Posts tagged with: University of Michigan

According to the 2013 Mackinac Policy Conference, Michigan’s three largest universities (Michigan State, University of Michigan and Wayne State) are producing entrepreneurs at twice the national average. According to Michael Wayland, the report included:

…responses from more than 40,000 of the 1.2 million alumni of the University of Michigan, Michigan State University and Wayne State University. The responses revealed that more than 19 percent of the alumni surveyed have started a company, and some have created more than one.

The study suggests a significant number of alumni are starting their own businesses, and more than 50 percent of those businesses are here in Michigan, contributing to our state’s economic prosperity,” said URC [University Research Corridor] Executive Director Jeff Mason in a statement. “The URC is committed to supplying the tools that can lead to new companies and more jobs.” (more…)

To provide water for people, communities have usually turned to  two different options: public or private utilities. However, if Bolivian President Evo Morales, leader of the Movement Towards Socialism Party, gets his way, the United Nations will pass a resolution blocking the sale of public water utilities to private companies. If adopted, this resolution will cause problems for many nations, especially the undeveloped countries receiving support from the U.N. that will be forced to abide by one option—public supply of water—instead of being permitted to consider privatization which may be more efficient and cost effective.  The makes the global water crisis much worse.

It will not help any country to limit its options when searching for the most efficient and cost effective solutions for providing a clean, sanitary, and abundant source of water.

Theories and examples in support and against both private and public water utility systems are numerous. A study conducted by the University of Michigan showed that water prices, in general, are too low. The study explains that direct and indirect subsidies, in both developed and undeveloped countries, have caused low prices, resulting in water waste. Furthermore, the study argues that if the subsidies are removed, the price of water will increase and provide an incentive for those utilizing water to not waste it. This, in turn,  will result in the investments that are needed to develop more efficient technologies. If subsidies are removed, then a lighter burden is placed on public funds.

Lending support to the findings of the University of Michigan study, a survey conducted in 2004 by Global Water Intelligence found that the under-pricing of water is widespread. The study analyzed the prices charged by water utilities in 132 major cities worldwide and found that 39 percent of water utilities had average tariffs that are set too low to cover basic operation and maintenance costs. Some 30 percent had tariffs that are set below the level required to make any contribution toward the recovery of capital costs.

Changing the price system may be a solution. Some argue for a metering that charges water users based on consumption. However, while subsidies are proving to be largely inefficient the question must be asked: Can those in undeveloped countries, who are already living in a state of grave poverty, afford increased prices on water?

The International Development Association and the World Bank are quick to point out the success of private water utilities. Examples can be found in Rwanda and Mozambique where the private sector helped provide, improve, and/or expand the water supply. The U.N. has acknowledged five reasons to pursue private sector partnerships.

A private sector supply of water can be more efficient and cost effective. According to the World Bank, it is estimated that in the United States each dollar of public funds raised for utilities has an opportunity cost of $1.30 of private consumption, and the average opportunity cost for each dollar of tax revenue raised is $1.17 for 38 African countries.

Critics of the privatization of water argue that while it is more efficient and cheaper, the private systems fall short of social equity in supplying water and charge higher prices. While there have been unsuccessful stories of privatization, the aforementioned examples in Rwanda and Mozambique are a just a few of the many success stories, and, as The Economist notes, when private utilities charge higher prices, that often corresponds to higher rehabilitation investments, better water quality, and better service.

Privatization will also promote the decentralization of  government, and in the case of many developing nations, remove the control of water out of the hands of corrupt bureaucrats. A large overarching centralized government is not needed. Instead, the principle of subsidiarity should be applied.

Private entities are able to supply an efficient and cost effective supply of water. Privatization is an effective solution, and its ability to meet the needs of consumers has improved. As a result, water supply can follow the principle of subsidiarity by utilizing other alternatives to supply water instead of through a system brought forth by a centralized government.

It is important to note that just as public utilities are open to corruption, inefficiencies, and poor management, so is privatization. Privatization can fall subject to a corrupt government. The example of Detroit is instructive here. For example, when a government decides to contract a private utility to supply water, instead of having an open bidding process, the government accepts no outside bids and picks a company that is owed a political favor. If privatization is to succeed government must take the appropriate actions to allow it to succeed and also nurture an environment that is open to decentralization, promoting business without unnecessary government interference.

We have all heard the phrase, “water is essential for life,” and we all understand its importance. Many of us are blessed to have instant access to clean, sanitary water. However, World Water Day, which recently took place on March 22, sought to raise awareness of the current water crisis.

According to the World Health Organization and Water for Life, in 2005 more than 1 billion people were faced with little choice but to resort to using potentially harmful sources of water. About 3,900 children die each day due to harmful water.

Furthermore, the water crisis isn’t going to be solved overnight especially when one takes into account the lack of fresh water for a growing population. According to a study conducted by the University of Michigan, 97.5 percent of all water is salt water and only 2.5 percent is fresh water. Of that 2.5 percent, nearly 70 percent is frozen in icecaps in Antarctica and Greenland, and less than 1 percent of the world’s fresh water is accessible for direct human use—this includes water found in lakes, rivers, reservoirs, and underground services shallow enough to be tapped.

In addition, the demand to feed an ever increasing population can be seen in the use of water by the agriculture industry. According to the same study by the University of Michigan, agriculture is responsible for 87 percent of the total amount of water used globally. Farming in Asia utilizes 86 percent of its total water use, in North and Central America the number is much lower at 49 percent, and Europe’s agriculture industry consumes 38 percent of its total water use. However, before the agriculture industry is criticized for its high intake of water, it must be remembered that water is a necessity for growing food and raising livestock which are essential—just like water—to sustaining life.

Besides the daunting numbers of those suffering from lack of water, recent events have caused many to demand action in solving the global water crisis. Bolivian President Evo Morales, Movement Towards Socialism Party, emerged as the leader in a movement demanding a resolution from the United Nations to block the sale of public services to private companies, and in 2008, Ecuador’s constitution gave rights to nature. These actions have raised cause for concern and debate from many who are apprehensive of an ever expanding government and U.N.

It is without question that action must be taken to alleviate the problems. The University of Michigan study also predicts that by 2025 we may be consuming 70 percent of the world’s total accessible renewable water supply (we currently utilize 30 percent). A big picture approach is needed to solving the global water crisis as well as an understanding of the role government must play without creating an inefficient unproductive solution.

Over the next few weeks I will be presenting a faith-based analysis to the global water crisis while also bringing to light different economic and social related issues.