Why is water so priceless in use, yet so worthless in exchange?
By James Workman
Peter Brabeck-Letmathe chairs Nestlé, the world’s 44th largest company, which last year earned US$ 9.6 billion profits on US$ 100 billion in revenues. He is the consummate international businessman, bargaining hard, overseeing 280,000 employees, outflanking competitors, and at ease with heads of state. Yet he remains incapable of negotiating one simple and irreplaceable ingredient without which his company ceases to exist: water.
He hardly seems the quintessentially gloomy Malthusian, yet Brabeck foresees “limits to growth” because our global fresh water supply is both finite and being rapidly, stupidly, depleted. The world can sustainably use 4,200 cubic kilometers of water he notes, but it consumes 4,500 even as aquifers plummet and rivers run dry.
Another Inconvenient Truth
A few years back he called water scarcity “the other inconvenient truth,” one riskier than climate change, and predicted that the cost of staple cereals would rise as the world exhausted its water. Time proved him right. Grain prices spiked 90%, triggering widespread urban food riots like those from Tunisia and Yemen to Egypt and Libya.
Why is this happening? “Put bluntly,” he explains, “water has no price. When we see and treat water as a free good, we waste it.”
Brabeck is only the latest and perhaps most prominent victim of the oldest and First Paradox of Water: the matrix of life is both figuratively and literally “priceless.” In 1776 this paradox stumped Adam Smith, whose Wealth of Nations noted how diamonds are utterly worthless in use yet invaluable in exchange, while the converse was true for water. Without water humans can’t exist, yet our species devalues nature’s precious liquid asset into a vague liability.
The Great Unknown
This paradox troubles all water users whether they run a rural farm or urban factory, multinational firm or nuclear family.
Annual shareholder reports discount water as a negligible “cost” to be “managed.” Accountants consider it a line item to absorb into spreadsheets. Chief Financial Officers regard water as a material risk to avoid. Any country can quickly provide its exact mineral wealth, human resources, arable land, energy potential, gross domestic product, and federal monetary budget; none can tell you the annual water reserves that keep its economy alive. No official knows the full cost of providing water because no individual can know it; water’s value is subjective, varying by time, place, conditions, and seven billion water users, half of whom live in cities.
The First Paradox of Water ensures that what we each intuitively grasp as a priceless asset we must collectively debase into a liability that is inherently worthless.
Why does this paradox of value arise, and how can we resolve it?
The brilliant conservationist Aldo Leopold famously warned urban readers about “two spiritual dangers in not owning a farm. One is the danger of supposing that breakfast comes from the grocery, and the other that heat comes from the furnace.” As self-interested stewards we value only the natural assets we own. We ignore what we can’t.
Since our food and energy trace their existence to water, our compound danger lies in not owning a well or creek. Instead, we suppose water comes from a faucet, toilet tank, or pipe. We lose interest in water throughout the urban supply chain. Unable to own or trade our share, we produce an urban, deeply tragic, commons.
A few “exchanges” of water occur between neighbors sharing a river or well, but these are rare, rural, informal (perhaps even illegal) and inequitable. For exceptions to become the rule, city dwellers must formally have an equal opportunity to own and trade water. It may seem a logistical nightmare for our urban world to literally “own” a real well and distribute the vital wet stuff. But thanks to the Internet and ubiquitous cell phones, such barriers don’t prevent ownership.
Frequent flier miles let us virtually “own” physical airline seats. Likewise, each of us can now transparently “own” a defined virtual share of water, distributed automatically, daily, digitally, and equally to all by the water monopoly that unites us. We may call this virtual share a right, credit or a privilege, but it now is ours to earn and accumulate, to use and exchange however we choose.
In some ways similar to the philosophy behind Sand County Foundation’s Water as a Crop, where I serve on the advisory council, this form of “H2Ownership” leads directly to dominion, investment and care. As we buy and sell our unused shares, water accrues real worth and allows a slum dweller or Nestlé executive to negotiate its relative local price. Thus together we can at last resolve this paradox of water, as its value in exchange can rise to the level of its value in use.
James Workman is author of Heart of Dryness: How the Last Bushmen Can Help Us Endure the Coming Age of Permanent Drought. He is a visiting professor at Wesleyan University’s College of the Environment and co-founder of SmartMarkets LLC,an online utility-based platform that unlocks equitable water and energy markets for cities using the system that has sustained the Kalahari’s indigenous people for 30,000 years.