Water Privatization

“Water promises to be to the 21st century what oil was to the 20th century: the precious commodity that determines the wealth of nations.”

Fortune Magazine, 2000

What is it?

Water privatization is the process by which the private, rather than the public, sector gains control of water assets and operations. There are three forms in which this usually occurs.

  1. Governments or public water delivery and treatment plants sell the entire system to corporations.
  2. In public-private partnerships, corporations take over water delivery services and operating/maintenance costs while collecting the revenue and keeping the profit through leases from the government.
  3. Corporations are contracted to manage water systems for an administrative charge.

Privatization and profit

The scarcity of available fresh water is being noted by corporations who are taking advantage of this situation to turn a profit in the trade of water. Unlike the small-scale water trading done by farmers in communities where water is viewed as a shared resource, many of these corporations are transnational companies do not care about regions, communities, or individuals.

Barlow and Clarke explain how the transition from public to private water systems introduces a whole new set of commercial obligations: “Maximizing profit is the prime goal, not ensuring sustainability or equal access to water” (89). As a business, water services can no longer be provided for their own sake. The private sector must give preeminence to profit and dividend generation which can be reinvested in their company, expanding their empire.

Frankly, the water industry is worth a lot of money. An indispensable product, a captive market, a rising demand, and willing governments are making the trade in water worth hundreds of billions. It is no surprise then that corporations are scrambling to get a part of this profit, resulting in the massive growth and expansion of this new industry.

Water: need or right?

There has been much international discussion in regard to whether water should be classifies only as a “need” or whether it can in fact be acknowledged as a “right.” This issue is not merely about definitions. For which ever term is decided upon and established in law and policy practice will have direct implications as to who controls water—the government or corporations.

If water is only a need, the private sector can assume the right to use it on a for-profit basis. However, if water is accepted as a universal right, the state can ensure that all people have equal access without regard for profit.

In 2002, the United Nations adopted water as a right for life through the International Covenant on Economic, Social, and Cultural Rights. Unfortunately, this principle is being violated as billions worldwide lack access to clean water and face waterborne illnesses each year, and privatization is intensifying this crisis.

The appeal (and the reality)

With all of the obvious problems associated with privatization, one must ask why an increasing number of public institutions are relinquishing control to corporations. In many cases, this process is occurring because many local governments do not have the tax revenue to sufficiently maintain pubic systems and they see privatization as a way to supplement their financial needs.

Debt, deficit issues, and deteriorating water infrastructure are causing municipalities to look elsewhere for help. The lack of available money for upgrading municipal water facilities reflects the current administration’s decisions to repeatedly cut these expenditures. Public Citizen’s article “How Clean Water is Threatened by Budget Cuts” is a poignant example of how one federal program has been targeted for elimination and could result in serious loss of water infrastructure support. Speculation has also been made that these budgetary cuts have been granted in return for the financial support of the same businesses who will profit from the privatization of water systems.

On the surface, it appears that the sale or lease of water systems will help alleviate the government’s financial burden and private companies can be made responsible for renovating the water infrastructure.

Privatization however, does little for the public system’s financial situation. This is because even after the private sector is given control, significant financial support is still provided for the water system by the government and public institutions. Cash contributions, grants, and tax breaks are given to the companies as “financial guarantees.” Although the public is still paying for at least a portion of the private water systems they now have less control over these systems than before.

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