San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The Three Gorges Dam Project

The Three Gorges Dam Project

It is genuinely difficult to present the Three Gorges Dam objectively because of the problem of credibility of those engaged in the debate about the project. The rivers of China have been a chronic source of sorrow for the people. Historically the control of flooding has been of paramount importance in judging a regime. Oriental Despotism is the concept that in China a ruler is judged as being good or bad not on the basis of his or her moral character or fairness in ruling but only on whether the water systems of China were maintained during his or her rule.

The major river of central China is the Chang Jiang (literally the Long River, officially the name is written as Changjiang) which is known in the West as the Yangtze River. The name Yangtze came from the name used for a small section of the Chang Jiang. Even the name Chang Jiang does not apply for the full length of the river. In the upper reaches of the river it is known as the River of Golden Sands and above that the River to Heaven.

In the middle reaches of the Chang Jiang there are three gorges, called Xiling, Wu and Qutang. A gorge is stretch of a river where it runs between stone cliffs. These stone cliffs are ideal places to anchor a dam so it can withstand the tremendous force of the water contained behind the dam. A dam can serve multiple purposes. It can store water during a dry season for irrigation. Water released through the dam can power turbine generators to produce electrical power. The program of storage and release of water can maintain proper water levels downstream so a river can be used throughout the year for transportation. During the rainy season the dam can catch runoff and prevent flooding. But along with these benefits there are costs associated with dams.

There is of course the cost of constructing the dam but there are also other costs which may be of equal or greater importance. For one there is the flooding of land above the dam on the river. Land and cities that were productive are rendered unproductive. The people and facilities in the inundated areas must be moved. The life of the running water of the river is replaced by the life of the still water of the reservoir of the dam. In tropical areas this change of life forms leads to the spread of diseases.

The benefit of flood control is actually the elimination of small floods at the expense of an increased risk of catastrophic floods. The dam authorities maintain a reserve of capacity to capture the runoff of great storms. But if a great storm comes or an earthquake that breaches the dam then the water contained in the reservoir surges downstream producing devastation that is far worse as a result of the dam having been built. Dams can also be the target of terrorists or in war. So the reduced risk of small floods is counterbalanced by an increased risk of catastrophes.

That such catastrophes can occur is evidenced by the Catastrophe of August 1975 when a typhoon from the South China Sea brought three successive days of enormous rain storms to the area of southern Henan Province. Altogether 62 dams failed in one night, including two major dams. As a result of this catastrophe 85,600 people died according to the official government figures but others place the toll at 230 thousand.

After decades of consideration and debate about placing a dam in the Three Gorges region of the Chang Jiang Premier Li Cheng pushed through the decision to build a 610 foot high dam that spans 1.3 miles across the river. The dam will create a reservoir that stretches 385 miles up the river and contains 39 billion cubic meters of water, about ten times the amount contained behind the dams that failed in August 1975. The filling of this reservoir will require the relocation of 1.9 million people.

There does not seem to be a readily available cost benefit study for the dam. Cost benefit studies are not a panachea for eliminating misguided decisions about public projects. The benefit and costs estimates can and have been falsified. But a cost benefit study focuses the debate and highlights the places where the figures are suspect. Even where honest cost benefit studies have been carried out it is commonplace for authorities to ignore the results of the study. When the analysis of the Aswan High Dam in Egypt indicated that there would not be significant net gains from building the dam the international lending agencies such as the World Bank denied funding. President Nasser of Egypt wanted the dam built regardless of the net benefits and so when the West would not finance it Nasser sought the assistance of the Soviet Union. The Soviet leaders cared not a bit about whether the project made Egypt better off or worse off they wanted to fund it in order to increase Soviet influence in the Arab world.

When the analysis indicated that a proposed dam on the Volta River in Ghana would produce little or no net benefit the president of Ghana at that time, Nkrumah, sought the assistance of U.S. President Eisenhower to get the project funded. Eisenhower used his personal influence with the Kaiser Aluminum Company to get it to leader a consortium of aluminum producers who would purchase a major portion of the output of the hydroelectric project. The problem was that there was excess capacity in the world aluminum industry at that time and it took an extremely low price for electricity from the Volta River project to get the consortium to agree to build an aluminum smelter in Ghana.

Subsequent events in Egypt and Ghana indicate that there was not much net gain from the two dams, just as the cost benefit analyses indicated.


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