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Drought is a compelling environmental phenomenon. Drought is also an extremely important feature of the political economies of dry regions. This study will emphasize the political significance of drought. Droughts, and especially protracted drought, send much stronger signals about water availability to a much more comprehensively diverse range of water interests than any other single political factor or any combination of factors operating in a political economy. Drought affects water users as well as those involved at all levels in water allocation, water legislation, and water policy development and implementation. Natural systems decree that water shortages have to be endured. A major socioeconomic consequence is that some users have to endure the economic impact of becoming the reserve economic sector— that is, the sector that accommodates future periodic water shortages. Not many political economies have the market, the regulatory instruments, or the political institutions to respond without very strong political stress to the reallocations implied in the identification of a reserve sector. Politicians have little stomach for such reallocation.