Authored by the Strategic Foresight Group and sponsored by the governments of Sweden and Switzerland, the report attempts to “redefine the water paradigm in the Middle East, so that water can be harnessed in a way that satisfies the social and economic needs of the people.”  The report’s Big Hairy Audacious Goal is to turn water into an instrument for peace in this war torn region.

It examines the current water situation in the Middle East and concludes that the nation states are about to walk off a cliff without a parachute. Nations have been making decisions about water as if it belongs to them, when in fact, rivers, lakes, aquifers, and rain have no consciousness of maps.

For example, the Jordan River supplies five nations: Lebanon,  Syria, Israel, Jordan and the Palestinian Territories and as each entity tries to optimize its own supply, the  Law of Unintended Consequences asserts itself and the overall supply declines. During many periods of the year, the river doesn’t have any flow.

What is the solution? Collaboration amongst national actors who haven’t played nice for a long time.

The collaboration strategy is named, “Circles of Cooperation,” a concept first introduced by Prince Talal of Jordan in May, 2010 at a regional conference, and it draws two initial circles, one around Turkey, Syria, Iraq, Lebanon, and Jordan, and the other around Israel and the Palestinian Territories.

The report is chock full of interesting information, much of it bleak.

• The  Dead Sea is dropping one meter a year due to lack of water and could be reduced to a lake in 20 years.
• The West Bank has five wastewater treatment plants and only one is operational.
• The Palestinian Territories need almost 100% more water then their current supplies.
• One of the biggest challenges in Damascus is unlicensed wells (estimated at over fifty thousand) which are draining the aquifer underneath the city.
• In Lebanon, 40% of the water in its pipes never reaches customers due to damaged or destroyed infrastructure (from the 2006 War with Israel).
• In Iraq, since the 2003 War, over 300,000 tons of raw sewage is dumped into the Tigris River DAILY.

I think there are two major takeaways from this report:

1. Michigan is unbelievably blessed with freshwater compared to Middle Eastern countries and
2. If the authors can seriously propose a collaborative process to help Middle Eastern countries treat water as a regional resource, why can’t we do the same thing in Michigan, when we don’t suffer from war, religious strife, or long standing drought?

I would encourage anyone interested in our Blue Economy to read “The Blue Peace.”

The MSF intends to award a total of $13 Million to non-profit organizations that invest seed money in companies that need support to transition from the research phase to commercialization. Obviously, the MSF goal is to diversify the economy and increase jobs by hopefully finding a pony in the barn of the Michigan hi-tech start-ups. And true to the Governor’s word, the state won’t be picking the winners and losers—some non-profits with will be the Great Deciders. Unfortunately, the state has rigged the game by restricting the choices to four sectors: Advanced Automotive, Manufacturing, and Materials Technology; Alternative Energy Technology; Homeland Security and Defense Technology; and Life Sciences Technology.

The MSF Water Technology Sector, which has supported a series of projects, will be shut out. Recently, I attended a conference on water technology projects that had been created in partnership with Israel and was pleased to hear of the progress. As a Michigan business owner, optimally I would like to attend a conference featuring Michigan water technology businesses, but we have to start somewhere. Snyder’s decision will make it much more difficult for water technology start ups to get important support.

Let the Michigan Strategic Fund know how you feel about this proposal at 21stCenturyJobs@michigan.org.

Governor Rick Snyder campaigned on "reinventing" Michigan. (photo Bill Rice)

The plot of the program was Governor Snyder’s tax cutting strategy—will it work?  Graham asked two local experts for their opinion—Lou Glazer of  Michigan Future think tank fame and Don Grimes, an economist at the University of Michigan.  Both men are mostly positive on Snyder’s program, though Glazer questions the wisdom of Snyder’s tax cuts.  He claims there is no correlation between economic prosperity and tax rates.  I will leave that debate to smarter folks like Glazer and Grimes, but I doubt that Glazer would be so sanguine if his business experienced a 400% tax increase like mine did when Granholm got rid of the old Single Business Tax. It’s always easier to say things don’t matter when they don’t happen to you.

But I digress… some years ago I actually met Mr. Glazer at a meeting in Detroit when he was just starting to wind up Michigan Future. After hearing Glazer’s pitch, I had other ideas for Michigan’s future and actually tried to start a foundation—Michigan 22nd Century—to drive them. But being a man of no great prominence, the Michigan 22nd Century never took off.

I had three core ideas for reinventing Michigan:

1. we need to build the world’s first water based economy (a word that isn’t mentioned in Graham’s program),
2. we need to build a post peak oil infrastructure, and
3. we need to create a state bank to get us out of debt.

I find it curious that so many smart people never mention our state’s debt load when they talk about reinvention.  Here’s an example: last year the Detroit Water and Sewerage Department earned $285 million from its water sales to about four million Michiganders, but it paid $145 million in principal and interest on its debt. 

Think about it!  50% of your water bill to Detroit goes to debt and interest … and people wonder why their water rates are going up! Memo to our thought leaders and politicians—if you don’t do anything about the debt, it will not matter how many taxes you cut (which is why Engler’s tax cutting program didn’t work in a era of ever rising leverage throughout our state).

I also find it curious that politicians and economists have been talking about replacing the auto industry for 50 years and they ignore the state’s only unique resource—its water.  We have it. The world is going to want it. It’s time we make a sustainable Blue Economy out of it.

And finally, any plan to reinvent Michigan is doomed to a repeat-a-vention, unless it confronts the challenge of Peak Oil.  Maybe I missed the email, but how is Michigan supposed to reinvent itself with $4 gas. Make no mistake about it—Libya is not a one off.

It is the beginning of mammoth and monstrous change for us and we better start the real reinvention. Now.

Not surprisingly, the propaganda machine at Bloomberg is already working to minimize the impact of Japan’s disaster on the world’s economic recovery—such as it is. According to Bloomberg, it’s unlikely “to dent the two year bull market in global equities.” No doubt, cold and thirsty Japanese wandering around in the rubble in search of their families and water will be comforted by Bloomberg’s cheery forecast.

So, it’s too early to focus on the water situation, though under normal conditions people start dying if they haven’t had water for three days. Nukes and equities come first.  It is impossible to know the damage to Japan’s water infrastructure—filtration plants, pumps, storage reservoirs, and transmission pipes, but one can assume that major pieces of the  water infrastructure in northern Japan has been smashed up. Given the pictures of buckling roads and fallen bridges, the rebuilding challenge will be huge and expensive.

Last night, my daughter, who for nine months has been crippled with the aftermath of a blood infection and currently resides in a hospital bed in our living room, said, “Well, Dad at least we don’t have to worry about earthquakes in Michigan.”

She’s right, at least according to geology and history.  Michigan sits on top of very stable earth.  There is a minor fault line running through the state from Mt. Pleasant to Lansing, but it has not been active in a billion years!

The biggest earthquake to hit Michigan occurred in 1947 and was centered south of Kalamazoo. With a magnitude of 4.6 on the Richter scale, it damaged chimneys, plaster and cornices.  As the Richter scale is logarithmic,  last week’s quake in Japan was 10,000 times more powerful than our 1947 window shaking disaster … if only Japan was contending with broken plaster.

Back to Bloomberg and big money … in 2010, Ceres, a national coalition of investors, environmental groups, and other public interest organizations working to address sustainability challenges, published a report that examined the risk of water scarcity on municipal bond offerings. The report noted that heretofore investors have paid little attention to water scarcity in the United States.  It has always been an abundant given. However as the Southwest and Southeast struggle with droughts and population growth, investors are starting to question their assumptions. The Ceres report assesses utilities in Alabama, Arizona, California and Texas and recommends that issuers and investors begin to factor  supply risks into the cost of utility bonds.

Notice that Ceres did not choose Michigan for a risk assessment, despite the economic meltdown that occurred here. As the days arrive that big money no longer takes water for granted, the rise of the Blue Economy comes nearer and nearer.  In the meantime, my thoughts are for the poor survivors in Japan.

We have to get a little creative.  Southeastern Michigan has one of the largest municipal water systems in the United States, the Detroit Water and Sewerage Department (DWSD).  DWSD is uniquely positioned to support Blue Economy technology innovation. It certainly has the funding.  In the next five years, DWSD plans to invest $1 billion in its water system and $700 million in its wastewater system.

That’s a lot of money and a lot of new Blue Economy jobs. Investments could be strategically targeted at budding Blue Economy technologies and using the department’s vast system for pilots. DWSD is currently participating with Israeli water companies on several new technologies including Miya, for leak detection.  While building a reputation for innovation and prudent risk taking, DWSD could benefit directly from federal and state grants for new technology applications. This is especially true of new technology that needs evaluation in real world conditions on a pilot scale in order to measure performance and build business cases. This contribution to Detroit’s economic growth has the added benefit of building the water knowledge, technology and manufacturing base in Southeast Michigan.

Other Michigan cities, big and small, are planning water and wastewater investments:

• Grand Rapids is planning to issue $136 million in water and sewer bonds in the next four years.
• Mt. Pleasant is budgeting almost $70 million for the next five years.
• And White Lake Township in Oakland County (population 28,000)  is planning on investing about $8 million in the next five years.

Overall, U.S. municipal water systems will spend $1.5 trillion on infrastructure capital investment projects by 2020. Most large municipal operators face regulatory, business and system challenges resulting from aging infrastructure, system design deficiencies and traditional utility solutions. These challenges provide abundant opportunities for innovation and application of new technology. I am not sure how much Michigan will spend but as you can see from the limited data that I have presented, it has to be billions.  Much of this money will be spent on water efficiency, especially in times of rapidly increasing rates.

Why couldn’t our water and sewer leaders collaborate under a Blue Economy banner and fund the foundation of our next economy?

Albom says that Michigan taxpayers need to support the movie industry to keep smart, creative, young people from leaving our state. He says that giving film makers $150 million will bring the state over $400 million in revenue. I’m not clever enough to make Mitch’s numbers work or not work, but for those with inquiring minds, I will refer you to a state senate assessment of the industry.

According to the report, “The nature of the credit and the resulting activity is such that under current (and any realistic) tax rate the State will never be able to make the credit pay for itself from a State revenue standpoint.”

Translation: Supporting the film industry is a money loser for Michigan taxpayers.

But, forgetting about the money argument for a moment, what Albom doesn’t touch is the fairness of Michigan’s film incentive program.  Movie makers get 42 cents back for every dollar they spend on a movie, TV show or even video game that was substantially made in Michigan.

Why can’t my business get 42 cents for every dollar we spend in Michigan? Project Innovations has been incorporated since 1992 and has contributed millions to the state’s economy and tax base. Why don’t we get special treatment? The answer is obvious – our business and thousands of businesses like ours are not important to the people running this state’s economic development program except for the taxes we pay to keep the give away coming.

Albom also doesn’t touch the question of sustainability.  Forty states offer film incentives and the first one that offers 43 cents on a dollar will be next go-to state for filmmakers.

I think sustainability has three ingredients:

1. The industry is very difficult to replicate
2. The industry knits together a number of skills resident in the state, and
3. The industry serves a  large market.

Obviously, Michigan’s film industry fails the sustainability test, but think about the Blue Economy for a second:

1. We have more fresh water than anywhere else in the world.
2. The Blue Economy knits together our skills in engineering (more per capita than any other region in the world), in manufacturing, and in agriculture
3. The global water market will be worth almost $500 billion dollars in 2011.

Let’s take our eyes off the bright lights and focus on blue. It’s our best sustainable hope.

The Clinton River Watershed

Located northeast of Detroit, the Clinton River covers 760 square miles and includes over 1,000 miles of streams in addition to the 80-mile-long main branch. In the 50’s and 60’s, fish couldn’t survive in the Clinton, but today, thanks to big investments in pollution control, the river supports an extensive fish population as well as canoeing and boating.

I wonder if Mr. Hackel envisions any collaboration with the Alliance of Rouge Communities, which “encourage watershed-wide cooperation and mutual support to meet water quality permit requirements and to restore beneficial uses of the Rouge River to the area residents?” Or if he sees any collaboration between his effort on the Clinton River and the Michigan Economic Development Corporation’s “Green Jobs for Blue Waters” initiative, which claims to support eco-tourism amongst its efforts to expand water technology industries related to water conservation, quality and transport technologies, wind energy production, and pollution remediation?

Although admirable for its energy, go-it-alone approach on the Blue Economy will not be nearly as successful as a collaborative approach.

Why does it have to be one or the other? Why can’t it be both?  We are a water rich state. And, I’m not just talking about the Great Lakes. I’m also talking about infrastructure already in the ground, one of the key economic development ingredients for a Blue Economy.  The Detroit Water and Sewerage Department provides water to approximately four million people and is one of the biggest water utilities in the nation. The downsizing of the auto industry in Southeast Michigan has reduced DWSD’s operations to 50% of its water capacity, making more than 500 million gallons a day available for water thirsty businesses.

Our water marketers, if new Governor Rick Snyder has to foresight to create them and set them loose, won’t have to look very hard for thirsty businesses.  They can start with El Paso, Texas. With a population of over 700,000; it is the fourth largest city in Texas.  Some of the folks in El Paso might be ready to listen to a water laden pitch. For the past three weeks, El Paso has experienced a severe water crisis due to unprecedented cold weather.  Water usage was restricted to drinking (no showers in El Paso) and business and schools, including the University of Texas at El Paso were forced to close.

Like many cities in the Southwest, El Paso has built beyond the capacity of its natural water reserves.  It only receives about 8” of rain per year and is in the process of depleting the Hueco Bolson, a massive aquifer underneath the city. In response, El Paso built the world’s largest inland desalinization plant. Launched in 2007, the plant is expected to supply El Paso for 50 more years … except when it snows or freezes or old pipes and reservoirs break down and almost a million people have to boil water for a week!

The global challenges of population growth, industrial expansion, infrastructure deterioration, dependency on fossil fuels, climate change, pollution and depletion of ground water will continue to drive sustainable water innovation.

Since the Great Lakes represent 18% of the world’s potable surface water, Michigan has a vested interest in improving watershed and lake quality and we have the skilled workforce and design, engineering and manufacturing expertise to create a global water hub.

Few would argue that Silicon Valley is known as the world’s hub for information technology. What are its salient characteristics as a global hub? Large information system companies have their headquarters in Silicon Valley: Apple, Intel, Google, Hewlett-Packard, etc. Silicon Valley companies produce a significant number of patents—almost 100,000 from 2000 to 2008, and more than 10% of the total U.S. patents in 2008. Silicon Valley draws large amounts of venture capital—$5 billion in 2009 and over $80 billion since 2000. And of course, Stanford University is located in Silicon Valley and has been an innovation engine for almost three decades.

Currently, the water industry is localized and has organized itself around the world’s cities and towns, providing discrete design, engineering and operations services (mainly for water and wastewater treatment) to government, utilities and industry. According to Goldman Sachs, of the world’s top 40 water companies, four are located in New York, and two each in Boston, Chicago, Dallas, Los Angeles and Philadelphia. Measured by locations of offices and plants, the top players in the U.S. water industry are Houston and Boston, neither of which is located near a large source of fresh water.

Clearly, Michigan has an opportunity to seize the moment and begin the process of aggregating this fragmented industry.  The last hundred years Michigan built its economy around the combustion engine; the next hundred years, it must build its economy around sustainable development of its water resources to create a water innovation hub.

As energy costs increase, food providers will be driven more and more into the metropolitan centers, where there is relatively cheap water and wastewater treatment – especially in depopulating cities like Detroit, Buffalo, and Cleveland.  Last week I pitched this idea to a small group of BASF managers in a conversation about the Blue Economy.  They said food localization is already underway in Europe and Asia and they expect it to gain momentum in the US  in the near future.

The Blue Economy is one of those invisible traits that show themselves from time to time.  To learn more, check out my Proposal for a Blue Economy.