Econ-Atrocity: Should water assets and services be privatized or publicly managed?

by Dollars and Sense

Should water assets and services be privatized or publicly managed?
By Amit Basole, CPE Staff Economist
An Econ-Atrocity, brought to you by the Center for Popular Economics.
April 20, 2006

The "water crisis"
The supply of freshwater is only 2.5% of the world's total water content. Not counting the part that is permanently ice and snow, about 1% remains for human needs. In recent times, due to increasing industrial and agricultural demands and growing urbanization, water consumption has grown twice as fast as the world’s population. When combined with wasteful use and massive pollution, these factors make clean, safe freshwater a scarce resource. Already, an estimated 2 billion people across the globe lack access to adequate and clean water. As a result, water has been called the "oil of the 21st century" and the CIA expects inter-country conflicts over water to rise in the coming decade or so.

The corporate solution to the crisis
This water crisis has come at a time when the neoliberal economic model, with its fanatical belief in the free market, is globally ascendant. The predictable solution, since water can now be treated as a scarce resource, is to let market forces of supply and demand decide the "right price" for it. This has led to the privatization of water provision services or the outright sale of water assets, like lakes, rivers and ground water sources, to private companies. As a result, a vital resource that has until now been a part of the ecological commons, has been turned into a commodity - something for sale in order to make a profit. The world water industry already rakes in profits equal to 40% of those of the oil industry. The stakes are extremely high when you consider that only 5-10% of the world’s water is currently in private hands. In the United States, private water companies currently serve approximately 15% of the population (the remaining being publicly served) and increasingly the trend is towards more privatization.
According to the Water Science and Technology Board (WSTB) the main argument for water privatization in the US is that the “magnitude of investments that will be required to continue to provide high-quality, reliable drinking water...to the nation is huge”. Hence, “public officials...are interested in alternatives that may help meet these needs.”
The view of the World Bank is that public subsidies resulting in low water prices encourage its wasteful use and merely shift the burden of paying for the water on to governments. These costs leave governments unable to finance the water pipes, tunnels etc. so urgently needed by the poor in the urban shantytowns and small rural farms of the developing world. Thus shutting the private sector completely out of water services will only prevent the poor from getting access to the water they need. With the blessings of the World Bank and the International Monetary Fund, a few large multinational corporations have begun to fight the "water wars" for greater access to the Third World water market.

Is there some truth to the neoliberal view?
Are governments everywhere indeed so strapped for cash that they can no longer afford to guarantee their citizens affordable and clean water? Will privatization lead to more efficient water management systems and lower prices due to competition? The 1990s saw a series of high-profile failures of privatized water management to deliver safe, cheap water to poor communities. For example, in Bolivia's third largest city Cochabamba, in 1999, when a subsidiary of the US-based Bechtel Corporation was entrusted with the city's water supply, the price of water doubled and tripled. Bolivians earning $100 a month were asked to pay $30 a month for water. The logic of the market was simple. Only those who could afford to buy water would get it. Recent experience with deregulation and privatization of many previously public utilities has shown that the private sector can be much more inefficient, wasteful and corrupt than government bodies. Moreover, in the case of a vital environmental resource like water, long-term ecological issues of sustainability and conservation are important. When faced with depletion of a water source, a profit-driven corporation is likely to simply move to newer sources.
As for the argument that governments do not have the resources to make investments in water infrastructure or to subsidize water supply to low-income households, one look at the huge tax cuts for corporations and the wealthy in the U.S. shows the true priorities of conservative budgets and policies. Across the world, many governments forced to adopt neoliberal policies as a result of pressure from the World Bank and the IMF, have consistently found the resources, amidst cutbacks in spending, to pursue military adventures, nuclear arms races etc.

The mounting resistance and the alternative
The battle lines have been drawn. Our demand should not be increased private sector involvement in water management. Nor should it be the continuation of bureaucratized and corrupt state-run facilities. We need more efficient and democratic public or community management of this essential common resource. Popular struggles in the Third World against the neoliberal privatization agenda have already shown the way. When faced with outrageous water bills, the citizens of Cochabamba, Bolivia, agitated successfully to reverse the government's decision. Examples of successful community-managed water systems are also growing in number. Turning water into a commodity to be sold for profit is wrong ethically, environmentally and socially. It speaks volumes about neoliberal ideology that something "right" in terms of profitability can be so wrong on all these other counts.

Sources:
1. The Privatization of Water, Nexus Magazine, vol 8, no.3
http://www.nexusmagazine.com/ articles/waterprivat.html
2. Summary of monograph, "World Water Resources At The Beginning of the 21st Century", prepared in the framework of IHP, UNESCO. http://espejo.unesco.org.uy/summary/html/summary.html
3. Global Trends 2015: A Dialogue About the Future With Nongovernment Experts, http://www.cia.gov/cia/reports/globaltrends2015/index.html
4. Maude Barlow and Tony Clarke, "Who owns water", Nation September 2, 2002, http://www.thenation.com/doc/20020902/barlow
5. Water Services, http://www.privatization.org/database/policyissues/water_local.html
6. Bolivia's War over Water, The Democracy Center, http://www.democracyctr.org/waterwar/#11
7. Privatization of Water Services in the United States: An Assessment of Issues and Experience (2002) Water Science and Technology Board, http://www.nap.edu/books/0309074444/html/
8. Reclaiming Public Water: Achievements, struggles and visions from around the world, Corporate Europe Observatory.
© 2006 Center for Popular Economics

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5/22/2006 03:48:00 PM