An in-depth look at the real cause of the California water crisis and the history which lead to this challenging situation. Why are farmers trying to grow water intensive crops in a desert environment? How could farming in a desert possibly be cost effective? What role do taxpayer funded Dam projects and government subsidies play in this shortage? Stefan Molyneux, host of Freedomain Radio, breaks down at the hidden story behind this growing problem.
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| So today the governor of California started to impose significant restrictions on the use of water. | |
| So there's a shortage. | |
| And wherever you see a shortage, particularly one that has taken a long time to develop, well, the first thing you're going to look for is government manipulation of prices. | |
| If you keep the price artificially low, you are guaranteed to create a shortage if the good is in demand. | |
| So it's not global warming. | |
| It's not suburban sprawl. | |
| It's not space aliens stealing liquid. | |
| The West is not a heck of a lot more dry at the moment than it has been in various other times throughout its history. | |
| And of course suburban and urban residents only use a fraction of the water consumed in the West. | |
| Yes! | |
| It's our good friend the farmer. | |
| Agriculture in the West uses over 80% of the water used in Western states. | |
| And most of that water is stored and pumped and diverted using dams, pumps and aqueducts paid for by the U.S. taxpayer, most likely you. | |
| In the late 19th century, there's nothing more gripping than a story that begins in the late 19th century, there was a move to get the government to take over the cost of irrigation. | |
| Why? | |
| Because... | |
| The government wanted people to move west for a variety of reasons. | |
| One was that there was a lot of discontent and social rebellions fermenting in the east. | |
| So they thought, hey, if we send people west, get them to be farmers, they'll take the pressure off. | |
| And they were concerned about anarchists and other malcontents causing trouble, so they sent them west. | |
| There was a plan that said if you went and farmed, or at least made improvements to a land, you could get up to 160 acres free. | |
| And the railways, of course, wanted governments to take over the cost of irrigation so that there'd be more farmers further away, which meant that there'd be more transportation requirements. | |
| Politicians and their cronies, of course, love this kind of stuff, because what they do is they buy up a whole bunch of land for almost nothing, because it's desert, and then they say, hey, just coincidentally, around that land, you know what we're going to do? | |
| We're going to put taxpayer-funded irrigation in. | |
| Thus, The value of the land explodes and politicians and their cronies can make an absolute fortune. | |
| So, as a result of a lot of political lobbying in 1902, yes, a long time ago, there was the federal government's Bureau of Reclamation. | |
| It started off fairly small. | |
| It exploded in size and power during the Great Depression, of course, when it became spend money to buy jobs. | |
| The Hoover Dam, countless smaller dams and water diversion projects and so on. | |
| It became a huge bureaucracy with an immense amount of power. | |
| And so basically through the taxpayers hundreds of billions of dollars have been spent over the years to get water to growers and other well-connected interests. | |
| Here's an example. | |
| The Central Arizona Project pumps water up 3,000 feet vertically and then moves it across 160 miles of desert from Colorado, the Colorado River, to Central Arizona. | |
| It costs a little under $5 billion. | |
| And, of course, most of the cost is paid for by people who will never live in Arizona. | |
| So, for more than a century, this federal Bureau of Reclamation has built and operated dams, canals, hydroelectric plants, In the 17 western states. | |
| It's the largest wholesale seller of water in the nation, second largest producer of hydroelectric power. | |
| It has 58 plants, about 250 dams, 350 reservoirs used for power, irrigation, flood control and recreation. | |
| They spend a couple of billion dollars a year, and that's not cheap. | |
| So it's socialized, it's communized, it's governmentized, and this is, of course, where you end up with these kinds of messes. | |
| So not only Did the government spend huge amounts of money? | |
| Basically, they had a damn everything approach. | |
| And they also extended repayment periods. | |
| So initially, you were supposed to pay back the costs of these dams and irrigation projects in 10 years. | |
| 1914, they extended it to 20 years. | |
| And 1926, they extended it to 40 years. | |
| And the Central Arizona project had an even longer repayment period. | |
| And in 1939, almost right before a war, I suppose... | |
| They increased subsidies further. | |
| They said, well, there's a 10-year grace period before you even begin to have to pay anything back. | |
| Now, of course, politicians love massive programs that require payments many, many years down the road. | |
| So they get to hand out jobs and they don't get the resistance of taxpayers because of deferred payments. | |
| The taxpayers don't see the hit right away. | |
| And if there's a 10% discount rate, what it means is that this was a 91% subsidy. | |
| You know, it's like those ads that show up, you know, find out where this journalist found iPads for 90% off. | |
| It's like, well, find out where farmers found water 90% off. | |
| 15% or less of project costs were typically repaid when interest costs were included. | |
| And so we're an 85 to 90% subsidy. | |
| And this is how you get the magic of rice in a desert. | |
| Now, this is just part of the cost. | |
| There is mitigation of the environmental damage done by these federal dams and irrigation systems. | |
| Salinity problems or excess salt in the water is a big problem in river systems. | |
| So you bring the irrigation water, it goes through the fields and then flows back into the rivers, but as it goes through the soil, it picks up salt and other minerals. | |
| And so the western rivers that are heavily used for irrigation sources become very saline, Or salty downstream. | |
| And the Colorado River is really salty by the time it gets to the Mexican border and Mexicans complained. | |
| And so the reclamation monolith from the federal government built a very expensive desalting plant. | |
| It's called the Yuma Plant. | |
| It's in Arizona. | |
| At a cost of 245 million dollars. | |
| But you see, it wasn't used ever since it was completed in 1993, so it really was $245 million completely wasted. | |
| On the other hand, it's been about $100 million over the last two decades just for maintenance costs on something which is not even being used. | |
| So, California has the Central Valley Project. | |
| It's the largest irrigation project. | |
| It provides almost 7,000 farmers water for about 3 million acres of land. | |
| And the farmers get the water at about 10% of its market value. | |
| So, when you have a 90% subsidy, what happens is people plant, they make decisions, they open up farms, they buy farmland, and you get a very unsustainable, unsupportable expansion of economic and human activity. | |
| In 2002, this was a while back ago, the subsidy was worth about $416 million a year. | |
| And that's really quite astounding. | |
| And not only do they get subsidies in water, they get subsidies from the U.S. Department of Agriculture. | |
| So about one-third of federal irrigation water in the CVP went to crops that received USDA subsidies, about $90 million. | |
| A year they mostly go to cotton and rice farmers. | |
| Now rice kind of have to have it underwater for a while. | |
| Not the best crop for a desert if you don't have the fire hose of illicit government spending. | |
| So we've got water subsidies, we've got subsidies for buying crops, and we also have electricity subsidies. | |
| The CVP uses these massive pumps requiring huge amounts of electricity to push water through about 1,400 miles of canals, which I think is similar to farming on Mars. | |
| And they undercharge the farmers for the costs of the electricity due to the tune of about a $100 million subsidy. | |
| Now, of course, like most subsidies, it's the politically connected and the big companies that do really well. | |
| The largest 10% of farms in the CVP, it's about 700 farms, get about two-thirds of the project's entire water supply. | |
| And as of 2002, so more than a decade ago, these got average subsidies of 349,000 directly. | |
| So, this is, again, it's the usual corporate welfare for the rich. | |
| So, one of the things that happens is that you end up very inefficiently using water when it's artificially cheap. | |
| There's an estimate that says if you increase 10% the water prices, it brings down a 6.5% reduction in irrigation water use in California. | |
| Now, of course, if you get a $50 iPad, let's say you get $550 iPads, what's your first impulse? | |
| Well, probably $2. | |
| Make sure they're legal, but if they're legal, to resell them. | |
| So, more restrictions are put on this water. | |
| Subsidized water goes to the farmers, but the farmers are not often allowed to resell them. | |
| So, it gets locked into its current uses. | |
| It's not like they have an across-the-board ban on water transfers, but it's really difficult. | |
| So, the water can't usually be resold, so it gets stuck in these lower-valued uses and higher-valued uses go under-supplied. | |
| So it's not that the quote shortages are largely caused by restrictions on the transfer of subsidized water, not from massive shortages in a particular region. | |
| And this is a sort of theory that's out there that says, well, everything that's really important needs to be run by the government. | |
| And water expert James Huffman says, no, no, because water is such a critical resource, it should be allocated under a regime that will assure its efficient use. | |
| And that regime is open markets based. | |
| On private rights. | |
| When you get these kinds of subsidies, you get ridiculous overuse of water. | |
| People in San Diego County use about 150 gallons of water a day, perhaps recreating the bad movie Waterworld. | |
| I don't know. | |
| Sydney, Australia, about the same temperature, about the same standard of living. | |
| People use half that amount. | |
| And it's five times what waterlogged Amsterdammers use every day. | |
| Now, how much does it cost if you're in San Diego County to use your 150 gallons of water? | |
| About 78 cents. | |
| Less than half a penny per gallon of water. | |
| Hmm, I wonder if that could account for overconsumption. | |
| Although agriculture accounts for 80% of water consumption in California, it's only 2% of the state's economic activity as a whole. | |
| A lot of farmers use flooding as their high-tech irrigation system, which is not that great. | |
| They flood the land to grow rice, alfalfa, and other very, very thirsty crops. | |
| If the water were priced at market levels, this wouldn't be happening. | |
| Not as much, anyway. | |
| 43% of California farmland in 2010 used some form of gravity irrigation, which is pretty imprecise, used huge amounts of fresh water, and could be a lot better. | |
| So... | |
| This is the result of massive amounts of government intervention. | |
| Look at Las Vegas and, of course, Amsterdam. | |
| So Las Vegas gets fresh water from a nearby reservoir and Amsterdam has to take pretty contaminated or polluted water from the nearby canals. | |
| It's very expensive to clean the water in Amsterdam, so it costs five times as much in Amsterdam as it does in Las Vegas, which is why, because it costs one-fifth, people in Las Vegas in a desert use five times as much water as those in Amsterdam. | |
| And this price in Vegas is kept, again, artificially low. | |
| So you've got lawns and pools. | |
| And so it's terrible. | |
| So water managers in Las Vegas have actually decided to subsidize the cost of removing lawns because in the western U.S., more than half of residential drinking water is actually sprayed locally. | |
| Outdoors are used outdoors. | |
| So water managers in Las Vegas sell water so cheaply that they're actually paying people not to use it. | |
| It was actually called cash for weed because you were paid to take your lawn out until the DEA got upset with the name and decided to change it. | |
| So, that's a very, very quick overview, but I really wanted everyone to understand that wherever you see these kind of shortages, wherever you see these kind of ridiculous misallocation of resources, look to the coercion of the state. | |
| Look for the wrong economic signals. | |
| Politically, it makes much more sense for politicians to keep prices low and, again, to defer maintenance is a big problem because it's all underground and out of sight, out of mind. | |
| There's huge amounts of underspending on infrastructure maintenance throughout America in general in the West with the water systems in particular. | |
| But as a politician, it's a perfect deal to keep the prices low. | |
| If you raise the prices, everybody starts screaming. | |
| And of course, the whole society has coalesced and made massive multi-billion dollar investments based upon the existing allocation and price of water. | |
| If that changes, huge economic dislocations are going to occur. | |
| People are going to abandon family farms. | |
| The whole... | |
| System of things is going to change. | |
| It's like up here in Canada, there are all of these should-be ghost towns, but actually kind of zombie towns, which is where there was some economic activity like a mine. | |
| The mine ran out, but people still stay there because of welfare and this and that and the other. | |
| And so you get this rigidity and artificiality of regulation producing human settlements where they would normally have... | |
| I mean, if the government kept dumping gold, there'd still be a gold rush in California if they kept dumping gold into the streams. | |
| So, we live in this kind of weird matrix where we are assigned in some ways to our lot in life by ridiculous and unsustainable government regulations. | |
| For politicians, it's great. | |
| Keep the price low. | |
| Everyone's happy. | |
| And if you raise the price, everyone starts screaming blue murderer. | |
| But, of course, you don't want to allow the price to go to market levels. | |
| That's a net reduction in the power of government. | |
| You don't get into politics to reduce your power. | |
| That's like going into a diet program to gain weight. | |
| So you keep the prices low, and what you do then is you impose draconian controls over people. |