Water – the real crisis facing us

While Americans are distracted and consumed by the routine chaos out of the White House, we are letting huge problems go unaddressed. One of the major problems is the current and growing global water crisis. For several years, the World Economic Forum has voted the global water crisis as the greatest risk facing our planet over the longer term, defined as ten years. But, this is not just a future problem, the city of Cape Town in South Africa is in severe water crisis and continues to ration pushing forward their Day Zero as long as they can

Per The Guardian in an article this week, the United Nations warns that water shortages “could affect 5 billion people by 2050 due to climate change, increased demand and polluted supplies, according to a UN report on the state of the world’s water. The comprehensive annual study warns of conflict and civilisational threats unless actions are taken to reduce the stress on rivers, lakes, aquifers, wetlands and reservoirs.

The World Water Development Report – released in drought-hit Brasília – says positive change is possible, particularly in the key agricultural sector, but only if there is a move towards nature-based solutions that rely more on soil and trees than steel and concrete.

‘For too long, the world has turned first to human-built, or ‘grey’, infrastructure to improve water management. In doing so, it has often brushed aside traditional and indigenous knowledge that embraces greener approaches,’ says Gilbert Houngbo, the chair of UN Water, in the preface of the 100-page assessment. ‘In the face of accelerated consumption, increasing environmental degradation and the multi-faceted impacts of climate change, we clearly need new ways of manage competing demands on our freshwater resources.’

Humans use about 4,600 cubic km of water every year, of which 70% goes to agriculture, 20% to industry and 10% to households, says the report, which was launched at the start of the triennial World Water Forum. Global demand has increased sixfold over the past 100 years and continues to grow at the rate of 1% each year.

This is already creating strains that will grow by 2050, when the world population is forecast to reach between 9.4 billion and 10.2 billion (up from 7.7 billion today), with two in every three people living in cities.

Demand for water is projected to rise fastest in developing countries. Meanwhile, climate change will put an added stress on supplies because it will make wet regions wetter and dry regions drier.

Drought and soil degradation are already the biggest risk of natural disaster, say the authors, and this trend is likely to worsen. ‘Droughts are arguably the greatest single threat from climate change,’ it notes. The challenge has been most apparent this year in Cape Town, where residents face severe restrictions as the result of a once-in-384-year drought. In Brasília, the host of the forum, close to 2m people have their taps turned off once in every five days due to a unusually protracted dry period.”

Here in the states, we exacerbate our drought and other water problems with bad piping and fracking, which waste or use huge amounts of water. But, with our vast agriculture, we need water to produce our and much of the world’s crops. We must manage it better. Two books are very illuminating. “Water: The Epic Struggle for Wealth, Power, and Civilization” by Steven Solomon is a terrific look back and ahead. He is the coiner of the phrase “water is the new oil.” The other book is called “Rancher, Farmer, Fisherman” by Miriam Horn that details the struggles of these professions and two others with climate change and its impact on water and other things they do.

Folks, this is a major problem. We must address it now before we all have our own Day Zeroes. If this is not enough to raise concern, one of the financial experts who forewarned us of the pending financial crisis, has a new concern – water.

 

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Big Issue #2 – Confronting Climate Change

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Water problems have been around for ages

The water issues that have been plaguing Flint, Michigan residents are not new. Our planet has had water (and sewage) issues dating back to when people gathered together in villages. In Steven Solomon’s book calledWater: The Epic Struggle for Wealth, Power, and Civilization” he describes how the mastery over water resources kept leaders of civilizations in power. The needed mastery revolved around water to drink and bathe in, water to carry sewage away, water for transportation and trade and water for naval control.

Here are a few examples to illustrate this point.

  • Every major city has had water/ sewage issues. In London in the 1850s, a  major problem came to a head which was called the Big Stink. The planners had sewage lines dropping waste into the Thames. When cholera and dysentery epidemics broke out, initially, the planners thought these were air borne diseases. But, when they realized a brewery, where employees drank free beer, had only minimal breakout, they realized the diseases were water borne. It turned out the sewage line was perilously close to the line that pulled water from the Thames to drink. Once that was remedied, the breakouts subsided.
  • In Edinburgh, the Scots had an unusual way have handling sewage. It turns out, the city dwellers would throw sewage out of their homes around 10 pm, which is the reason people smoked after meals to mitigate the smell. This made foot traffic very perilous and less than sanitary.
  • In Chicago, when the city got so crowded and filthy, city leaders realized they needed to carry sewage away, but they could not figure out how to do it. An engineer had an idea that they should lift the buildings using railroad car heavy duty jacks and build the sewage and water lines beneath the buildings.This actually worked too well, as Lake Michigan began to get filthy and fish would be coming up through the water lines into bath tubs. So, they had to remedy where the sewage was dumped.
  • It is thought that the greatest Chinese achievement is the Great Wall. Yet, a more monumental achievement per Solomon was to build a canal between the two major rivers in the country – the Yangtze and Yellow Rivers. This was a massive undertaking, but led to transportation and trade across the country.
  • Solomon also advocates the two greatest achievements in US History that made us a world power is the building of the Erie and Panama Canals. The former linked the east coast with trade of goods with the Midwest, making Chicago a very important port. The latter gave us access to two oceans and helped with global trade and naval might. He also credits the two Roosevelts as our greatest water presidents, with Teddy building the Panama Canal and buying watershed rights in the west. FDR built many dams to create hydro-power.

I mention this now, as Solomon has been a staunch advocate for addressing our water problems before it is too late. Flint-like problems exist in several cities right now. Yet, this goes beyond Flint, as our planet is drying up our water resources and it is noticeable by satellite pictures. It is also being made worse by climate change, which the Department of Defense says is one of the greatest threats to our planet. And, The World Economic Forum echoes these concerns with the global water crisis being the number one risk in their 2015 Global Risks report followed by climate change inaction. Solomon is adamantly against fracking as the amount of water wasted is huge per frack. He also notes that not only climate change will make the water crisis worse, but so will over-population.

Finally, the man who predicted the housing crisis two years before it happened, who is featured in the movie “The Big Short,” has only one investment right now. He is buying up water rights. Yet, outside of the Flint issue which is being spoken to by Clinton and Sanders, no candidate is addressing our water concerns and only one Republican candidate admits that climate change is a problem, John Kasich, with both Democrats being vocal about it. These might be questions we want to ask our candidates about, especially with Department of Defense and World Economic Forum noting their concerns.

Fiscal FactChecker: 16 Budget Myths to Watch Out For in the 2016 Campaign

I have written several times that we need to do something about our debt crisis, as the problem is only going to get worse. I liken it to having a water problem in your house. If you don’t fix it now, it will get far worse later on.

In addition to The Concord Coalition who I have mentioned before, a sister nonpartisan group to their effort spawns from the Committee for Responsible Federal Budget called Fix the Debt. The Board of Directors of the Committee include some big names who served in various government, think-tank and business roles. The Fix the Debt group was founded by former Chief of Staff Erskine Bowles and former Senator Alan Simpson of the Simpson-Bowles Deficit Reduction Committee.

I will provide a link below, but wanted to summarize a piece called “Fiscal Fact Checker: 16 Budget Myths to Watch Out For in the 2016 Campaign” which is dated August 6, 2015. Those myths are:

Myths about the National Debt

  1. We can continue borrowing without consequences
  2. With Deficits falling, our debt problems are behind us (this is expected to reverse in 2015-16)
  3. There is no harm in waiting to solve our debt problems
  4. Deficit reduction is code for austerity, which will harm the economy

Myths about Taxes

  1. Tax cuts pay for themselves
  2. We can fix the debt solely by taxing the top 1%
  3. We can dramatically lower tax rates by closing a few egregious loopholes
  4. Any tax increases will cripple economic growth

Myths about Health Care and Social Security

  1. Medicare and Social Security are earned benefits and therefore should not be touched
  2. Repealing Obamacare will fix the debt
  3. The Health Care cost problem is solved
  4. Social Security’s shortfall can be closed simply by raising taxes on or means-testing benefits for the wealthy

Myths about easy fixes

  1. We can solve our debt situation by cutting waste, fraud, abuse, earmarks and /or foreign aid
  2. We can grow our way out of debt
  3. A Balanced Budget Amendment is all we need to fix the debt
  4. We can fix the debt solely by cutting welfare spending

In addition to the above, I wanted to reiterate two global trends that impact the US as well. First, per the World Health Organization, we are the most obese country in the world, as well as having the highest costing health care system in the world. The Affordable Care Act has helped, but we are over-tested, over-medicated and future train wrecks waiting to happen This will create continued cost pressures on Medicare, Medicaid and the subsidies under Obamacare.

Second, per the World Economic Forum, we are an aging population. We are not as bad off as places like Japan, Greece, Portugal, Spain, etc., but as we age cost pressures on Social Security and Medicare/ Medicaid will heighten. For people in their 60’s, the average cost of health care is roughly twice that of folks in their 30’s. The aging is actually hitting some of our states and municipalities with increased retirement liabilities relative to fewer workers being hired. Detroit, Stockton, and Birmingham have all filed for bankruptcy, with this being a contributing cause, plus states like Illinois, New Jersey, etc. are having significant retirement cost pressures.

Please check out these two websites and see who is involved in these nonpartisan efforts.

http://www.concordcoalition.org/

http://www.fixthedebt.org/

Also ask your Senators, Congressional representatives and Presidential candidates what they plan to do about this. Like climate change and the global water crisis, we can no longer wait on action.

Ten Greatest Global Risks over Next 10 Years per World Economic Forum

Let’s face it, long term thinking is hard for most leaders and society in general. It is too far off, but we still cannot wait to plan as the cost and problems can get too large. The World Economic Forum recently produced a Global Risks Report – 2015, which highlights the greatest risks over the next eighteen months and over the next ten years.

Rather than focus on the next eighteen months, let me focus on the longer term, ten-year horizon, as the risks are far more dramatic in impact as many are planetary in scope.

  1. Water crisis
  2. Failure of climate change adaption
  3. Profound social instability
  4. Food crisis
  5. Extreme weather events
  6. High structural un- or under-employment
  7. Large-scale cyber attacks
  8. State collapse or crisis
  9. Major biodiversity and ecosystem collapse
  10. Failure of national governance

Water tops the list as it is becomingly an increasingly dear commodity worldwide. I have noted before our energy production must bring into the equation more the impact on water sources. Moving to renewable energy sources which are not water intensive is as important as their positive impact on climate change. And, climate change will only make water and other problems like the food crisis, extreme weather events, and ecosystem collapses even more problematic with increased droughts, forest fires and floods with stalled weather systems.

The profound social instability and high structural un- and under-employment are contributors to our global poverty problem. Other top ten risks are also contributors such as state or national governance failures or the climate impacted natural crises. Those in poverty tend to more impacted by these issues as they have so few choices. Plus, I would season the ability to address these issues with overall corruption, where monies, services and goods intended to help are steered to the pockets of leaders and oligarchies of influential people.

These are the questions we need to be asking politicians and candidates about. If they are unprepared to address these issues or deny their existence or importance, then we need to vote for other folks who are prepared. These problems are already rearing their ugly heads, so the time is fleeting on our ability to do things to address these problems.

A link to the 2015 Global Risks Report follows:

http://www.weforum.org/reports/global-risks-report-2015

Two Macro trends we need to heed

Since our public debate in political circles tends to focus on what donors want or who is winning the political “gotcha” game, I thought it might be important to repeat some comments about macro trends for which we need to plan ahead. Looking forward from a report sanctioned by the World Economic Forum (WEF) and Organisation for Economic Cooperation and Development (OECD) that was done in 2008-09 timeframe, several macro trends were identified by leaders in business, education, foundations, and governments. Two are highlighted below.

First, a key concern is simply demographic and it has and will shape our economy and budgets for some time. The world population is aging. It is getting worse here in the US, but it is much worse in places like Japan and Greece, e.g.  In fact, a key reason Greece is struggling today is trying to fund financial commitments made to people who have already retired. You can address the benefit commitments to future retirees, but much of the liabilities owed are for people who have left the workforce and being funded by fewer relative workers per retiree.

This is hitting the US in our cities and states and will continue to do so. Just count the number of states who are grappling with serious underfunding issues on pensions and seeing higher retiree medical costs. It impacts our federal Social Security and Medicare programs as well, but with the earlier retirement opportunities in state pension plans, the cost impact is exacerbated there. With the tandem problem of communities not growing due to suburban flight and poor planning, a number of cities have had to declare bankruptcy. This why it is critical for all governmental pension and retiree medical  plan sponsors to address the future issues now so costs can be spread and mitigated.

Second, a key macro trend that makes the above problem worse, not better, is we are an increasingly obese world.  Unlike the aging ranks, the US can lay claim to being the most obese country in the world. We are number one. This is one of the reasons we can lay claim to the most expensive healthcare system in the world. A former UK colleague, who helped companies with developing global health management plans, noted that the greatest export of the US is obesity. That was not meant to flatter us.

As a former actuary, I can tell you the medical cost rate for people in their fifties is generally 2 to 2 ½ times the medical cost rate of the average workforce.  The ratio goes up for older populations. Yet, as we have grown in size through obesity, we are even greater train wrecks waiting to happen. This is why it is critical we get as many people insured for healthcare as possible, so they can see doctors now, be prescribed treatment patterns, and attempt to ameliorate future health catastrophes. We spend a lot of time talking about and fighting cancers which is great, but heart disease will kill 10 times more people, especially women, who tend to ignore symptoms more so than men and wait longer to seek help. And, heart disease risk is heightened when patients are more obese.

There are other key macro trends noted within the WEF and OECD report. It is worth the read to understand other key drivers of our global economy. But, these two are overarching problems which we need to deal with now before they become worse, as the more we wait, the higher the cost impact.