Blue Gold?

Living in the United States and, in particular, living close to the Great Lakes, it is easy to take water for granted. This article from the Christian Science Monitor suggests that there is some reason to be concerned about clean freshwater supplies, and eloquently lays out the options.

Within reason, water shortages are mostly a problem of pollution and distribution, not one of total resource stock and rate of resource extraction. The article paraphrases water expert Peter Gleick:

“The idea of ‘peak water’ is an imperfect analogy, he says. Unlike oil, water is not used up but only changes forms. The world still has the same 326 quintillion gallons”

Nonetheless, there is plenty of reason to be alarmed. The article outlines many places in which clean, fresh water is already being missed, and the problem is by no means limited to developing nations or to Africa, although they will likely be hit hard:

Public fountains are dry in Barcelona, Spain, a city so parched there’s a €9,000 ($13,000) fine if you’re caught watering your flowers.
Barcelona is not alone. Cyprus will ferry water from Greece this summer. Australian cities are buying water from that nation’s farmers and building desalination plants. Thirsty China plans to divert Himalayan water. And 18 million southern Californians are bracing for their first water-rationing in years.

Cited in the story is a report which warns that water will soon bring about violence, if not addressed. As described in the story, “the report identified 46 countries with a combined population of 2.7 billion people where contention over water has created ‘a high risk of violent conflict’ by 2025”. This is of particular concern in Africa, where supplies will likely see the tightest crunch and in Tibet, where the polluting Chinese hope to compensate for their own waste by diverting clean water away from other locales.

Mark Clayton, the article’s writer, links the problem to water being over-subsidized, and people consuming more than they would if they had to pay the actual market value. He lists privatization as one option to bring the cost to the consumer up to match the free market value, but seems reluctant to fully endorse the option, citing human rights groups that find privatization to be a threat to the basic human right of potable water. The fact of the matter though, is that a market must be opened up in which water can be traded and reach a worldwide, competitive price. That is the only to force conservation. Privatization cannot be taken to mean local monopolies, that could be a disaster. Profit-maximizing monopolies will inherently produce a shortage, because their marginal revenue diverges from the market’s demand curve. Beyond that, the only way in which the right to water would be threatened is if the price is too high for some of the poor to afford. The solution being to give an income subsidy to the poor so that they can afford the price, while still avoiding the distortionary effects of a per-unit subsidy.

Once water is more expensive to the people who waste it most, we will find ways to conserve and stop polluting. The article lists several of these, including repairs to leaky pipes that make up the water delivery infastructure, more prevalent use of desalination, and the use of drip irrigation (after all, 70% of water is used for agriculture). One idea that is left out is that once there is a market value set for water, and some property rights established, it would be possible to charge the firms and countries that dump toxic chemicals and deprive someone of potable water.

The lesson to take away from Clayton’s article is that water is being squandered and in some parts of the world while in other parts of the world people are dying for it or dying from a lack of it. Water may be very expensive to move or process, but there is enough on this world to satisfy everyone. It’s just a matter of creating incentives for conservation, and subsidizing the very poor so that they can be competitive.


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