Free Market Water

(Originally posted on waterefficiency.net)

By Elizabeth Cutright
Editor
Water Efficiency

There’s been a lot of talk lately about the role of government regulation within a capitalist system. Can oversight and strict accountability coexist with a laissez-fair market? And should a balance be struck between private enterprise and public good? Those are tricky questions that beg complex answers, but what if we switch the subject of the discussion from economics to natural resources—more specifically, what if the shorage wasn’t dollars, but gallons. What if water rights were treated as private property and traded like commodities? What would private water ownership look like, and—more importantly—would such a system promote efficiency and conservation?
You only need to look South to see this type of system in action. In the March 14 edition of the New York Times, Alexei Barrionuevo writes about the situation in Chile’s Atacama desert, and how private water rights are impacting the country’s citizens and changing its landscape. With a private property approach to water resources, Chile has allowed water rights to be bought and sold with minimal government or environmental regulations. The result is a private ownership system that allows for a consolidation of water rights on a scale unheard of in the United States. As Barrionuevo’s article points out, 80% of water rights across a large swath of southern Chile are owned by Endesa (a Spanish-owned electric company), and in the Atacama desert (one of the driest regions in the world) some towns have sold up to 75% of their water rights to large mining companies. In Chile, farmers fight with large—often international—conglomerates over rivers and natural reservoirs, and every time the conglomerate wins, another small town or agricultural community dries up.
Chile’s water rights trading system was created during Augusto Pinochet’s military dictatorship during the 1980s, and it provides a great example for what happens when the government doesn’t just abdicate responsibility for controlling natural resources, but actually hands over controls to the highest bidder. Proponents of Chile’s system argue that the free-market model promotes efficiency by allocating water based on economic use, but it’s clear that this “for-profit” system ignores an important aspect: Although water can be a commodity—something to be bought and sold based on the balance of supply and demand—that is not its only identity. Ultimately, no one can forgo water and survive: It’s not just a “want,” it’s a basic need.
So what does the situation in Chile have to do with our situation here at home? Well, just like Chile, we too are dealing with a water crisis, and our water demands—both literal and virtual—are continuing to grow, even as our water resources are threatened by pollution, waste, and inefficient collection and delivery systems. Nevertheless, we have managed to strike a balance between private and public needs. In the United States, three fourths of water systems are public, guaranteeing citizens access to clean, affordable water. In many communities throughout our country, tying cost to use (in the form of tiered-rate structures) has encouraged a more conscientious approach to water use. But a lot more needs to be done.
We must grapple with the same dilemma Chile faces—how to support the continued growth of an economy dependent upon a finite resource. California farmers are already in the cross hairs of this issue: with fewer water allocations and a weakened consumer base, these farmers must learn to do more with less. And the solution—for farmers and for all of us—will not be found in reduced operational costs (in the form of decreased crop yields or lay-offs), but using water more efficiently.
So the question is not, “can water rates promote water conservation?” We first need to determine whether we are committed to fair, equitable, and cost-effective water distribution that rewards conservation where possible, but does not deny access in the process. Within that context, I think it’s fair to then ask, “should water delivery be a for-profit undertaking?”
(Click Here to Read Barrionuevo’s article.)