California faces one more year of water supply. The state is in the grip of a record drought tied to climate change. This water crisis holds the potential to collapse California’s economy if the state truly runs out of water. What an irony that the state most focused on global warming may be its first catastrophic economic collapse victim.
California has a $2.2 trillion annual economy. That makes California the seventh largest economy in the world. For all the greatness of Texas, the California economy is approximately twice the size.
California’s companies are the world’s technology leaders. Google, Apple, Facebook, Twitter, Cisco, Disney, Hewlett Packard, Tesla and Solar City all have their corporate headquarters in California. Little know Atomic General located in San Diego is a world leader in military drones. San Francisco and San Diego rank No. 1 and No. 3 among the top 10 biopharma clusters in the U.S.
California is also a global breadbasket: It is the world’s fifth largest supplier of food. The California agriculture industry is highly efficient, and the state is the largest food producer in the U.S., with only four percent of U.S. farms. California’s crop diversity is world class, with the state growing over 450 different crops. Crops exclusively grown by California in the U.S. include almonds, artichokes, dates, olives, raisins, pistachios and clover. The state also produces more than 86 percent of all lemons and 94 percent of all processed tomatoes in the U.S. You might want to drink to California’s agricultural success by having a glass of California wine, as the state is the world’s fourth largest wine producer.
Whether you are a Democrat or Republican, the state anchors your government spending plan as California is the largest federal tax payer among U.S. states. The state also pays more in federal taxes than it receives in federal spending.
This research can be yet another climate change deniers’ example of science getting in the way of their personal beliefs or economic incentives, except this time the consequences of denial will impact Americans who eat tomato-based products, use a lemon or search Google.
The economic ramification will range from measurable to catastrophic. Two-thirds of the state’s water losses are tied to the agricultural community's pumping the aquifer dry. A point of diminishing return is being reached with increased reports of dry wells. California’s agricultural industry is on the precipice of economic decline and may be heading toward collapse due to a lack of water.
Rationing is now a topic of discussion in California. Water conservation has been as much of California’s culture as energy conservation and renewable energy. But conservation cannot overcome this scale of drought and water shortage. Rationing appears the last option available, and it holds the potential of dramatically curtailing economic activity.
Rationing means that people and businesses will have to reduce their economic activities due to a lack of water. One obvious impact will be a lack of water to serve the approximately 227 million domestic person trips annually to California that generates over $100 billion in visitor spending. It has the potential to impact the operations of California's tech companies that the rest of the U.S., and the world, depend on to run their economies. It will certainly mean less food sourced from California with higher prices at grocery stores across America.
My guess is that California will address this crisis through technology. Over the long term, the state will accelerate its adoption of zero net buildings. Creating economies of scale through state-wide adoption will drive the cost of smart water technology to affordability. New companies will be born, and California will become a global supplier of smart water technologies. But that is the future, after much economic pain tied to the consequences of climate change. The storm cloud on the immediate horizon is the potential first national economic crisis tied to global warming. The forecast is for a very hot political season over whether our country can deny climate change any longer.
Image credit: Flickr/docentjoyce
Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017