In this week’s Debunking Economics podcast, Phil Dobbie and Prof. Steve Keen dive into the global water crisis under the banner “Trouble on the Waterfront.” They explore the paradox of Earth’s abundant water supply versus the tiny fraction that is actually accessible, highlighting UN figures that show billions still lack safe drinking water and sanitation. From the UK’s tight margins between renewable supply and consumption, to Australia’s surplus constrained by geography, and Iran’s alarming shortages that threaten the viability of Tehran itself, the discussion underscores how climate change and poor management amplify the risks. Along the way, they touch on desalination’s energy intensity, the embedded water footprint in consumer goods, and the stark reality that water scarcity is as much about distribution and governance as it is about absolute supply.

The conversation then pivots to the UK, where privatisation of the water industry has left infrastructure lagging. Keen points out that while the public sector once invested in long‑term projects like Kielder Reservoir, the private sector has built virtually no new dams since the 1990s, preferring short‑term profit over resilience. Together, they argue that essential resources like water and power require excess capacity and long‑term planning—something markets alone cannot deliver. With wit and urgency, the episode makes clear that water is the ultimate recyclable resource, but without effective stewardship, even countries famed for rainfall could face scarcity.

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Foreign aid is shrinking fast. The UK has cut its commitment from 0.7% of national income to 0.3%, the US has scrapped USAID and axed 80% of its projects, and overall global aid is down by more than a quarter in just five years. That’s less than 0.2% of the world economy — smaller than Walmart’s turnover — even as the Gates Foundation warns that cuts have already reversed decades of progress in child survival. In 2025 alone, 200,000 extra children under five are expected to die from preventable causes. And in places like Afghanistan, Somalia, and the Central African Republic, one in ten infants won’t make it to their first birthday.

Economist Steve Keen argues that aid is often designed with the assumption that chunks of it will flow back to donor countries through trade and contracts, reinforcing global imbalances rather than fixing them. He suggests revisiting Keynes’s old idea of a Bancor — a global currency to balance trade — so aid isn’t just a disguised subsidy for rich economies. Without structural reform, we’re left with the paradox of trying to support countries where GDP per capita is $150–$200, while the same amount is a single day’s salary in Luxembourg. Rethinking aid means asking whether we’re propping up conflicts and fragile states, or building a fairer system where resources actually stick and help people survive.

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The early days of Bitcoin its proponents argued that this could be the global currency to replace fiat money. Governments the world over were issuing too much currency, leading to inflation, whilst imposing arbitrary regulations that would be impossible once authorities lost control of money.

Steve says for that to work Bitcoin would need to be capable of the instantaneous transactions we are used to with the billions of banking transactions that happen every day. What’s more, the limited supply of Bitcoin means increases in productivity are likely to result in deflation p- a bigger enemy to the economy than rising prices.

Instead Bitcoin has become just another asset class. The initial argyument that it served as a useful hedge against a downturn, in the same way gold does. Except now Bitcoin has started to mirror movements of other assets, like shares. And speculators are buying into it, often in highly leveraged positions. Risky?

Still the argument remains that Bitcoin could be a workable currency. One that consumes a lot of energy in the process. When energy becomes really scarce, says Steve, Bitcoin will be the first thing to be turned off.

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Several listeners have written in to get Steve’s views on the path being taken by Mark Carney to rescue the Canadian economy. Initially it looked like the country was rebounding strongly from the pandemic, but in the last couple of years the growth has slowed and then declined. That was before President Trump hit them hard with tariffs and then said he’d like them to become part of the US. 

In some ways he is trying the same approach as the UK – to balance the operational side of government spending but inventing in infrastructure beyond that balanced operational budget. That would be fine if a large chunk of that investment wasn’t going to defence. There’s also very little attention to the most fundamental issue for Canada unaffordable housing. Proudly the most unaffordable in the world. Hard to get people to spend when a huge chunk of their income is disappearing into mortgage payments.

There’s another fundamental problem with Carney’s approach. As Steve points out, it almost every policy it relies on outside influence, rather than domestic resolutions.

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This week Phil and Steve look at cost-plus inflation, driven by rising wages. Right now its being given as the reason that services inflation is remaining sticky and that’s why many central banks are reluctant to reduce interest rates. Steve says it’s a far more sensible assumption than the neoclassical belief, promulgated by Milton Friedman, that inflation is always and everywhere a monetary phenomenon.

It's not just workers who can put prices up, of course. Companies can increase their margins, and we saw a fair bit of that post-COVID. Burt what of the tech-driven future, where wage negotiations will be harder. Basically, we’ll be lucky if we have a job. Does that mean the tech bros call the shots and wage driven inflation will be a thing of the past?

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Before he was the UK Prime Minister at war with the Nazis, Winston Churchill ws the UK’s Chancellor. He played it very straight, with a preoccupation with balancing the budget. He also took the Uk back onto the Gold Exchange, despite warnings from Keynes that the move would be deflationary.

In 1928 he reinforced his neoclassical credentials, saying very little additional employment and no permanent employment can be created by state borrowing and state expenditure. That is, of course, the exact opposite of the idea of a job guarantee, but is Churchill partially right? Can a job guarantee ever create jobs that will enhance productivity?

This week Phil and Steve look into job creation and Churchill’s fear of using government spending to protect the labour market. It was a time when even Joh Maynard Keynes didn’t get everything right. For example, he argued that the multiplier effect would add new money and new employment from government cash injections. But how can you multiple the injection if no new money is created? And it ignores the real benefits jobs can create, behind the money gained from those directly employed, whether by the government or the private sector. 

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You would assume that government spending is largely designed to help those on lower incomes. The NHS was designed to ensure free healthcare for all. The same for public education. And for welfare payments. So, I theory, the more the government spends, the more wealth is transferred to lower incomes.

This week Phil and Steve explore the idea that rising government deficits actually help the rich. That’s because the so-called debt is financed by the issuance of bonds, much of which is nought on the secondary market to add to the wealth funds of the richer end of society. They receive dividend payments funded from the government. That’s a case of government money supporting the wealthy.

So, is there a way of government money being used to support the less well-off, without helping the rich to get richer?

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Copyright and IP rights has always been notoriously difficult to protect. Does it become impossible with the rise of AI? The ideas presented to you through your favourite AI engine come from somewhere whose ideas are being used to support an argument. Or, if you create an artwork that is analysed and used to create other artworks, has copyright been infringed, or is what we would have traditionally called inspiration? Phil asks, is it time to just admit defeat and accept that copyright is an outdated notion and find other ways of compensating the artist and creator?

Then there’s the social cost of intellectual property rights. A question that existed before. If Statins had been available as cheaply as they are now before their patent lapsed thousands - possibly hundreds of thousands -of lives would have been saved. Does the same apply to Mounjaro? How do you balance the commercial imperative from big pharma against the social benefits?

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The small number of technologists who increasingly control the planet’s wealth and political and social agenda are, it seems, big supporters of UBI. Elon Musk is at the forefront of this push. And why wouldn’t he be? His vision is a future of unbounding economic growth, in which the work of humans is almost completely replaced by robots, leaving us all plenty of time to pursue interests, engage in deep philosophical thought or, more likely, get fat watching daytime TV with no sense of purpose.

This week Phil and Steve look at the consequences of Musk’s vision and discuss the one factor Musk has yet to answer – where does the money come from? Steve says the tech bros don’t seem to grasp the workings of fiat money creation, which h might be part of the answer. But Phil is more concern ed about the power that Musk and his brethren wield. Do we need to redefine capitalism, so the power of these feudal tech lords is diluted by working cooperatives, to ensure technology is used for the betterment of society and not leading to a hunger games future?

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18th century economist Richard Cantillon theorised that new money added to the economy always reaches the wealthiest people first. If there’s a lot of it, the extra supply will push up prices, but the rich won’t feel it, they’ll just create it. The impact down the track is that the poor, surviving with the same money as before, get hit with the higher prices. 

Phil suggests that wouldn’t be the case if extra money was created through government spending. It would be the workers and those on welfare getting the first touch of the new money. But, as Steve explains, most money created through government deficits is counteracted by the private sector buying up the government’s bonds. Most of the new money is created through private debt - bank loans, for example. So Cantillon was right.

The way to fix the problem s to put in place policies that would see more of a balance between public and private sector money creation.

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