Agriculture Reference
In-Depth Information
Generally, the rest of the support community is not considered as a stranded asset ,
even though this infrastructure might fit the definition. In this context, the social capital
and support services developed around an irrigation industry could also become
'stranded' if the irrigation activity is removed, or the water is converted to other uses. In
a free market environment, these services generally develop in response to demand
signals from the irrigation activity. An exogenous shock to a regional community, such
as a government buying significant water allocations, could negatively impact upon the
services that have evolved to support the irrigation industry during the peak of its activity.
Historically, financial benefit from a restructuring, such as a water allocation buyback,
is likely to accrue only to the holder of water allocations. They in turn will likely make
business investments outside of their local irrigation community, thus 'stranding' local
social capital.
Reducing water allocations results in a number of restructuring issues for licensed water
users. The impact of stranded infrastructure and financial compensation, often
expressed as restructuring assistance for holders of water allocations, is generally the
focus, and considerable political and academic effort has already been invested in this
aspect.
Literature, in general, looks at the positive and negative social impacts on the individual
direct recipient businesses and families, and treats this as a flow-on from economic
change. But what happens when you have a positive economic (and therefore social)
outcome for the farming families directly involved in transactions, but a negative impact
on the community as a whole during a period of structural adjustment?
For example, if irrigators are compensated through the purchase of their water
allocations or through another policy decision, they might decide to leave their
rural community. The farmers and their families would have been adequately
compensated, but with their removal from the rural supply chains, sometimes
all at once, those supply chains could collapse before the other businesses in
them have time to react, innovate and adjust to their new customer base, if one
emerges.
The literature largely ignores the direct economic third party impacts on the support
community servicing the licensed water users all along the agri-business supply chain.
This group is made up of the providers of goods and services supporting irrigation
communities; suppliers of fuel, fertiliser, farm chemicals, seed, freight services,
machinery, and specialist services such as those of agronomists.
The multiplier effect can take this to the next level of tertiary providers such as medical,
education, financial, and retailing. At these levels, policy decisions to buy out water
allocations can impact the wider social capital of rural communities.
Community health and social welfare are also “outside the market” as water
rights were 20 years ago. Is it possible to develop economic models which
assign value to these stranded assets, in order to ensure the social capital of the
broader irrigation communities that have been developed around the use of
water is given due consideration?
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