Windfall: The Booming Business of Global Warming (18 page)

In Australia, the catastrophic drought in the Murray-Darling basin, the continent’s overstretched twin to the Colorado, was also good news for Summit. But it was not the only reason Summit was buying here, too. The other reason, Dickerson explained, was that Australia had copied the American West’s system of tradable water rights in the early 1980s. Then Australia further liberalized its system, creating what has become the planet’s freest and most bustling water market. The Colorado’s twin in drought was also its twin in free enterprise. In the Murray-Darling, Summit had secured what outsiders estimated to be at least 10,000 megaliters, or 2.6 billion gallons. It cultivated a diversified portfolio, Dickerson said, as with stocks, buying water in various Australian states that flowed to various crops: wine grapes, citrus, cotton, or almonds. He planned to become something other than a short-term speculator: a long-term rentier. Once Summit purchased Australian farmers’ water, he said, the firm banked it and leased it right back to them and their neighbors. Returns were already a safe 5 to 6 percent a year. “There’s no risk,” Dickerson said. “If some guy doesn’t pay, we still own the water. It’s like you turn off a tap.”

In an era of increasing scarcity, many economists argued, the best way to cut our profligate waste of water was to have active water markets. Championed in Australia by the University of Adelaide professor Mike Young, in America by the Hoover Institution fellow Terry Anderson, founder of Montana’s “free market environmentalist” Property and Environment Research Center, the idea was that trading means incentives to conserve and use water efficiently, that markets allowed a scarce resource to flow to the highest-value activities. “One of the things governments can start doing,” Dickerson told me, “is to allow water to be priced at what it’s worth, then create a mechanism by which the rice farmer can sell his water to the wine producer.” That Australia’s water trading helped one of the planet’s great exporters of rice and wheat through its drought was undeniable. On a macro level, the economy survived remarkably unhurt. Also undeniable were the distortions: By 2008, near the end of the decade of drought and historic evisceration of the $35 billion farming sector, Australia’s rice production had dropped to 1 percent of normal, its wheat production to 59 percent. That year, what aid agencies dubbed the “global food crisis” led to protests in Egypt, Senegal, Bangladesh, and dozens of other countries. Adelaide’s wine industry, on the other hand, was still thriving.

As I headed out the door into the San Diego sun, Dickerson graciously loaded my arms with books and reports, apologizing that he couldn’t give me his only copy of
Unquenchable
. At the top of the stack was
Water for Sale: How Business and the Market Can Resolve the World’s Water Crisis,
a book published in 2005 by the libertarian Cato Institute, another Koch-brothers-funded think tank. “Some people don’t like it,” Dickerson said, “but this is what’s coming.”

 • • • 

TO TRULY UNDERSTAND
what was coming, I had to make another trip, to the continent where the future already seemed to be here. In Australia, Summit Global ran its wet-water operations out of Adelaide, a swiftly growing city of 1.2 million people near the end of the Murray River that had near-brackish tap water and a reputation for bizarre murders. At the height of the decade-long drought that locals call the Big Dry—the worst drought to yet hit the industrialized world—I drove there from Sydney, dropping south to the Snowy Mountains before traversing the continent westward along the dwindling Murray. It rained when I was in the Snowies, and then it didn’t rain again, and the land became ever more orange and empty. On the banks of the Murray, river red gums cast their shadows on flats of cracked mud, and on the sides of the highways every other farmhouse seemed to have a “For Sale” sign. The river was so low that its iconic riverboats could not get through the locks. “The whole rural thing is just going to go belly-up,” a captain told me in Echuca. “Everyone’s going to move to the city, and there’s going to be nothing out here. It’s going to be like some sort of
Mad Max
movie.”

The sellers in the burgeoning water markets, I learned, were family farmers. Small-time ranchers sold to corporate farms or citrus growers or the government; water flowed uphill to cities and vineyards. The biggest purchaser was the federal government, on a $3.1 billion run of buybacks for what it called “environmental flows.” Until the drought broke in late 2010—dramatic floods inundated 250 homes—the river did not readily reach the sea, and government warned that this would be the new normal unless there were fewer demands on the overstretched Murray-Darling basin: By 2030, climate change was expected to decrease local rainfall by 3 percent, decrease surface water flows by 9 percent, and increase evaporation by up to 15 percent. Lining up behind the government were Summit and a growing cast of other funds: Australia’s own Causeway Water Fund and Blue Sky Water Partners, Singapore’s Olam International, Britain’s Ecofin fund, and a company called Tandou Limited, which was owned by a New Zealand corporate raider, the American hedge fund Water Asset Management, and Ecofin.

In Adelaide, a young PR manager led me past a row of brokers sitting in velvet chairs and staring at flat-screen Dell monitors, scanning satellite images on Google Maps: the headquarters of Waterfind, the country’s largest water brokerage, which had developed its own software platform for trades up and down the Murray-Darling and touted its plan to become a true stock market—the Nasdaq of water. There were exchange rates for different parts of the river system, he explained—owing to evaporation and local regulations, a liter in the Murrumbidgee Valley might not be worth quite the same as a liter in Murray Bridge—and there were volume caps to navigate; some states were still protectionist about their water, though it was getting better. These were paper trades, conducted by phone and Internet. Buyer and seller could be hundreds of miles apart. One would turn off his pumps, and the other would turn his on. The water market in 2008, near the peak of the drought, was worth $1.3 billion, and it had been growing by 20 percent a year. Bulk water in Australia is measured by the megaliter, equivalent to 264,000 gallons. The price of a megaliter fluctuated wildly. “In the temporary markets last season,” he said, “the low was right around $200. The high was right around $1,200.” In general, though, during the drought, the price went up.

Another day, I drove into the hinterlands of Adelaide with a former undercover narcotics detective now assigned to the new crime of water theft. We cruised near the Murray, looking for action, and he told me about the tools he had: night-vision goggles for stakeouts, aerial surveillance to detect overly green fields. We stopped at a marina to see all the houseboats stuck in the mud, and he told me about the tools the criminals had: makeshift dams, surreptitious pumps, hoses snaking over to neighbors’ spigots, and frozen carp. The carp were for the wooden waterwheels meant to measure each farmer’s water allotment. Jam a frozen fish into one of them, and it would stop spinning. By coincidence, this was known as “spragging the wheel.” If an inspector came, the carp, now thawed, indistinguishable from a wild fish, got the blame. That water theft was being taken so seriously helped make sense of what else I was seeing in the world’s most liberated water market. The idea that water could be stolen, like the idea that it could be bought and sold, was predicated on the increasingly accepted idea that it was something that could be owned in the first place.

“I’m not so much interested in the cause of the climate change,” Senator Bill Heffernan told me when we met at the Parliament House in Canberra, Australia’s hill-ringed capital. “I’m interested in what we’re going to do about it.” It was the sentiment of the new age, the free marketeer’s emerging mantra in two hemispheres—only Heffernan, the right-hand man to the former prime minister John Howard, a wheat farmer, and a kind of futurist for Australia’s conservative party, the Liberals, was beginning to doubt that strong property rights and liberalized markets could really save the day.

When the Liberals were last in power, Heffernan had chaired the Northern Australia Land and Water Taskforce, which investigated whether the country’s status as an agricultural power could be saved if production and population moved from the Murray-Darling to its underpopulated, water- and land-rich north. He had great hopes for the Cape York Peninsula, a Kansas-size tropical wilderness populated by a few thousand indigenous islanders and aboriginals, some of whom were pushing to turn these ancestral lands into a UNESCO World Heritage site.

“Climate scientists are saying that over the next forty to fifty years, 50 percent of the world’s population will become water-poor,” he told me. “They are saying that in the region of Asia, our immediate neighbors, there will be a 30 percent reduction of productive land over the next forty to fifty years. The food task will double in that time, and 1.6 billion people could possibly be displaced. Now, if that science is only 10 percent right, we’ve got a serious problem. One of the problems with this changing planet is, how are we going to manage world order? I mean, the chief commissioner of the Australian Federal Police said last year that the greatest threat to Australia’s sovereignty is actually climate change.” The north was dangerously close to overcrowded Asia.

Heffernan knew that foreign hedge funds were circling, and he saw their arrival in Australia’s water markets in the same protectionist light. “I don’t think we can afford for water to become just a speculative commodity,” he said. But I was surprised to learn that water speculation wasn’t his main concern. As the drought abated, Arabs, Chinese, and other foreign investors were scouring Australia and the rest of the planet for something else: farmland. Like naturalists the world over, Heffernan was alarmed. As he told one reporter, “We are actually redefining sovereignty.”

SEVEN

FARMLAND GRAB

WALL STREET GOES TO SOUTH SUDAN

T
he day we flew to Juba in an old DC-9, the sun was out and the clouds were distant puffs, and all we could see was green: the dirty green of the Nile, the dark green of the mango trees, the radiant green of the uncultivated savanna. The land was flat and muddy and empty, and it stretched forever. “Just look at that shit,” Phil Heilberg said. “You could grow anything there.”

We went to see the general immediately after landing, Heilberg taking the passenger seat in an aging Land Cruiser pickup driven by his business partner—the general’s eldest son, Gabriel—and me sitting in between them. We rumbled down one of South Sudan’s only paved roads, passing Equatorian boys on motorbikes, Kenyans tending makeshift kiosks, the cluster of permanent structures constituting downtown, and the fortified offices of the UN Development Programme, then turned into a neighboring compound. It was surrounded by machine-gun emplacements and thatched-roof huts known as
tukuls,
which were homes for guards and wives. The monkey was gone, Heilberg noticed. The guards used to have a monkey. “Where’s your monkey?” he yelled as we drove in.

General Paulino Matip, the deputy commander of the Sudan People’s Liberation Army (SPLA), was waiting for us in a dirt courtyard shaded by mango trees. He wore a tracksuit and was slouching in a plastic chair in front of a plastic table with a doily on it, flanked by a dozen elders from his Nuer tribe. His face was expressionless. “Ah, Philippe,” he said, and he slowly stood to hug him. Gabriel translated the rest: “The only white man who is good.”

In the flurry of news accounts and think-tank reports about what activists had begun calling the global farmland grab, Heilberg and Matip were recurring characters: the Wall Street guy and the warlord, the former AIG trader and the most feared man in South Sudan, twin symbols of what would happen the more populations boomed, temperatures rose, rivers ran dry, and food prices—and thus the value of farmland—shot through the roof. In the previous decade, especially after the 2008 “food crisis” that preceded the financial crisis, rich countries and corporations had acquired an estimated 200 million acres in poorer countries—the equivalent of the combined cropland of Britain, France, Germany, and Italy, or almost 40 percent of arable Africa, or every inch of Texas. It was a territorial shift unseen since the colonial days, and it was happening quietly and bloodlessly, behind closed doors. I’d come here because Sudan, along with Ethiopia, Ukraine, Brazil, and Madagascar, was one of the major target countries—and because Heilberg, convinced he was doing the right thing, was unafraid of the attention.

Heilberg’s own patch, leased in a late-2008 deal approved by Matip, was nearly the size of Delaware: a million acres. Irrigated by an offshoot of the Nile, it was level and fertile, safe from drought, and largely free from land mines. The deal, if it was valid, had turned him into one of the largest private landholders in Africa, and crammed in his briefcase was a map showing where he now hoped to double his holdings: six blocks to the east and north of his first million acres, close to the border with Ethiopia, outlined in orange marker.

The goal of Heilberg’s Juba visit was signatures. He wanted Matip to lean on South Sudan’s agriculture minister and on its president, Salva Kiir, of the politically dominant Dinka tribe, to sign off on his farmland deal. People were beginning to whisper about it—that it was illegal, that it violated the new country’s new land law. Heilberg told me the signatures were mostly for show: The farmland was in the general’s home state of Unity, and Heilberg had it because the general and other Nuer leaders said he had it. But official approval would reassure potential investors. And President Kiir had promised his signature, Heilberg said. General Matip had stopped battling his fellow southerners only after the 2005 peace accord that had ended Sudan’s twenty-two-year civil war, the longest in Africa, and set out a path toward independence for the south, which would come after a 2011 referendum. He had leverage over the president: the twenty thousand to thirty thousand members of his Nuer militia, whose integration into the SPLA was still mostly on paper.