When it comes to the formal economy of Arctic countries, there can be seen a common trends of large-scale resource extraction activities, typically of non-renewable resources.
This finding has multiple socioeconomic and environmental implications, both on macro and micro scale.
Mining is of "capital-intensive nature" that also affects ownership structures. It creates a capital dependency requiring access to huge amounts of "free" capital. Usually, large multinational corporations or maybe state-run, national companies engage in this type of activity as they have the economic capacity but also manpower and knowledge to perform "megaprojects" related to resource-extraction.
It is not really an economy of scale or local businesses running these types of activities. The AHDR concludes: "While the industrial-scale natural resource exploitation creates considerable wealth, these activities are mainly carried out to supply markets outside the Arctic regions. A few large corporations dominate the extraction activities, and some of them are present in several Arctic countries. Where the massive riches are destined for export and only a fraction of the income and profits remains."
Demand is derived from world consumption and world investment. In terms of the AHDR on community viability this would imply a connection on macro scale to global "bust and boom" cycles. The further the consumption of certain resources in places outside the Arctic goes and the more capital is made available for investment, the higher is the actual demand.
This can be both beneficial or detrimental, as it could foster development of resource extracting activities and building of further infrastructure in the North in times of "boost" when capital is readily available but it can also lead to the abandonment of activities in times of "bust" and according downturn in socio-economic development of regions of the North, when capital is retreated and demand for supply, accordingly pricing of a commodity is low.
As the backbone of Arctic economies is the extraction on large-scale of non-renewable resources: There is the ultimate threat of a depletion of resources ending all economic activities and consequently significantly affecting the Arctic economies largely based on this.
This is different to industries or economic activities based on renewable resources that in theory are unlimited. Ironically many traditional indigenous activities such as fishing, reindeer herding or hunting were.
Minerals and deposits are finite and if sustainability is to be reached, the pressure is on decision-makers, stakeholders and political entrepreneurs to find ways to "green" and diversify economies. This also implies to think about the challenges of environmental damage that mining does.
Many places in the circumpolar North have seen severe environmental damage due to mining activity. Here the interplay of retaining wealth / profits at local level, political entrepreneurship and systematic economic development with a sustainability factor at local and macro level is crucial.
The wealth needs to be invested and "transformed" into investments in infrastructure and other, more sustainable forms of industries and activities that on the long run help to get away from the mining activity. Finally, the low level of innovation in resource extracting industries is somewhat contrasting a tendency of post-industrialism in globalized societies to foster knowledge-based industries.
Human-capital investment and preparation for a knowledge based culture / industry seems to often be more sustainable and future-oriented than maintaining on activities such as mining. So the ultimate question will be who really is right: the ones who favor industrial development in expectation of property and welfare or those who prefer to focus development on small scale businesses and economies of scale.
Sources: Arctic Human Development Report The Economy of the North Megatrends UArctic
