In an economy awash in capital, why does water want for investment?

America’s water and sewer utilities need trillions of dollars of investment—a state of affairs now thoroughly documented and loudly lamented.* Water/sewer systems provide the most basic of basic services; they’re tangible, provide real value, and sustain the entire economy. The water sector’s investment troubles aren’t due to a financial crisis or lack of liquidity in the broader economy. In fact, the economy is absolutely awash in capital.

So why does the water sector struggle to secure financing for the nation’s most critical infrastructure?

Capital aplenty

A key to the astonishing success of capitalist economies is the way that complex equity and securities markets transform financial capital into productive capital, turning dollars and cents into foundries and factories. Current economic indicators point to abundant financial capital available for investment. Corporations are holding record cash reserves and posting strong earnings, while equity and credit markets remain robust, despite geopolitical and tariff uncertainty. Liquidity remains strong. The AI sector has attracted massive capital flows, demonstrating investor willingness to finance long-term infrastructure. Record high gold prices indicate liquidity surpassing pre-COVID conditions, in part due to investor worries about an AI bubble.

There’s so much capital sloshing around financial markets that investors drove $600 billion growth in the cryptocurrency market in 2025. That’s more than twelve times the value invested in water/sewer bonds last year. As I write this, the cryptocurrency Dogecoin—which was supposed to be a joke—has a market value of $23 billion.

Water infrastructure literally sustains life.**

Cryptocurrency literally is nothing.

How on Earth do water systems want for investment in an economy that somehow pours trillions of dollars into cryptocurrencies? If Dogecoin can raise billions on a meme, what does it say about us when clean water can’t?

Use value, exchange value, and ironic underinvestment

In The Wealth of Nations, Adam Smith famously observed:

Smith’s great insight was the distinction between use value and exchange value, and his water-diamond paradox reflects the dilemma facing America’s water and sewer utilities. Water systems have immense use value—they are essential for life, health, and economic activity. Yet to access financial capital, utilities must convert that use value into exchange value, typically through the bond market. Historically, utilities have been investor favorites: they’re tangible, reliable, and backed by a service that no one can live without. If water systems struggle to attract financing, it is not because capital is scarce. Investors are pouring trillions into cryptocurrency, which has no use value at all, but apparently immense exchange value. The dearth of capital for pipes and plants and reservoirs lies in perception: utilities are seen as poor investments.

Why? Too often utilities look like deadbeats—charging low rates, keeping shoddy records, carrying shaky balance sheets, or serving shrinking customer bases tied to single industries. Others have governance boards unwilling to invest in their own systems, even when sustainability demands it (we launched Waterworks Excellence in part to help leaders clarify priorities). And looming in the background is the specter of bailouts: why sacrifice for success if failure brings free money from state or federal programs?

Capital markets reward confidence and penalize risk. Investors chase assets that promise stability, growth, liquidity, and returns. Utilities that can’t demonstrate sound management, financial resilience, and a willingness to price services sustainably will remain trapped in Smith’s paradox: indispensable in use, undervalued in exchange.

Credit counseling

Large municipal water and sewer utilities generally enjoy strong credit ratings and easy access to capital markets. As long as their leaders are willing to invest, large utilities' diversified customer bases and professional management make them attractive to financiers. But for smaller and economically distressed utilities, converting use value into exchange value requires demonstrating financial sustainability. That means cleaning up the books, implementing rates that generate sufficient revenue, and ensuring accurate metering and reliable billing. It means responsible oversight and qualified management. For long-term sustainability, it also means consolidating small systems to diversify revenue streams, spread expenses, improve management, and strengthen governance.

Technical assistance (TA) can foster that kind of sustainability, but only if it goes beyond untangling red tape and filling out applications. Weak TA merely connects struggling communities to a dwindling, politically precarious pool of government money, while doing little to make their utilities self-reliant. Strong TA helps utilities become truly credit-worthy—competitors in the capital market instead of charity cases.

Water Finance Exchange is showing the way with comprehensive, hands-on TA aimed at building financially sustainable utilities.^† When working with a struggling community, WFX is like a skilled mechanic rebuilding an engine—not a gas station attendant pumping petrol into a creaking, sputtering jalopy. For the safe, reliable, and resilient infrastructure Americans need, we must make water systems the kinds of investments that capital markets can’t ignore.

Water will always have the greatest use value. Let’s make it shine like a diamond.

*See this study, this study, and most recently, this study.

**Water infrastructure also literally sustains cryptocurrency.