INTRODUCTION
TO ECONOMICS
Lesson of 14 November 2006
WATER
Drought
conditions in much of southern and eastern Australia have precipitated
therein a water crisis, effecting
much of the population of the mainland states.
An examination of the evidence suggests that basically the nature
of the problem is not geographic or physical, or, for that matter,
economic. Rather it is
political.
Supply
Australia
is the driest of the inhabited continents, having, amongst them, the
lowest average and the most variable annual rainfall.
It also suffers from high evaporation, and the discharge from its
river systems is the lowest of the inhabited continents. Nonetheless, the figures suggest that Australia possesses
ample supplies of freshwater, both ground and surface, sufficient for
its existing needs and for the needs of its growing population, for the
foreseeable future. Experts suggest that this would be so even absent
the making of any significant changes in current methods
Like
coal, salt or bananas, water is a commodity.
There is no shortage of water; more than half the world is
covered with it. The
technology for the large-scale distillation of salt water is widely
known and readily available. A
similar position applies with respect to the recycling of wastewater.
Such techniques are widely used today even in some parts of
Australia.
More
innovative [and expensive] measures could, if thought necessary be
adopted, as witness the suggestion that water could be piped from the
Kimberleys to Perth in WA. History
lends credence to such a proposal, with the construction more than a
century ago of the Mundaring to Kalgoorlie water pipeline.
Much of Australia’s water is found in the rivers of the
northern coastline, which water today is largely wasted.
Damming one or more such rivers and piping the water south is
technologically feasible. Even
the tethering, towing and melting of icebergs has been suggested as
feasible.
The
existence of the above readily-ascertainable facts tends to suggest that
the daily horror stories appearing in much of the nation’s press are
largely myths, having the effect, whether wittingly or otherwise, of
diverting attention from the real problem and the likely means of their
resolution.
Politicisation
Traditionally
the supply of water in Australia has largely been a government monopoly.
Predicably this has tended to result in water being used as a
form of patronage, with cheap water being supplied to electors,
particularly in rural electorates for agricultural purposes.
{Agriculture today uses about 70% of the water consumed in
Australia].
As
economics teaches, providing something at a price below its worth leads
to waste and excessive use. Typically,
when supply began to be a problem, the government would build another
dam, in itself a form of patronage.
This would be paid for by taxes.
On the other hand, most of the actual income, received by the
various water boards from the sale of the water, was taken by the
government for general revenue. In
effect this was a form of tax.
What
has caused a gap to occur in this cycle of events has been not so much a
shortage of water. but rather the rise of environmentalism and the
conservation movement’s opposition to the building of further dams.
This has necessitated a switch in emphasis towards saltwater
distillation and wastewater recycling as a means of overcoming the
perceived problem. Both
measures are energy intensive and have led to a divergence of political
views with the PM suggesting the possible use of nuclear energy and
Premier Beattie from the coal-rich state of Queensland preferring clean
coal power.
Conclusion
The
government solution to the problem has been to introduce a variety of
constraints and rationing designed, by punitive means to reduce the
demand for water. An
economic solution would be likely to advise a rise in price to achieve a
similar result, with more efficient use.
It might also suggest the abolition of the government’s
monopoly, thereby permitting and encouraging a greater supply
David Sharp
November 2006
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