Innovation, Productivity Growth, and the Survival of the U.S. Copper Industry

Mining is widely viewed as an old industry with mature and stable technologies. Companies and countries with the best deposits are the most productive and efficient producers. As these deposits are depleted, mining shifts to countries with the next best deposits. This tendency to exploit poorer quality ores tends to push productivity down and the prices of mineral commodities up over time. Copper mining in the United States, however, calls into question this conventional view. After leading the world in output for decades, the U.S. industry lost its ability to compete and suffered a major decline during the 1970s and early 1980s. In the face of predictions of complete collapse, it staged a remarkable revival, and today mines more copper than in 1970. A handful of companies achieved this recovery, in large part through their efforts to introduce a wide range of cost-reducing innovations. These efforts, in turn, helped double labor productivity in copper mining during the 1980s. The known copper endowment of the United States hardly changed over this period, aside from the depletion arising from mining, and had little to do with either the decline or the recovery. The experience of copper mining in the United States holds a number of lessons for countries competing in global mineral markets and for countries striving to raise their labor productivity and standard of living. In particular, it highlights the stimulating influence of global competition on industry productivity and comparative advantage, even in the mining sector where mineral endowment is widely thought to be of overriding importance.