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“We have plenty of horror stories on our side, too.” The Gary facility, to take one example, went private only after the EPA forced the public utility to find a more experienced operator to solve a range of problems. “Individual municipalities don’t have the expertise to employ all the new technology to meet the new standards,” Camus says. “We do.”

The bottom line is this: that water is essential to life makes it no less expensive to obtain, purify, and deliver, and does nothing to change the fact that as supplies dwindle and demand grows, that expense will only increase. The World Bank has argued that higher prices are a good thing. Right now, no public utility anywhere prices water based on how scarce it is or how much it costs to deliver, and that, privatization proponents argue, is the root cause of such rampant overuse. If water costs more, they say, we will conserve it better.

The main problem with this argument is what economists call price inelasticity: no matter what water costs, we still need it to survive. So beyond trimming nonessential uses like lawn maintenance, car washing, and swimming pools, consumers really can’t reduce water consumption in proportion to rate increases. “Free-market theory works great for discretionary consumer purchases,” says Hauter. “But water is not like other commodities—it’s not something people can substitute or choose to forgo.” Dozens of studies have found that even with steep rate hikes, consumers tend to reduce water consumption by only a little, and that even in the worst cases, the crunch is disproportionately shouldered by the poor. In the string of droughts that plagued California during the 1980s, for example, doubling the price of water drove household consumption down by a third, but households earning less than $20,000 cut their consumption by half, while households earning more than $100,000 reduced use by only 10 percent.

In fact, critics say, private water companies usually have very little incentive to encourage conservation; after all, when water use falls, revenue declines. In 2005 a second Bolivian riot erupted when another private water company raised rates beyond what average people could afford. The company had dutifully expanded the city’s water system to several poor neighborhoods outside the city. But the villagers there, accustomed to life without taps, were obsessive water conservers and hadn’t used enough water to make the investment profitable.

The biggest winners of a sophisticated water market are likely to be the very few water-rich regions of the global north that can profitably move massive quantities across huge distances. Russian entrepreneurs want to sell Siberian water to China; Canadian and American ones are vying to sell Canadian water to the Southwestern U.S. So far, such bulk transfers have been impeded by the high cost of tanker ships. Now, thanks to the global recession, the tankers’ rates have dropped significantly. If the Sitka plan succeeds, other water-rich cities may soon follow.

But in between the countries that will profit from the freshwater crisis, and those that will buy their way out of it, are the countries that have neither water to sell nor money with which to buy it. In fact, if there’s one thing water has in common with oil, it’s that people will go to war over it. Already, Pakistan has accused India of diverting too much water from rivers running off the Himalayas; India, in turn, is complaining that China’s colossal diversion of rivers and aquifers near the countries’ shared border will deprive it of its fair share; and Jordan and Syria are bickering over access to flows from a dam the two countries built together.

So what do we do? On the one hand, most of the world views water as a basic human right (the U.N. General Assembly voted unanimously to affirm it as such this July). On the other, it’s becoming so expensive to obtain and supply that most governments cannot afford to shoulder the cost alone. By themselves, markets will never be able to balance these competing realities. That means state and federal governments will have to play a stronger role in managing freshwater resources. In the U.S., investing as much money in water infrastructure as the federal government has invested in other public-works projects would not only create jobs but also alleviate some of the financial pressure that has sent so many municipal governments running to private industry. That is not to say that industry doesn’t also have a role to play. With the right incentives, it can develop and supply the technology needed to make water delivery more cost-effective and environmentally sound. Ultimately both public and private entities will have to work together. And soon. Unless we manage our water better now, we will run out. When that happens, no pricing or management scheme in the world will save us.

With Ryan Tracy

Link: http://www.newsweek.com/2010/10/08/the-race-to-buy-up-the-world-s-water.html