The volatility of stock market trading has made global headlines over the past couple of weeks thanks to the frenzy surrounding a US video games retailer. It’sa dizzying yarnof Reddit vigilantes taking coordinated action to bankrupt hedge funds that were short selling GameStop stocks, resulting in rollercoaster share prices, trading restrictions and US congressional hearings. It provides a stark illustration of the absurdity of the stock market, and yet, late last year, the US state of California decided to allow water to become a tradable commodity.

Futures trading allows speculators to bet on the future price of a financial instrument or commodity, like oil or gold, and since December 2020 the Chicago Mercantile Exchange (CME) has made it possible to trade in contracts for California’s water market. Reeling from the impact of extreme weather events and climate change-related disasters, as America’s richest state, California has been propelled to look for ways to lock-in future water prices. Although water trading is not new (in China, for example, the governmentencourages cities to trade water, with the quantity and quality specified in a contract), the CME has made water a financial product, and other countries are watching closely. As farmers, municipalities and hedge funds become equal players on the market,market watchers are telling investors“one thing is for certain, in the commodities play for 2021, water should be on your list.”

The human rights community isn’t quite so enthusiastic.

Ina statementmade days after the exchange was launched, the environmentalist, physicist, economics professor and former Spanish member of parliament wrote that “such a futures market could also lure speculators such as hedge funds and banks to bet on prices, repeatingthe speculative bubble of the food market in 2008,” when global prices of wheat, rice and other cereals hit a 30-year-high, sparking widespread protests and unrest.

In particular, Arrojo-Agudo fears that large agricultural and industrial players will gobble up the world’s limited water resources at the expense of small-scale farmers. According to the Food and Agriculture Organization of the United Nations (FAO),over 1.2 billion peoplelive in agricultural areas severely affected by water shortages or scarcity. The UN advocates establishing water rights and quotas, and Arrojo-Agudo tellsEqual Timesthat a market-based approach is unsuitable for distributing the most fundamental of human necessities: “In Spanish there is a saying: ‘You don’t ask an elm tree for pears.’ In this case it is inconsistent to ask the market to properly manage water as a human right.”

When water is treated as a commodity, there is nothing to distinguish its use in a swimming pool and its use for basic sanitation. But in a human rights framework, the latter takes priority. “The logic imposed by the financialisation of life – which is often presented as unavoidable – corresponds to the idea not only that everything can be bought and sold, but that everythinghasto be bought and sold,” he says. In California, knowing that water resources will become increasingly scarce but that municipalities will desperately need to supply water to residents, financial corporations could buy up large quantities of water and inflate prices, as has been the case in the housing market.

Financialised at the source

Since the 1980s, various global governance structures and aid donors have actively recruited the finance sector in the management and ownership of public services. Financial and material products became increasingly entangled as institutions like the World Bank and the International Monetary Fund (IMF) promoted the idea that basic services like water infrastructure could be improved and made more efficient with the involvement of transnational actors.

One of the most significant examples of water privatisation took place in Chile, where General Pinochet’s 1981 Water Code “established a model for water management that strengthened private water rights, adopted a market-based allocation system and reduced state oversight,” according to MIT Urban Planning PhD candidate Daniel Gallagher writing in the Guardian. This opened the door to the privatisation of water and sanitation services elsewhere, particularly throughout the Global South, as part of the neoliberal reforms pushed by the World Bank and IMF. These reforms promoted infrastructure projects as ideal vehicles for investors and pension funds. This is what experts call the financialisation of nature – employing natural resources for the accumulation of capital.

One of the most notorious examples took place in 2003, in theTanzanian capital of Dar es Salaam, where aid donors put huge pressure on the government to transfer responsibility for the city’s water system to City Water, a joint venture between British, German and Tanzanian firms, backed by a US$145 million loan from the World Bank, the African Development Bank and the European Investment Bank. There was no public consultation and users faced soaring water costs, frequent disconnections, and no discernible improvement to water services. The government terminated the contract early in May 2005 and City Water was ordered to pay millions in compensation following an international tribunal.

In Europe, the2000 Water Framework Directivestates: “Water is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such.” And yet the directive does not prevent commercial actors from having a say in water provision. This political ambiguity created the space for the European Commission to take part in privatisation drives in response to the 2008 financial crisis – a move that was resisted by grassroots and civil society organisations like the European Citizens Initiative,Right2Water.

Slowly, we are beginning to see a reversal of the privatisation trend. Ina 2014 report, the Transnational Institute (TNI) noted that between 2000 and 2014, there were 180 cases in 35 countries around the world of municipalities taking back public control of water supply and sanitation services, including the cities of Berlin, Budapest and Paris. In most cases, contracts with private providers had proved so unsustainable that municipalities cancelled them, even if it meant paying out compensation.

In 2014,Greek civil society successfully thwartedthe privatisation of the water supply in Athens and Thessaloniki. TNI notes that this also happened in France, “the country with the longest history of water privatisation and home to the leading water multinationals” like Veolia and Suez, which have been at the forefront of exporting the privatisation model around the world.

How to manage scarcity for the common good

Lack of access to water can become a national security concern, says Tom Middendorp, chairperson of the International Military Council on Climate and Security in The Hague. “Water is becoming ‘blue gold’, and it worries me when we look at it from a security angle,” he told attendees of the 2020 European Forum Alpbach, an interdisciplinary platform for science, politics, business and culture, emphasising that, whatever the provision on the ground looks like, it is governments’ responsibility to prevent scarcity. However, the destabilisation of infrastructure under financialised systemsaffects rich and poor countries alike. “All water users must be at the table,” Nigeria-based human rights activist Chitra Nagarajan told the same panel. “Some people have always experienced water insecurity, [but] this is not inevitable.”

When water is traded as a product, there is the added concern that speculators who have bet on scarcity will have a vested interest in limiting access to water to keep prices high. “Water is a very profitable market, because people pay for it every month,” says Pablo Sánchez Centellas of the European Federation of Public Service Unions (EPSU). The Spanish trade unionist, who coordinated the Right2Water initiative, says: “That’s why when [companies] try to commercialise something like water, there is a rejection. These companies want to make money but when there is an issue, when there is an actual problem, they just run away and leave the public authorities to deal with it. You cannot just be there when there is money to be made.”

Asked whether European water multinationals, increasingly held accountable and rejected on European soil, will flock to the US and other potentially financialised markets, Sánchez Centellas says this is already happening. The French waste and water multinational Veolia, for example, was brought into the American city of Flint, Michigan to advise it on using a local river full of industrial toxins as a source of drinking water. Switching Flint’s water supply led toone of the worst public health disasters in modern American history, and Veolia has since been ensnared ina years-long legal battlewith the State of Michigan over the issue.

Although water provision is a natural monopoly and there is a strong push to keep it under democratic control, its extraction and supply lends itself to profiteering. Democratic control or not, over-extraction can worsen water scarcity in interconnected ecosystems. Withan increasing number of communities facing water precarity in the US, Indigenous water rights activist and legal scholar Kelsey Leonard posits one solution that could work on a global scale – granting legal personhood to water. In a 2020 discussion onNPR, she said this would give water visibility in a court of law. “If you can grant legal personhood to a corporation, why not to the Great Lakes? Why not the Mississippi River? Why not to the many waterways across our planet that we all depend on to survive?”

The author’s participation in the 2020 European Forum Alpbach was sponsored by the Thomson Reuters Foundation.

Daiva Repečkaitė is a Lithuanian freelance journalist currently based in Malta.

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