Sunday, June 12, 2011

Water should not be privatized


Historically, water was privately owned in Europe and in the United States in the mid-19th century. But the role of the private sector lost of its importance in the 20th century as the public sector owned water utilities as well as other basic services. The privatization of water came again in the early 1990s after the fall of the Berlin wall and the rise of free market policies. The World Bank and the IMF played an important role in this process through the conditionality of their aid. As water privatizations failed , especially in Latin America, there is a growing movement against privatization. 

The basic argument for privatization is that it will improve access and efficiency for the poor and reduce child mortality in Third world countries. Is it really necessary to privatize to ensure these goals are met? 

As a basic human need, water should be a responsibility of governments. Transfer of control to a private entity that seeks to maximize profits reduces the role of government and public accountability. It has a negative impact on low income people as prices increase and it affects the quality of service. Corporate social responsibility is rarely applied, as water companies do not really care about the well being of people. If people cannot afford the water service, should they be excluded from access to a key public good? 

Private multinational companies do not have a stake in the communities in which they operate. They tend to restructure existing companies, fire employees and reduce their benefits and hire new ones. Is this to the benefit of small, poor communities? Although full privatization is rather an exception today, being limited to England and Wales, Chile and some cities in the United States, the so-called public-private partnerships (PPPs) - which are the most common form of private sector participation in water supply and sanitation - are often a way of giving maximum advantage to the private sector and increasing the fiscal burden through investments to the public sector. In fact many of these agreements fail to include adequate public participation, contract monitoring and accountability. 

Another important point concerns the lack of environmental responsibility, in particular the impact on local eco-systems and downstream water users. Private companies, which seek to make more money for the sale of more water, may neglect the potential for water use efficiency and conservation improvements.  


There is no such thing as good or bad privatization. The logic is driven by profit maximization, which often implies higher prices above social costs and poorer quality of service. People should then be able to reclaim their water systems from private entities and complain in case of unaffordable rates and non-cost effective delivery. 

Today and tomorrow, in Italy, more than 20 million people will vote for a referendum to abolish  a government decree to privatize  the provision of water and sanitation in all local communities  and to allow private companies to make profits beyond cost recovery. The reason is that the market for water services has expanded considerably as prices increased by 65% since 2002 and that the State has invested massively over past years - over 64 billion euro- to repair the damaged infrastructure which produced enormous efficiency losses (47 % of the water supplied through the network is being lost). Private companies will then maximize their profits without having to invest in the water infrastructure. 

We should vote YES, for the abolition of this law, in the interest of people and communities.


2 comments:

  1. Italian people have massively voted YES for the four questions subject to referendum, including on water privatization. This is a clear victory of civil society over economic powers.

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  2. It was wondering if I could use this write-up on my other website, I will link it back to your website though.Great Thanks.
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