Up here in the Arrowhead, a controversy rages about the best way to promote rural economic development. On one side are those who believe the sulfide ore copper mine being planned by Twin Metals is the best way to create jobs and raise incomes. On the other side are people concerned about the potential environmental damage of such a mine, which would be located in the same watershed as the Boundary Waters Canoe Area Wilderness.
On the surface, the controversy appears to be a fight between two competing priorities: jobs versus environmental protection. But a closer look at the current economy of the region and the changing nature of rural economic development tells a different story.
Without question, America’s rural communities are under threat as their traditional industries decline and many young people leave to find better job opportunities in cities. Yet in Minnesota, a 2014 study showed that rural areas are experiencing a net in-migration of young families seeking a better quality of life, lower cost of living, and lower crime. (The study, titled, “Rewriting the Rural Narrative,” was by Benjamin Winchester, University of Minnesota Extension.)
Nationwide, rural areas that offer natural amenities — especially proximity to recreation areas — are the ones attracting new residents. Many of these newcomers bring their jobs with them or start businesses.
This, in fact, is my story. I am a Ph.D. economist who spent most of her career at the World Bank in Washington, D.C. I have worked in most regions of the world — Latin America, East Asia, Eastern Europe and Central Asia, and Africa — on policies and projects to promote economic development. During my summer canoe trips in the BWCAW, I came to love what the wilderness has to offer: clean water, pure air, wildlife, and silence. Fifteen years ago, my husband and I moved to the Ely area, where I have continued to work as a consultant to several multilateral development banks.
I’ve had the opportunity to observe the region’s economy from the perspective of my professional experience. Over the course of the past several decades, the area has diversified away from its traditional base of mining and logging. Now, the top employers are health care, education, retail, construction, professional services, and government. Wilderness-based businesses are an important part of the picture.
Although household incomes within the narrowly drawn Ely city limits are well below the statewide average, they are higher in the surrounding townships that offer lakeshore and acreage. A large share of the area’s household income is non-labor income, reflecting the area’s attractiveness to retirees.
What effect would the Twin Metals project have on the regional economy? A 2018 study by two Harvard economists compared the likely effects on employment and income of two alternative development paths — “with” and “without” the project — over the next 20 years. To reflect the uncertainty inherent in these types of projections, the authors ran a large number of employment and income scenarios using different sets of assumptions.
The results were striking. Under almost all of the scenarios, the Twin Metals project would create a temporary boost to regional employment and income, but this would only last a few years. After that, the economic benefits of the project would be outweighed by its negative impact on the recreational industry and in-migration. In the end, the region would be left worse off economically.
History is full of examples of countries whose natural-resource wealth led to disappointing economic outcomes. Commodity price volatility results in boom-and-bust cycles; skilled labor is attracted to the resource sector, delaying economic diversification and industrialization; and the resource sector tends to operate as an enclave with few forward and backward linkages to the rest of the economy. While not on the same scale, there are some parallels with the mining sector’s impact on Northeastern Minnesota.
From a purely economic point of view, the Arrowhead would be better served by a withdrawal of the BWCAW watershed from mineral leases. The real generator of jobs and income is the region’s amenity-based economy: an economy that is diversified, stable, and sustainable.
Kris Hallberg of Ely is a consultant to the World Bank and other multilateral development banks after spending most of her career in international development at the World Bank in Washington, D.C. She moved to Ely in 2005. She wrote this for the News Tribune.