Iron ore below $90: Beijing coughs, the periphery catches a cold

According to RFI, iron ore, essential to steel production, is trading at its lowest level in more than two years. On several occasions in recent days, prices have dropped below the $90-a-tonne mark. The radio's commentary attributes the fall mainly to two factors: supply and demand, with demand judged insufficient in China.

That is as far as the dispatch takes us. At this stage it does not say which exporting countries are hardest hit, nor what the fall changes for their public revenues, their miners or their debt. What follows is therefore our reading, not an established finding.

Still, we can ask the awkward question: who absorbs the shock? When the main buyer slows down, it does not suffer the collapse in prices, it profits from it: its steel costs less. The seller, meanwhile, discovers that its budget rested on a price it does not set. Prices are decided in Beijing, on financial exchanges and in the boardrooms of a handful of major mining groups, rarely in the towns near the mines.

This is the mechanism that the tradition of dependency has long described: economies shaped to supply raw materials to the centre, and kept tied to it through the terms of trade, debt servicing and loans with conditions attached. Note, however, that the centre has moved. China has taken the place once held by European metropolises as the great buyer of raw ore. The price has become the thermometer of an economy whose hand others hold.

The effects, in general, distribute themselves as follows: the exporting state sees its revenues melt away and turns to borrowing or austerity; mineworkers, first exposed to production cuts, pay in jobs and wages. We have no figures to verify this here, and we will not invent any. But the pattern is well known, and raw-material exporters have lived through it at every turn of the cycle.

Amilcar Cabral saw in imperialism a "piracy transplanted from the seas to the mainland" (our translation, from La Arme de la théorie). The formula is harsh, but it has the merit of reminding us that the exploitation of peoples' resources is no market accident. Cabral also added that independence without social transformation changes only the flag: diversifying the economy, processing ore on site, building an industry; that is the programme which falling prices make more urgent and which rising prices make us forget.

The market, we are told, has simply spoken: supply, demand, move along. Let us say instead that it still speaks with the accent of those who buy. The question remains who, in the exporting countries, will dare to answer otherwise than by waiting for the next rise in prices.