NCPA - National Center for Policy Analysis


August 18, 2006

Water is the king of commodities and there's plenty of it, enough to solve the planet's water problems -- but only if governments create markets, says Investor's Business Daily (IBD).

  • There already is a global water market, worth about $400 million, according to the New York Times. 
  • Corporations around the world, many of them large international firms, are investing in water delivery businesses and water-related equipment companies.

For water markets to work, governments must designate the resource as an economic good, a commodity that can be bought and sold, not something that belongs to the public. To do so, property rights governing water sources must be established.

Turning water into a market commodity won't be politically easy.  Some would say it's impossible, given the many governments that have an aversion to markets:

  • Yet Mexico, Pakistan, India and Peru, where there's been armed conflict over water, are examples of somewhat unlikely nations that have founded water property rights and/or water markets.
  • So has Chile, which has shown that water markets can improve the economic efficiency of water use and stimulate investment, economist Mateen Thobani observed in a World Bank report.
  • Investment leads to new businesses and jobs, both of which are desperately needed in poor nations where water is in short supply.
  • Markets can help prevent predicted shortages and reduce the incidence of death and sickness caused by lack of water or water-borne disease.

"Countries that have redefined and traded water rights have seen water access for the rural poor increase in volume and fall in price," American Enterprise Institute resident scholar Roger Bate writes in Australia's Courier Mail.  "All users . . . have seen supplies increase in reliability and quality with infrastructural improvements."

Source: Editorial, "Open The Spigots," Investor's Business Daily, August 18, 2006.


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