Posted by: shipbright | September 4, 2009

Global primer series: Economic water scarcity

Coming back to the “primer series” on global freshwater issues I’m going to do a series on “economic water scarcity” which kicks off a whole bunch of issues.  So, in past posts I wrote about how natural global water distribution is uneven, not where the people necessarily are, nor in amounts needed by people.  That’s the natural world at work and I’ll be coming back to that especially as we talk about climate change.

line for waterEconomic water scarcity, on the other hand, is man-made.  It is where a people has water but does not distribute it evenly making things more complicated and political.  The United Nations has declared that water is a human “right.” That one of the most fundamental elements needed for life is a “right” seems like a no-brainer.  But the question then becomes who develops the water supply and who pays for it?  Who creates a water distribution system?  How is water “valued” to reflect the true costs of its development, delivery and the amount used?

Add to this mix ethnic tensions [e.g. Darfur], transnational boundary issues [e.g. The Colorado River], religious tensions [e.g. Jordan River] and competing uses [e.g. agriculture vs. urban centers].  You begin to wade into a swamp of complicated issues.

Here’s a good summary of economic water scarcity from the Water Project:

Economic water scarcity is by far the most disturbing form of water scarcity because it is almost entirely a lack of compassion and good governance that allows the condition to persist. Economic water scarcity exists when a population does not have the necessary monetary means to utilize an adequate source of water. Economic water scarcity is about a unequal distribution of resources for many reasons, including political and ethnic conflict.


Since economic water scarcity is a man-made issue it lands square in the lap of local, national and global politics.  It is especially acute in the developing world where financial resources are extremely limited.  If a country does not have the money to develop safe drinking water [“potable” water] it has to go out to organizations like the World Bank for a loan OR strike a deal with a corporation that has the wherewithal to do the job.  These choices cause concerns and conflicts both within the country and globally as well.  For example, in countries where the chasm between the “haves” and the “have-nots” is so large, will the water being developed be accessible by only the political elite or dominate ethnic group?  Will water be focused on urban population centers vs. rural populations?  Who makes these decisions?  Who gets to participate in the decision making?  This may sound far fetched but it is exactly what is going on.

The World Bank has actively been addressing these issues and has been critized at times for meddling in the internal politics of a country through the terms of its water development loans.  The issue of third world debt is something I’m sure you’ve all heard about.  Private corporations have the resources and expertise to do these sort of jobs but they get sucked into the internal politics and some have been accussed of political interference as well [bribes, supporting one political party over another, supporting one ethnic group over another]. 

Outside assistance quickly becomes a flashpoint of “globalization” and the perceived evils of foreign control of a nation’s resources for the benefit of wealthy foreign shareholders; yet outside assistance is desperately needed.

So economic water scarcity is at its heart a political issue:   free markets and the development and privatization of water OR water as a collectively owned resource with Government’s role to develop and distribute the water.  This is simplified but cuts to the essence.

adam smithPRO’S and CON’S: Those who subscribe to the Free Market paradigm point out that the creative entrepreneurial spirit driven by profit motive is the most economically efficient model with which to address the world’s freshwater problems.  Water can be mined, harvested, and conserved for profit and with economic incentives for the consumer that allows the “buyer” to maximize their own personal water use efficiency.

The Free Market school of thought believes that by bringing global resources to bear on a community, region, state, or nation allows access to capital that governments would most often not be able to afford.

free market my assThose who subscribe to government development and/or tight regulation point out that the “for profit” motive gives developers incentives to work for corporate shareholder gain of the resource, not necessarily for the gain of society at large. Those who have the wealth will receive more than their “fair share” at the cost of those who are impoverished… especially in rural poverty areas where the expense of delivery far exceeds the income that can be gained by the developer.

govt regulationThose of the government control model believe that there is an issue of “globalization” that allows foreign absentee owners to reap profits from developing nations that can ill afford the outflow of capital and without consideration to the local population.

I want to present both sides of this argument fairly but, because I believe no on can ever be truly free of bias, I want to share my personal viewpoint.  Both sides of the issue are correct and have valid points.  The “answer” for me lies somewhere in between.  I am a “free Marketer” at heart but my experience in life is that I am wary of Man’s penchant to succumb to our “animal spirits”.

I do not subscribe to the “evils” of globalization–it’s a natural evolution of the free market in a world where time and transportation make the globe a smaller and smaller village.  On the other hand, the corporate model of shareholder maximization motivates those people to externalize costs in the development, creation and delivery of the good or service in order to maximize personal profit.  (More on externalizing costs in another post.).  There are other issues of globalization and culture but I want to set that aside for the moment and focus on water…

The Free Market is the most efficient economic system we have.  However, it is the creation of Man and like Man it is imperfect.  Similarly, our government is created by us and is therefore imperfect, keeping in mind that in our democratic system we elect our own imperfection. We frequently hear the public and private sectors criticizing one another and both sides have valid points.  I subscribe to the thought that when you point a finger, three fingers point back at you…so the sooner we all start to work together, the sooner we can get on with the business of hauling our sorry butts out of the messes we’ve created on this planet.

We have an informative example of the issue of economic water scarcity in Cochabamba, Bolivia.  A consortium of foreign corporations brought their capital and expertise to develop a water supply and made a deal with the central government.  Was the deal transparent to all?  Was everyone in the society going to benefit and pay their fair share? How is the issue of urban concentration of a population vs. the rural disbursed population and higher cost of delivery handled?  How is the water shared between the agricultural users and other users?

Globalization and water… if you’re a strict free-marketeer or an anti-globalization activist neither of you will be happy with what the long-term outcome was and is. 

People fought and people died over this issue.  Remember when I wrote about Darfur and said that one death is a tragedy and 300,000 is a numb statistic.  Well a number of people died over this issue in Cochabamba but here are two names:  Victor Hugo Daza, a teenager, and Captain Omar Jesus Tellez, an Army Captain.  The former was shot by troops and the latter was injured, dragged out of a hospital and dismembered by the local populace.  These issues are real, they happened and its scary.  Cochabamba holds lessons for all of us, lessons that were paid for in blood.

no water…no civility…no civilization




  1. adam smith was a really nyc and sensible person he is known as d father of nations bcz of his grt work feels gud dat even 2day his name is cherished in d field of economics

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