Businessweek has a pro-desalination article that claims $64 billion will be spent on desalination by 2016. The article covers the typical drawbacks of desal (energy intensive, waste disposal problems, etc.) as well as the scientific consensus that desal is a niche product. It ends on a disconcerting note, i.e., by mentioning the companies that stand to capture a share of that $64 billion in spending.
Think about it.
If most of our water problems are not supply-related but institutional -- we need to figure out how to reallocate adequate water from current users (mostly farmers) to cities, environment, etc. -- then the "problem" of water could be fixed with a few clever changes in the law. BUT, if that were to happen, then the market for desal projects would shrink and so would those $64 billion in anticipated sales.
If you were a GE or Veolia executive, how would you feel about losing your potential market? Badly, I'd think, and your natural reaction would be to try to "save" those future, potential sales by opposing attempts to fix the institutions of water management. One easy way to do this is to continually remind people of water wars, water scarcity, aqueducts in earthquake-prone regions, etc -- problems that, conveniently, would not plague the clever water manager who bought a desal plant. Another way would be to support those who oppose reform of water institutions -- often those who stand to lose from "efficient" allocation of water. (With markets, they would be compensated, but some of those people do not trust in that outcome.)
Bottom Line: The cheapest solution is not always the solution that is put into place -- especially when there is money to be made, bribes to be paid, etc. Although desalination is useful as a niche product (e.g., on nuclear subs and islands), it is just as sensible as using a chainsaw to chop a tomato -- or starting a war in a distant country to force one guy to retire...