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.

The Age of Risks

The gigantic cataclysm in Japan has stirred people's conscience that we have entered into the "global risk society "*.  This means that our society is increasingly concerned about the future and has to deal with hazards and uncertainties induced by modern life. The magnitude of the disaster has no precedent in history. It had large human consequences and social costs;  the material damage is estimated in more than 200 billion dollars, around 4% of Japanese GDP.  The point of issue is whether this could have been avoided, at least not in that magnitude.

Human beings are always subject to a level of risk, such as natural disasters which are largely perceived as generated by non-human forces Since earthquakes cannot be predicted, we do not know when tsunamis will happen before the earthquake occurs. But it is established that tsunamis occur on average twice a year throughout the world and inflict damage near the source. It is if like the inner core deep inside the Earth have waken and created a rupture in the laws of natural equilibrium putting at risk the survival of many animal and vegetal species. But the other side of the Japanese disaster concerns manufactured risks, which are the product of human activity. For example, the disaster caused by the nuclear plant in Fukushima led to a decline of public faith in nuclear technology and a growing concern for sustainability.

Mankind suffers from loneliness in an ever crowded world. As the Polish sociologist Z. Bauman explained,  the paradox is that the more populated are our cities, the more we feel lonesome, frightened and quarrelsome. Without any hope in the future, without a memory of the past, our world is flattened on an unsteady present.

However, the age of risks which has put in question the sense of our existence has nevertheless triggered positive energies in terms of creativity, wealth creation, desire for freedom and rights. The Arab revolutions which rose a couple of months ago has extended from the Atlantic to the Indian Ocean. Their heroes are young people, men and women; they want food and freedom but they are not illiterate, as they gather and communicate through websites and their weapons are the modern technologies.

This 'social' tsunami has a social and political intensity which is similar to the geological phenomenon which convulsed the oceans. The human wave swept away corrupted regimes and claimed equality, dignity and freedom. This was the essence of that pacific revolution which is still pervading the Arab world.

Globalization and technology have introduced in the social fabric the concept of communicating vessels. Immigration from poor to rich areas is a 'social tsunami', and it would be vain to try to block it with populist arguments. Governments need to govern it as best as possible in the medium and long term and prepare for the tide. In the countries where natural disasters occurred,  they will engage in rebuilding houses, railways, anti-seismic construction; in the 'global risk society', they should engage vigorously in a culture of solidarity and hospitality, a diverse division of work and a diverse concept of citizenship. Those who think that erecting walls will contain the human tide, will only render it more destructive.

The main thrust of these changes is to build up progressively a new model of development based on sustainability (in the wide sense) and social justice. The logical premises exist  but the forces of resistance to change may still be very powerful.

* Risk society" is a term that emerged during the 1990s to describe the manner in which modern society organises in response to risk. The term is closely associated with several key writers on modernity, in particular Anthony Giddens and Ulrich Beck. The term's popularity during the 1990s was both as a consequence of its links to trends in thinking about wider modernity, and also to its links to popular discourse, in particular the growing environmental concerns during the period (from Wikipedia: http://en.wikipedia.org/wiki/Risk_society)

Growth is not a measure of society's success

Society's success cannot be measured only by economic growth. This view is gaining wider acceptance among academics as well as policy makers.

Kenneth Boulding wrote with great sense of irony: "the only people who believe in infinite growth in a finite world are madmen and economists". There are limits to growth because of the scarsity of natural resources and its overexploitation which makes growth  uneconomic in the sense that marginal costs may exceed marginal benefits*. Natural disasters, for example are known to increase gross domestic product. But since many large costs, to repair the damage such as providing temporary housing to displaced people, are not considered as real costs and are kept off balance sheet, policy makers continue to pursue growth no matter the cost.

Several economists have challenged this conventional wisdom and have advanced a set of ideas that put in question growth as a paradigm and outline a vision of progress based on qualitative measures. Nobel prize, Joe Stiglitz, together with Amartya Sen and Jean Paul Fitoussi issued in 2008 a report about alternative measures of economic progress.

It is hopeful to see a modern nation such as Japan stepping off the ever-accelerating machine of infinite economic growth and finding that societal well being remains high (FT January 6). Japan is not Bhutan, a country which is proud of being at the forefront of measuring happiness as an indicator of  social welfare.

What do we have for all the growth of recent times? Flat screen televisions and other incredible innovations, but also deforestation, climate change and stagnant incomes for all but the richest households. Shouldn't we rethink radically our model of economic development as a way out of the crisis?  

As Robert Kennedy said in a speech in 1968, GDP "measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile". 

 

* See the work of Herman Daly, an ecological economist credited of having originated the concept of uneconomic growth and the paradigm of steady state economy (http://www.sd-commission.org.uk/publications/downloads/Herman_Daly_thinkpiece.pdf )

Copenhagen is just the start of a process

Most analysts and press coverage talked about the failure about negotiations on climate change. Yet, the outcome of the Copenhagen summit was largely foreseen. It is true that too high expectations were placed on the talks. So what went wrong?

Climate change is too big an issue to be resolved at once. It is thus difficult to judge on the sole fact that the agreements were not binding- the Kyoto protocol was legally binding but had essentially no effect on the global emissions. We can also mention the (morally justified) protests of the third world countries. So let's be realistic.

This is an issue of balance of power in which the actions of 20 nations really matter. This is the first time in history that all leading economies had come together to take action on global warming. In its final declaration*, the Copenhagen summit did not reach an agreement on quantified targets on global emissions by 2020. However, it registered a number of key advances. The US administration (unlike the previous one) is now committed to curb gas emissions. There is some financing from rich to poor countries to help combat the consequences of global warming. Nations have also agreed on a deal on deforestation, which is a major source of carbon emissions.

The big developing nations - which will be responsible for future growth of gas emissions- have come close to acknowledge that there will be no solution without a contribution from them. We are not there yet- and there will no doubt be more fractious negotiations to come. The whole issue is about what model of development all nations want to pursue. China, India or Brazil cannot simply continue in their development path in a business as usual scenario- which is in fact not simply an imitation of the development model experienced by the most developed nations. We're also talking about meeting basic needs of the population such clean water, electricity (especially in rural areas) and other public utilities.

The time has also come to change direction. The major producers of carbon emissions - above all China and the US- should agree on introducing a carbon tax. This proposal has been dismissed as being politically impossible, but this seems to be the only way forward. China and India will never agree on binding quotas. That is fair as nobody can predict how much fossil fuel the rapidly growing economies will need by 2020. These economies should instead not grow on a business-as-usual path, but pursue their economic development while decreasing their carbon emissions.

Another key lesson from the summit is also the role of the UN. There has been a lot of criticism on its ability to solve the world's most pressing problems. Should key nations negotiate among themselves, and let others endorse (or not) as they wish? This would in my view be morally irresponsible: all countries should be part of the deal as problems should be addressed equitably. This is perhaps more difficult, as countries must, according to UN rules, reach a consensus before a binding decision is made. For a climate change agreement covering many complex areas, hundreds of negotiators had to meet in dozens of working groups to work on draft technical documents. But in the long run, the UN method will pay off and will prove its effectiveness in forging a treaty on climate change. This will depend on common will which should prevail against narrow and selfish interests of the single nations.

* http://unfccc.int/files/meetings/cop_15/application/pdf/cop15_cph_auv.pdf

Climate change, poverty: two defining challenges

Climate change and poverty are the two defining challenges of the 21st century and they must be tackled together. It means that if we fail one, we fail the other. The aim is to meet the environment's carbon constraints while creating the growth necessary to raise living standards for the poor.

It is true that climate change affects gravely the poorest in many parts of the world. Natural disasters have a devastating impact on human lives and also on means of subsistance.

There is no alternative to a low carbon economy. Current growth patterns are characterized by high prices for fossil fuels and undermined by a hostile physical environment that climate change is already creating. If risks are not addressed, the eventual consequences will be worse.

Climate change poses a profound threat to our economic future and to the economic possibilities of our grand children (to quote a famous essay by Keynes), while low carbon growth promises decades of sustainable prosperity.

The Stern report* concluded that "the benefits of strong, early action on climate change considerably outweigh the costs". It proposes that one percent of global GDP per annum is required to be invested in order to avoid the worst effects of climate change, and points out that failure to do so could risk global GDP being up to twenty percent lower than it otherwise might be.

However, there is a continuing rich-poor divide on sharing the burden of curbs on greenhouse gas emissions in a drive to avert droughts, wildfires, species extinctions and rising seas. At the G-20 on 7 November, Britain pushed to reach a $100bn deal to meet the costs of climate change by 2020 but developing nations held firm they would not accept.

The forthcoming UN summit in Copenhagen will probably not lead to an agreement on the costs of climate change. Economic interests from rich and emerging countries seem difficult to reconcile. But rich countries should also endeavor on helping the poor to adapt to climate change, sharing technology and cutting emissions from deforestation. The selfishness of the rich countries is in fact the main source of division.

* http://www.hm-treasury.gov.uk/stern_review_report.htm