26 May 2009

ɹǝpun uʍop ɯoɹɟ sɐǝpı uʍop ǝpısdn

via ML, I got this editorial on water trading in Australia:
Water is a vital and increasingly rare commodity. It is essential for the maintenance of life which includes cities, towns, small communities, agriculture and industry.

Ownership should be controlled by the state for equitable distribution and use by all on a sustainable basis. This process should be controlled by, and answerable to, the democratic process. It is the right of all citizens to have access to a life-sustaining supply of potable water.

[snip]

Investors and speculators hope to create a profitable market in water. For banks, the acquisition of water licences represents an investment against which they can borrow, lend and trade. Controlling water will confer power.

The head of Treasury, Ken Henry, is, in my opinion, wrong in claiming that the market will regulate and conserve water through price. It will not. It will create winners and losers, cartels and monopolies, which will only work to the benefit of the big producers and the top end of town.

Such an arrangement would be feudal and one need look no further than Pakistan to see how it would operate and the extent to which equity would be lacking.
I don't know where to begin with this upside down thinking. Let's see:
  • "Ownership should be controlled by the state for equitable distribution and use by all on a sustainable basis." Besides the obvious invocation of failed USSR-style economics, this remark is also wrong-headed because there is NO incentive to use water sustainably if you cannot re-distribute it via markets.
  • The market "will create winners and losers." Although this does happen in markets (Toyota vs. GM), the real winners from markets are consumers. They will benefit from water markets.
  • "look no further than Pakistan..." I am quite surprised that this Australian thinks that his country is as corrupt and failed as Pakistan. I'd say that the chance that Australia will turn into another Pakistan is about as likely as Pakistan overtaking Switzerland in prosperity. Come on!
Ironically, I do see one silver lining in Mr. Haigh's op/ed: If water is controlled by monopolies (which I doubt, btw), then at least it will be conserved -- and that's sustainable.

BTW, if you want to learn more about markets down under, check this out.

Bottom Line: There are many ways to misunderstand how markets work, and Mr. Haigh, fearmonger, has managed to comprehensively misunderstand them. Bravo!

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