The title of this post must seem obvious to many of you, but WHY is it obvious when we can see many areas of human activity where corruption has such a small impact?
The place to start is with the nature of water management, which often involves sharing the costs and benefits of water within a group. The water has a "non-excludable" status that can lead to unfair outcomes. Failures occur when users shirk from paying their share of costs ("the provision of a public good," in Elinor Ostrom's nomenclature) or take more than their share of benefits ("the consumption of a common pool good," according to Ostrom). As respective examples, consider when polluters "get away with" degrading water quality or users "with excess rights" deplete quantity.
The political necessity of managing costs and benefits within a group opens up that management to problems of corruption, i.e., decision makers favoring one group over another, to the detriment of society-at-large. That corrupt favoritism can result from ideology (e.g., farmers should pay less), greed (e.g., donations resulting in free water) or laziness (e.g., rebuilding flooded areas "because tradition).
It's thus clear how bad political decisions can result in polluters "getting away" with pollution or users with "excess rights" leaving others dry. Those decisions allow actions that lead to shortages, toxicities, ecosystem collapse and failures in human development.
What defines a developed country? Drinkable water and healthy ecosystems.
These governance problems do not affect the provision of "excludable" private and club goods like bottled water or company water operations because users in those situations are forced to face the costs of their actions. What about plastic bottle pollution or companies that dry out aquifers? Both of those problems are of the commons, i.e., someone buys a bottle of water from a store (private good) but then dumps it on the ground (commons). The company example has to do with "too many rights" (including the entire absence of rights) being given to the company and other water users (private rights exceeding supply in the commons).
These "negative externalities" from the use of private goods manifest as damage to the commons. That damage can be lowered or eliminated by, say, adding a deposit on plastic bottles (maintaining its value after being emptied) or removing groundwater rights when levels drop. Those are just two possibilities, but you can see -- and agree -- that political power is necessary for change. Is political action required for managing private goods? No. Bottled water sellers have advertising.
Why should you care about this question if you've got enough water to drink and live in a healthy environment? Because those governance failures usually start to destroy private goods. Undrinkable water keeps people from going to work or helping their families. Dry rivers nearby might lead neighbors to tap into your groundwater. Crop failures and flood damages can drive people to flee as migrants and refugees.
Bottom Line We all lose when water is mismanaged, wasted and polluted. We all need to make sure that politicians, water managers, and leaders are held to account in providing the basic mark of civilization: drinkable water from a healthy environment.
Addendum: The OECD has an ongoing project on water governance. This recent paper summarizes a bigger report.
Abstract: There is a lack of evidence-based assessment on how engagement processes contribute to water governance objectives. This article addresses this research gap by presenting key findings and policy guidance from a study by the Organisation for Economic Co-operation and Development (OECD) on “Stakeholder Engagement for Inclusive Water Governance”. This study employed comprehensive methods, including a survey administered to 215 stakeholder groups worldwide and separately, 69 case studies of specific stakeholder engagement initiatives on water management.