One reason behind the soaring premium on water lies with the fact that for the first time in modern economic history, the rest of the developing nations, are at the forefront of driving global growth, placing unprecedented demand for natural resources in the process.
The global economy no longer beats to the tune of the West—or the small populated, but wealthy cohort of the US, Canada, Japan, Australia, New Zealand, and developed Europe. For years, developed nations set global commodity prices, while the ‘rest’ were price takers. That was the past. The future will be different.
Indeed, it is the developing nations that increasingly exert the most pressure on the world’s natural resources. In the search for commodities, water included, the West has failed to recognize the critical fact that it is now in direct competition with the ‘rest’ for natural resources, notably water. In other words, the long-standing monopoly the West has enjoyed in devouring the world’s natural resources is over. In years and decades past, as long as consumers in the developing nations remained poor and lacked the income to purchase a computer or car, or afford a good meal, the West did not have to compete with the developing nations for oil, copper, water and other commodities. For much of the post-cold war era, the equation was rather simple: the developing nations produced commodities, the West consumed them. Those days are past, however. The budding new middle class of the emerging markets has changed the equation.
How big is this middle class cohort? According to the World Bank, the middle class of the developing nations is relatively small, yet, nevertheless poised to expand rapidly over the next few decades. This group already accounts for some 400 million people, according to the Bank, a figure roughly one-third larger than the entire US population. More importantly, the middle class of the developing nations is expected to triple in size over the next two decades, increasing to 1.2 billion shoppers by 2030. By then, the developing nations will account for 93 percent of the global middle class, up from 56 percent in 20007 levels of water consumption from the developing nations.
Most average Americans are oblivious to the rising middle classes of the developing nations and what this new consuming cohort means for the world’s already stretched natural resource base. They have yet to recognize that as the new global consuming class adopts and acquires western lifestyles—moves from the village to the city, works in air-conditioned offices, drives to work, consumes more protein—more the demand, higher the prices for energy, water, agricultural goods and other natural resources.
Given the demand and supply conditions, the price of water will increasingly reflect the rising per capita incomes and the attendant jump in consumption among consumers in the developing nations. Thanks to the rising consumption among emerging market consumers, later, between now and 2030, worldwide demand for food is expected to rise by 50 percent and demand for meat will jump 85 percent, according to the World Bank huge source of water demand—agriculture uses approximately 70 percent of the global fresh water supply—the more these consumers consume meats, fruits and vegetables, the greater the demand on the world’s water infrastructure. Think rising global water scarcity or more conflicts between states as the world scrambles to secure a more reliable water supply. Related to these trends—ever rising levels of saline and pollution of key water bodies and aquifers, and the continued degradation of the world’s water supply.
As part of the new world we live in, the competition for resources, with water forming the front and the centre of this conflict, that could very well lead to more tension between the well-endowed ‘rest’ versus the depleted, resource-deficient West.
To revert to the US intelligence report on global water security, the report highlight the following:
• ‘We assess that during the next 10 years, water problems will contribute to instability in states important to U.S. national security interests. As a result of demographic and economic development pressures, North Africa, the Middle East and South Asia will face major challenges coping with water problems.’
• ‘We judge that as water shortages become more acute beyond the next 10 years, water in shared basins will increasingly be used as leverage; the use of water as a weapon will become more common during the next 10 years. Water terrorism could become a major issue for some nations.’
• ‘We judge that during the next 10 years the depletion of groundwater supplies in some agricultural areas will pose a risk to both national and global food supplies. There is a strong correlation between water available for agriculture and national GDP.’
• ‘We judge that, from now through 2040, improved water management (e.g., pricing, allocations and ‘virtual water’ trade) and investments in water-related sectors (e.g., agriculture, power, and water treatment) will afford the best solutions for water problems.’
All of the above makes clear that the world—distracted by one financial crisis after another, over the past few years—is heading for a crisis which is of far greater magnitude.
Today, nearly one in every four human being lives in areas of physical water scarcity on account of inclement weather, water-waste and sub-par agricultural practices. The water infrastructure in the US and overseas is crumbling while demand is rising. According to a few mainstream forecasts, one in three people in the world will face some type of water shortage by 2025. Presently, one out of eight people lack access to clean water, while in fifteen years 1.8 billion people will live in regions of severe water scarcity. Around 46 percent of the people in the world do not have water piped into their homes. Some 2.5 billion people in the world do not have access to a toilet, equivalent to 40 percent of the world population. And the disparity of water usage is massive: for instance, while Americans use about 100 gallons of water at home each day, millions of the world’s poorest people subsist on fewer than five gallons. Accordingly, women in the developing countries walk an average of 3.7 miles to get water. Gabra women in northern Kenya spend up to five hours daily hauling water.
Drought conditions have become more severe in many parts of the world, while the pace of global urbanization has accelerated, straining the water infrastructures of many nations to their breaking points. Population growth and urbanization are expected to drive demand for water up 40 percent within twenty years according to the World Bank. Then there is the unrelenting demand for ‘virtual water’.
This is an excerpt taken from ‘Thirsty Nation’ by Joseph P. Quinlan, Sumantra Sen and Kiran Nanda: http://bit.ly/1gl4Oru
About the authors
Joseph P. Quinlan is the U.S. representative from the Economic Policy Committee, to the Organization of Economic Cooperation and Development in Paris for the U.S. Council for International Business. He is also an Advisory Board Member to the European Business Council, Washington D.C. Joseph has previously served as a consultant to the U. S. Department of State. He is also the Managing Director and the Chief Market Strategist of Bank of America, Global Wealth and Investment Management in New York. He has authored The Last Economic Superpower: The Retreat of Globalization, the End of American Dominance, and What We Can Do about It and The Transatlantic Economy 2008: Annual Survey of Jobs and Trade and Investment Between the United States and Europe (Transatlantic Economy: Annual Survey of Jobs, Trade & Investment) among other works.
Sumantra Sen serves at the advisory board at the Climate Bond Initiative, UK and Association for Sustainable & Responsible Investment (ASrIA), Hong Kong. He is also a member of the Environment & Energy Committee at Indian Merchants Chamber, Mumbai, India. Sen is the Founder & CEO at Responsible Investment Research Association.
Kiran Nanda is a Corporate Economic and Sustainability Consultant. He had previously served as the Director at Indian Merchants Chamber Economic Research & Training Foundation (IMC ERTF). Kiran had also served as Senior Economist in Tata Economics and Statistics Department, with visionaries like J. R. D. Tata himself and Nani Palkhivala.