24 October 2014

Speed blogging

These "lily pads" clean water (cost needs to fall)
  1. News from Chile: Water market participants are more efficient with water than non-market participants and new challenges facing water suppliers who now provide drinking water and wastewater services to 99 percent of the population

  2. California bureaucrats are "trying really hard" (but not doing so well) when it comes to following their own conservation mandates

  3. These Silicon Valley guys are drinking recycled water (toilet-treatment-tap)

  4. Biased source, but Westlands has indeed swung a nice deal (free water, lots of money) out of the Feds. Rights or corruption?

  5. Monterey residents are protesting "unfair" water rates. CalAm's rates guy emailed me an explanation:
    Residents are billed on an allotment based structure where the more used the higher the terminal rates. Non-residential are billed on compliance or non-compliance with best management practices and the amount of outdoor watering. Residents are protesting that non-residential are billed on flat rates per division (based on compliance and outdoor watering), so they have a "sweet" deal. We have strongly defended the current structure since the two lowest residential tiers are less than the lowest non-residential rate and over 80% of residential consumption being in the lowest two tiers.
    So, let's not defend the "water hogs," eh?
H/T to ML, RM and SS

23 October 2014

A few thoughts on California's Proposition 1

California Proposition 1, the Water Bond (Assembly Bill 1471), is on the November 4, 2014 ballot.

Here are my few thoughts on this $7+ billion bond.*

NB: I am ignoring the (possible and probably likely) existence of federal, state and local laws and financing relating to these topics; the possible conflict among these topics; the probability that some/all of these spending priorities will be blocked by lawsuits; and the typical complexities of implementation. All of these issues are likely to reduce the effectiveness/impact of this bond's promises.
  • $2.7 billion for water storage projects, dams and reservoirs. Waste of money, given that most storage is now empty and the best way to store water (moving forward) is in aquifers
  • $1.495 billion for competitive grants for multibenefit ecosystem and watershed protection and restoration projects. Reasonable idea, in terms of spending on public goods. Tricky to turn "competitive" into "results." Does not make sense in cases where ecosystems have been damaged by urban or agricultural activities. Difficult to justify if the money is going to some regions but not others, as this cross subsidy may not benefit net payers
  • $900 million for competitive grants and loans for projects to prevent or clean up the contamination of groundwater that serves as a source of drinking water. This should be paid by polluters (farmers and industry)
  • $810 million for expenditures on, and competitive grants and loans to, integrated regional water management plan projects. "Plan projects" should be paid by the regions involved
  • $725 million for water recycling and advanced water treatment technology projects. No point in subsidizing industry for development. Water utilities may want to, in exchange for equity or discounts
  • $520 million to improve water quality for “beneficial use,” for reducing and preventing drinking water contaminants, disadvantaged communities, and the State Water Pollution Control Revolving Fund Small Community Grant Fund. Again, should be paid by polluters. If they are bankrupt (you know, like Westlands), then the State can pay this
  • $395 million for statewide flood management projects and activities. Again, a regional concern. The Dutch tend to subsidize flood projects at the national level, but they are far more united
  • Oh, and I don't see anything here about better governance (e.g., groundwater regulation, markets for water, or increasing prices to improve resource use), which makes me worry that voters may tax themselves $7 billion to get no results. (Governance is both necessary AND sufficient to get results. Money is neither -- just look at the $5 billion+ spent wasted on studying the Delta!)
Bottom Line: The water bond appears to be a desperate plea to throw Other People's Money money at problems users should pay for. Vote No.

* Here are some posts on the 2009-2010 (failed) campaign to spread water pork all over the state: moves ahead, fail [best one], pork pork!, delayed (for now), and some history

22 October 2014

Anything but water

  1. Dutch pensions are managed with a firm grasp of reality, unlike American "fantasy plans" that will leave workers in the lurch

  2. It's Final -- Corn Ethanol Is of No Use (except to crooked politicians)

  3. Margaret Mead described how "proper" behavior depended on culture, not moral absolutes. Speaking of culture, we just finished using Small is Beautiful for my microeconomics class, and I'd update my 2009 review to include:
    Schumacher has a lovely vision for how a bottom-up system of production by the masses would work, but he does not describe a strategy for dealing with people(s) who prefer large and ugly, e.g., China, the US, Canada, et al. This weakness puts his advice into the aspirational rather than pragmatic section of my bookshelf.
  4. Bryan Caplan argues that open borders are the best way to help the poor (and ourselves). I asked him:
    What's your response to "they're taking our stuff" when people (a) don't care about the 95% who are better off, (b) don't understand how policy works (e.g., waiting period for unemployment) and (c) support nativist populists (e.g., Marine Le Pen or Gert Wilders)?
    His reply -- "teach them how policy works" -- will not counter their logic. Thus, I stick with my (second-best) idea of two passports for everyone

  5. Russ Roberts's new book on Adam Smith explains how Smith reconciled loyalty to family and society with the efficiency of markets

21 October 2014

Ecosystems are complex and amazing

TR sent this nice video on the benefit of wolves to Yellowstone's flora, fauna and (water) flows

The Price of Thirst -- the review

I asked for a review copy of Karen Piper's book because I wanted to take some time with an "anti-capitalist" perspective on water issues (the lead blurb comes from Maude Barlow) whose subtitle is "Global Water Inequality and the Coming Chaos."

This review is based on my reading of one-third of the book (Introduction, California and Conclusion). I didn't read the rest because my objections to Piper's unsubstantiated, biased and inflammatory analysis opinions were coming much faster than insights or useful ideas.

Allow me to explain.

Piper is a postcolonial geographer, which puts her (stereotypically) at the opposite extreme in perspective from economists. I have no gripe with that orientation, as we probably agree 80 percent of the time on the tragic outcomes of abuse of power. Where we differ is in the diagnosis of driving forces, the relative scale of harm from market versus government failures, and the useful responses to these problems.

We also differ in our analytical methods, at least as far as this book is concerned. Piper undermines herself numerous times with cheap shots, unsubstantiated innuendo and non sequiturs.* I really wish that she'd had a stronger editor. This book is too biased to appeal to anyone with a shred of interest in capitalism and markets; it will only serve as a 290pp bludgeon for anti-colonial protestors who have not bothered to check their privileged discourses at the entrance of clear -- or realistic -- thinking.

Rather than respond in a chronological fashion, I will try to distill my remarks into themes:

Corporate vampires
Piper frequently invokes an "us-vs-vampires" image of corporations, as if We, the People, are totally helpless in the face of corporate greed. On page 3, she says:
And now they [Suez, Veolia et al] are mining our water, quietly gaining control over the world's water supplies, with the help of national governments and institutions like the World Bank and IMF... in the future you may be just as likely to be buying your water from China [due to Chinese companies entering the water business] as France.
This rhetorical slant is wrong in both fact and substance. The fact is that corporations are merely one party to ALL water-related activities. Where there is a buyer, there is a seller; where there is a vendor, there is a regulator; where there is a bribe on offer, there is a politician asking for it. This last duo underlines her mis-emphasis on substance, i.e., corporations do not have the power to rule us without the permission from corrupt politicians who have a greater power to allow their rule (more below). Perhaps the root of Piper's misunderstanding lies in her definition of "privatization," i.e.,
Privatization means charging higher water rates or redistributing water to make a personal profit. Theoretically, speaking, privatization means applying a new market paradigm to our water systems, one that sets up the "free market" as the regulator for water distribution. [p 10]
I'd like to find a "free market" in water distribution like the one she describes. As far as my knowledge of the world goes, I've never seen a "free market regulator" -- or anything like such an oxymoron -- in operation.

Multi-lateral (colonial) organizations
Piper's contempt for multilateral organizations like the World Bank and IMF is matched only by her admiration of the United Nations and NGOs, groups that are governed by money and populism, respectively. Although I am sympathetic to the plight of the powerless, I also see the importance of balancing between these interests, rather than taking a sure-to-fail stand with one against the other (either way). That's why I balanced between the two sides, respectively, in Parts I and II of my book. Piper will have none of this, as she puts scare quotes around "cost-recovery", "water pricing" and labels this and that as neo-liberal, ex-colonial, money making ventures. Frankly, I was distressed and disgusted by her populism: many water problems can be traced to under-investment and failure to recover costs (seen those headlines about how the US needs to invest $1 trillion to preserve water services?)

Presumably, Piper opposes the "cost recovery" and "water pricing" that are necessary to protect services, reduce demand, and prevent shortages in California, Sao Paolo, Spain, Saudi Arabia and dozens of other countries and regions. Sadly, she puts the blame for these failures on colonialism without looking for deeper problems. Yes, colonial administration (and ideas) underpin many exploitative systems, but can we blame colonialism for failures in China or South America? How long can we blame them for failures in India, Pakistan and African nations? What about water failures in Ukraine? Shall we blame those on the Russians -- or should we blame the Ukranians (who colonized Russia)? Can Americans blame Britain for disasters in California, Ohio, W Virginia and elsewhere? Piper would have got a lot more traction if she stopped blaming long dead outsiders and looked at today's corrupt, incompetent local failures.

How will you save yourself, without water, Mr. Bond?
Piper loves hyperbole and exaggeration. Her book opens with the 2012 World Water Forum in Marseilles (I was also there). She tries to sex up a boring meeting of ministers (10 percent), businessmen (20 percent) and water wonks (70 percent) with hush-hush conspiracies that were neither new (the World Bank loves dams) nor interesting (water companies had big booths). If her stories were supposed to be insightful, then I'd have wanted to see more facts; if they were supposed to be entertaining, then I'd have wanted to see more sex and violence. The WWF is big and boring, sure, but there are no Bond villains walking around.***

Sadly, Piper resorts to ad-hominem attacks on various engineers and bureaucrats (e.g., Lesseps, Camdessus) as if these men's failings can be extrapolated into a global conspiracy to kill the poor. This mis-emphasis sounds not only churlish -- it distracts from the broader issues of public policy failure (at the Bank but most often in national governments). Her book would have been far more powerful if she had pursued (accidental and intentional) government failure. Instead, she draws false conclusions from imaginary connections, claiming that "by visiting every continent except Antarctica, I demonstrate not only the scope of the problem but also how these stories are interconnected. This is truly a planetary problem" [p 34] Sorry, no. Water flows are global but management failures are local.

The index lacks references to politics, governance and corruption, but Piper discusses these themes -- usually in an upside-down manner. In one surreal passage (p 57), Piper says that California "farmers threatened to sue, and the state could not afford to fight... [so it] was forced to the negotiating table." Statements like these omit the fact that states (anywhere) can do what they want when it's legal to do so or change the laws to make their will legal. Piper fails to grasp (or discuss) this fact at the same time as she misses its corollary -- that corruption ("the abuse of public power for private gain") is directly related to the monopoly power of the state. Farmers, water companies, and even the IMF cannot dictate terms to sovereign states. Those facts mean that states either negotiate because the alternative is "worse" (e.g., privatizing water companies rather than reducing military spending) or because corrupt politicians prefer to sacrifice their people. The important issue here is not that Piper would disagree with my summary (I don't think she would). It's that privatization is only one way for a broke or corrupt state to abuse its people. Another way -- and much more common -- is for the state to neglect or run down the public water utility. That outcome equally or more tragic for water consumers.** Indeed, in her section on "how to profit from a water crisis" [p 26], Piper identifies threats from pollution, groundwater depletion, and climate change. I agree that these are problems, but she jumps from the problems to the "corporations celebrating, rather than lamenting, uncorking champagne as the ship goes down" [p 28]. I would have said "in the absence of governance reforms to counter these problems, people will look for solutions and corporations will step in when government fails to do so," but Piper misses that context. Worse, she jumps in the wrong direction: "Corporations can make profit by raising water rates, cutting spending on infrastructure and labor, receiving government subsidies, and selling more water" [p 29]. And where is government during all this? Presumably no government exists in Piper's neo-colonial hell.

What solutions does Piper propose? She supports the "Alternative Forum" (FAME, in French), which is composed of "happy people of all colors and genders... that promotes the idea that no one owns the water" [p 8-9], which is surely a lovely image, except for its massive failure in addressing water's rivalrous nature. Presumably, Piper would be pleased to allow anyone to take water from anywhere. This would leave poor farmers dry, as their richer neighbors pumped deeper or bribed higher. It would leave the poor in slums without water that was intercepted and routed to rich neighbors. It would desecrate and destroy environments far and wide, as water was taken from rivers and put into cotton fields. Piper clearly misses the basic idea of separating water into private OR communal property. The English say "different horses for different courses," but Piper wants to use the same horse for racing, pulling a cart and sausage (as les FAMEeurs would say).

Her over-simplified view would wreak havoc with our systems of allocating water for food, drinking and the environment, and it's based on ideology over rationality or practicality. Piper dismisses the "language of development... with terms like benchmarking, scaling up and best international practices." Instead she evokes a "language of water [that] is evasive and a trickster [sic]. It is smarter than those in power. It will turn to steam and then to clouds when it is hot..." Piper gets so carried away with her revolutionary rhetoric that she forgets that humans just want water for drinking, bathing, eating and living. Water is not a revolutionary ideology. It's a necessary and rich part of our lives that deserves respect, requires cooperation, and must be managed for safety, efficiency and equity.

In her concluding chapter [pp 222-227], Piper offers a wish list of solutions ("stop climate change, stop throwing people off their land, recognize indigenous knowledge, revive small-scale and local solutions, regulate the virtual water market, imagine alternative economies, imagine an alternative blueprint, and reform the globalization regime") that reflect her anti-corporate, anti-money, anti-globalization agenda more than the real issues in the water sector. I would have given one suggestion -- hold public and private water utilities accountable to customers --  over all of these, but Piper has a different agenda. Indeed, she ends with a sob story about how her ears were damaged at an anti-G-20 rally in Pittsburgh, parting with a final non-sequitur: "Although I learned nothing about water privatization at the G-20, I did learn what its opponents are up against" [p 231]

Bottom Line: I give this book TWO STARS for describing the dark side of water governance failures without providing any useful analysis of how failures arise, or how to fix them. Piper makes 3-4 overwrought, sensationalist statements for every good point, which undermines her credibility at the same time as it distracts attention from real problems. Don't waste your time or money on this book. Go talk to your community's water managers to understand how the system works, where it's at risk, and how you can help.

* For example:
  • "Imagine that we should withhold medical care as... a method of population control... this is precisely what he [Camdessus] is saying about Africa" [p 15]
  • "China owns 9 percent of Thames water... RWE decided to dump American Water on the open market" [p 18]
  • Drinking water was not a primary concern [of the World Bank] because drinking water offered no obvious return on investment" [p 22]
  • The re-emergence of a powerful water industry could only occur through deregulation and force" [p 23]
  • OMG: "Corporations raise water rates as high as they can... unlike public utilities, corporations have to pay taxes... they have high advertising costs, which public utilities do not... layoffs are the main reason for privatization... corporations can require that governments provide subsidies for poor people who cannot pay their bills... cities are losing a permanent income stream from water bills" [p 29]
  • "Water rights and utilities are being bought up at bargain basement rates in the US, thanks to the housing market crash in 2008" [p 32]
  • "The Ganges River is now being diverted to Suez in Delhi" [p 33]
  • "I will show how privatization lead to a growing insurgency in Iraq" [p 33]
  • "My goal with this book is to help return cultural diversity to the management of the world's water supplies... the solutions just need funding and legitimacy" [p 36]
  • "Today, California cities are going bankrupt at a staggering rate... they lose leverage to control their own water supplies" [pp 62-63]
  • "Thus, Fox News" [p 65 -- and yes, no context]
  • "Along with suicides, water cutoffs are increasing throughout Greece" [p 217]
  • "The truth is that the IMF kills people" [p 219]
  • "The price of a thirsty world has been an increase in vultures, or corporations that would steal the last pennies from dying people" [p 221]

** More tragic if you consider the benefit of separating the water company into a "corporate unit" whose operations are easier to understand, before or during privatization.

*** Another howler  [p 30-31]: "The 2008 James Bond movie Quantum of Solace shows an uncanny presentiment about the shadowy world of water corporations... the WWF was like a fundraiser for a Bond villain... in this world, bribery and corruption seem to be an industry standard"

20 October 2014

Monday funnies

Speed blogging

  1. Fleck discusses different governance models on the Colorado River (a resource that REALLY needs improved governance). Related: Aquadoc on the "dark side of governance" (i.e., unseen and/or corrupt)

  2. Louisiana politicians dare the federal government to NOT protect "valuable" industry that they are citing in flood plains. Hint: don't play chicken with feckless cajuns

  3. The UN's Green Infrastructure Guide for Water Management [PDF]

  4. Spanish farmers cope with drought reshuffling private and communal water rights

  5. A timeline on California's new groundwater regulations
H/T to RM

18 October 2014

Flashback: 13-19 Oct 2013

A year later and still worth reading...

17 October 2014

Friday party!

This is my bike commute to the pool (and back) through Amsterdam's canal zone:*

* You can run at high speed with HTML5

The middle class is dead, long live the middle class

Many people blame crooked politics for the growing (and ridiculous) income and wealth gaps between the 1% and 99%. I totally agree that corrupt politicians are a big part of the problem, but exogenous pressures from globalization and technological change are also transferring power and money from labor to capital in ways that nobody can stop (except by ending trade and innovation). Those exogenous pressures are affecting people, worldwide, so they will disrupt life in well-managed countries at the same time as they push dysfunctional countries even further towards class warfare (economic chaos and social disruption).*

I'm not going to dispute the claim that technology is cannibalizing "middle class" jobs (law, accounting, engineering, teaching, etc.), as the patterns are already clear. Instead, I am going to offer some ways to offset the inevitable, negative impacts.

Technology is going to result in even stronger gains in income to the creative and capital classes who design the widgets we buy or collect a few pennies from billions of fans. Coming from the opposite direction, we're going to see more people chasing fewer jobs, as technology automates more tasks. Computers are now faster than us at many things (most teens can barely add or subtract these days), but new software is going to make computers smarter than us at many things (doctors are already losing credibility to expert systems). It's not clear that people will enjoy a middle class lifestyle on lower class wages.

There are three possible policy responses to these forces: denial, opposition and coping.

I'm pretty sure that US politicians will go with denial, as their pro-rich policies serve them well [pdf]. Most Americans still believe in "the American dream," even as they commute further for a lower standard of living and smaller chance of their children rising above their socio-economic status. The same goes for politicians in other corrupt, plutocratic countries (Russia and China spring to mind), since they don't really care about average citizens.

Politicians in other countries will go for opposition, in a foolhardy attempt to either soak the rich or block technological change. I'm pretty sure this is the case in Italy, Spain and Greece, where politicians are busy "defending" wages and punishing businesses. Those actions will merely push more activity into the black market and offshore.

Politicians will try to cope with these imbalances in countries where exogenous forces are understood and balanced though social welfare programs. It seems that the Netherlands and Scandinavian countries fall into this category. Coping will mean extending existing programs for job training, unemployment insurance and social housing, but these will need to be augmented.**

Perhaps the best idea is to implement a "basic income" support for all citizens that will (1) help them pay for necessities and (2) work fulfilling jobs that pay less due to automation, offshore competition, etc. Such a program would support work in human services (health, learning, psychology), the arts and other areas that are considered hobbies today. I cannot put enough emphasis on benefits of this program, in terms of human security, fulfillment and cooperation.

I think that a basic income program should be funded with property taxes. Higher taxes on income are unlikely to work, as the rich and corporate can evade/avoid them in numerous ways.*** Higher taxes on consumption would merely push transactions underground. Taxes on property are easy to collect, regardless of ownership or use, since property cannot be hidden and property values are fairly easy to estimate when there's a property market.

Bottom Line: The gains from globalization and technological evolution are going to a smaller group of people. Politicians should allow this process to continue for its economic benefits, but they should tax capital (land) to provide financial support to the masses who must (and should) find their own, not-so-profitable ways of living with dignity in a harmonious society.

* The Economist recently wrote on this topic: Introduction, rewards to capital, losses to labor, the end of development-through-industrialization and potential solutions

** Econtalk has many episodes on labor. This recent one discussed how "technology is a complement for the high skilled but a substitute for the low skilled." They also glossed over a troubling problem, i.e., the last technological wave did not cause huge social problems because people displaced by agricultural innovations could move into industrial and service jobs, but where will those people go when technology destroys those jobs?

*** I reckon that half the corporate fraud and lobbying would disappear if corporations were not taxed. The economic theory supporting such taxes only makes sense in the context of income taxes (i.e., shifting income back and forth between real and corporate "persons").