Water in California:
More Valuable than Gold

Nov 19, 2014

In November, California voters passed a 7.1-billion-dollar water bond by a wide margin. This bond measure was pushed by both Democrats and Republicans, as well as all the major business groups, and it was supported by several unions and a handful of environmental groups.

To garner voters’ support, the Democrats and Republicans inserted some funding in the bond measure for safe drinking water projects and contaminated water clean-ups. But most of the funding will go to construct new dams and reservoirs. Exactly what will be built was not spelled out in the measure presented to voters. That decision will conveniently be made behind closed doors by a panel appointed by Governor Jerry Brown, a Democrat. This was obviously a way to hide whose interests will be served by these dams and reservoirs paid for by taxpayers.

California already has the most highly developed infrastructure on the face of the earth to collect and deliver water. It includes 1,400 dams, thousands of miles of aqueducts and pumps so powerful they lift water nearly 3,000 feet over the Tehachapi Mountains. This system consumes five per cent of all the electricity in the state. Almost every river, big and small, in the entire state has at least one dam. Yet, despite this gargantuan re-engineering of nature, more dams, canals, tunnels and reservoirs are about to be built.

Why build more? Supposedly, demand is outstripping supply. The population, especially in the southern areas that get the least rainfall, is continuing to grow, while the water supplies are shrinking, especially given what is supposed to be the very severe drought that is now in its fourth year.

Both arguments are false.

Is the water being used up by the approximately 25 million people who live in the southern part of the state? Are they straining the scarce water resources? The dirty little secret is that personal water use is literally a drop in the bucket. Domestic consumption accounts for less than 8 per cent of the total water used. That’s how much water all 38 million people, many of whom are concentrated in big metropolises such as Los Angeles, San Francisco Bay and San Diego use. Business, industry and landscaping in the state use up another 12 per cent of the water usage. Combined, that still comes to only 20 per cent of total water. In reality there is enough water in California to support in an average year, 318 million people, that is almost the entire population of the United States, including their lawns and dishwashers.

Despite continued population growth of about 150,000 people per year in Southern California, total water consumption by people and business has actually declined by at least 20 per cent over the last two decades—probably for a lot of reasons, but plumbing code reforms and other basic conservation measures play an important role. And that drop in usage is continuing.

No, the demand for more water is not coming from the growing population, but from California’s big corporate farms, which already use 80 per cent of the water in California. One crop—almonds—soaks up more water than all 38 million people in the state.

Neither is the issue the drought. California has historically gone through periodic droughts—and some of them have been very severe. No, the real issue is who is taking the water and how it is used.

Drought or no drought, California’s climate in the southern half of the state, where most of the agricultural production is concentrated, has always been arid. If farming were limited to growing crops that were consistent with this climate, there wouldn’t be a water shortage and there wouldn’t be any need to build ever more infrastructure.

But in California, corporate agriculture decides for itself what to produce and where to produce it, and the government supports those corporations. Much of their farm production is concentrated in the 450 mile long Central Valley, and its surrounding foothills, where some areas get less rainfall than the Sahel Desert. In order for these companies to grow most of their crops, they need massive amounts of water to irrigate their fields. So, the government constructed huge infrastructure projects to bring them that water, and charged them almost nothing for it.

All the arguments put forward by the public officials and the news media have just one purpose: to convince the public to support spending to supply the big corporate farms with still more water.

Corporate Empires

California is the most important agricultural zone in the United States, producing over a third of the country’s vegetables and nearly two-thirds of its fruits and nuts. California is also the leading dairy state, having surpassed Wisconsin in 1993. And it ranks among the top five states in raising chickens and cattle.

This production is carried out by massive factory farms. To the public, they pretend to be simple “family farms”. But some of these companies hold a virtual monopoly over key crops. Privately owned Paramount Farms, the largest farming company in the country, for example, dominates the production of almonds and pistachios in the entire world. Others are organized into farm owner cooperatives, like Sunkist, Sun-Maid, Sun Sweet, Blue Diamond, that control the processing, marketing and distribution of their crops and are managed from corporate headquarters in such cities as San Francisco, Los Angeles and New York and they have corporate offices all over the world. All these enterprises are tied in myriad ways to other corporate giants—in real estate, banking, oil, chemicals—through interlocking directorships, marriage, financial holdings. Oil companies also became big farm producers. A gigantic cattle ranch put together at the end of the 19^th century became the basis of the oil and gas conglomerate, Tenneco. And they have all been linked to the University of California, whose research arm provides them with new plant varieties, farm machinery, pesticides, etc. at taxpayer expense. In other words, the U.S. capitalist class owns and controls California agricultural production for its own private profit.

Robber Barons, Financiers, Mine Owners, Speculators

In California, farming has always been big business. When California became a state in 1850, it was the dawn of the age of the robber barons. In New England and the Middle West, subsistence farming was just beginning to give way to commercial farming. But in California, railroad robber barons, San Francisco financiers, mine owners who were flush with capital from gold and silver rushes, snapped up huge swaths of land and grew wheat and raised cattle.

In the early years, most of the land was still in the hands of the U.S. government, which distributed 8.5 million acres to “farmers”, most of whom were big landowners. By the early 1880s, the federal government had handed over 11 million acres or one-tenth of all the land in California to the Central (later Southern) Pacific Railroad. To cash in on this bonanza, the company sold off much of this land in big chunks, often to some of the railroad’s own major stockholders or to speculators. In subsequent years the railroad made much more money transporting the crops the robber barons grew on this land. By the turn of the century, the Southern Pacific’s Fruit Express had become just as important to its business as passenger service.

Many of these landholdings were practically feudal estates, which measured in the tens or even hundreds of thousands of acres. The big landowners employed thousands of migrant workers, keeping them in a state of abject poverty and servitude. Sometimes they leased their land out to smaller farmers or other big landowners. The Miller-Lux cattle ranch was ranked among the 200 richest companies in the country. Wheat barons brought in massive gangplows and steam combines to work the land. The wheat and cattle barons produced for the growing population attracted by the gold and silver rushes and then the workforces that built the railroads. The wheat barons themselves imported a large number of migrant workers from Asia. The wheat barons shipped the surplus crops through an expanding rail and ship network, which ended up in Liverpool, England. The California-Liverpool wheat trade was a primary cause behind the introduction of clipper ships. After the arrival of the transcontinental railroad in 1869, big landowners shipped fruit east. They also sent the fruit by ship if it was canned or dried. By the late 1870s, refrigerated railcars opened up a whole new world of sales for them.

In the first decades, most of this production was in the northern section of California’s Central Valley, where water was more plentiful. But access to water was always a top priority. Land barons acquired as much frontage along streams and rivers as possible in order to assure enough water for livestock and periodic flooding of bottomlands for the growing of alfalfa and hay, greedily fighting each other over control of water. They began to use irrigation to grow more crops on their own land. Speculators and large landowners also rushed into the real estate market with water and land ventures. They subdivided and sold some of their holdings, and realized big profits by providing dams, ditches, crops and water rights.

This sometimes resulted in disaster. For example, in 1901, the Colorado Development Company made a cut in the river bank of the Colorado River and built a canal to irrigate a part of the Imperial Valley, near the Mexican border, where it was selling land. But during a series of floods in the first half of 1905, the Colorado River leaped over its banks at the cut. The entire river changed course and flooded the agricultural settlement. E.H. Harriman, who controlled the Union Pacific and Southern Pacific railroads, brought in an army of experts, laborers and equipment, but it still took them more than two years to stop the flooding and wrestle the river back into its banks. He extracted an extremely steep price in return for the work.

At the turn of the century, another way opened up to get more water for irrigation: new, powerful electric and gasoline driven pumps. Land owners began to “mine” the great aquifers that had vast amounts of underground water and bring new expanses of the Central Valley into production, creating rich new sources of wealth. Then, a series of droughts from 1918 to the 1920s pushed the farmers to intensely overpump. This drastically lowered the water table, making pumping prohibitively expensive. Big farmers took advantage of the crisis to consolidate their holdings. For example, Joseph DiGiorgio, who had established a large ranch in the Central Valley after having made a fortune importing bananas from Central America, bought out his neighbors as their wells went dry. He then sank new shafts outfitted with enormous gasoline pumps. Equipped thus to reach the water that no one else could, DiGiorgio went on to create a private fiefdom around himself. But overpumping also created an environmental disaster, as the very surface of the land subsided, producing “squeezed”, compacted aquifers that could never again be refilled with water.

Water and Power

To bring much more water to their farms, the big landowners looked to the government to construct and pay for massive infrastructure projects.

The first big government water project was engineered by the city of Los Angeles in one of the great water and real estate heists in history, fictionalized in the 1974 film, Chinatown.

Los Angeles, with its Mediterranean climate, is actually drier than Beirut. In 1905, a couple of speculators linked to both the city and federal governments hatched a plan to make a quick fortune by bringing a huge amount of water to the city. They got the city-owned utility, the Department of Water and Power, to send out agents to secretly buy up water rights along the Owens River, 230 miles north. The river was fed by melting snows from the Sierra Nevada mountains and the land around the water was rich and lush. The agents for the city scammed the ranchers and local farmers into relinquishing their water rights, with promises of how much money they would make and threats of what would happen if they didn’t sign.

L.A.’s wealthiest elite, including the owners of the Los Angeles Times, railroads, banks, trolley car companies and an electric utility, secretly formed a syndicate that bought up the entire San Fernando Valley, north of Los Angeles. After the city announced its plans to bring the water down from the Owens River, their property was suddenly worth 40 times the purchase price. To close the deal, public officials and the Los Angeles Times convinced voters to agree to pay for the very expensive aqueduct through harsh desert to bring the Owens River water down to Los Angeles, by claiming that the city was facing a supposed “water famine”.

In 1913, the Los Angeles Aqueduct was opened. But for the next 20 years hardly a drop of that water made it as far as Los Angeles. All the talk about a water famine was a lie. Instead, the water stolen from the Owens Valley and paid for by the L.A. taxpayers was used to irrigate the San Fernando Valley owned by the monopolists. It made them rich—fabulously rich. They used the water to turn desert into an agricultural cornucopia. Their real estate syndicate, the Los Angeles Suburban Homes Company, used their profits to constantly acquire still more land. They created the biggest suburban subdivision in the world. To attract customers to those empty suburban houses, the developers ran promotions throughout the country, fueling population growth of the entire region. The speculators made still more money building railroads and trams to service those suburbs. And many of these same land barons also invested in farmland. Shortly after Los Angeles began getting Owens River water, some of these land barons were assembling the third-largest land empire in the history of the state, the 300,000 acre Tejon Ranch, straddling Los Angeles County’s northern border with Kern County.

For the first dozen years after opening the aqueduct, LA officials tried to assuage the anger of the residents of the Owens Valley by taking water only after the Owens settlers’ needs were met. But in the 1920s, the city of L.A. began to take more of the water and the anger of the valley residents grew. The city of Los Angeles began purchasing most of the land and water rights that the city did not yet hold, in order to hasten the departure of the residents. But some did not leave. And some carried out a kind of guerrilla war, dynamiting the aqueduct many times. So, the city sent armed guards to protect the aqueduct 200 miles away. Eventually the city bought out all the remaining property holders in the Valley, while turning the Valley into hardscrabbled desert, no longer good for agriculture. (During World War II, the U.S. government did find a use for the Owens Valley. It chose the desolate Valley to set up the first of ten concentration camps to imprison Japanese-Americans, the Manzanar War Relocation Center.)

The Los Angeles real estate speculators used the Owens Valley water lavishly. The developers filled the region up with individual homes and lawns and swimming pools for the better off. They irrigated everything: the lush landscaping, the golf courses, even the grass along the roads. They created a kind of fantasy in complete denial of the arid nature of the climate.

With massive development in their sights, in 1930 the real estate tycoons pushed the Department of Water and Power to get the electorate to agree to pay to tap the water from Mono Lake farther to the north of Owens Valley. Once again, they declared that Los Angeles was facing another “water famine”.

At every level, federal, state and city, the government was providing the water for these latter day robber barons—at the expense of the population of Los Angeles and of all the areas deprived of water.

Dividing the Waters

Starting in the 1930s, the federal and state governments stepped in to construct three massive water projects, with construction continuing over the next 40 years. On the Colorado River, the federal government built a system to use the river’s water that was anchored by Hoover Dam. Completed in 1936, Hoover Dam was the world’s first concrete dam and it was also the highest dam. Although the Colorado River ran through seven states (Wyoming, Nevada, Utah, Colorado, New Mexico, Arizona and California) as well as Mexico, the land barons and developers in California, who were, by far, the most powerful, made sure that they got most of the water. The federal and California state governments, in a series of complex partnerships, built two other systems: the federal Central Valley Project (CVP), which was begun in 1933, and the California State Water Project (SWP), which was built in the 1960s and became the largest state water project in the country. Together, these two projects constitute a sprawling network of dams, pumping stations and canals that send water from the north more than 400 miles south to the farmlands and to a much lesser extent, cities. In 1972, the city of Los Angeles also built a second aqueduct to tap a vast underground aquifer under the Owens Valley, thus creating even worse environmental disasters in that region.

The big federal projects, the Hoover Dam and the CVP, served as symbols of Roosevelt’s New Deal, and its massive infrastructure projects, whose purpose was advertised as developing the arid Southwest. Small family farms were supposed to blossom with the arrival of federal water. But the real purpose of these government projects was to enrich agribusiness, big landowners and land speculators.

According to Federal law the main benefits of these projects were supposed to go to small property owners. Only farms that were less than 160 acres were supposed to get water at very low subsidized prices from the Federal government. Those that were bigger were supposed to pay full price for the water. The law also prohibited absentee landlords from gaining subsidized water. But either government officials didn’t apply those limits, or when they did, they turned a blind eye to the obvious legal tricks that big landowners used, such as phony partnerships and trusts, to get around the limits. By 1982, the federal government moved to relieve the big landowners of many of these legal inconveniences, by upping the official limit to 960 acres and removing the restrictions on absentee landowners to gain subsidized water.

The price that the big farms paid for the water was a tiny fraction, five or ten per cent, of what people in the cities paid. The federal government foisted the cost onto taxpayers throughout the whole country, while the state government and local agencies hiked the water bills and property taxes on residents in urban areas in the region. For a couple of decades, the cities in southern California paid for water they didn’t use, sending the water to the big farms practically for free.

When those big dams were being built, government officials and the news media gushed over how the electricity would be so cheap, people could throw away their electric meters. But when the electricity came on line, it was expensive. Much of what people paid for electricity was used to lower the big farms’ water bills still further.

Bringing government subsidized water to the big farms increased their value instantaneously, often triggering frenetic speculation. The windfall was especially great for the gigantic landholdings of Standard Oil and other oil companies, the Southern Pacific Railroad and its real estate subsidiary, and the land companies that were decedents of the old cattle and wheat empires from the previous century. Their farms and ranches were located in some of the driest regions on the West Side of the Central Valley, far from the melting snows and rivers that flow from the Sierra Nevada Mountains. With government subsidized water, these big companies opened up huge expanses of land for farming.

It was certainly not in the DNA of these factory farms to conserve water. When government subsidized water began to flow, they didn’t reduce pumping water from the underground aquifers, despite the fact that they were depleting their own resources. They used the new government subsidized water to bring new lands into production, while continuing to pump water to irrigate the land already under cultivation.

This hasn’t changed. Twenty years ago, the big farmers got Congress to give them big tax breaks to subsidize new technology to irrigate their fields more efficiently. They then used all the water they saved with more efficient irrigation, to bring still more land into production. Once the current drought hit, they intensified the pumping of the underground water. Some farms are pumping water from 2,500 feet underground, water that had been there for thousands of years, causing the empty underground aquifers in some areas to collapse by an average of a foot a year.

The Grapes of Wealth

California used all that subsidized water and newly irrigated land to dominate a big part of fruit and vegetable production for the entire country, even though those crops were—and are—grown much more cheaply in more humid environments where it actually rains.

But agribusiness also uses government subsidized water to grow other crops that are even more wasteful and absurd. For example, one of agribusiness’s top crops has consistently been hay and alfalfa, that is, common grasses for animal feed that can be grown just about everywhere there is rain. But in California, the fields are irrigated... a lot. Agribusiness grows a lot of that alfalfa in a desert, the Imperial Valley near the border with Mexico, under scorching heat and no humidity, where temperatures often reach 120 degrees in the summer. Yet, because the government provides agribusiness with almost limitless amounts of heavily subsidized water from the Colorado River 90 miles away, agribusiness grows huge surpluses of alfalfa. Even during this drought—which public officials and the news media tell us is so severe—agribusiness exports 600,000 tons of alfalfa annually from the Imperial Valley to Japan and China. As many commentators pointed out, it is government subsidized water embedded in the alfalfa that agribusiness exports thousands of miles away.

Today, gigantic amounts of heavily subsidized water have allowed agribusiness in California to emerge as the number one producer of almonds in the world, producing 82 per cent of the world’s almonds, a complete monopoly. Several Wall Street financial companies have bought thousands of acres of rugged desert, brought in government subsidized water to irrigate the desert and now grow almonds. But almonds require lots of water, twice as much water as even cotton and tomatoes. And, because almonds grow on trees, they need a permanent supply of water. They can’t be fallowed in a year if there is low rainfall. Experts say this creates an inflexible need for water. In reality, government water is enabling agribusiness to grow its profits.

Almonds had replaced cotton as the top crop in California—another incredible waste at every level. Of course, big landowners couldn’t have produced all that cotton without massive government aid and subsidies. California had emerged as the leading cotton producer in the country after government water first began reaching California’s fields in the 1940s. A few enormous farms produced most of it. The biggest farm, owned by the J.G. Boswell Company, was 250,000 acres, or close to 400 square miles. Its cotton was grown on the fertile soil of a former lake bed, Tulare Lake, that had been drained by the U.S. government. Measuring 800 square miles, Tulare Lake had been the largest fresh water lake west of the Mississippi River. The U.S. government also dammed up the four rivers that fed the lake. The U.S. government constructed the reservoirs behind the dams that provided the water that irrigated the crops, providing as much water as a city of three million people uses. But the subsidies didn’t end there. Because the U.S. Department of Agriculture declared cotton to be in surplus, farm companies were also eligible for additional subsidies from the federal government’s price support program and Boswell grabbed the lion’s share.

In other words, Boswell wasn’t really farming cotton... but tremendous government subsidies. As a result, Boswell, whose owners were descendants of cotton plantation slaveholders in Georgia, emerged as the biggest farm company in the country, with Boswell himself a longtime member of the board of directors of General Electric.

Finally, big farm companies horde massive amounts of government subsidized water for speculative purposes. The Resnick family, which owns Paramount Farms, the largest almond producer in the world and the biggest farming company in the country, also controls a powerful entity called the Kern County Water Bank—an underground water reservoir in the hottest, driest, southernmost edge of the Central Valley. The Kern County Water Bank is like the Bank of America of water. It has a capacity to supply the city of Los Angeles with enough water for two years. Back in the 1980s, the state of California had spent over 70 million dollars building this water bank. But in 1995, California’s Department of Water Resources suddenly, and without any public debate, transferred it to a band of corporate interests led by the Resnicks, as well as the owners of the gigantic Tejon Ranch.

The water bank saves up water during ordinary years, water supplied by the government at subsidized prices. During years of drought, like right now, the water bank sells the water to other farmers or cities at a price that is 10 or 20 times what they paid for it. Often, it takes water supplied by the government at very low prices, and sells it back to other government entities at much, much higher prices. In 2009, during the previous drought, the water bank controlled by the Resnicks and Tejon Ranch made a profit of 73 million dollars selling water to the town of Victorville, a relatively impoverished outlying suburb of Los Angeles.

Many other big farmers are “banking” water in their own aquifers and reselling it at a big profit. An article in the Sacramento Bee, “Kern County Hub of Water Trade” (July 14, 2002), describes how the Nickels family, who are descendants of 19^th century cattle barons, are making millions of dollars a year buying subsidized water from the state water system and then reselling it to state and municipal water districts at a huge mark-up.

The enormous infrastructure and capacity to produce is perverted by the capitalist drive for profit, creating monumental waste.

Destruction for Profit

Agribusiness’s hold over water resources creates disaster.

Over the last summer, several thousand households in almost two dozen impoverished communities around the farming region in California’s Central Valley suddenly had no running water. Their taps went dry. The people couldn’t do all the simple functions that everyone takes for granted: flush the toilet, fill a drinking glass, or take a shower after a hard day’s work often in terrible heat, or wash the dishes. Everything had to be done with bottled water. Families suddenly had to spend hundreds of dollars to wash their clothes at the laundromat and on paper goods to avoid washing dishes.

A few of these towns made not just national, but even international news. The news reports tried to use it to illustrate just how bad and unforgiving the drought is.

But the drought is not the reason the wells, rivers and streams, which had served as a source of water for these communities and homes, ran dry. No, they ran dry because the big farming companies have overpumped so much water that the water table has plunged, while the government has drained thousands of rivers, sloughs and entire lakes in order to deliver it to these big farmers.

These policies have enormous consequences for the future.

The state and federal governments pump much of the water that they deliver to the Central Valley from the Sacramento-San Joaquin River Delta. They are pumping so much fresh water out of the Delta, which is the largest estuary on the Pacific Coast, it is destroying major parts of the natural habitat. And this has contributed to the actual collapse of the Delta, including the complete destruction of the marshland and the ongoing sinking of the islands, which are now at least two dozen feet below sea level. This degradation heightens risks of all sorts. In fact, the only thing stopping the sea from completely invading the Delta are about 1,100 old, decrepit and leaking levees that could easily be destroyed by an earthquake or a violent storm. As Robert Bea, professor of engineering at the University of California, Berkeley, warned in the New York Times (July 1, 2011): “In terms of damage, deaths and long-term cost, a rupture in the delta levees would be far more destructive than what happened in Hurricane Katrina. This is a ticking bomb.”

What has been done to the Colorado River is just as destructive. The U.S. government has built so many dams and reservoirs on the Colorado River, it has turned the river into the most controlled and plumbed river on the planet—all in order to take the water out, especially for the benefit of California agribusiness. The government drains that water from a region that encompasses 15 per cent of the United States, including from Wyoming, Utah, Colorado and New Mexico, Nevada and Arizona, leaving big parts of those states dry. By the time the Colorado River reaches Mexico, it practically isn’t a river anymore, because there is almost no water left. This imperialist robbery has not only destroyed the Colorado River’s delta on the Sea of Cortez, turning two million acres of rich wetlands into a wasteland, it has also destroyed productive farms and fishing grounds—and the jobs that go with them—leaving drug smuggling and gangs in their place.

“After me, the flood,” the motto of French kings in the period that preceded their overthrow, could well be the motto of those who run and profit from California agribusiness. Their only interest is to increase their short-term profits and wealth, as well as expand their domination over domestic and world markets. They do this against the interests of the entire population. Working people pay the bill for the government to suck every last drop of water from the most remote nook and cranny in order to hand it over to capitalist agriculture, destroying the economy, jobs and the environment in their wake.

This is the capitalist system at work. It is a system that long ago outlived its usefulness.