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November 6th, 2012

The Water Racket and the Financialization of Nature

By Mitch JonesSeafood Challenges

There’s been an increase of chatter lately about the prospects of global water markets. CUNY journalism professor Frederick Kaufman published an essay in Nature that raises concerns about the prospects for a future financialized global water market. His concerns aren’t too different than what we have been saying. But his essay has provoked a response from The Nature Conservancy. 

Under the title “Water Privatization: Let’s Cut the Hysteria,” Brian Richter dismisses concerns about the financialization of nature and the privatization of our common resources. In particular he responds to Professor Kaufman’s concerns about a global water market, claiming it is not going to happen (or not the way Professor Kaufman thinks it will) and it’s “highly unlikely” it would be traded globally, and if it were, it’s price wouldn’t be volatile.

No one claims that there is currently a global bulk water market. There isn’t. There is a global bottled water market, and that market is the thin end of the wedge for getting people used to the idea of water as a commodity. This is important, because in order to create a global water market, water has to be turned into a commodity. Water also has to be privatized for water markets to exist, and that is taking place globally as well. Once water is privatized and commoditized, marketizing it easily follows. Privatized, commoditized, and marketized water can be financialized – with derivatives markets built up to allow financial actors to speculate on the price of water. This speculation in itself could drive price volatility, as evidence shows speculators are increasingly driving the traditional commodity markets.

A global water market is still a threat, even though the economists who dream of it say it is 25 to 30 years away. The chief economist at Citigroup has a vision of globally integrated physical water markets, single hulled water tankers sailing the oceans and a water derivatives market. Already, Valérie Issumo, a Switzerland-based economist, has developed what she terms an “Ethical Water Exchange” designed for the commoditization of treated water on which futures could be traded or serve as the conditions for credit lines. Economist Henning Bjornlund claims a derivatives market for water could provide efficiencies for the distribution of water that would be bigger than the water market itself. What that means is that a water derivatives market would make it even more likely that those who can afford to pay the most for water will be the ones to get water.

This isn’t hysteria. It’s the vision of determined economists – some at powerful banks – who believe the financialized free-market paradigm that brought us the global economic crisis is the right model for determining who gets water where, and for what purpose.

But it isn’t surprising that the folks at The Nature Conservancy are asking us to look the other way—they are deeply invested in the financialization of nature. Their Natural Capital Project seeks to expand the market paradigm over all of nature. They work to develop a global carbon market that would seek to offset pollution by allowing companies to buy offsets in other countries, even going so far as to call for a carbon free-trading zone of the Americas. 

As George Monbiot has pointed out nature has become natural capital, and natural processes have become ecosystems services. The Nature Conservancy’s Natural Capital Project is part of this process seeking to find a quantifiable economic value for the natural world. It accepts the canard that what can’t be priced can’t be valued.

We believe that our common resources can’t be reduced to an entry in an accounts book. Their value is too great to be priced. Instead of gambling with financial actors and markets in nature-based assets, we should rely on the regulation of activities that harm the environment and contribute to climate change. Instead of pushing the expansion, integration and financialization of water markets, we should implement and enforce regulations that preserve our essential resources and promote policies that acknowledge water as a human right.

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