Water is a mysterious thing. We just take it for granted. Few give it a thought, until it is no longer there. Nothing concentrates the mind more than when the taps suddenly run dry.
Religion uses it for cleansing. To many, it is a gift from God. Billions regard it as a fundamental human right. Economists use the lack of it to measure the poverty of a community. Poets and authors write of it with passion and emotion. Fish swim in it and industrialised cities dispose of their waste into it.
What people never think about is that the oxygen we breathe comes from organisms living in water. Few understand that the jobs sustaining them are dependent on water. Nobody buying a car, eating a hamburger or making fashion decisions about clothing thinks of the volume of water that’s embedded in the products they consume.
Who gives a second thought to the germs and diseases that can be transmitted from contaminated rivers irrigating crops that are eaten by hungry consumers somewhere far away?
Collectively, all of this is true. So, all these things are part of the fundamental problem we have. The economics of water just don’t make sense, simply because it is treated as a social good.
We call this model Winer, an acronym for “water is not an economic resource”. So powerful is the emotion attached to this belief that any talk of needing to raise capital for infrastructure is dismissed as an evil intention to commodify water.
But is this in our collective best interest?
The global population passed the 8 billion mark recently and it continues to grow. Water resources are under pressure all over the planet, at the very same time that the public is suspicious of science and wary of predictions of a coming calamity.
Humans are now producing chemical substances and synthetic products that are both durable, and alien, to nature. This means that a cocktail of chemicals is now bombarding all living organisms, from single-celled creatures to humans living in complex social structures.
Nature is unable to cope, so these hazardous chemical compounds are being accumulated in food webs, partially metabolised, sometimes concentrated, but always creating unintended consequences somewhere else.
Economics is called the science of scarcity, and it tells us that scarcity equates to value. The greater the scarcity, the higher the value and vice versa.
Applying this simple logic to the plight of humankind, we have a growing number of consumers chasing a diminishing resource. If economic principles prevailed, then the diminishing quantum of water will equate to an increase in the value of safe water. Then our mental block tells us that this is an argument for commodification, which is bad, so we intuitively reject it without thinking about the logic and the consequences.
The best lesson I ever learnt in my professional life was taught by Dr Seuss when he documented the story of The Lorax. That story is about creating demand for a product that nobody really needs, which he called a Thneed.
Smart brand managers created a social awareness of the “need for a Thneed”, so demand grew. Lots of benefits were accrued to the owners of the brand, but the voice of caution raised by the Lorax was simply ignored. I strongly urge every reader to
style="font-weight: 400;">watch the video about The Lorax as narrated by Dr Seuss.
Now let’s apply this to water. As human needs grow, the demand for water will simply outstrip supply. This will probably happen in the lifetime of most of my readers, and certainly in their children’s lifetime, depending on where they live.
Economics tells us that scarcity drives value so the cost will go up. Social prejudice will grow as the increasingly angry masses demand from their local government a steady supply of clean water, for which many are unwilling to pay because it is regarded as a human right.
This is what economists call the willingness to pay, which caps the value of water at levels that will increasingly be lower than the cost of producing safe water.
Remember what I said earlier about the chemicals, plastics and waste products overwhelming our aquatic ecosystems? The wise old Lorax called this “gluppity-glupp”. This will drive up the cost of producing safe water, and it will collide with the willingness to pay.
So, what now?
Governments, regarded as the only legitimate supplier of water, will increasingly face the dilemma arising from their inability to supply water that is safe at a price that society is willing to pay. They will be caught in the relentless grip of the jaws of a vice that can only tighten.
Logically, this will mean that local economies will slowly succumb to the debilitating effects of the destruction of water security. Investors will increasingly be unwilling to place their capital at risk in a local economy that is water insecure. This means that companies cannot grow so new jobs can’t be created fast enough to absorb the growing population.
Emerging technologies, like artificial intelligence, will replace people wherever possible. Unemployment will become an increasingly complex problem for many local governments with the potential to overwhelm their capacity to provide safe and reliable water, and the dominoes will start to fall.
It need not be this way, but this is how it is at present. In places such as South Africa, it is more acute, but it is also happening in the Middle East, Australia, Singapore and the Americas. It’s a universal problem that will have to be dealt with in our lifetime.
Which investors would be willing to put capital into the development of infrastructure needed for water security when the product being produced is deemed to have no economic value, so the willingness to pay undermines the business model?
Society will increasingly be faced by a stark choice. Either elect a trustworthy government capable of providing water security, energy security, job security, food security and national security, or accept that the growing cost for all of these will be carried by each citizen in one form or another.
There will be no easy choices if we go down that road, because economics also tells us there is another concept at work – the capacity to pay. Willingness to pay is one thing, but the capacity to pay is another, so the richer folk will absorb those costs and live their lives as before, while the poor get left behind. The same will apply to investors, who will simply move to other markets that are safer and more predictable.
This growing disparity will drive insecurity, until the rich migrate, leaving the poor behind.
The economics of water matter. There are no free lunches. Listen to the voice of the Lorax and learn about the gluppity-glupp, flowing from the factory that processed Truffula trees into highly valued Thneeds.
Please just listen to the voice of the Lorax, when he speaks for the trees, for I am but a person trying to make sense of it all. Listen and make your own choice.
If not for you, then for your children. DM