The coming age of thirst

If there was ever a need for the reminder of just how interconnected the world is, there is a piece in today’s New York Times (yes, I’m very happy Times Select is defunct) that helps bring it home.

China is consuming its freshwater at runaway speeds. In the words of Fred Pearce, “If northern China were a separate country, it would be one of the most water-stressed in the world.”

China’s industry consumes 3-10 times the water of comparable industry in the developed world, according the Times article. China’s farmers are siphoning water out of the ground to sustain crop-growth in semi-arid parts of the country. The easy answer would, of course be to stop farming in dry areas, and to ratchet up standards on manufacturing to use water more efficiently (see what a Coke-WWF partnership is striving towards, here).

If the solutions were easy, there wouldn’t be much need for a discussion.

Here is my guess at some of the problems China is facing in solving this challenge:

1. Modern, developed-country standards for manufacturing are more expensive, are probably less labor-intensive, and probably require a more sophisticated maintenance system than current operations. So to make this work would be to actually reduce the number of jobs available, and to increase the product cost (because in Northern China, labor is still cheaper than capital). To be environmentally responsible, then, might mean putting industry out of business.
2. Maintaining a near-self sufficient farming base gives China two things: first, a huge job-cushion. If a person can’t find a job, but has food (because he or she is a farmer), there isn’t the same kind of urgency as there would be if there were no farmers; and second, it gives an abundant supply of low-cost food for China.

A significant change in either of these policies exposes China to great uncertainty about the future, and likely unrest of some form or another. And all of this is independent of China’s challenges with providing its people (and economy) enough electricity to satisfy increasing demands from an increasingly affluent populace. Currently, most of that growing demand is slated to be satisfied by newly built coal-powered generation plants.

To this point, the problems have all been China-related. The connections to the world are numerous. Some overt, and others more subtle. Starting at the above the waterline issues, and plunging quickly:

Global food prices. If China changes its policies about domestic water use for farming, it could greatly impact the global supply of grains like corn, rice, and soybeans. This would be great for other farmers around the world who would receive higher prices for their crops. But it would be bad for global consumers—especially poor urban consumers—who have to spend relatively high portions of income on staple foods.

Global trade. European and U.S. trade imbalances with China would likely decrease, as our farmers would be able to sell their crops to China. If China’s industry was using more water-efficient processes, the per-unit cost would likely increase as well. This means that the American consumer would likely buy less (or the factories would leave China all-together). On the surface these two seem beneficial, but the ripple effects would likely trend negatively. Job-loss in rural northern China would require the government to spend more of its money on social-welfare, job retraining, or educational programs. And since we’re talking about programs for a few hundred million people, these would be significant expenses. There may also be programs to support grain-purchase subsidies, to keep the prices low for the urban poor. This means the Chinese will have less money to pump back into the U.S. economy in the form of buying our government debt. This leads to downward pressure on the dollar, which leads to an increasing interest rates and fears of inflation.

To be clear: China is going to do what is in China’s interest, not in the U.S. interest. But if the U.S. wants China to deal effectively with the water problem it is facing (which is, incidentally, the same water-problem the U.S. faces, by the way), we will have to find a way to work with China to use less water, grow or buy the same amount of grain, and do them both without significantly disrupting their current pace of economic growth.