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The "Obama Law" Devastates Impoverished People in the World's Second Poorest Country, The Congo

People are going hungry, pulling their children out of school due to poverty, and joining criminal gangs to make ends meet in the poorest region of the Congo, the world's second-poorest country.  Residents of this African nation attribute this economic devastation to what they call "the Obama Law" -- provisions of the 2010 Dodd-Frank financial "reform" law backed by Obama that have created a virtual embargo on minerals produced in the Congo's desperately-poor mining towns. As David Aronson notes in The New York Times,

The “Loi Obama” or Obama Law — as the Dodd-Frank Wall Street reform act of 2010 has become known in the region — includes an obscure provision that requires public companies to indicate what measures they are taking to ensure that minerals in their supply chain don’t benefit warlords in conflict-ravaged Congo. . . the Dodd-Frank law has had unintended and devastating consequences, as I saw firsthand on a trip to eastern Congo this summer. The law has brought about a de facto embargo on the minerals mined in the region, including tin, tungsten and the tantalum that is essential for making cellphones.

The smelting companies that used to buy from eastern Congo have stopped. No one wants to be tarred with financing African warlords — especially the glamorous high-tech firms like Apple and Intel that are often the ultimate buyers of these minerals. It’s easier to sidestep Congo than to sort out the complexities of Congolese politics — especially when minerals are readily available from other, safer countries.

For locals, however, the law has been a catastrophe. In South Kivu Province, I heard from scores of artisanal miners and small-scale purchasers, who used to make a few dollars a day digging ore out of mountainsides with hand tools. Paltry as it may seem, this income was a lifeline for people in a region that was devastated by 32 years of misrule under the kleptocracy of Mobutu Sese Seko . . . and that is now just beginning to emerge from over a decade of brutal war and internal strife.

The pastor at one church told me that women were giving birth at home because they couldn’t afford the $20 or so for the maternity clinic. Children are dropping out of school because parents can’t pay the fees. Remote mining towns are virtually cut off from the outside world because the planes that once provisioned them no longer land. Most worrying, a crop disease periodically decimates the region’s staple, cassava. Villagers who relied on their mining income to buy food when harvests failed are beginning to go hungry.

Meanwhile, the law is benefiting some of the very people it was meant to single out. The chief beneficiary is Gen. Bosco Ntaganda, who is nicknamed The Terminator and is sought by the International Criminal Court. Ostensibly a member of the Congolese Army, he is in fact a freelance killer with his own ethnic Tutsi militia, which provides “security” to traders smuggling minerals across the border to neighboring Rwanda. . .

Most of the militias that wreaked havoc between 2003 and 2008 have since been incorporated into the Congolese Army. The two or three of any significance that remain get their money from kidnapping and extortion, not from controlling mining sites or transport routes. The law has not stopped their depredations. . .

Rarely do local miners, high-level traders, mining companies and civil society leaders agree on an issue. But in eastern Congo, they were unanimous in condemning Dodd-Frank.

Dodd-Frank's conflict-minerals provisions will also damage U.S. industry to the tune of billions of dollars.  It will impose massive compliance costs on automakers and others, as Washington Legal Foundation, Carter Wood, and the National Association of Manufacturers have noted. NAM notes that it will harm the automakers and their suppliers, and estimates that it “will cost U.S. industry between $9-16 billion to implement.”

Its economic harm to the Congo's poor people was entirely predictable.  It was predicted by observers like Laura Seay, a professor of political science at Morehouse College, who recently noted that “because it is almost impossible to verify whether minerals sourced from the [Congo] or its neighbors are truly conflict-free, electronics companies now have a strong incentive to source minerals elsewhere, leaving Congolese miners unemployed.”  She pointed out "the near-impossibility of creating a reliable tracing scheme in a place where almost every public official can be bribed" and its inevitable consequence, "a de facto boycott on minerals from" countries like the Congo.

This is just one of countless economically-destructive provisions contained in the Dodd-Frank law, which is a 2315-page laundry-list of special interest giveways that contains little real reform, and instead contains a vast array of payoffs and favors for special interest groups like trial lawyers. Civil rights commissioners and economists criticized it for containing racially discriminatory provisions. Dodd-Frank  did nothing to reform the biggest bailout recipients, the government-sponsored mortgage giants Fannie Mae and Freddie Mac, even though Administration officials like Treasury Secretary Geithner later admitted they were at the "core" of "what went wrong" in the financial crisis.  Major provisions of Dodd-Frank have been criticized for violating the constitutional separation of powers, equal protection, and property rights.