Water Markets: A False Solution to a Real Crisis
Putting a public resource in the hands of the wealthy will not solve California’s water crisis
If we have learned anything from the water shut-offs in Detroit and the ongoing water crisis in the Western U.S., it is that every community deserves access to safe and reliable water, regardless of its ability to pay. Yet a new movement is afoot to transfer control of our water to new water markets. Despite the evidence privatizing water doesn't work, water privatization and market-based schemes are still being pushed upon the public as a solution. Specifically, we are seeing the idea of water markets gain attention, especially in response to the Western drought.
While not a new idea, the widespread use of water markets, which represents the financialization of all of our common resources, is relatively new. They are a false solution that assigns the benefits of our investment in this common resource to a small few at the expense of everyone else, and do little to ensure adequate supply to anyone.
We know that large financial institutions dream of water markets. In fact, Willem Buiter, Chief Economist at Citigroup, has written of his desire to see a global water market: "I expect to see a globally integrated market for fresh water within 25 to 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments -- puts, calls, swaps -- both exchange-traded and OTC will follow.... Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
This is a frightening vision of a future in which our water is controlled by the Wall Street casino and it is currently being slipped into policy discussions under the guise of a solution to water shortages in a drought.
Water is the ultimate common resource. As a nation, we invest in dams, in water infrastructure for transport and in treatment plants to make water more available for public use. And we invest a lot. According to the Congressional Budget Office, from 1956 to 2006, we spent almost four trillion dollars on developing our water resources. Society has spent that money because water is important for all of us.
Moreover, water is the ultimate inelastic resource. Economists describe a resource as "inelastic" if the price of the resource doesn't really affect the amount of the resource being consumed. Not only will we pay anything if we need water, we are unwilling to part with what water we have. In Chile, where they marketized water in the 1981, there were very few trades. That's because farmers were unwilling to part with their water access for any price. And when large corporations simply took water, poorer farmers were unable to afford the court costs to fight for their rights. The choice of a market over government in a resource that people didn't want to sell led to centralizing a common resource in the hands of the rich.
The calls for water markets and water pricing also fail to see the reality of what water distribution and control would look like under these markets. In the United States, according to a study published in 2009, real estate developers seeking small amounts of water during construction projects and suburban developments paid the highest prices. In 2012, natural gas companies seeking water for hydraulic fracturing outbid Colorado farmers, freezing out farms.
People who think of the market as the ultimate expression of fairness confuse money with people, and cost with value. A market can't represent the common will of the people, because only those with the money to buy are allowed a voice. And it can't express the value of water because the value of a life-giving substance like water is different than its cost. Water is vital for all of us. And, access to water cannot be for sale.
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If we have learned anything from the water shut-offs in Detroit and the ongoing water crisis in the Western U.S., it is that every community deserves access to safe and reliable water, regardless of its ability to pay. Yet a new movement is afoot to transfer control of our water to new water markets. Despite the evidence privatizing water doesn't work, water privatization and market-based schemes are still being pushed upon the public as a solution. Specifically, we are seeing the idea of water markets gain attention, especially in response to the Western drought.
While not a new idea, the widespread use of water markets, which represents the financialization of all of our common resources, is relatively new. They are a false solution that assigns the benefits of our investment in this common resource to a small few at the expense of everyone else, and do little to ensure adequate supply to anyone.
We know that large financial institutions dream of water markets. In fact, Willem Buiter, Chief Economist at Citigroup, has written of his desire to see a global water market: "I expect to see a globally integrated market for fresh water within 25 to 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments -- puts, calls, swaps -- both exchange-traded and OTC will follow.... Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
This is a frightening vision of a future in which our water is controlled by the Wall Street casino and it is currently being slipped into policy discussions under the guise of a solution to water shortages in a drought.
Water is the ultimate common resource. As a nation, we invest in dams, in water infrastructure for transport and in treatment plants to make water more available for public use. And we invest a lot. According to the Congressional Budget Office, from 1956 to 2006, we spent almost four trillion dollars on developing our water resources. Society has spent that money because water is important for all of us.
Moreover, water is the ultimate inelastic resource. Economists describe a resource as "inelastic" if the price of the resource doesn't really affect the amount of the resource being consumed. Not only will we pay anything if we need water, we are unwilling to part with what water we have. In Chile, where they marketized water in the 1981, there were very few trades. That's because farmers were unwilling to part with their water access for any price. And when large corporations simply took water, poorer farmers were unable to afford the court costs to fight for their rights. The choice of a market over government in a resource that people didn't want to sell led to centralizing a common resource in the hands of the rich.
The calls for water markets and water pricing also fail to see the reality of what water distribution and control would look like under these markets. In the United States, according to a study published in 2009, real estate developers seeking small amounts of water during construction projects and suburban developments paid the highest prices. In 2012, natural gas companies seeking water for hydraulic fracturing outbid Colorado farmers, freezing out farms.
People who think of the market as the ultimate expression of fairness confuse money with people, and cost with value. A market can't represent the common will of the people, because only those with the money to buy are allowed a voice. And it can't express the value of water because the value of a life-giving substance like water is different than its cost. Water is vital for all of us. And, access to water cannot be for sale.
If we have learned anything from the water shut-offs in Detroit and the ongoing water crisis in the Western U.S., it is that every community deserves access to safe and reliable water, regardless of its ability to pay. Yet a new movement is afoot to transfer control of our water to new water markets. Despite the evidence privatizing water doesn't work, water privatization and market-based schemes are still being pushed upon the public as a solution. Specifically, we are seeing the idea of water markets gain attention, especially in response to the Western drought.
While not a new idea, the widespread use of water markets, which represents the financialization of all of our common resources, is relatively new. They are a false solution that assigns the benefits of our investment in this common resource to a small few at the expense of everyone else, and do little to ensure adequate supply to anyone.
We know that large financial institutions dream of water markets. In fact, Willem Buiter, Chief Economist at Citigroup, has written of his desire to see a global water market: "I expect to see a globally integrated market for fresh water within 25 to 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments -- puts, calls, swaps -- both exchange-traded and OTC will follow.... Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
This is a frightening vision of a future in which our water is controlled by the Wall Street casino and it is currently being slipped into policy discussions under the guise of a solution to water shortages in a drought.
Water is the ultimate common resource. As a nation, we invest in dams, in water infrastructure for transport and in treatment plants to make water more available for public use. And we invest a lot. According to the Congressional Budget Office, from 1956 to 2006, we spent almost four trillion dollars on developing our water resources. Society has spent that money because water is important for all of us.
Moreover, water is the ultimate inelastic resource. Economists describe a resource as "inelastic" if the price of the resource doesn't really affect the amount of the resource being consumed. Not only will we pay anything if we need water, we are unwilling to part with what water we have. In Chile, where they marketized water in the 1981, there were very few trades. That's because farmers were unwilling to part with their water access for any price. And when large corporations simply took water, poorer farmers were unable to afford the court costs to fight for their rights. The choice of a market over government in a resource that people didn't want to sell led to centralizing a common resource in the hands of the rich.
The calls for water markets and water pricing also fail to see the reality of what water distribution and control would look like under these markets. In the United States, according to a study published in 2009, real estate developers seeking small amounts of water during construction projects and suburban developments paid the highest prices. In 2012, natural gas companies seeking water for hydraulic fracturing outbid Colorado farmers, freezing out farms.
People who think of the market as the ultimate expression of fairness confuse money with people, and cost with value. A market can't represent the common will of the people, because only those with the money to buy are allowed a voice. And it can't express the value of water because the value of a life-giving substance like water is different than its cost. Water is vital for all of us. And, access to water cannot be for sale.