Instead of sandstone unis, what about iron ore ones?
As the Senate debates the Mining Resources Rent Tax legislation it occurred to me that, for all the political posturing and economic ‘forecasts’ amid significant uncertainty and complexity, there is another way forward.
At the Adelaide Festival of Ideas forum, ‘Resource Rich or Dirt Poor’, held in Adelaide late last year about the proceeds from the mining boom. I asked, “If BHP and Rio Tinto together endowed Universities in Australia with $10 billion by 2015, a) Why would they? And b) What would be the implications”?
Fanciful? Naïve? …Or not? The immediate response from the panel was a cynical, “Well, yes, why would they”? And if they were to make such a donation it would have to be put through a ‘cleansing’ institution, a Government agency to ensure that the funds were put to appropriate use.
The panellists’ suspicion of the mining companies’ motives was obvious; one also made the point that those with the money to donate are not the best to decide what to do with the funds anyway, local communities are. Therefore the Government should be the arbiter of distributing taxation income with regard to need and equity.
So why would BHP and Rio Tinto decide that it was in their best interests, as individuals and as Australian-based global companies, and on behalf of their shareholders, to endow Australia’s Universities with the equivalent of one year’s funding - $10 billion? And if they did, what are the consequences?
Fairly obviously the income from a $10 billion endowment would a) Make a real, substantial contribution to up-grading the excellence of tertiary education through increasing permanent academic employment to cater for the increased demand mandated by Government; and b) Ensure that Australia more broadly has the capacity to provide high quality education for the foreseeable future no matter what Government policy or global economic circumstances might otherwise dictate.
The scenario for the companies is also apparently, straightforward, if the response of the panelists is any guide. By bestowing upon the universities staged endowments over the probable life of extraordinary profits (to, say 2015), the companies would gain enormous credit in the eyes of the Australian public and politicians.
The companies could point to hard evidence of the return of part of their fantastic, if short-lived ‘super profits’ to the society which sold them the rights to extract the resources in the first place.
BHP Billiton and Rio Tinto are about to lose billions to the Australian Tax Office in the Mineral Resources Rent Tax, so they might prefer to have an option for disbursement before tax that would reduce the taxable income liable to the MRRT, especially as an endowment is fully tax deductible.
More problematically, the mining sector would have ‘changed the rules of the game’ in terms of the nature of their perceived power in negotiations with various levels of Government regarding regulation and taxation.
Their actions would upset the expectations of other social actors, such that the suspicions about company motives as held by Governments, environmental and business lobby organisations and communities would be heightened.
If one can influence the way others perceive you, you have more control of the agenda. It is likely that the attitudes of employees to their employer would shift their personal identity, from, perhaps,’ make money and get out’, to the knowledge that “I also made a contribution beyond myself”.
The attractiveness of the companies as places to work would therefore extend beyond the financial, beyond the immediate, beyond the personal gain. The companies could align their international branding strategy with philanthropy with employment as a key strategy for business success.
The suspicion of mining company motives and ruthless execution of business models, however, is well founded. Perhaps the most recent example was the withdrawal by BHP Billiton from their Ravensthorpe, WA ,nickel mine when nickel prices dipped.
The community’s expectations of a longer term future for jobs and improved wealth were dashed. There was very little time for families and community relationships to adjust, thus creating real hardship and reducing trust of future mining operations in the area.
But in terms of Public Relations, the virtue of an endowment for education is its potential multi-generational legacy. If one assumes that the Universities can manage the endowments to produce a reliable income, then the mining companies will have ensured ‘their’ Australian community with a guaranteed funding base for tertiary education, relatively independent of external political and economic forces.
The legacy of this real as opposed to paper or fictitious wealth is thus seen to be spread throughout the community for a broad community benefit. $10 billion is not a lot to distribute across all 39 Universities; other companies like Xstrata, Fortescue and the consolidating coal and gold miners could also be asked to contribute. Otherwise, BHP Billiton and Rio Tinto might select a city or cities in which to invest.
For example, Adelaide, South Australia. “Why Adelaide”? ‘Robust’ debate might suggest that Adelaide is the best placed city to receive the endowment. The city has won awards as a ‘Most Liveable City’; it has a lower cost of living, especially housing, compared to other Australian capital cities; it has a sustainable capacity for population growth which is not shared by Perth or Brisbane; and its Universities are of high quality with degree offerings that cover the range of tertiary educational needs of a modern developed nation.
Moreover, endowments of the scale proposed would have a transformational impact on tertiary education in Adelaide’s Universities. By contrast, spreading the endowment across six or twelve Universities in Sydney and, or, Melbourne would not have the same ‘step-change’ impact on the Universities, on the body politic, on financial markets, on students’ choices.
This scenario only works if BHP Billiton and Rio Tinto agree to let the Universities apply their endowment income as the Universities see fit. That is, the mining companies do not enforce any caveats, beyond what I suggest is the need to re-position the primacy of teaching in University philosophy.
Recent statements from the Business Council of Australia bemoan the lack of trained graduates in engineering and science, but their lament could equally be applied across the social sciences and humanities.
The mining companies must be prepared to engage in classical philanthropy in order to reap the benefits of a more complex, nuanced reputation as a member of the Australian and global community through the potential legacy of multi-generational education benefits for Australia.
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