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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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Who Will Control The World’s Water: Governments Or Corporations?

Who Will Control The World’s Water: Governments Or Corporations?

Water is perhaps the world’s most important resource, and one of the most common resources. For decades water was regarded as a common good, and it was plentiful enough that in most parts of the world there was little money to be made off of it. Now as the world’s population continues to grow, all of that is changing. Late in March, Tetra Tech was awarded a $1B five year contract to help support the US Agency of International Development (USAID) and its water development strategies. Tetra Tech will help USAID by collecting data related to water use, develop water management strategies, and help improve access to water in select areas.

This contract is far from the first in the area of water management. Today there are numerous companies focused on earning a profit based on water management, water provision, and water remediation. There are at least ten major corporations working in the area including three that between them supply water to 300 million people in 100 countries. These three corporations, RWE/Thames, Suez/ONDEO, and Veolia control vast swaths of water systems in Europe and are now looking at a less saturated market; the United States. The US has its own share of large water companies including American Water Works, ITT Corp, and GE Water, but most Americans are still served by publicly owned utilities and this presents a new opportunity for corporations in the space. Related: California: A Microcosm For Impending Global Water Crisis

Water is so critical a resource that any discussion of privatizing water resources predictably draws a frequent public outcry as the fight over a water infrastructure bill in Congress last year showed. The truth is though, that water access is no more or less safe in the hands of corporations than in the hands of governments. There are certainly cases of corporations abusing their customers, but there are equally many cases of governments using their considerable power to oppress their citizens. Corporations are often owned by and responsible to shareholders (i.e. the general public). Further, while government objectives are often murky and depend on the people in office, corporate objectives are more straightforward – earn a profit. Related: Who’s To Blame For The Oil Price Crash?

None of this is to say that people should be racing to sell off water rights, but the realities of the 21st century will require hard choices. The world’s population is growing most in countries which are less developed and have less infrastructure. Rich nations like the US, Europe, and Japan are seeing slow or no population growth while under-developed nations like India and Indonesia continue to see booming growth. This will lead to challenges that unstable governments are ill-equipped to handle, but which require serious investment efforts. Related: Top 4 Energy Innovations On The Horizon

Even in the United States, the on-going drought in California is taxing the ability of the government to handle the problem. Perhaps what is needed is a system of interstate pipes to enable the transfer of water resources between areas of the country in the same way that the interstate highways facilitate traffic flow. Such a system would enable the movement of water from say, the water-soaked northeast (which had a very wet winter) to the parched southwest. Traditionally major projects like this have always been the purview of the government. But in today’s dysfunctional political environment, it is unclear if the US government is even remotely prepared for the challenges that would accompany building a national canal system.

Regardless of one’s views on the efficiency of government or the effectiveness of corporations, it is clear that the world is entering a new era where water is now fair game as an economic resource. And that is a scenario that presents both major risks and major opportunities for mankind.

By Michael McDonald for Oilprice.com

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  • John Scior on April 10 2015 said:
    It would be wise to encourage metering of water in places that have none such as certain parts of California. Also , some agricultural practices waste so much water that though encouragement of better practices, one could theoretically end the drought in the west. I always thought a good idea might be to run a small pipeline from the pacific ocean to death valley ( which is below sea level ) and utilize the high heat there to evaporate salty sea water so that rain could fall in surrounding down wind areas. Also, raising say cattle for dairy and beef in these drought stricken areas might be better left to states around the great lakes where water is plentiful. Sorry California herdsmen, its not economically viable to raise herds in a drought stricken area. Finally, the las Vegas area's drought could be remediated by vast swaths of solar power to provide electricity during the day (allowing the water flow from Hoover dam to be shut off and thus retain water for drinking ) and then resumethe generation of hydro power at night as the sun goes down.
  • Viola Perry on April 10 2015 said:
    People come first! There would be no use for corporation if people would not exist!
  • Jakob Stagg on April 10 2015 said:
    Government or corporations? Is there a difference?
  • Jesse Richardson on April 12 2015 said:
    Water is a private property right, and has been for well over a 150 years. It will remain so.

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