Wed, Aug 22, 2007 - Page 9 News List

Free water!

Poor management and inefficiency plague government water programs, but the oil market may provide examples for improvement

By Kendra Okonski and Caroline Boin

Every year, World Water Week gathers experts and UN officials in their thousands, uttering vitriolic statements, holding meetings and forming alliances -- but ignoring the real problem that prevents a billion people getting decent water: Bad management.

This year, the main issue is (surprise, surprise!) climate change. But, whether or not climate change will increase droughts or increase rainfall, none of these meetings will lead to better water management because that management is generally accepted as a natural state monopoly: "Only governments can reach the scale necessary to provide universal access to services that are free or heavily subsidized for poor people and geared to the needs of all citizens," Oxfam says.

Water, like any resource, is scarce in many places. Normally, scarcity or demand drives people to devote their time, ingenuity and money to finding more efficient ways of using resources and increasing supplies. These entrepreneurs, whether they produce or sell wheat, shoes or water, need to be able to make a living out of their business -- but in most countries private water business is illegal.

To understand the problem with water, it is useful to look at another liquid resource: petroleum.

The management of water and of oil is heavily politicized -- oil supply is subject to cartels and political tensions, while water is one of the most heavily regulated and controlled goods on earth. And both are distributed unevenly across the globe: The Middle East is rich in oil but poor in water.

Still, to a large degree, oil production, transport and use is managed largely through the market process. As a result, its price enables all market participants -- from explorers to consumers -- to decide how much to use and whether to invest in the business.

Human ingenuity has been invested in discovering more oil and better ways of handling and using it because, when there is potential for reward, people invest their own resources (effort, skill, money and time).

Thanks to such investments, oil now accounts for 40 percent of the world's energy, supply has multiplied by more than 150 during the past century and the price has remained similar in real terms over that time. And this dangerous substance is transported safely to every corner of the world.

As with oil, water requires processing and transport. Water for households or industry generally requires treatment. It must also be transported from wells and reservoirs, whether by human, animal or mechanical labor or through pipes. And once water has been used, it needs to be properly disposed of or it can exacerbate the spread of diseases such as cholera and even contaminate clean water.

If water were oil, entrepreneurs would pounce upon myriad opportunities to find new or better ways to treat, distribute, use and recycle it. But, unlike oil, water is rarely subject to market processes.

Without the benefits of competition, water policy is determined by lobbying, corruption and inefficiency. This explains why in most poor countries, from Pakistan to Peru, farmers pay a subsidized price for water. This causes waste and shortages, usually to the detriment of the poor, who must spend their own scarce time and money in pursuit of other sources of water. For instance, 30 percent of India's urban population lacks access to municipal water. Around the world, slums rarely have any municipal supply.

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