Water Economics and Conservation

It's not often that I get a request to blog on something, but Rob wanted me to talk about this debate on water and economics. As you all know, I really can't resist a bearded man. So here we go.

The economist David Zetland argues that we need to let market forces decide water rates. Only then will conservation happen.

If we had a reasonable price on water, we could have a sustainable water supply everywhere, forever.

People will have 100% reliability IF they are willing to pay. If businesses want reliable water, they pay. If poor people want to use water for more than drinking and sanitation, they pay. If a guy wants to irrigate his golf course, he pays A LOT.

The food supply would shift to higher value crops (less alfalfa and more broccoli). Food prices would go up, but they would reflect the true cost of growing food, not the subsidized cost from unsustainable practices.

Zetland's argument repeats the same problems I have often have with economists--it assums that all people are the same with the same power to buy and sell their goods and labor. I agree that we waste a lot of water and the low prices of that water is a major reason. But what about the poor? Should they have to pay higher rates for water in order to bring usage under control? Should water be treated like any other commodity? I have to answer no. I'm not sure that Zentland disagrees with me so much on this, in that he seems to believe that people should have water for basic uses, but then many of his readers don't have this commitment.

In 2000, the World Bank forced Bolivia to privatize some of its water. The right-wing government of the time sold the rights to Coachabamba's water to the multinational corporation Bechtel. Bechtel decided to charge a supposedly fair market price for the water. But of course, no Bolivian could pay for it. This led to enormous protests in the streets that eventually led to the death of one protestor. Bechtel withdrew after the Bolivian government paid them a large sum in compensation. The backlash to this helped along the rise of Evo Morales.

One major problem with letting market forces decide prices is its amorality. Society must take into account how its practices affects the poor. Another problem of course is that market forces don't actually exist as independent operators. They are constantly manipulated by the wealthy and governments to support big business and the rich. Those who scream the loudest for laissez-faire economics are the first to seek government intervention when the economy doesn't progress in their favor.

Several major progressive bloggers support Zetland's plan, including Matt Yglesias and Kevin Drum. To me, this helps demonstrate the disconnect between too many leading left-leaning bloggers and the world's poor, as well as the happy acceptance of economists' constructions of the market without question. A more interesting criticism comes from Froude Reynolds, who questions our background on current water issues. He claims we have all read too much Marc Reisner, who wrote Cadillac Desert. This book condemned how California agriculture has used water throughout its history. Along with Donald Worster's Rivers of Empire, Cadillac Desert brought a lot of attention to one of America's most disturing industries. But Reynolds is right. Cadillac Desert is over 20 years old and a lot of its points aren't necessarily valid today. Agriculture doesn't dominate water in quite the same way as it did 50 years ago.

However, I think Reynolds overstates when he says that the system is "much less outrageous." It is just as outrageous, but in different ways. Agriculture still wastes a tremendous amount of water growing things in places where they should not be grown. Golf courses, housing developments, and theme parks waste gargantuan amounts of water. We allow people in Phoenix to grow orange trees in their yards, we promote pools in Los Angeles, and we love the fountains in Las Vegas. Our society is still based on the profligate use of water and this water is still used primarily by the rich for the rich.

This leads us back to the problem of the market-based solution. Zetland is no doubt right when he says that raising water rates would force people to use less overall water. But the problem is that the golf courses, agribusiness farms, casinos, and wealthy McMansion owners could and probably would still pay those rates. It would be the poor that would suffer. They would not be able to pay for the water they need everyday. The middle class would suffer too. Perhaps they waste money watering their lawns. This should be discouraged. But in a world of rising commodity prices across the board, can we afford to let mysterious market forces raise the water rates of everyone to ensure conservation? I wouldn't support that.

So what can we do? What options make sense? I think the most logical and fair way to adjust water usage is to combine Zetland's ideas with government internvention on behalf of the poor. Water should remain very cheap up to a certian level of usage. Today's poor, both in the United States and around the world, deserve clean water as a right. It is up to governments and international organizations to ensure that right. But after those rights are taken care of, then I think it is quite logical to raise water prices by quite drastic measures. This might not be the so-called laissez-faire market that Zetland and other economists like to talk about. But it does essentiallly the same thing. Through government policy, we can ensure the rights of everyone to supplies of good water while also lowering overall consumption and waste.

The crazy thing about this idea is that it supposes the idea of a government that works for the majority rather than the rich. The unreality of this possibility is perhaps the biggest obstacle from implementing a water plan I could support.