TCS Daily

Water Wars

By Roger Bate - September 8, 2003 12:00 AM

One of the less well-known attacks on capitalism and trade that can be expected at the World Trade Organisation Ministerial Meeting in Cancun, Mexico will be on water privatisation.  A related concern and inevitable complaint will be directed against excess energy consumption, allegedly leading to a warming planet, which will apparently make water supplies even scarcer.


While these attacks, made by a mixture of green groups, unions and socialist governments, will not make the headlines -- the debates about agricultural subsidies and access to drugs are of more immediate concern -- they will persist and grow over the next decade. Water will be the resource issue of the 21st century and the allegations made about how capitalism and trade exacerbate water wars must be combated today.


A few weeks ago at the Stockholm Water Symposium, the United Nations proclaimed that between 2 billion and 7 billion people will be affected by water scarcity by 2050. Since the low-end projection for the number of people on the planet in 2050 is 7 billion, this should be some indicator of how alarmist the UN has become on water.


The UN further estimates that over the next 20 years the average per capita supply of water worldwide will shrink by a third, with 8% of world population suffering chronic water shortages.  To make matters worse, the World Meteorological Office (WMO) claims that water problems will probably be made worse as "global temperatures continue to warm due to climate change". The results of such climatic changes "need immediate attention in order to satisfy future food demands for an exploding human population and to minimise human and economic suffering from catastrophic floods" says the Stockholm International Water Institute, organisers of the Symposium. 


There is little doubt that water is appallingly mismanaged around the globe. Most governments spend billions on dams, irrigation channels and other supply augmentation techniques, and then price water at close to zero. The result is massive overuse by farmers, municipalities and industries. There is little evidence that the climate is changing, but even if it is, the damage wrought by bad policies far outweighs any damage caused by human emissions of greenhouse gases.


But very little of the symposium, few of its speakers, and none of the activist complaints in the run up to the WTO meeting target those who cause the greatest problems -- national governments. Instead there are numerous demands for less water-intensive crops to be grown, 'softer' approaches to allow for re-use of water in irrigation, and other sensible policies that will be of marginal benefit.  But all agree that water is too important to be left to the market, and especially the privatisation pushed by the World Bank, a few free market think tanks, as well as the corporations that expect to benefit.


Maude Barlow is probably the most articulate independent activist opposing water privatisation and she will undoubtedly make her mark at the Cancun Ministerial meeting. She opposes the "Washington Consensus solution: the privatization and commodification of water. Price water, they say in chorus; put it up for sale and let the market determine its future. For them, the debate is closed. Water, say the World Bank and the United Nations, is a 'human need,' not a 'human right.' These are not semantics; the difference in interpretation is crucial. A human need can be supplied many ways, especially for those with money. No one can sell a human right'.


Her approach is clear, get water declared a human right and it will be harder to commodify. If she succeeds, and there seems to be little apparent opposition, it will make the privatisation of water far harder in future. Not only do she and her acolytes attack the water companies like Suez, but they eye the increasing size of the bottled-water industry with dismay. 


She recently analysed the industry and concluded that "companies like Nestlé, Coca-Cola and Pepsi are engaged in a constant search for new water supplies to feed the insatiable appetite of this business. In rural communities all over the world, corporate interests are buying up farmlands, indigenous lands, wilderness tracts and whole water systems, then moving on when sources are depleted. Fierce disputes are being waged in many places over these 'water takings,' especially in the Third World. As one company explains, water is now 'a rationed necessity that may be taken by force.' Corporations are now involved in the construction of massive pipelines to carry fresh water long distances for commercial sale while others are constructing supertankers and giant sealed water bags to transport vast amounts of water across the ocean to paying customers."


Part of the problem about Barlow's complaint is that it is only partially wrong. Markets are only as good as the institutional environments in which they operate, and currently markets cannot operate very well. Companies are restricted to bottled water supply, or are allowed to provide potable water through municipalities but are constrained on what they can charge, how they operate and for how long they can supply water. Corporations are bound to try and make too large a profit in the short run because their investment in new supplies, or improvements in old supplies, may be taken away from them at any time -- it's a classic tragedy of the commons. Currently corporations are over-pumping communal aquifers because they must do so to recoup their investments. Barlow's solution is to nationalise all water resources. But what really needs to change is the institutions in which water markets, currently or potentially, operate. Without institutional change water will continue to be wasted and the dire forecasts predicted by the UN more likely to occur. 


And without acceptance that water is just another commodity it will never be used efficiently. The message that the WTO delegates should listen to is that it is necessary to allocate water like any other commodity. If governments wish to provide financial support for the poorest, they should do. It's the same with agriculture. Give financial aid for food/water to the starving/thirsty, but don't protect the suppliers with subsidies. Only then will food and water be properly priced.


Dr. Roger Bate is a visiting fellow of the American Enterprise Institute.


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