Center for the Advancement of the Steady State Economy
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A Thirst for Economic Change?

by Erik Alm

I sincerely hope, for the sake of posterity, that they will be content to be stationary, long before necessity compels them to it. –John Stuart Mill, On the Stationary State

ErikAlm2In the face of global resource shortages and the alarming rate at which we are losing species, many of us share the hope that J.S. Mill so ominously communicates in one of his better-known quotes. But what will it take to catalyze the shift to an economic state that respects our natural boundaries? Perhaps the catalyst could be a life-altering dearth of a critical resource that, until recently, most of us in the United States have taken for granted: water.

The idea that a water shortage like the one California is currently facing could cool the economic engines that have elevated the state to the eighth-largest economy in the world has been discussed in local media and state government offices alike. The Desert Sun, a paper serving the rapidly-growing Coachella Valley in the southern part of the state, recently posed the question of whether water worries will slow development in the valley. The New York Times expressed its worries about California’s continuing economic vigor by stating the drought “. . . is forcing a reconsideration of whether the aspiration of untrammeled growth that has for so long been this state’s driving engine has run against the limits of nature.”

CA Drought - Kevin Cortopassi

Many proposed policies that could stem our water problems are discarded because they are seen as anti-growth. Photo Credit: Kevin Cortopassi

Replying to questions like these, the head of the State Water Resources Control Board, Felicia Marcus, says “We have a long way to go before we have tapped out our resources,” and prospects for economic growth are still as bright as ever. The non-partisan California Legislative Analyst’s Office reinforces this view in a brief report released in mid-April. Citing a recent Wall Street Journal survey of economists, the report concludes “. . . we currently do not expect the drought to have a significant effect on statewide economic activity or state government revenues.”

Many of these rosy economic predictions rely upon hopeful qualifiers such as assuming the drought will be short-lived, that the recently imposed water restrictions will not be expanded, or that water districts will continue to receive adequate allocations from the State Water Project. These assumptions may prove to be overly optimistic.

Surface water, which normally covers 60% of the state’s demand, is predicted to be in even worse shape this year due to the lack of snow in the Sierra Nevada Mountains. California’s State Water Project, which distributes this water throughout the state, supplying drinking water to more than 23 million people and helping to irrigate agricultural lands in the Central Valley, was able to deliver to water districts only 5% of their contracted amounts in 2014. Another important source of surface water, the Colorado River, is also showing the effects of extreme drought with Lake Powell, the system’s biggest reservoir, below 45% of its capacity.

Groundwater, which is used to supply the other 40% of the state’s demands, and up to 60% during times of inadequate surface flows, faces similar stresses. “The withdrawals far outstrip the replenishment. We can’t keep doing this” says Jay Famiglietti, a NASA scientist who studies water supplies in California. The recent well-drilling boom that is providing California farmers with at least a temporary solution to their water woes seems to be adding urgency to his words.

As the search for additional water becomes more desperate, some have been thirstily eyeing the amount allocated to ecosystems. California’s Department of Water Resources estimates that 50% of the state’s water is used by the environment, 40% by agriculture, and 10% by urban users. Even with a quarter of the state’s native freshwater fishes being listed as either threatened or endangered and many more headed in the same direction, some interest groups have advocated reducing environmental water allocations, even at the peril of critical habitats.

This “people versus fish” debate is largely due to a misunderstanding about the way the environmental use statistic is calculated. Most of the water “used by the environment” flows in state and federally protected rivers in the sparsely populated North Coast where there are few alternative uses. In the majority of the state, environmental use of water is far from dominant at 33%, with agriculture accounting for 53% and urban users at 14%. Noting the dramatic devastation that California wetlands have suffered over the last 150 years, including the loss of Tulare and Owens Lakes and the removal of 95% of the native vegetation along Central Valley creeks and rivers, the state appears determined to allocate more water to natural systems. A 2014 bond measure approved up to $200 million to acquire water rights for environmental use and funding mechanisms for restoration of wetlands are also being sought.

Another hope for increased water security is desalination. Plants similar to the one in Santa Barbara, CA, which is being restarted after years of laying idle, have been used to provide a technological solution to water shortages in some parched and energy-rich parts of the world. However, due to high initial capital costs, stringent permitting requirements, huge energy demands, potential environmental harm, and a final product that is more than four-times as expensive as surface water (and nearly double the cost of building a water recycling system), it seems unlikely that desalination will be able to make up for the increasing shortfalls that our current trajectory of growth will bring.

In an apparent public admission that the state has no viable ideas for increasing supply, on the first of April, like a bad joke, Governor Brown called for the state’s first ever mandatory water use restrictions. “Folks realize we have now reached the limits of supply, so the focus is on demand.” says Heather Cooley, water program director for the Pacific Institute, a water-resources research group in Oakland, CA. Proposals for reducing demand range from increasing water efficiency to $10,000 fines for residents and businesses caught being wasteful. However, some people have pointed out the hypocrisy of the water restrictions. Craig Ewing, president of the Desert Water Agency which serves Palm Springs and other communities, has heard it often, “The public is faster to react to these things than governmental institutions, and so the public is already saying, ‘Why are we seeing new development when we’re being asked to cut back?’ And the governments are going to be slower to figure out, ‘Well, how do we deal with all of this?’”

Currently, many proposed policies that could effectively stem our water problems are immediately discarded as unworkable because they are seen as anti-growth. Temporary building moratoria for areas without a secure water source are a case in point. However, if the public were better informed about the negative consequences to their quality of life from policies that support continued growth even in the face of critical resource shortages, perhaps they would favor policies with growth-curbing corollaries instead. Unfortunately, for some in the state, like those in East Porterville whose homes are currently without any running water at all, the choice of whether or not to grow their community has been obviated. Their focus now is firmly fixed on survival.


5 Responses to “A Thirst for Economic Change?”

  1. R. Overby says:

    After a while your timely well-written article mentioned desalination and some of its drawbacks. It is a fact, however, that growthmania will be able to sustain itself as long as cheap energy is available. Physical growth may go on and on ad nauseam as it already is. There is plenty of water in the Pacific.

    Water may also be piped in from Alaska and/or Canada as long as sufficient cheap energy is available.

    Growth will not be thwarted by statistics employed to raise fear of scarcities. The cancerous growth paradigm will only hire more clever engineers. R.

  2. John Doyle says:

    Yes indeed, as R.Overby says, growth will continue while cheap energy is abundant. It will go on and on, until it can’t.
    Of course growth today is mostly credit spending, not nation building or that stuff. As long as there is the illusion of endless credit then growth will continue, until it can’t
    The bankers and their acolytes, politicians, will see to it that the big lies stay fixed in our minds.
    The big lie is of course that we can have endless growth. Forget the planet is finite.
    Of course ,too, another big lie is that we can keep on having cheap energy. Well, that option is only partially true now, and with low oil prices the expensive wells are shutting down or loss making.
    We actually have a glut of oil, and coal and iron ore etc. Counterintuitively it signals economic decline, because there are fewer customers spending and demand is getting lower every day.

    We are entering a period of deflation, but it will only get worse. No more booms because no more cheap energy, or not for long enough to fuel one.

  3. Geoffrey says:

    Erik, Thank you for this. Re JSM, water is now THE necessity, and it has the ability to impose a steady state very quickly. Pollution of surface and aquifers and oceans, drought, untimely precipitation, mismanagement, and population growth will be the prime agents. In my blog article, I refrained from mentioning California, so I am very glad that you did so.
    The comments from our colleagues are very good, but I would like to point out that the problem is now world wide, and there are already countries which are beginning to find it hard to find credit to satisfy their water demand for the long term. The financial community is already lowering the credit rating of some countries which are suffering drought and mismanaging the water they have. Brazil is a prime example. This year Sao Paulo was down to 10% of its reserves, and due to the destruction of the Amazon which supplies water to the hydrological cycle the drought continues, and the credit rating has been lowered. The government is not having much success in reassuring the financial community that all is under control. So mismanagement of water resources has become a credit rating criteria, and I am sure that the Californian administration is well aware of this.

  4. Dave Gardner says:

    Great work, Eric. We’ve honored this on the Wall of Fame at

    If you read between the lines, what is being explored here is whether California can/will wake up and end pursuit of unsustainble growth, as a rational response to the hard limit water is presenting, or will the state just end up in a steady state because it is eventually forced by mother nature to do so. As Alm is pointing out, the rational path is not looking too likely.

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