Tag Archives: china

Is #China Confronting the Real Perpetrator of #WaterScarcity?

China is a huge country, we all know.  It also has, according to The Economist, priced water “far from market levels.”  The economist argues that a huge reason for China’s enormous water scarcity problem is the inefficient use of water, which is mostly due to below market level water prices:

By increasing supply, the government is failing to confront the real source of the problem: high demand for water and inefficient use of it. Chinese industry uses ten times more water per unit of production than the average in industrialised countries, according to a report by the World Bank in 2009. A big reason for this is that water in China is far too cheap. In May 2014 Beijing introduced a new system that makes tap water more expensive the more people use. But prices are still far from market levels. Officials turn a blind eye to widespread extraction of un-tariffed groundwater by city dwellers and farmers, despite plummeting groundwater levels.

Raising the price would cut demand and encourage more efficient use. It should also help lure industry away from water-scarce areas where prices would be set at higher rates. Arid areas that are forced by the government to pipe water into desiccated cities like Beijing could offset their losses by charging higher tariffs.

I don’t pretend to have the exact answer.  But I have to ask an economic question here.  Isn’t water about as inelastic a product as you can get?  Wouldn’t you pay whatever asked for water?  If so, raising or lowering the price wouldn’t have a big impact on its use.

In Inevitable, the solutions are not so easy.  People need water.  People will pay what it takes for water.  People will pay what it is necessary for other inelastic products that water produces: medicine, food, energy, etc.  Also, when panic sets in, there will be the “inevitable” race to the bottom in the form of hoarding.

So, what is the ultimate answer to water scarcity?  First, we need to acknowledge it.  Because the novel tells the story of what happens when the failure reaches a crisis.  And by that point, no amount of price control or de-regulation will portend a desired outcome.