This issue affects the whole world, not just developing countries.I agree that there are tremendous opportunities to rationalize the distribution and use of water, but there is very strong ideological and cultural opposition to the commodification of water. If Exxon is getting slammed for record oil profits (profits they deserve), the outcry over water profits would be deafening.*
At Goldman Sach’s “Top Five Risks” conference earlier in June, the investment bank announced that water was the “petroleum for the next century.” According to the presentations at the conference, the US alone needs to invest over $1 trillion in new piping and waste water plants in the next 12 years alone.
Legal skirmishes over water rights are already showing up in the headlines. However, currently they are more about making money than survival.
However, the area where water shortages are most acute is China.
China comprises 21% of the world’s population, but controls only 7% its water supply. And its rapidly expanding population is requiring larger and larger food supplies as consumers adopt a more western, protein heavy diet.
It takes 1.5 cubic meters of water to produce 1 kg of corn. In contrast it takes six cubic meters to produce a 1 kg of poultry and 15 cubic meters to produce a 1 kg of beef. And Chinese meat consumption has doubled since 1985.
In simple terms, anyone who can produce safe, drinkable water is at the beginning a multi-decade long bull market in the commodity.
OTOH (economist!), people would probably forgive profits if they result from better management. I've gotten some inquires from the investment community -- people wanting to discuss how to turn higher water efficiency into profits -- and I'm glad to help.**
Bottom Line: The flip side of "raise prices" is that a lot more money will be spent on water. The bigger this flow, the greater the interest from those seeking to get a piece of this action. (If you think that bottled water attracted too much corporate interest, watch what happens with markets for the other 99% of our fresh water supply.)
* Fortunately, water is more widely distributed than oil and thus subject to less influence from corrupt states, e.g., Russia, Iran, Iraq, Saudi, Venezuela, Nigeria, Angola.
** Understanding institutions will be very important in improving water management because every place has its own way of managing its supplies. You can't just drop a McWater plant on a place and expect good results. It seems that there will be some demand for resource economists who study institutions. I'm lucky to be on the supply side :)