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April 9, 2015

California Drought Shows How America's Only Highly Functional For the 1%

By Fabius Maximus, FabiusMaximus.com

Graphic Source: Bloomberg.com

Summary: The California megadrought shows America's public policy machinery at work. Dysfunctional for us; highly functional for the 1%. It's the price we pay for our apathy and passivity. Today we review California's latest response to this crisis. 
Here's the tale in brief, told by journalist Mark Hertsgaard in "After Warmest Winter, Drought-Stricken California Limits Water But Exempts Thirstiest Big Growers":
There are a lot of Californians who are suffering right now, especially farm workers. There are communities out in Central Valley, the poor communities where a lot of farm workers live, that literally don't have water coming out of their household taps anymore. That is not the case for Mr. Stewart Reznick {billionaire} and a lot of bigger farmers. In fact, my story in The Daily Beast started with a conference that Mr. Reznick and his pistachio company, Paramount Farms, held just last month, where they bragged, literally bragged and celebrated about the record profits that they are making on pistachios, on almonds, and not only the profits, but the record production levels, and the record acreage levels, which means that as the state has been going into drought, nevertheless agricultural interests are planting more and more acreage, new almond trees - we are growing alfalfa here which is a very thirsty crop and gets exported over to China.

There are all kinds of examples of this. But, the pain is not being felt equally here. The growers at that conference, they literally trooped out of that conference listening to Louis Armstrong saying "it's a wonderful world," and I think the mood was captured by one grower who said, "I've been smiling all the way to the bank," and they played a clip from that Tom Cruise movie, "Jerry Maguire" where Cruise yells out "show me the money." Well, they are making plenty of money, some of the big farmers here, and that's largely because they are still getting plenty of water, and, as I say, the experts say that this water is underpriced. If that if we did price it properly, which means a little bit higher, that there is enormous strides that California could be taking with water efficiency.
We literally could, essentially, wipe out the effects of the drought in California - 22% decrease in water consumption in the agricultural areas, which would be roughly the equivalent of the amount of surface water that the farmers did not have last year because of the drought. So, there is a lot that can be technologically, but until you get the pricing right, and the political economy of this straight, we are not going to see those things.
Hertsgaard explains in a Daily Beast article "How Growers Gamed California's Drought" - "Consuming 80% of California's developed water but accounting for only 2% of the state's GDP, agriculture thrives while everyone else is parched."
{A}griculture consumes a staggering 80% of California's developed water, even as it accounts for only 2% of the state's gross domestic product. Most crops and livestock are produced in the Central Valley, which is, geologically speaking, a desert. The soil is very fertile but crops there can thrive only if massive amounts of irrigation water are applied. Although no secret, agriculture's 80% share of state water use is rarely mentioned in media discussions of California's drought. Instead, news coverage concentrates on the drought's implications for people in cities and suburbs, which is where most journalists and their audiences live.

... The other great unmentionable of California's water crisis is that water is still priced more cheaply than it should be, which encourages over-consumption. ... One reason is that much of the state's water is provided by federal and state agencies at prices that taxpayers subsidize.

A second factor that encourages waste is the "use it or lose it" feature in California's arcane system of water rights. Under current rules, if a property owner does not use all the water to which he is legally entitled, he relinquishes his future rights to the unused water, which may then get allocated to the next farmer in line.

Lawmakers have begun, gingerly, to reform the water system, but experts say that much remains to be done. For years, California was the only state in the arid West that set no limits on how much groundwater a property owner could extract from a private well. Thus nearly everyone and their neighbors in the Central Valley have been drilling deeper and deeper wells in recent years, seeking to offset reductions in state and federal water deliveries. This agricultural version of an arms race not only favors big corporate enterprises over smaller farmers, it threatens to collapse the aquifers whose groundwater is keeping California alive during this drought and will be needed to endure future droughts. (Groundwater supplies about 40% of the state's water in years of normal precipitation but closer to 60% in dry years.)

Last fall, the legislature passed and Governor Brown signed a bill to regulate groundwater extraction. But the political touchiness of the issue - agricultural interests lobbied hard against it - resulted in a leisurely implementation timetable. Although communities must complete plans for sustainable water management by 2020, not until 2040 must sustainability actually be achieved. The Central Valley could be a dust bowl by then under current trends.

There are practical solutions to California's drought, but the lack of realistic water prices and other incentives has slowed their adoption. ... Meanwhile, underpriced water has enabled continued production of such water-intensive crops as alfalfa, much of which is exported to China. Rice, perhaps the thirstiest of major crops, saw its production area decrease by 25% in 2014. But pasture grass, which is used to fatten livestock, and many nut and fruit products have seen their acreage actually increase. Resnick told the Paramount Farms conference that the acreage devoted to pistachios had grown by 118% over the last 10 years; for almonds and walnuts the growth rates were 47 and 30%, respectively.

One striking aspect of California's water emergency is how few voices in positions of authority have been willing to state the obvious. ... The price of water, however, is not determined by inalterable market forces; it is primarily a function of government policies and the social forces that shape them. Elected officials may dodge the question for now, but the price of water seems destined to become an unavoidable issue in California politics.
Pray for Rain
Not an effective response in Turlock, CA (Justin Sullivan/Getty Images
For more details about this madness see "California Goes Nuts" by Tom Philpott at Mother Jones. It has some fascinating information.
It takes a gallon of water to produce a single almond - more than three times the amount required for a grape and two and a half times as much for a strawberry. ... In all of the other water-scarce states in the West,authorities restrict how much water a user can pump out of the ground. But in California, landowners can drop a well wherever they want,unimpeded by the state. Some counties require permits for wells (though they're usually easy to get), and in a few Central Valley watersheds, things have gotten so contentious that courts have stepped in to limit water pumping. But mostly, California groundwater is yours for the taking. As the State Water Resources Control Board puts it on its website, "To get a right to groundwater, you simply extract the water and use it for a beneficial purpose."
Philpott then describes the corrupt political processes that allow rich farmers to loot California's natural resources. As with previous such booms, at the end they'll flee with their swag - leaving desolation behind. 
Courtesy Fabius  aximus, FabiusMaximus.com via Global Economic Intersection

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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