The Scarcity of Resources in the World - Case Study Example

The scar of resources in the world has taken an urgent turn in light of the explosive combination of an expanding global population, climate change wreaking its disastrous effects and unsustainable consumption patterns. What we are currently faced with is a situation wherein parts of the world are exceedingly wealthy and gobbling up resources in unsustainable ways, and other parts are facing hunger and deprivation. Without effective interventions, we are teetering precariously near the edge of a precipice. This paper looks at the case of water as a prime example of a finite resource whose depletion, if left unarrested, will create serious problems for the world. Fresh water is a basic human necessity. We need it for drinking, sanitation and personal hygiene, irrigation, hydroelectricity, for the natural resources it contains (such as fish), to preserve ecological balance, as part of our cultural mythology and for enjoyment (as part of the scenery). Flowing river water is a common resource which confers user rights but no private ownership rights. Groundwater, on the other hand, is subject to private ownership and therefore vulnerable to excess exploitation. This also makes ground water harvesting practices more scattered and difficult to implement and monitor As more and more parts of the world face increasing water shortages and water commoditization, the issue of water scarcity – how it is perceived, problematized and the consequences in the form of policy responses – becomes crucial. Postel (2008) sums up the problem cogently: Why has so much of modern water management gone awry? Why is it that ever greater amounts of money and ever more sophisticated engineering have not solved the worlds water problems? Why, in so many places on this planet, are rivers drying up, lakes shrinking, and water tables falling? First and foremost, it is essential to study the concept of scarcity – its underlying assumptions and how these translate in policy terms. Scarcity is a central concept in economic theory, particularly neoclassical economic theory, which in turn has strongly influenced policy thought. This focus on scarcity as deriving from economic thought, has important implications for policy planners. Firstly, scarcity is a given in economics. Thus, policy makers need not necessarily try and understand the nature of the scarcity – whether it is absolute or relative, constructed or real (Mehta 2003 and 2006) They can simply accept it as a natural and inevitable condition, evaluating only the degree of scarcity and building responses accordingly. Secondly, under conditions of scarcity, the market is considered to be the most efficient allocator of resources. In many developing countries, the market is replaced by the state, but scarcity is still considered to be addressable external to the situation either by the market (by privatising water for example) or by the state (through prioritising of needs and resources connected to water). Segerfeldt proposes that the problem is not the shortage of water, but the absence of or deficiency in effective policies. He states: Worldwide, 1.1 billion people, mainly in poor countries, do not have access to clean, safe water. The shortage of water helps to perpetuate poverty, disease and early death. However, there is no shortage of water, at least not globally. We use a mere 8 per cent of the water available for human consumption. Instead, bad policies are the main problem. Even Cherrapunji, India, the wettest place on earth, suffers from recurrent water shortages. In looking at the roots of the problem of defective water rights policy, it is imperative to talk about the phenomenon of the “resource curse”. The literature has recognized that somehow the countries rich in natural resources are subject to a curse: despite of the fact of having natural resources those countries seem to be trapped in a growth failure. Institutions, openness, and even savings are some of the factors claimed to be affected by the presence of natural resources or certain geographical conditions (Sachs and Warner, 1997; Sala-i-Martin and Subramamnian, 2003; Mursehd, 2004; Zuleta 2007), but there is no consensus in the literature identifying the main mechanism by which the natural resources hamper growth. According to Sachs and Warner (1997) the possible indirect effects of natural resources on growth stem from two potential facts: on the one hand, corrupt institutions arise in abundant resource economies and in the presence of corruption the levels of demand for investment decrease. Sala-i-Martin and Subramamnian (2003) and Murshed (2004) coincide with Sachs and Warner (1997) in the sense that they find that the mechanism by which natural resources hamper growth –as the resource curse suggest– is the damage on institutional quality. On the other hand, resource abundance fosters inward-looking strategies, which in turn promote low investment rates and therefore hampers growth. Different authors support the idea that the presence of natural resources fosters the presence of rent-seeking groups, damaging institutions’ quality within a country (Murshed, 2004; Wick and Bulte, 2005). Also, Billon (2009) summarizes different evidence in the literature that illustrates that conflict in a country is exacerbated with the presence of natural resources when rebel groups can access the rents that stem from these resources. But what is the solution and how do we ensure that the rights to water and resources are more equitably distributed? On the level of national policy, we can perhaps take our cue from Brazil that imposed measures to stop the frenzied logging and burning that leads destruction of the rain forest. (Bittman: 2008). The destruction of the rain forest will have tremendous consequences on the eco-system and biodiversity as a whole and it is important for nations to take decisive strides towards protecting their natural resources. However, beyond protecting their eco-system, nothing much will be accomplished if consumption patterns are not altered. Leslie (2007) presents the example of China: China has also become a ravenous consumer. Its appetite for raw materials drives up international commodity prices and shipping rates while its middle class, projected to jump from fewer than 100 million people now to 700 million by 2020, is learning the gratifications of consumerism. China is by a wide margin the leading importer of a cornucopia of commodities, including iron ore, steel, copper, tin, zinc, aluminum, and nickel. It is the worlds biggest consumer of coal, refrigerators, grain, cell phones, fertilizer, and television sets. It not only leads the world in coal consumption, with 2.5 billion tons in 2006, but uses more than the next three highest-ranked nations—the United States, Russia, and India—combined.  The next solution is to improve governance. What a country does with its resources is part destiny, part choice. Colombia is a good example of this. Its privileged location and weather conditions are Colombia’s destiny. Unfortunately, some regions of Colombian soil offer the ideal environment for the presence of illegal drugs crops and corruption from rent-seeking groups and bad governance have capitalized on this. A map of Colombia that overlaps the presence of rebel groups and the presence of illicit crops like the one sketched by United Nations (2005) clearly shows that precisely where narcotics are, so are illegal armed groups. It may reflect what both the theory and the empirical evidence have shown: wherever there are natural resources, there will be rent-seeking groups trying to capture the revenues from the resources. In doing so, corruption arises, and specifically in the Colombian case, rebel groups emerge. The state has been seen as an arena for struggle over scarce resources. In developing countries, questions of political inclusion and exclusion are crucial to deciding the acceptability or otherwise of a policy response. This is especially so in a democratic context where the issue of consensus is important for deciding appropriate policy responses (Lindblom, 1959). Developing states often initiate projects and plans that lead to human and environmental disasters, and an existing analytical framework (see Scott, 1998) has relevance for the kind of policy options that are likely to find acceptance.  it is important to bring up the contribution by Acemoglu et al (2005). For Acemoglu et al (2005) institutions are the main determinant of growth in the long run. Also, Acemoglu et al (2005) state that “Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders.” On the global level, it is absolutely imperative to come up with a framework of guidelines that will regulate the interaction between states and prevent developing states from being unduly prejudiced by the stronger states in the global political economy. It may also be a good idea to enlist the help of corporations to ensure that the corporate enterprise is made a force for good. It will help the world, but it will help them as well, creating a win-win situation. To quote John Mackey, “there can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors.” (2005). It is also important to regulate trade not only within countries, but within and among countries. Bosker and Garretsen (2008) state that neighboring institutions also count when explaining the level of income of a country. The authors call it “geography of institutions”. In the case of Colombia, neighboring institutions clearly have had an impact on Colombian economic performance. In fact, Venezuela is not recognized as the most democratic country in the region, and Ecuador also seems to ‘play’ under the influence of Venezuela. We mention specifically Venezuela and Ecuador, which are only two out of the five countries Colombia has frontiers with, because precisely in the borders with these two countries there are Colombian regions intense in illicit crops. Also, Ecuador and Venezuela are mentioned because in the border areas with these countries Colombian rebel groups look for refugees by being hidden in the forest and tap into village water supplies. Colombian institutions are not recognized for being the best in the region, but definitely the low-quality institutions of its neighbors also have a detrimental effect in Colombia’s economy. Bosker and Garretsen (2008) state that a channel by which neighboring institutions harm one country’s resource supply is “when a neighboring country directly interferes into your internal affairs by supporting the opposition or financing rebel groups”. Different mass media, both local and international, have documented that Colombian rebel groups receive support –and sometimes in the form of guns– from Venezuela’s government. Unregulated exploitation of natural resources, conflict, institutions and “bad neighbour” practices end up being part of the problem. There should be multilateral organizations and perhaps, multilateral conventions that govern how states interact with one another. Regional talks should be held in order to find wholistic approaches to the problem at hand. But then there are solutions that must be accomplished at the level of the individual. One major way is to lessen consumption. Alan Durning (1992) makes an important point: Over a few short generations we have become car drivers, television watchers, mall shoppers, and throw-away buyers. The tragic irony of this momentous transition is that the historic rise of the consumer society has been quite effective in harming the environment, but not in providing the people with a fulfilling life… Water is such a precious resource and we must do all we can to ensure that we have an abundant supply of it in the years to come, but more importantly that this supply is accessible to all. We must correct the unevenness of global development where water supply is concerned and work towards a future where resources are equitably distributed. Works Cited Acemoglu, D., S. Johnson, et al.” Institutions as a fundamental cause of long-run growth.” Handbook of Economic Growth. Cambridge: Cambridge UP, 2003. Print. Bittman, M. “Rethinking the Meat Guzzler”. The New York Times. 27 January 2008. Web. 6 March 2012. Bosker, M. and H. Garretsen. "Economic deveopment and the geography of institutions." Journal of Economic Geography 9. (2009): 295-328. Print. Durning, A. How Much Is Enough? New York: W.W. Norton and Company, 1992. Leslie, J. “The Last Empire: China’s Pollution Problem Goes Global”. Mother Jones. 10 December 2007. Web. 7 March 2012. Lindblom, C.D. ‘The science of muddling through’, Public Administration Review 17.2 (1959):: 79-88. Print. Mackey, M. “Rethinking the Social Responsibility of Business.” Reason.com. October 2005. Web. 5 March 2012. Mehta, L. Whose Scarcity? Whose Property? The Case of Water in Western India. Land Use Policy 24.4 (1956): 654-63. Print. Murshed, M. When does natural resource abundance lead to a resource curse? Discusion Paper, Environmental Economics Programme, Institute of Social Studies. (2004). Print. Postel, S. “The Missing Piece: A Water Ethic” The American Prospect. 23 May 2008. Web. 07 March 2012. Sachs, J. and A. Warner. Natural Resource Abundance and Economic Growth, Center for International Development and Harvard Institute for International Development. (1997) Segerfeldt, F. “Private Water Saves Lives.” Cato Institute. 2005. Web. 05 March 2012. Read More