Menus Subscribe Search

Follow us


Waterpic

DGDESIGN/SHUTTERSTOCK

Could Water Bring Jobs Back to the U.S.?

• May 08, 2012 • 4:00 AM

DGDESIGN/SHUTTERSTOCK

There is a coming jobs exodus from China, and back to the Rust Belt and other water rich regions. Or so says one principal at a water hedge fund.

Have you gotten the memo yet? You can stop worrying about peak oil: the United States is sitting on centuries of natural gas and Canada is full of tar sands. But then there is water. No less than Morgan Stanley Smith Barney declared “peak water” the challenge of the century last December in a report upholstered with authoritative graphs showing the heating of the world and the shrinking of water resources. Words almost failed report writers as they declared, “Water may turn out to be the biggest commodity story of the 21st century, as declining supply and rising demand combine to create the proverbial perfect storm.”

The factors driving this “storm” include climate change (changing rainfall and drought patterns) and population growth, particularly in the world’s cities and among the middle class, creating increasing pressure to grow more (and more luxurious) food. Add to that the recent upswing in water-hungry energy sources such as fracked natural gas and tar sands, which has focused more attention on water. McKinsey estimates that by 2050 the world will need a 140-percent increase in its water supply—which, the management consultancy adds, is obviously impossible. Dickon Pinner, a partner at McKinsey, recently described this coming conflict as an opportunity for companies that figure out how to make industry, cities, and agriculture more water-efficient: “There’s a big prize out there.” The industrial titans of future “big water” are lining up: GE, Siemans, ITT, Dow, and others are developing water expertise.

Mention Big Water, or a coming age of water, and most of us visualize drought, migration, and mayhem. But some parts of the U.S. are strikingly water-rich, and the water century, if it comes, has the potential to remodel the country, economically and ecologically. Bill Brennan, a principal at the water hedge fund Summit Global Management, has been working the investment side of water for more than 15 years after working as an environmental engineer. As an investor, Brennan cautions that water is not “blue gold,” a commodity that allows investors to make profits by investing directly. Water itself is too expensive to ship, and desalination requires a lot of energy. Rather, its primary economic attribute is that without it, housing, industry, and agriculture come to a halt. “As long as it’s abundant, people will pay it no notice,” he says, “but as soon as there’s a shortage, they’ll hit the panic button.” In other words, in places where water is abundant it has no price and where it’s scarce, it’s very expensive.

As yet, there’s no futures market for water. Instead we have a form of water arbitrage, which Brennan calls “virtual water,” or water embedded in products. An 8-ounce glass of beer contains 20 gallons of virtual water—water used to grow the grains and brew the beer. A cup of coffee contains 50 gallons of virtual water. Shipping coffee or beer or rice from a high-water, low-cost place to a place without water is one way to ship water. Brennan says the U.S. hasn’t fully absorbed the importance of virtual water, but China and India, where drought and population pressures are more extreme, recognize the crucial relationship of water to GDP growth. As of last October, 80 Indian companies had spent $2.4 billion buying East African land in areas where water is abundant to grow and export water-hungry crops. China has also been actively buying land, and has reportedly considered buying rice (a pound contains 650 gallons of virtual water) from the U.S. Virtual water has created an unnoticed trade flow from water-rich countries to the water poor. In world terms, the U.S. is an enormous exporter of water. (See the graph on page 16 of the Morgan Stanley Smith Barney report.)

Push the logic of virtual water further and Brennan sees the world’s industries relocating. Take a region like the American Southwest, where “citizens see water as a God-given right, and governments see it as eminent domain.” ­Brennan sees “friction” within the next five years, as pressures for water for agriculture, extracting oil and gas, getting rights to increasingly scarce snowfall, and population increases lead to increased struggles for water access. He sees businesses shifting out of areas that fail to reach agreements around water, and towards areas with easy water. And when the jobs go, the people will follow. What area “in the U.S. is best positioned for water? The Great Lakes. I see the Rust Belt flourishing over the next 30 years, while people will leave places like Colorado.”

In Brennan’s view, the concept of virtual water will be enhanced by real energy. A state like Pennsylvania, with abundant water and lots of nearby natural gas will become reindustrialized as companies from around the world relocate. “The chemical industry is repatriating to the U.S. for the abundance of water and cheap energy. We’ve got enough water for 5 to 20 years.” Cheap labor in places like China is becoming a nonissue, Brennan says, while companies chase the chance to have access to resources again. What he describes—a new life for once-abandoned, resource-rich places like Bellingham, Washington—sounds like the Industrial Revolution all over again. In fact, a similar shift occurred after the 1973 energy crisis, when many manufacturers relocated from the Northeast to the South, where they could spend less on energy and (in some cases) labor.

For those living in any of the damp parts of the U.S. with high unemployment, Brennan’s analysis offers hope of a revival. But how will we handle jobs returning, particularly if they’re in industries like chemicals, with a heavy environmental footprint? Environmentalists’ efforts to limit the damage from extracting resources in the U.S. during the last 30 years have been enabled by globalization, which allowed U.S. consumers to buy cheaper resources abroad. But when the U.S. has some of the world’s cheapest water, how will we protect it as a natural resource?

There may well be tensions between the depressed rural towns that lost industry nearly two generations ago and are desperate for jobs of any kind, and national or regional movements that don’t want to see the U.S. exporting a resource too cheaply. For the “creative classes” on the coasts, the idea that parts of the U.S. economy are living on resources (rather than their wits), may seem a bit “third world,” or at least a step backwards from the service-and-brains paradigm the country has embraced over the last two decades. The paradox is that in order to get business to treat water well, we may need to put a price on water—an idea that runs counter to our American sentiment that water should be free.

 

 

Lisa Margonelli
Lisa Margonelli is the author of Oil On the Brain: Petroleum's Long, Strange Trip to Your Tank. She is currently working on a book about termites.

More From Lisa Margonelli

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

December 18 • 4:00 PM

How I Navigated Life as a Newly Sober Mom

Saying “no” to my kids was harder than saying “no” to alcohol. But for their sake and mine, I had to learn to put myself first sometimes.


December 18 • 2:00 PM

Women in Apocalyptic Fiction Shaving Their Armpits

Because our interest in realism apparently only goes so far.


December 18 • 12:00 PM

The Paradox of Choice, 10 Years Later

Paul Hiebert talks to psychologist Barry Schwartz about how modern trends—social media, FOMO, customer review sites—fit in with arguments he made a decade ago in his highly influential book, The Paradox of Choice: Why More Is Less.


December 18 • 10:00 AM

What It’s Like to Spend a Few Hours in the Church of Scientology

Wrestling with thetans, attempting to unlock a memory bank, and a personality test seemingly aimed at people with depression. This is Scientology’s “dissemination drill” for potential new members.


December 18 • 8:00 AM

Gendering #BlackLivesMatter: A Feminist Perspective

Black men are stereotyped as violent, while black women are rendered invisible. Here’s why the gendering of black lives matters.


December 18 • 7:06 AM

Apparently You Can Bring Your Religion to Work

New research says offices that encourage talk of religion actually make for happier workplaces.


December 18 • 6:00 AM

The Very Weak and Complicated Links Between Mental Illness and Gun Violence

Vanderbilt University’s Jonathan Metzl and Kenneth MacLeish address our anxieties and correct our assumptions.


December 18 • 4:00 AM

Should Movies Be Rated RD for Reckless Driving?

A new study finds a link between watching films featuring reckless driving and engaging in similar behavior years later.


December 17 • 4:00 PM

How to Run a Drug Dealing Network in Prison

People tend not to hear about the prison drug dealing operations that succeed. Substance.com asks a veteran of the game to explain his system.


December 17 • 2:00 PM

Gender Segregation of Toys Is on the Rise

Charting the use of “toys for boys” and “toys for girls” in American English.


December 17 • 12:41 PM

Why the College Football Playoff Is Terrible But Better Than Before

The sample size is still embarrassingly small, but at least there’s less room for the availability cascade.


December 17 • 11:06 AM

Canadian Kids Have a Serious Smoking Problem

Bootleg cigarette sales could be leading Canadian teens to more serious drugs, a recent study finds.


December 17 • 10:37 AM

A Public Lynching in Sproul Plaza

When photographs of lynching victims showed up on a hallowed site of democracy in action, a provocation was issued—but to whom, by whom, and why?


December 17 • 8:00 AM

What Was the Job?

This was the year the job broke, the year we accepted a re-interpretation of its fundamental bargain and bought in to the push to get us to all work for ourselves rather than each other.


December 17 • 6:00 AM

White Kids Will Be Kids

Even the “good” kids—bound for college, upwardly mobile—sometimes break the law. The difference? They don’t have much to fear. A professor of race and social movements reflects on her teenage years and faces some uncomfortable realities.



December 16 • 4:00 PM

How Fear of Occupy Wall Street Undermined the Red Cross’ Sandy Relief Effort

Red Cross responders say there was a ban on working with the widely praised Occupy Sandy relief group because it was seen as politically unpalatable.


December 16 • 3:30 PM

Murder! Mayhem! And That’s Just the Cartoons!

New research suggests deaths are common features of animated features aimed at children.


December 16 • 1:43 PM

In Tragedy, Empathy Still Dependent on Proximity

In spite of an increasingly connected world, in the face of adversity, a personal touch is most effective.


December 16 • 12:00 PM

The ‘New York Times’ Is Hooked on Drug du Jour Journalism

For the paper of record, addiction is always about this drug or that drug rather than the real causes.


December 16 • 10:00 AM

What Is the Point of Academic Books?

Ultimately, they’re meant to disseminate knowledge. But their narrow appeal makes them expensive to produce and harder to sell.


December 16 • 8:00 AM

Unjust and Unwell: The Racial Issues That Could Be Affecting Your Health Care

Physicians and medical students have the same problems with implicit bias as the rest of us.


December 16 • 6:00 AM

If You Get Confused Just Listen to the Music Play

Healing the brain with the Grateful Dead.


December 16 • 4:00 AM

Another Casualty of the Great Recession: Trust

Research from Britain finds people who were laid off from their jobs expressed lower levels of generalized trust.


December 15 • 4:00 PM

When Charter Schools Are Non-Profit in Name Only

Some charters pass along nearly all their money to for-profit companies hired to manage the schools. It’s an arrangement that’s raising eyebrows.


Follow us


Apparently You Can Bring Your Religion to Work

New research says offices that encourage talk of religion actually make for happier workplaces.

Canadian Kids Have a Serious Smoking Problem

Bootleg cigarette sales could be leading Canadian teens to more serious drugs, a recent study finds.

The Hidden Psychology of the Home Ref

That old myth of home field bias isn’t a myth at all; it’s a statistical fact.

A Word of Caution to the Holiday Deal-Makers

Repeat customers—with higher return rates and real bargain-hunting prowess—can have negative effects on a company’s net earnings.

Crowdfunding Works for Science

Scientists just need to put forth some effort.

The Big One

One in two United States senators and two in five House members who left office between 1998 and 2004 became lobbyists. November/December 2014

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.