culturalprecedence for operations to be conducted by highly-capitalisedcompanies - most of which came from outside of not only West-ern Australia, but also Australia (Harvey & Press, 1990). The sub-sequent flight of profits to the Eastern States and overseascontributed to local discontent, since many of the benefits ofmining were seen as accruing elsewhere (Department of Treasuryand Finance, 2004).

The Goldfields’ economic success is set against Australia’s longhistory of heavy reliance on resources, and by default world de-mand for resources, for its prosperity (Maddock & McLean, 1987).Indeed, Australia’s development as a colonial peripheral resourceregion servicing its British central core coupled with its sparsepopulation in relation to land mass follows development patternsoutlined in ‘classic’ staple economies (see Bertram, 1963; Hayter &Barnes, 2001; Wellstead, 2007: 14). Exports of raw materials, suchas gold, provided the income to pay for its increasing demand formanufactured goods from the industrialising centre of Britain(Maddock & McLean, 1987). Thus, the economic developmentmodel was:

.based largely on the importation of labour (immigrants) andcapital (British savings) to exploit the natural resource endow-ment (agricultural and mineral) for the production of a numberof resource-intense commodities in which Australia had acomparative advantage

(Maddock & McLean, 1987: 13)

As suggested by the staples thesis, the rapidmovement of goods,people and resources between the regional periphery of theGoldfields and the Perth metropolitan core became of criticalimportance for Western Australia’s development (see Wellstead,2007). Indeed, infrastructure development was a priority for poli-cymakers, with major engineering investments to link the region tothe urban core. The construction of telegraph communication(1894), the Eastern Goldfields Railway (1894), and the Perth-Kalgoorlie water pipeline (1903) all helped to open up the region(Bolton, 2008). The government also used its improved financialposition to construct the Fremantle Port, improving connectivitywith the world economy. Western Australia became even furtherentrenched as a staples economy with the decision of the govern-ment to invest in agriculture as the major export backstop to theresource economy (Tonts & Jones, 1997).

The sustained investment in infrastructure meant rapid rises inproductivity and efficiency in gold extraction, producing a boom forthe region and increases in demand that helped to stimulate eco-nomic recovery in eastern Australia. By the 1920s, however, theregion began to stagnate, largely due to its vulnerability to risingproduction costs under a fixed gold price that had remained steadyat around US $20 per ounce (Bertola, 2003). Moreover, the effect ofthe two world wars on investment and consumption impacted onthe regional economy hard. In contrast, the Great Depression saw areturn to boom conditions as gold’s countercyclical propertiesfuelled reinvestment and a rapid increase in production (Crowley,1960). All of this aligns with documented ‘cyclonic’ tendencies ofstaples production (see Barnes et al., 2001). Throughout the im-mediate post war period, the region continued to experience eco-nomic fluctuations associated with changes in global demandfor gold. It also continued to be dominated by extraction, with

relatively little investment in alternative economic activities (Webb& Webb, 1993).

In the mid 1960s, the discovery of nickel reserves in the Gold-fields led to the emergence of a second staple commodity. Thedevelopment of the industry was led by Western Mining Corpo-ration, with the largest mine in the study area opened at Kambalda,to the south of Kalgoorlie, in 1967. As with gold, relatively littleattention was given to processing, with the central objective toextract and transport the ore as efficiently as possible (Webb &Webb, 1993). While a nickel smelter was constructed near Kal-goorlie, this was built largely as a means of reducing bulk, with thenickel concentrate then transported by rail to the industrial area ofKwinana south of Perth for refining before export to internationalmarkets.

Economic structure and performance

The economy of the Goldfields remains highly focused onresource extraction. In 2010, the region had the second highestvalue of minerals production of all of the State’s regions at A $8.4billion. This represents 12.3 per cent of the value of all mineralsproduction in Western Australia, and was second only to the Pil-bara, which has a gross value of production of A $48.9 billion,largely on the back of its large iron ore industry. The Goldfields’dominant commodities remain gold and nickel, which collectivelyaccount for A$8.1 billion, or 96.4 per cent, of the region’s gross valueof production. The performance of these minerals is extremelyvolatile, and is determined almost exclusively by internationalcommodity prices (Tonts, 2010).

Fig. 2 provides insights into this volatility. Between 2001 and2011, the annual gross value of nickel production varied between alow of A $1.5 billion in 2002 and A $7.24 billion in 2007. This risewas driven by the international price for nickel which rose fromjust under US $20,000 per tonne in 2001 to more than $54,000 pertonne in 2007. The onset of the global financial crisis saw the pricefall to less than $12,000 per tonne in 2009, with a correspondingdecrease in the value of production in the Goldfields. Similarly, thevalue of gold production has shifted with the world price. Steadyprice increases in the wake of the global economic downturn in2008 saw the value of production rise to more than A $4.8 billion in2011.

These broad shifts in the value of production are reflected inlocal resources activity. Rising prices often leads to a rapid increasein exploration activity, new mine construction and resource pro-duction (Tonts, 2010). Indeed, these periods are often characterisedby labour shortages, rapid increases in the cost of living, and localwage inflation. In contrast, falling world prices often leads to thepermanent or temporary closure of mines (Tonts, 2010). Forexample, the decrease in the nickel price between 2007 and 2011resulted in a decrease from 21 mines employing 6800 to 11 minesemploying around 5300 people. This is similar to the ‘flickering’process described by Freudenburg and Wilson (2002) in NorthAmerica, where rises and falls in commodity prices often lead to theopening and closing of mines, with consequent economic and socialvolatility and vulnerability for local communities (see alsoFreudenberg, 1992; Randall & Ironside, 1996).

The vulnerability of the Goldfields’ economy to cyclonic varia-tions in performance is amplified by another key characteristic ofremote staples economies e the lack of economic diversification.While the optimistic model of staple theory suggests that resourcedependence can eventually lead to economic diversity, the historyof the Goldfields is quite the opposite. The focus on efficientextraction and export has meant that the region is characterised bythe truncated form of development often described in stapleseconomies, with both weak backward and forward linkages in the

Fig. 2. Value of production for gold and nickel, 2001e2010. Source: Department of Mines and Petroleum, Statistics Digest, 2001e2010

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regional economy. Indeed, levels of economic diversity are some ofthe lowest in Australia. Table 1 provides location quotients for theregion based on employment for the period 1996e2006. Locationquotients provide an indication of the relative importance of asector compared to a wider reference economy; in this case thenational labour force. Quotients over 1.0 indicate that a sector isover-represented when compared to the national economy. In theGoldfields, the location quotient for mining increased in the periodbetween 1996 and 2006, suggesting not only a high level ofdependence on the sector, but falling levels of economic diversity.The only other sectors to record quotients well above 1.0 wereconstruction in 1996 and 2001, largely as a result of new investmentin the resources sector, and rental, hiring and real estate services,which is associated largely with sub-contracting to mining. Theemergence of both a fly-in/fly-out and drive-in/drive-out work-force in recent years, as opposed to permanent settlement, hasundoubtedly been a contributor to the falling levels of economicdiversity (Storey, 2001). In the mining support services sector in

Table 1Location quotients for employment in the Goldfields, 1996e2006.

1996 2001 2006

Agriculture, forestry & fishing 0.3 0.3 0.2Mining 22.5 24.9 25.8Manufacturing 0.4 0.5 0.7Electricity, gas, water & waste services 0.7 0.9 0.9Construction 1.6 1.3 0.9Wholesale trade 1.0 0.9 0.7Retail trade 0.7 0.8 0.8Accommodation & food services 0.9 1.0 0.9Transport, postal & warehousing 1.1 1.1 1.0Information media & telecommunications 0.4 0.4 0.4Financial & insurance services 0.4 0.4 0.5Rental, hiring & real estate services 1.0 1.2 1.2Professional, scientific & technical services 0.8 0.6 0.5Administrative & support services 1.0 1.1 0.9Public administration & safety 0.6 0.8 0.7Education & training 0.7 0.8 0.8Health care & social assistance 0.6 0.6 0.7Arts & recreation services 0.6 0.6 0.6Other services 0.9 1.1 1.2

Source: Calculated from ABS, 2007.

particular (e.g. surveying, mine engineering, drilling, explorationgeoscience etc.) firms are increasingly located in the Perth metro-politan area, and simply engage with mining operations on a flex-ible subcontractual basis. In terms of staple theory, this has furtherweakened local economic linkages, and has emphasised the con-centration of capital in the metropolitan region.

Geographies of investment and distribution

One of the longstanding concerns of regional industries, resi-dents and politicians is that, despite their significant role in thegeneration of economic prosperity, their interests and needs areoften not being met (Tonts & Jones, 1997). As noted by Langton,(2010: 8):

The mining regions are the source of enormous revenue, yettheir residents are disadvantaged and deprived of services.Because Australia is a wealthy, developed nation with a robustand well-managed economy, the policy problem has beendisguised. Put bluntly, the state governments are rent-seekers,eager to extract benefit, slow to put anything back. Rent-seekingis one of the triggers of the [WA] resource curse.

This has resulted in political conflict concerning the distributionof development funds at essentially two levels: 1) State and Fed-eral government; and, 2) resource regions and the Perth metro-politan area. The relationship between State and Federalgovernment with regards to the distribution of financial resourcesis managed through a system of fiscal equalisation (Hancock &Smith, 2001). As Berry (2011) points out, the quantum of fundstransferred from the Commonwealth to States and Territories un-der these schemes is not insignificant and amounts to around A$75 billion per annum. These transfers are in essence a form ofspatial redistribution, with funds transferred from prosperousStates to those that are economically lagging. The methodologyused to calculate transfer payments is complex, but is based largelyaround the capacity of jurisdictions to raise revenue (Berry, 2011).There is also recognition that the cost of providing services andinfrastructure outside of the city is costly, and thus the fundingalgorithm also incorporates an assessment of remoteness. On thisbasis, Western Australia had traditionally been a beneficiary under

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the scheme. However, in recent years the strength of the resourceseconomy in the State, and in particular the payment of substantialmining royalties to the State government, has resulted in a lowerlevel of transfer than is the case in States with a weaker economicbase. This has become highly contentious, with some arguing thatequalisation promotes spatial ‘balance’, while others suggest that itpromotes mediocrity and acts as a disincentive to entrepreneur-ialism (see Le Goff, 2005).

In the case of the Goldfields, the current system of equal-isation might be regarded as problematic. The combination oflarge-scale private sector and State government investment hascontributed to the development of a resource industry worthroughly $8.4 billion annually and that generates some A $230million in royalty income for the State. This above average ca-pacity to generate revenue from mining reduces the State’stransfer payment. This is despite the remote location, high cost ofinfrastructure and service provision, and high development costsassociated with mining in the region. Moreover, the growth oftemporary workforce arrangements (e.g. fly-in/fly-out) meansthan there tends to be a significant underestimate of the ‘real’population in resource regions when the transfer payments arecalculated. Ultimately, this means that prosperous resource re-gions tend not to be rewarded under the current model ofequalisation payments. Indeed, many policymakers argue thatthe reverse is true, with the regions viewed as a source of rev-enue, rather than a space of reinvestment (Parker, 2011). Putanother way, fiscal equalisation in this case tends to reinforce theview of such regions as a ‘resource bank’. Perhaps not surpris-ingly, the Western Australian government has repeatedly ques-tioned the Commonwealth government over whether the State isreceiving a fair return for its level of economic activity and in-vestment (Department of Treasury and Finance, 2002;Government of Western Australia, 2009a).

For the Goldfields, however, the problems are not confined toits financial relationship with the Commonwealth government.One of the longstanding concerns of non-metropolitan commu-nities in Western Australia is that the State government also has atendency to extract wealth without adequate reinvestment. Dataon government revenue by region are scarce, although miningroyalties do provide valuable insights. Mineral royalties in WesternAustralia amounted to some A $3.9 billion in 2011, which repre-sents some 18 per cent of all State government income(Government of Western Australia, 2012). The Goldfields’ earningsfrom royalties of A $230 million represents 5.9 per cent of theState’s royalties (to put this in context, 86 per cent of royalties areearned from iron ore, most of which is in the Pilbara region). Whencombined with earnings from regular State taxes and levies, theGoldfields represent an important source of State revenue. Yet,despite this government spending in the region is quite small. Inthe 2011/12 State government budget papers, expenditure onGoldfields projects stood at A $162 million ($27 per capita)(Government of Western Australia, 2012). In contrast, the Perthmetropolitan area had project commitments of A $1.42 billion($845 per capita). This imbalance is also replicated in governmentemployment, which might be reasonably considered an, albeitimperfect, measure of public sector investment. In the Goldfields,there are 85 State government employees per 1000 workers, whilein Perth there are 98 State government employees per 1000workers. This is not to suggest that it is realistic to expect equalityon these measures. As the State capital, Perth has a range of higherorder functions, specialist public services, senior managers and soon (Tonts & Taylor, 2012). However, these data do point to a generaldisparity in expenditure.

This disparity in expenditure has long been a source of politicaland popular debate. Indeed, as far back as the 1890s this was used

as a basis for increased political representation in rural areas,including the Goldfields. As one newspaper argued:

Increased country representation would have a check on theaggrandizement of those more populous parts where so muchmoney has already been spent, and prevent the evil of central-isation which would seek to advance the capital city ... at theexpense of the country districts, which are really the backboneand mainstay of the State

(quoted in Black, 1984; p. 27).

A perusal of the Hansard records of the Parliament of WesternAustralia suggests that relatively little has changed over the courseof the past century. For example, in debating levels of politicalrepresentation and the need for increased public expenditure in2005, one member of parliament commented that the WesternAustralian people:

.know [that] the wealth of this state lies in the hard work donein the country to bring billions of dollars into Western Australiaeach year, with millions of dollars going to the government inroyalties to make this a wealthy state. People know this, andrecognise that services and support are needed for countryWestern Australia

(Hames, 2005: pp. 428e461)

The dissatisfaction with the level of government reinvestmentin resource regions was addressed by the National Party in the leadup to the 2008 State government election. In looking to broaden itselectoral base beyond its traditional agricultural constituency, theNationals began to address the question of redistribution byadvocating that 25 per cent of all mining royalties should be rein-vested in non-metropolitan areas. Under the slogan of ‘Royalties forRegions’, the Nationals were widely held to be promoting a form ofpopulist ‘bush socialism’. The Nationals had traditionally only everheld a small number of seats, normally as part of a coalition withthe conservative Liberal party. In an electoral twist of fate, theNationals found themselves holding the balance of power in a hungparliament and in a position to roll out its new regional develop-ment policy.

Royalties for Regions

The central idea underpinning Royalties for Regionswas that notenough of the wealth being generated by resource exports wasbeing returned to those communities. Indeed, Markey et al.’s(2008) notion of non-metropolitan areas being a ‘resource bank’against which the capital was being drawn down in favour of thecity was how the National Party promoted (and defended) thepolicy. In many respects, there are resonances here with the so-called ‘countrymindedness’ ideal that the National Party’s fore-runner, the Country Party, used as the basis for its political exis-tence and strategy (see Davies & Tonts, 2007; Duncan & Epps,1992).The countrymindedness thesis held that rural areas were deservingof special attention in rural policy not only because they generatedthe bulk of Australia’s wealth, but also because rural life was morevirtuous than urban living (Aitken, 1985). The sentiment under-pinning Royalties for Regions was expressed by a National PartyMember of Parliament not long after the policy had beenintroduced:

It is a remarkable turnaround for regional areas, which havebeen short-changed for years with rundown services and facil-ities, despite producing much of the state’s wealth

(Davies, 2009: 9405/3).

M. Tonts et al. / Applied Geography 45 (2013) 365e374372

In addition to guaranteeing that 25 per cent of all royaltiesearned from mining would be spent in non-metropolitan regions,the policy also ensured that these funds would be over and abovenormal State government expenditure on services and infrastruc-ture. There were a number of other important elements to thepolicy that were designed to promote the notion of rural empow-erment, including: the establishment of a country local governmentfund to direct resources into local community projects; fundingpriorities established by regional community representatives;oversight of the funds by an independent Regional DevelopmentTrust.

The amount of funding directed into non-metropolitan areas aspart of this scheme is substantial. In the 2011/12 financial year,nearly A $1.5 billion was allocated, of which A $422 million was for‘cross regional’ projects, while the remainder went to individualregions. In addition to cross-regional funding, the Goldfieldsreceived an additional A $86 million. This included investment in arange of schemes, including: A $12.8 million to local governmentsfor services, roads and other infrastructure; A $8.2 million forcommunity services; $65.2 million for regional infrastructure andindustrial headworks. A perusal of State government Budget papersindicates that at least A $400 million has been spent in the Gold-fields since the scheme was established in late 2008 (Governmentof Western Australia, 2009b; 2010; 2011; 2012).

One of the explicit objectives of the Royalties for Regionsscheme is to increase economic diversity and liveability in non-metropolitan areas (Department of Regional Development andLands, 2012). In many respects, this is about reducing stapledependence in non-metropolitan Western Australia. While it istrue that there has been considerable expenditure on communityfacilities, sporting infrastructure, hospitals, schools and otherservices, the extent to which the scheme is actively breaking re-gions out of a staples trap is questionable. In the Goldfields, aconsiderable amount of funding is being spent on upgradingtransport infrastructure, including road, rail and the expansion ofthe port in nearby Esperance. All of this is focused on improvingthe efficiency of transporting raw materials out of the region, andthereby reinforces the truncated economic development thatInnis (1930) described (see also Hayter & Barnes, 2001). Butperhaps even more telling is the Exploration Incentive Schemethat is funded as part of Royalties for Regions. This providesaround A$80 million per annum to assist companies to explore fornew mineral resources. The scheme provides up to 50 per cent ofthe cost of exploration drilling for companies, up to a value of$150,000. Clearly such a scheme not only represents a substantialintervention in the market, but also reinforces the focus onstaples.

Perhaps not surprisingly, the Royalties for Regions scheme hasbeen a source of considerable policy and public debate. For Hydeand Pickford (2012, p. 30), the scheme “has formalised pork bar-rel politics on a massive, perhaps unprecedented scale”, and is littlemore than the National Party shoring up support in its non-metropolitan constituency. Similarly, Daly and Lacy (2011) sug-gest that Royalties for Regions is an inefficient use of public re-sources, and arguably unnecessary intervention in the market.Supporters of the scheme though are at pains to point out thatroyalties should not be treated like public income generatedthrough taxation. As the Premier of Western Australia has argued,royalties are income derived from the sale of resources at a set priceto private capital by the citizens of the state (Burrell, 2012). This, heargues, is quite different to a tax, since it is the sale of the citizens’resource. Other defenders of the scheme return to argumentsrelated to the notion of a resource bank, and refer to investment inthe city based on wealth generated in the regions. For the architectof the scheme, the National Party Leader Brendan Grylls, it is ironic

that there is “no question about pork barrelling when. buildingwaterfronts and museums and sports stadiums” in the capital citywhen, in his view, Royalties for Regions is rectifying “50 years ofunderinvestment” in regional services and infrastructure (quotedin Powell & Thompson, 2012). Only time will tell if the scheme isable to achieve its objectives.

Conclusion

Australia’s, and in particular Western Australia’s, long history ofresource extraction has many similarities to the historical devel-opment of Canadian regional economies. It perhaps comes as nosurprise then that elements of Innis’ staples thesis resonatestrongly with Western Australia. There is considerable evidence tosuggest that while the resource sector does draw global capital tothe region and contribute to development that might otherwise notoccur, the vast majority of the benefits accrue in metropolitan re-gions. However, we would argue that this is not surprising giventhe complex global networks associated with the resource sector.Indeed, the resource sector operates in a highly spatially distributedfashion with functions such as financial and investment decision-making, engineering, construction and research embedded withinglobal networks and articulated through Australia’s capital cities.From this perspective, examining staples economies, and perhapseven reinterpreting the staples thesis, with reference to globalproduction networks (GPN) has the potential to offer novel insightsinto the nature of development in resource dependent economies,such as Western Australia. While classical staples theory tends toview ‘power’ as concentrated in themetropole and then applied ‘to’a region, the GPN’s perspective might provide more nuanced ac-counts of the nature of power, the geometries of networks, and thestrategies of firms. This aside, it remains the case that in regionssuch as the Goldfields the truncated form of economic develop-ment suggested under the more pessimistic versions of staplestheory plays out to the extreme. We would also argue that thepolitical strategies of successive governments have reinforced thisby facilitating investment in the simple extraction and efficienttransport of raw materials. In essence, the state has engaged in thereproduction of a particular form of narrow, staples led economicdevelopment. In the Goldfields, the high degree of exposure to thegold and nickel industries makes it extremely vulnerable to thecyclonics described by Barnes et al. (2001). However, it is alsoimportant to recognise that this volatility has diffused into othersectors, with the emergence of footloose capital in industries suchas manufacturing and services. Moreover, we would suggest that itis also worth noting that the resource sector does draw globalcapital into a region that would otherwise have few economicopportunities.

Markey et al. (2008) offer a novel interpretation of staples-leddevelopment in Canada, suggesting that resource regions areoften viewed as a resource bank, with the natural resourceextraction largely contributing to capital accumulation elsewhere.In many respects, a similar process can be seen as having occurredin Western Australia over the past century or so. The Goldfields is asignificant producer of export earnings and royalty income, yet inreal terms, the flows back into the region are relatively modest.Regional political and public discontent about this imbalance haslong been a feature of Australian politics. Royalties for Regions is anattempt to address this issue through one of the largest regionaldevelopment funding schemes ever undertaken in Australia. Itchallenges notions of spatial redistribution by redirecting fundsinto those places in which they were earned. However, there ap-pears little evidence to date that the policy is likely to break thestaples trap. Indeed, it would seem that, yet again, governmentpolicy is enabling the reproduction of staples dependence by

M. Tonts et al. / Applied Geography 45 (2013) 365e374 373

reinvesting in the infrastructure, skills and incentives that underpinthe production and export of raw materials. In this respect, whilethere is a substantial increase in the quantum of funding available,the extent to which there will be a transformation of regionaleconomies is questionable.

Acknowledgements

The authors would like to thank the reviewers for their helpfulcomments on the paper. We would also like to thank Neil Reid andJay Gatrell for organising this Special Issue. The usual disclaimerapplies.

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