The New Economic Market: Water

Introduction

Globalisation contains a lot of different fields. One part is the process of word wide interaction and linking up between people, companies and nations. The interaction increases especially in the field of politic, economy, culture, environment and communication. This interaction effects individuals in the same way as institutions or societies.

I will focus especially on the supply of water. The secure supply of portable water of high quality is the condition for life on earth. Politicians as Boutros Ghali prophesised the war on water already in 1885. Others believe that in the 21.century water will takeover the interest that oil had the 20. century (Boutros Ghali, 2009). Water covers 75 % of the surface of the earth, but just 2,6 % of this water is freshwater and 0,6 % is usable, the rest is contained in the ice of glaciers or part of the eternal snow. The water deposit on earth is unchangeable but the regeneration cycle of water takes several of hundreds of years. (Loewe,2007)

The New Economic Market: Water

Almost thirty years ago the discussion about water as a restricted good started to become a basic problem all over the world. In the course of globalization that caused the inter linking between countries and economy markets, the watermarked and water as an unlasting resource gained importance. Since the understanding rose that water wound last for ever and environmental organisations made the water shortage and water pollution to their main topic, politicians and ambassadors of countries started to focus on that. The first world water conference was in 1977 in Mar del Plata in Argentina. Since then water was one of the main topics in political discussions. In the 80ties the aim was to offer worldwide water supply to every one, but the goal could not be fulfilled until today. The UNO (United Nations Organization), UNESCO (United Nations Educational, Scientific and Cultural Organization), UNICEF(United Nations Children's Fund), WHO (World Health Organization), FAO (Food and Agriculture Organization) and a certain number of countries focused on the co-operation with each other and the co-operation with private investors to enable the worldwide water supply. The goals were clear. The currency of the water problem made the organisations focus on quick and effective solutions. But every organisation had different ideas and methods to solve this problem and bring far- and long-ranging chanages. On the international Conference on Water and Environment in Dublin, 1992 four resolutions were made that formed the guideline:

“4 Dublin principles : - Fresh water is a finite and vulnerable resource, essential to sustain life, development and the environment. - Water development and management should be based on a participatory approach, involving users, planners and policy-makers at all levels - Women play a central part in the provision, management and safeguarding of water. - Water has an economic value in all its competing uses and should be recognize as an economic good.” (www.worldwatercouncil.org)

The fourth point made it possible to treat water as an economical good. Until then, it was possible for companies to make money with water. One reason for this decision was the thought that through the treatment of water under economical aspects and under the free market economy conditions, it will rise in quality. If water will be seen as a good, it will follow the rules of supply and demand, and it was hoped, that water would be dispensed equal and more efficient. Since then water was not treated as a common property-resource, or common-pool resource anymore. As water was treated as a common property-resource, water was characterised as a good “whose size or characteristics makes it costly, but not impossible, to exclude potential beneficiaries from obtaining benefits from its use”(http://en.wikipedia.org/wiki/Common-pool_resource). This conference made it possible to treat water as an economic good. That means that the water-market changed. From now on it follows the rules of an economic market, characterised by the rules of supply and demand.The idea was that this could solve the water supply problem. For the first time water lost its status as common property and became marketable. The World Bank as one big supporter of water privatisation:

The World Bank as the international development bank often pointed out, that the deregulation and privatisation of water supply is the best solution to offer poor people access to important water infrastructure. Support from the World Bank as facilities and guarantees for water projects are often linked to the condition that private investors are participants, known as Public Private Partnership.

In the paper of the Dublin principles it is argued that “water pricing should primarily serve the purpose of financial sustainability through cost recovery”( Hubert Savenije and Pieter van der Zaag, International Water Resources Association). Important to think of is the fact of water prising, a focus should be given to equity considerations through, for example, increasing block tariffs. There is a need of defining a fair and reasonable price that secures the acquisition for everyone.

The lack of economic competition

A basic problem of the privatisation in the form of rent or sell of the public water supply is the lack of the economic competition. The public water supply turns into a monopoly and competition is impossible. The state has the possibility to choose the company that offers the best and efficient offer as good quality and low prices. Because of the privatisation every company has the chance to rent or buy the public water supply all over the world. For example the German company RWE bought the British water company Thames Water, that since then controls the water supply in London, Berlin, Budapest, Shanghai, Jakarta, Bangkok and the supply of different cities in Australia, India, Japan, Singapore and Malaysia.

Water in a bottle

Through Globalization and the opening of the world market it was possible for beverage companies to conquer the water market basically in developed countries. Worldwide Nestlé, Pepsi, Danone and the Coca Cola company are the marked leaders of mineral water in bottles. Beyond the problem that the production of plastic bottles has a high negative impact on environment, the regional public water quality declines. Water supply changes from a public issue to a private issue, it just depends on money. Rich people can afford high quality water in bottles, in contrast to the poor. That causes a reduced pressure on policy, because public water supply looses its importance, if high quality water is available even if it is in bottles and expensive.

The idea is, that if companies as Nestlé, Pepsi, Danone and the Coca Cola do not have the exclusive right as an monopoly to sell water in a bottle in certain regions and communities as Mexico or Guatemala, the pressure on the government would rise to provide tap water of good quality. The problem that shall be pointed out is, that through the supply of water in bottles the basic service of water is secure, even if the price is variable and made by companies as Danone and Coca Cola, or others. That makes it possible that the governments of these countries do not have to improve the quality of the tap water, they do not have to improve the water-pipes and the water quality and the water supply. The pressure of the population is not strong enough and the rich people do not have to help changing something, because companies as Coca Cola for example take over the water supply.

Privatisation of Water Supply

“Worldwide water supply to every one” was the goal in the 80ties. The governments and development organisations thought to reach the goal, to provide the world population with high quality water with public funds. In the 90ties world wide water supply should be organised and improved by private companies. They were equated with characteristics as efficient, productive, profitable, flexible and innovative. On the contrary public suppliers were given characteristics as corrupt, bureaucratic, acting without flexibility and low quality. It is the truth that some of the characteristics of public supplier are correct, in particular in developing countries, but the decline of the public sector is caused by debts, the macroeconomic situation and the absence of democracy. The negative characteristics were used to legitimate the privatisation of the water-sector. Further, in times of low national and regional budgets the water supply is a burden and too expensive. In the future the public water sector will keep its importance, particularly concerning the water supply of poor people, which will not happen without state aid.

Virtual water

Virtual water is the amount of water that is necessary to produce some thing. Per example, to produce 1 kg flour, 1500 L of water are necessary. Water is necessary to clean the corn and the machines, to produce the electricity that is used for the machines, to produce the gas for the transportation and a lot more.

To calculate the amount of water that a county utilizes, it is necessary to consider the amount of virtual water too, that is used to produce the products that the country imports. There are some possibilities to reduce the amount of virtual water and to dispense water more equally:

• One possibility is to transport unused water from a region with an abundance of water to a region with low water abundance. This concept is used sparely. For example in Colorado in North America , a region with a high water abundance, the unused water is transported through pumps over the Rocky Mountains to a region with a low water abundance, California.
• Another possibility to reduce the amount of virtual water is to use the water surplus in regions with a high water amount to produce goods that need a lot of water to be produced and to export them after they were produced. Then the water does not need to be exported.
• The next thing to think about is, how much water can be saved, if the product would be sold in the same regions where they were produced? The problem is that a lot of products can’t be produced just in some specific regions. For example rice can’t be produced in Germany, because there are not the right climate conditions.

The consumption of food out of the region is never the less important aspect, even if it is not possible with every kind of goods.

Conclusion

All the aspects that were mentioned are thoughts and developments concerning water supply and the possibilities of its sustainable handling. The fact that water is indispensable to life makes it necessary to find solutions to offer every one a secure water supply. The meetings and conferences that were held pointed the importance of water and its treatment out and made some important reforms possible. The fight for equal sustainable water supply is not won jet, and it will take a lot of time and energy. Water is a problem of equal utilisation and its importance for living is more and more in the mind of people.

This article is focused on the importance of water and the different developments of the water sector. Globalisation is discussed in different aspects and influences the treatment of the water supply sector too. Since the inter-linking of world wide water markets, water as an unlasting good is a problem to be solved. It is mentioned that the economy competition is not secure. In a lot of countries the public water supply turns into a monopoly and competition is more or less impossible.

Because of the privatisation every company has the chance to rent or buy the public water supply all over the world. But just the big and influential companies realistically do that and turn out to be the market regulator. On the one hand there are the companies that have the monopoly on the tap water as RWE and on the other hand there are the companies that have the monopoly on the water that is soled in a bottle as Coca Cola or Nestlé, just to mention some. The problem that turn out to be the loss of the status of water as a common property resource. The main idea was that through privatisation water will rise in quality and in the quality of supply, but it did not really worked out that way. There were some reasons for that. On the one hand the quality of the quality of the water-pipeline- system and on the other hand as mentioned the possibility of the creation of water monopolies.

It is not easy to find solutions for this problems, it is clear that the ways of solving the problem as in the moment are no satisfaction. One opportunity would be to keep up the way of privatising the water sector but with a bigger focus on the postulate of a fixed price that secures a good quality and the possibility for every one to effort water.

Further the importance of the large amount of water wastage that is caused by the production of food as described in the part of the virtual water is important to keep in mind. It was pointed out that water is an unlasting good. The world has an amount of water that can’t be changed. The handling of water in the moment does not consider this fact enough. If there won’t be any changes, the amount of usable water won’t be enough for everyone in a few years. Some possible solutions were mentioned in the text as the transportation of water from a region with an abundance of water to a region with low water abundance. Or another possibility is to use the water surplus in regions with a high water amount to produce goods that require a large amount of water in the production. In general it is important to have the scarcity of water and other goods in mind and in politic discussions the environment with its resources has to achieve an extra importance all over the world. And not only for some years, rather until expedient solutions are found. Since the last 15 years the political movement towards environment protection has a positive effect but it has to be followed more intensively.

References

• Loewe,Jens: Das Wasser Syndikat.Dornach 2007 http://www.unesco.org/water/

• http://www.unesco.org/water/

• http://en.wikipedia.org/wiki/Common-pool_resource

• Stadler,Lisa. Hoering, Uwe: Das Wasser- Monopoly. Zürich 2003

• Barsig, Michael. Becker, Frank: Wasser- Waffe, Ware, Menschenrechte? München 2005

• Mauser, Wolfram: Wie lange reicht die Ressource Wasser? Frankfurt am Main 2007

• Boutros Ghali:"Die Kriege der Zukunft werden um Wasser geführt", http://www1.bpb.de, cited 2009.