Water Privatisation

Water is a natural resource, God-given and free as it falls from the sky. It is also essential to all life, including humanity. Lack of good water is the biggest single factor in disease and ill health in the developing world, and without it people cannot grow crops to support themselves. Pollution of water sources or over-extraction has a very damaging environmental impact. For all these reasons water is special and should be seen as a common good, part of the responsibility of governments to their people. Access to clean water is a human right, not something to be traded away or withheld on grounds of cost.

Demand for water increases with population growth, so it does not respond to market signals in the way other resources do. Rich consumers in the developed world also waste water through extravagant use of luxuries such as garden sprinklers, swimming pools, lush golf courses, etc. – a problem which will get worse as income inequality increases, both between and within countries. Demand management is needed to prevent waste and to ensure access for all, including the poor, something which pricing water in a purely economic way will not achieve. This is a job for governments, accountable to their people, not for private companies.

Large sums are needed to meet global water targets, but the private sector will only provide these in return for a large commercial return, meaning that the true cost of the investment will eventually be much higher than if it were publicly funded. Investment from governments and donors is preferable to privatisation as they can target investment at the most needy, rather than focusing upon the most profitable opportunities. Water supply is also a natural monopoly, so private companies have no competitive pressures to drive up quality and drive down prices.

Even in the developed world, the experience of water privatisation is not encouraging: in England shareholders cashed in and much of the industry ended up in foreign hands while prices went up, yet droughts in the 1990s still led to widespread rationing. Recent electricity supply crises in California have also shown how badly regulation of private utilities can fail. Meanwhile Australia has successfully reformed its water supply system while retaining it in public hands.

Treating water as a purely economic good will be bad for the poor. The rich may take advantage of badly targeted subsidies in some developing countries, but that does not mean that these subsidies are not essential to the poor. How would farmers in much of India cope without state-funded irrigation water? South African experience shows that when their village water supply was charged at even a low price, many women chose to fetch dirty river water from a long distance rather than pay the new cost. The Bolivian disaster of privatising water supply in Cochabamba shows the dangers: the American firm Bechtel doubled water tariffs so that some families paid a third of their whole income in water rates, mass protests led to army repression and even death before the scheme collapsed completely.

Private companies are unlikely to care for the environment. Their duties are to their shareholders, not to society at large and nature in general. They will seek to reduce costs and maximise profits, most likely at the expense of high environmental standards.

Attempting to use market mechanisms such as water exchanges to protect the environment is also a bad idea. The value of healthy ecosystems and biodiversity is impossible to calculate. Trying to do so makes the environment just another resource to be exploited, rather than protected for its own sake.