All Politics, No Economics

The May 22, 2010 issue of The Economist has a special report on water. The titles of the article tell the story - - "Enough is not enough", "Business begins to stir", "Making farmers matter", "Trade and conserve", and "To the last drop" (Or how to avoid water wars -- with 60% of the world's population living in a river basin shared by two or more countries -- the conflict potential is rather clear).

The series of articles highlight four areas that need attention - -

1. Improvement in Storage and Delivery. Mother nature has fixed limits on water supply - - we have to better utilize what we have. Storage and delivery looks at underground reservoirs, replacing leaking pipes, lining earth-bottom canals, and irrigating plants at their roots with just the right amount of water.


2. A focus on farming. We need to make farming less thirsty - - genetic engineering could aid in producing crops that need less water and are much more drought resistant.


3. Get the salt out. Invest in technologies that take the salt out of sea water. A side focus - - yet increasingly important, is to make these technologies much more energy efficient.


4. Make the market work. Pricing and economic incentives need to be utilized to bring supply and demand into balance. Well-water countries should make water-intensive goods, and arid ones should make those that are water-light.

Historically speaking, the trouble with water and the four good ideas outlined in the articles, is that water is all about politics, not economics. That needs to change - - technology, economics, physics, and hydrogeology need to replace the old water ways of politics and the culture of waste and poor resource management. Our water problems are on a collision course with energy problems at the same time we have huge fiscal problems. We have limited flexibility to deal with our pressing water issues. The Economist states this very clearly - -

Meanwhile, investment is badly needed almost everywhere. In the developed markets of the United States, where water rights are traded, prices have been rising fast. But since water in most places is usually priced so low, if at all, the revenue generated is seldom enough to maintain or replace existing infrastructure. Even in America the bills will be dauntingly large. Analysts at Booz Allen Hamilton tried in 2007 to estimate how much investment would be needed in water infrastructure to moderise obsolescent systems and meet expanding demand between 2005 and 2030. Their figure for the United States and Canada was $6.5 trillion. For the world as a whole. they reckoned $22.6 trillion.