Managing Globalization: The Trouble with Water

This month, the United Nations Development Program made water and sanitation the centerpiece of its flagship publication, the Human Development Report.

Claims of a "water apartheid," where poor people pay more for water than the rich, are bound to attract attention. But what are the economics behind the problem, and how can it be fixed?

In countries that have trouble delivering clean water to their people, a lack of infrastructure is often the culprit. People in areas that are not served by public utilities have to rely on costlier ways of getting water, such as itinerant water trucks and treks to wells.

Paradoxically, as the water sources get costlier, the water itself tends to be more dangerous. Water piped by utilities - to the rich and the poor alike - is usually cleaner than water trucked in or collected from an outdoor tank.

The problem exists not only in rural areas but even in big cities like Manila and Jakarta, said Hakan Bjorkman, program director of the UN agency in Thailand. Further, subsidies made to local water systems often end up benefiting people other than the poor, he added.

The agency proposes a three-step solution. First, make access to 20 liters, or 5 gallons, of clean water a day a human right. Next, make local governments accountable for delivering this service. Last, invest in infrastructure to link people to water mains.

The report says governments, especially in developing countries, should spend at least 1 percent of gross domestic product on water and sanitation. It also recommends that foreign aid be more directed toward these problems.

Clearly, this approach relies heavily on government intervention, something Bjorkman readily acknowledged. But there are some market-based approaches as well.

By offering cut-rate connections to poor people to the water mainline, the private water utility in Abidjan, Ivory Coast, has steadily increased access to clean water, according to the agency's report. A subsidy may not even be necessary, despite the agency's proposals, if a country can harness the economic benefits of providing clean water.

People who receive clean water are much less likely to die from water-borne diseases - a common malady in the developing world - and much more likely to enjoy long, productive, taxpaying lives that can benefit their host countries.

So if a government is trying to raise financing to invest in new infrastructure, it might find receptive ears in private credit markets - as long as it can harness the return. Similarly, private companies may calculate that it is worth bringing clean water to an area if its residents are willing to pay back the investment over many years.

By further opening up water infrastructure to investors, globalization might actually help people to get the clean water they need. But globalization could also make the problem harder to solve by creating a world market for water.

"As competition for water intensifies within countries, the resulting pressures will spill across national borders," the report predicts.

Some water supply basins are shared between as many as 19 countries, and 800 million people get their water from sources that originate outside their countries' borders. Without cooperation or regulation, that competition for water is likely to be won by wealthier bidders.

In the meantime, some local solutions are being found. In Thailand, Bjorkman said, some small communities are taking challenges like water access upon themselves.

"People organize themselves in groups to leverage what little resources they have to help their communities," he said. "That's especially true out in the rural areas. They invest their money in revolving funds and saving schemes, and they invest themselves to improve their villages."

It is not always easy to take these solutions and replicate them in other countries, though. Assembling a broad menu of different approaches can be the first step in finding the right solution for a given region or country.