Get Ready For Water As a Market Commodity

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Last updated on July 10, 2019 Comments: 12

Every food produced has a market price. As I’m writing this, the price for corn is about $277 a metric ton, but sophisticated traders are looking at what they expect the future price to be, which right now is about $251 a metric ton in May. Speculators trade on the minute-by-minute or second-by-second expectations for future values, and trading is such a big business that the cost of these futures gradually affects the price of corn in the store.

Corn is a natural food, grown and farmed in various locations throughout the world. It appeared in nature originally without intervention by humans, but now humans cultivate the crop, sell it, and help feed people all around the world.

It’s difficult to see much difference between corn, and other natural foods, and water. The planet is 70 percent covered in ocean water. Our bodies are 65 percent water. Water evaporates and returns to earth in the form of rain and other precipitation. Water is a basic building block of life as we know it. The first cities were always located very close to natural water because, among other life-providing uses, water was — and still is — the primary method of long-distance travel for a mass of people.

Can a natural resource like this be turned into a market commodity like corn?

Today, water is relatively inexpensive. Cities provide water to their residents. Water service has spread to the outskirts and suburbs through municipal planning. Residents of rural communities without water service, in most areas, can still get their own water through a private well. But there’s a problem: access to clean water is not available to everyone living everywhere. Where public water supplies are contaminated because communities can’t afford to clean or because communities were willing to accept outside corporations to pollute their lands in exchange for the promises of a growing economy, the lack of clean water leads to poverty and disease.

Across the world, the quality of life correlated to the quality and availability of water. For an individual family, moving from a poverty-stricken area to a modern city is a good solution, but there are several problems.

  • Moving a household costs money, and it is difficult for a family living in poverty.
  • Because of the difficulty, it can be a long process, taking several decades to raise the money and resources.
  • Even after moving, the households needs to adapt to a different culture.
  • Any one family moving doesn’t solve the particular problem of poverty in locales with no access to clean water.

The good news is there are large non-profit organizations working on the problem, but adding to the difficulty is the fact that private enterprises are jockeying now for the ultimate marketization of water as a resource.

Nestlé, Coca-Cola, and PepsiCo all see the advantages. If all drinking water throughout the world were to be controlled and distributed by private companies, shareholders would profit. Water is a basic necessity to life, even more than any particular solid food. When not provided for free, people would be willing to pay whatever they can for access to clean water. On a human hierarchy of needs, whether you’re looking at Maslow’s model or talking to a doctor about basic survival, our bodies must have water at all costs, clean water in order to avoid disease.

The potential for profit is virtually unlimited.

Here’s where a private water market becomes dangerous. And the concepts are easily recognizable with memories of the Enron debacle still fresh. With the privatization of energy, resources shifted to whomever was able to pay the best price for the service. This created artificial shortages in some areas — keeping supply low and demand high kept prices moving upward while at the same time depriving households of the resources they should have had. To benefit shareholders, corporations take shortcuts and play as close to the line of legality as possible. They employ clever people who determine how much can manipulate while escaping legal scrutiny, while at the same time, these corporations spend billions of dollars from their revenue to lobby lawmakers and fund politicians around the world so once in office, they owe favors to the same corporations.

If drinking water is owned and controlled by private corporations, society would recognize that access to water is not a basic human right. Humans also need oxygen from the air to live. Do we have a right to breathe or will we someday need to pay for our access to clean air?

With privatization, the lack of universal access to drinking water will no longer be a societal problem, it will be an economic problem. Those who can pay for clean water will have it, those without the wealth do not. This is already the case at a community level; poor citizens in wealthy cities have access to the water they need, but poor citizens in poverty-stricken areas do not.

There seem to be two options: either the government controls the water supply or private corporations do. It’s often argued the private corporations can do what governments do more efficiently precisely because they have to answer to shareholders who expect efficiency and profits. The question is whether we can trust private corporations with a public good, and in many cases as seen throughout recent history, we cannot. Shareholders’ priorities often conflict with providing a public need democratically to all citizens. I’m not anti-capitalist, but the shareholder form of capitalism is poorly suited for handling societal issues.

That isn’t to say we can trust governments fully with these responsibilities, either.

The eventual privatization of water seems to be unavoidable. In today’s world, private money seems to always win these discussions. Therefore, consider what the future will look like and what we can do now to prepare for this inevitability.

If you’re in the “upper middle class” or you are able to build up your savings month after month, you probably won’t notice a difference in your life.

Most Consumerism Commentary readers are going to fall into this category. It’s in a corporation’s best interest to make sure its class of shareholders have access to their “product,” so this particular class of consumers, those who are more likely to invest in the stock market, will be shielded from most economic obstacles to access.

If you own a home that falls under municipal water access, you already have a bill you pay, and you already budget for the expense. Even if the price of water increases to be more along the lines of your electricity or gas bill, you could probably still afford it. Keep in mind you also pay state, local, and property taxes which help municipalities provide water service; don’t expect those taxes to decrease just because the rights to water have been privatized.

For those in the above category, there may be some minor occasional inconveniences. For the most part, your life won’t be disrupted, but as the industry matures, expect some inconveniences. Just like we saw the the privatization of energy and Enron, regulations may not always be able to stop manipulation of the market. Droughts, now brought on by the weather and climate change, will be controlled by private corporations looking to manipulate the market. Corporations will have more control over people’s lives than ever before.

Expect swings in the price of water

Once water is listed on a commodities exchange, with a price that fluctuates constantly as traders and their algorithms try to predict next month’s price, water pricing will be more volatile, like the price of gasoline at a pump. Speculative bidding causes prices to rise and creates market bubbles. That will make it harder to budget for the family and can result in shortages.

The shortages will affect those living in poverty

First of all, poverty-stricken regions already have poor access to clean water. Privatization promises a more efficient way of delivering the product, but it’s clear that corporations have no interest in customers who are not profitable. Conditions will get worse for those already disadvantaged. The result will be disease, famine, and death around the world.

Charitable organizations committed to water access will rise

To fill in the holes left by corporate-controlled water, non-profit organizations will rise in prominence. As the need for financial help to pay for water increases, so will the efforts of charity. One of the most popular non-profit organizations in recent years with a mission to increase access to potable water is charity: water. This organization builds wells; in the future, charity may take the form of providing water subsidies to help pay for the cost of water from a private company.

Make changes today that could save your family and community in future generations

My ancestors moved from Europe to the United States. Some were more financially successful than others, but all saw the conditions in Europe as unfavorable and did whatever they could to secure the potential for a better life, even if only for their descendants. The voyage was strenuous and long, so the parties who arrived were different than the parties who departed. Migration out of economically depressed locations is the selfish solution, but is the only solution for those unable to change conditions in their homeland.

Prepare for war in locations where the issue is most pronounced

Big economic gaps between the rich and poor — and in this case, wealth is represented by access to clean water, those with, and those without — in close proximity foment violent rebellions. With privatization the gaps that currently exist will only become more pronounced, as corporations provide their services to where they can mine the biggest profits.

I confess that I’m a small part of the problem. Although there’s nothing wrong with the water provided by my town, I’ve been drinking bottled water — and a Nestlé brand at that. I chose this because for whatever reason, I don’t like the taste of my tap water, even after filtering. As a child, I don’t remember ever drinking bottled water, and I believe this is part of a societal trend. As a whole, middle class society is much richer than it was twenty or twenty-five years ago, but we might not feel wealthy because our expectations of a middle class life have changed so much.

I’m already taking part in the privatization of the water supply. I’ll make a concerted effort to switch to tap water, but the world is already on the road towards full privatization of a water market. In business, people talk about five-year plans as if they represent a long-term view. In a societal shift as important as this, you might want to consider your fifty-year or hundred-year plan for your family and your descendants.

The market will bear a significant price increase for clean water because it is, besides clean air, the only substance needed to survive at the most basic level. If you’re not in a position to be able to afford water at prices ten to twenty times what they are today, start shifting your world now so your grandchildren will have a chance to survive.

Human Beings Have No Right to Water (hat tip: Beth Ellen Cooper-Davis)

Article comments

Anonymous says:

I’ll stick to my well, thank you very much.

There are not enough people in my area to make it cost effective to bring city water or sewer.

Anonymous says:

Drinking bottled water is quite different from the privatization of water that you would use to wash your dishes, take a shower, etc.

Anonymous says:

there would need to be proper oversight & regulation of water as a market commodity & I don’t see that happening at all.

Anonymous says:

I find this article very disconcerting, for some reason. I guess, like most Americans, I take clean water for granted. The thought of it being a vehicle for profit is a little scary.

And Luke, try a squeeze of lemon in the tap water….makes it taste very fresh.

Anonymous says:

This is a mixed bag. SOME types of privatization would actually increase the accessibility of clean drinking water. In the Philippines, for instance, people buy their drinking water from vendors who filter it so that it’s safe, thus increasing public health. Allowing this more widely or on a greater scale could rescue entire communities from unsafe drinking water.

OTOH, if it is done without control and without proper oversight, entire communities could end up disenfranchised from reliable water sources, and that would be a travesty.

Anonymous says:

I get the idea here but I don’t really see what the cause for worry is. Water is a limited and valuable commodity. But I see zero effort to privatize it here in the US. This is not something that some company is just going to “take over”. There are too many industries and interests involved to let that happen.

I’m also not worried about drinking water. Our water /sewer bill is about $60 a month and roughly 10¢ of that goes to drinking water. If water became scarce or expensive at some point then I’d cut all other uses before anyone goes thirsty. No more 15 minute showers for the wife.

Water is very local as well. Its much more of a problem in some parts of the world than others.

Plus the stuff does literally fall out of the sky… And I live in the Pacific Northwest, so you can maybe see why I lack concern.

Anonymous says:

You wrote: “But I see zero effort to privatize it here in the US.” American Water Company states: “We serve an estimated 15 million people in more than 30 states and parts of Canada.” and that’s just one company. The state of Washington is one of those states if that’s your part of the northwest. Enron did try to start up a market (trading desk) for water similar to what they did in electricity in California – although it didn’t work out in England or California. Their efforts in the California power market did, it fact, cause a real crisis for several months. In Austin Texas a private water company increased rates 40% – 60% in a little over a year. It still falls from the sky in Texas – just not as often.

Anonymous says:

WEll I’ve never heard of American WAter. While they may manage some water utilities I’m sure they’re heavily regulated. Enron is a good example of how things can go wrong but even they didn’t have nationwide exposure. If a private company tried to take over our water system I’d oppose it. THis just isn’t anywhere near the top of my list of things to get worried about.
I understand clean water is more of a problem in developing nations and certainly it could become a more disputed resource in mankinds long term future. But today where I sit, this is just not a concern.
I’m a little more worried about the Zombie Apocalypse.

Luke Landes says:

If energy serves as any example, and I think it does, in the U.S., it will look like this: The first step involves smaller companies in communities taking over the municipal duties, and that already exists in places throughout the country. The second step involves conglomerates buying up the smaller companies in consolidation. In developing countries where there isn’t as strong of a water infrastructure in existence, the model is different, with outside companies coming in.

Anonymous says:

I agree with the evolutionary path portrayed, however it’s the commodity part that’s more troublesome. Most US privatizations come with a heavy regulatory harness but a market can be manipulated, as Enron did with electricity. When treated as a commodity in a market environment, speculation and manipulations must be kept in check – something we haven’t done a great job of in the past.

Anonymous says:

I share the concerns about that kind of thing and I certainly wouldn’t want it to happen. To get to the point that they’re trading water like that it would take a lot of major law changes (hopefully the Californians learned their lesson).

Anonymous says:

History can teach us a lot. Here’s a quote from 2002: “The company was called Azurix and when it went public with great fanfare in the summer of 1999 it hoped to control the water utility business around the globe.” Azurix failed and the taxpayers in England were left holding the bag. As for me, I don’t use bottled water because the tap water here taste great and gets the highest reviews for purity – but it does come from a commercial entity (American Water Company).
We just don’t know what our future will look like and never will.
By-the-way, Azurix was started and owned by Enron. Hmmmmmm