Should Corporates Control Water?

Be it a “public actor” or a “private actor” in charge of water services, if they aim to make profit, people’s suffering are inevitable, said Petra Dobner, Professor of Political Science at Martin-Luther University, Germany.

“Distribution of water is something that has to be done incrementally”, said Dobner.

Water privatization has led to a situation where people are terminated from water services because they cannot pay. Redistribution of water had to be done to make sure everyone received water, Dobner added.

In her talk, titled ‘A Short History of Water Privatization’ at the Chennai Water Forum convention in Kalakshetra on October 6, Prof. Dobner explained how the perception of water as a commodity evolved and laid the ground for privatization of water resources and services.

In the middle of the last century, the understanding was that United Nations would only intervene when a sovereign state needed support regarding natural resources.  But afterward something important happened to give way to water privatization, said Dobner.

Prior to the United Nation conferences, the different issues of food security, women right and human rights were dealt in separate special conferences. In 1972, the first UN global conference on Human Environment took place in Stockholm.

In June, 1992, the UN conference in Rio de Janeiro held that states all across the world were responsible for the devastating situation of water and its management. It also said that states had failed to bring water to the people, and market would make sure it reached them.

The Rio conference was preceded by the Dublin conference which changed the way water was treated. The Dublin conference concluded with the Dublin principles; the 4th principle conceived water as an economic good. It posited that past failure to recognize the economic value of water had led to wasteful and environmentally damaging uses of the resource.

On the other hand, Rio declaration was that water was both a social and economic good.

Until 1990s, water was considered a social good with public access, said Dobner. By calling it economic good, water was available to be controlled. It was followed by artificial water scarcity in order to raise demand. But in the beginning, “water privatization was well meant, and ecologically sound; it just did not go with the social need”, she added.

Referring to the historical juncture of 1992, after which all sorts of organisational meetings started promoting the privatization of water services, Dobner explained their threefold argument for it. Firstly, they assumed water was wasted and not valued because it was free. Hence, they argued privatization would help in conserving the resource. Yet, the scope for individuals to waste water is quite less as household water consumption contributes only 10% of the whole.

Among the rest, 70% water is consumed by the agricultural sector and 20% by the industrial sectors. Although, household consumption of water is much higher in a first world country like the United States than a developing country like India, water service in India has not yet been completely privatized.

The second argument was that private organisations were more efficient than public ones and thus, could produce water for cheap. They posited that it would help the poor as they pay the highest price compared to their earning. But there was no proof that private companies performed better than government bodies.

The third argument revolved around letting the private companies enter the market which will reduce the price.

“But water is a natural monopoly”, said Dobner, since it can only have a single provider in a particular place. “The providers can compete for the market, but cannot compete in the market.” The lack of competition is promoted by the high entry fee to the market as well. So there is no opportunity for the consumer to choose any other option which is contrary to free market capitalism.

Though they proposed that privatization with its efficient distribution of water would help the poor, it was doomed to fail due to the profit logic of the market. Rural spaces, where distance is longer yet people are fewer, face lack of investment as the payback is not sufficient for the private investors. That is why vast rural regions suffer from water scarcity.

Dobner mentioned that Adam Smith, the founder of classical free market economic theory, in his book The Wealth of Nations, had put some limitations on marketization. Big water infrastructures cannot be privatized, she said, because the public needs access to them. Also the big amount of money needed to build such infrastructures would make the private investors look for profit and hence, higher prices would be imposed. The lack of competition in the water market would feed this exclusionary process furthermore.

But then it raises the question regarding the rationale behind the 1992 decision of treating water as economic good. There is a historical context to this, explained Dobner; after the fall of Union of Soviet Socialist Republics (USSR) in Russia, the fight between capitalism and socialism came to a showdown. That is when people made a mistake by assuming – since socialism did not work, capitalism would.

In this period, the attitude towards social welfare was also changed by people like Margaret Thatcher, former Prime Minister of United Kingdom, and General Augusto Pinochet, the president of Chile advised by the neoliberal economist Milton Friedman and his famous Chicago Boys.

After 1989, the popular notion was that communism was terrible and free market was the saviour. It was instrumental in considering water, which was a public resource, as an economic good.  “State failed, but that did not mean market made it any better,” said Prof. Dobner.

Regarding state intervention in privatized water services, Dobner said that it was relative; if the state was corrupt and did not care about the poor, the companies they give access to will do the same as any private actor.

This article originally appeared here.


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