The Fourth Wall
page 5
Water, from page 1
efficient method of management.
Supporters of the private-sector
have argued otherwise. In an arti-
cle asserting the benefits of water
privatization, Fredrik Segerfeldt
says that the privatization move-
ment has been largely ineffective
only because multinational corpo-
rations frequently fail to imple-
ment efficient methods of main-
taining contractual obligations.
The contracts themselves are also
very demanding of companies,
often including vague suggestions
about prices, methods, and prod-
uct quality. Instead of dismissing
water privatization as ineffective,
he suggests that investors and
companies work together to de-
lineate more successful. But other
experts in the field do not feel
that the efficiency of privatization
can be improved. The nature of
private-sector profits and compe-
tition makes the practice of water
privatization economically cor-
rupt, often sacrificing the rights
of whole communities to increase
profits. Privatization essentially
establishes a monetary value for
water resources, which can be-
come a powerful and inaccurate
label due to the complex relation-
ships between water and a re-
gion’s social, political, and eco-
nomic context. When states fail
to provide efficient water ser-
vices, private companies seem to
be the answer. Instead, privatiza-
tion can make things worse be-
cause developing countries lack
financial resources to establish
proper. regulatory committees to
ensure that companies are adher-
ing to the standards and condi-
tions outlined in their contracts.
Because of the expense in-
volved in water, management, as
well as the diverse array of agri-
cultural, industrial, and public
water needs, the methods used to
manage water resources can
greatly impact a country’s econo-
my. Between 14 and 30 billion
dollars a year is required to make
clean drinking water and proper
sanitation available to all those
who need it. The introduction of
transnational corporations (which
will further be referred to as
TNCs) in the twentieth century
has had a huge impact on the op-
tions available when it comes to
providing and improving these
water services, especially in de-
veloping countries where invest-
ment capital is low. TNCs often
have an enormous amount of po-
litical and economic leverage
because of the profits they bring
in. In 2000 only 73 countries had
gross national products over $10
billion. In comparison, 485 cor-
porations had profits exceeding
the same amount, and 11 brought
in profits over $100 billion. When
a corporation of this magnitude
has control over a country’s most
valuable resource, the effects can
be a devastating shift in power
and control.
Some economic experts favor
transnational corporations, saying
that foreign direct investment
stimulates the economy of devel-
oping nations and allows for
growth of capital and improve-
ment of infrastructure. Poor coun-
tries with no means of income
growth: are then in a position to
break their own cycle of poverty.
This, argument, however, hinges
on the assumption that the market
has perfect competition and that
companies that are investing do
not deduct unreasonable or exten-
sive profits. According to sup-
porters of the Global Reach argu-
ment, TNCs will never provide
perfect competition because of
the extent to which they control
the market. In the case of water
privatization there are only two
major competitors within the in-
dustry, Suez and Vivendi, along
with their partners and subsidiar-
ies. Because TNCs are such large
companies, they frequently form
oligopolies in communities where
there are no substantially large
local businesses, as is often the
case in third world countries. This
is certainly the case with Suez
and Vivendi, since most of the
world’s private water manage-
ment is controlled by these two
companies and their subsidiaries.
The result is a depression of local
water management businesses, an
uneven distribution of wealth,
and the consequential reinforce-
ment of social class systems. The-
se economic implications vastly
increase the cost, both socially
and financially, of privately con-
trolled water management and
sanitation.
Many activists and experts
feel that economic consequences
and price increases make private-
sector water management unrea-
sonable. The cost of water for the
consumer is not only determined
by the cost of water infrastructure
and development projects within
the region, but also what the cor-
poration hopes to gain in profit as
a result. In 2005, private manage-
ment of water resources was esti-
mated to be a $200 billion indus-
try. A for profit company simply
can not maintain a humanitarian
mission statement while still pay-
ing dividends to its investors.
Supporters of privatization argue
that price increases are infrequent
and rarely cause problems for
communities who switch to pri-
vatized water resources. There is
little evidence, however, to sup-
port this claim. On the contrary,
there is much evidence to support
the fact that price increases are
quite common and often cause a
huge discrepancy in the availabil-
ity of water to the wealthy versus
the severely impoverished. After
the city water systems of Cocha-
bamba and El Alto in Bolivia
were placed under the control of a
Bechtel Corporation subsidiary
under pressure from the World
Bank, rates for local water rose
by 35 percent. Similarly, when
private water metering was intro-
duced in rural areas of South Af-
rica, many of the poor were no
longer able to afford clean water
from public wells that were once
accessible for free.
Perhaps the most compelling
argument against private-sector
control of water resources is the
belief that water is a fundamental
human right and as such should
be available to everyone. Water
is not listed in the 1948 Declara-
tion of Human Rights only be-
cause it was considered a univer-
sally accepted fact that water is
necessary for life and free for all.
However, if water is a human
right, then so must also be food,
since it is essential to human life.
Since it is unreasonable to argue
that food should be controlled by
governments, some insist that it
should also be unreasonable for
water to be controlled in this way.
This argument can be considered
invalid when you consider that it
costs money to buy seeds for
planting crops, buy food for rais-
ing livestock, and pay workers to
harvest crops. Water, on the other
hand, is freely available in the
form of rainwater. The issue is
not how to distribute water, but
how to best establish water infra-
structure in a way that will meet
the demand for proper availability
and sanitation. A for profit com-
pany can not meet this challenge
in a way that is in the best interest
of the people.
Although water is a renewable
resource, excessive use by one
group takes away from its availa-
bility to others. When a monetary
value is associated with water, it
creates a situation in which one
group can take as much water as
they want as long as they have
the money to pay for it. This
leads to depletion of ground wa-
ter (and water resources in gen-
eral) in places where bottling
plants are established. One exam-
ple of this unfair use of water was
the establishment of the Coca-
Cola bottling plant in Mehdiganj,
India in 1999. Not only did the
plant cause devastating agricul-
tural damage as a result of a
wastewater spill in 2002, but it
used so much water that water
levels in the area dropped by 40
feet. When Nestle’s Deer Park
bottled water brand established a
plant in Michigan, the company
took so much water that locals
eventually took their case to the
Supreme Court of Michigan. The
court ruled in favor of the compa-
ny, establishing that as public
property, water is free to all, in-
cluding bottled water companies
who sell their products at outra-
geously expensive prices. Similar
incidents, such as the outbreak of
disease and denial of access to
water based on an inability to
pay, occurred in Bolivia, the Phil-
ippines, and South Africa.
In addition to the negative
effects that water privatization
has on local communities, private
-sector water management also
undermines the idea of water
rights as a whole. By treating
water as a commodity, corpora-
tions are ignoring the meaning of
water within different social con-
texts, such as the religious signifi-
cance of the Ganges River in In-
dia. The classification of water as
a commodity stems from the con-
flict of interest that is often preva-
lent in large corporations, such as
the TNCs that control the private
water market. Control of water in
areas of water shortages allows a
corporation an enormous amount
of political leverage.
One way that water corpora-
tions can influence the market is
indirectly through the World
Bank and the IMF. By giving
loans to poor countries that can
not even pay for water develop-
ment and other basic needs, the
World Bank and the IMF create a
situation in which countries be-
come buried in international debt.
This then becomes leverage that
the World Bank and the IMF use
to push contracts and developing
projects that serve the interests of
their investors. Making matters
even worse, the conditions of
these loans force water privatiza-
tion on third world countries. As
mentioned earlier, development
loans from the World Bank often
carry conditions of water privati-
zation. Unfortunately many peo-
ple do not understand this rela-
tionship between development
groups and the private water in-
dustry. Consider that the two top
advisers to former president of
the IMF, Michel Camdessus, are
none other than the two vice pres-
idents of Suez and Vivendi, and
the conflict of interest suddenly
becomes very apparent.
Those in favor of water privat-
ization have no argument when
you consider the compounded
negative effects that private-
sector water management has on
a given region. Although eco-
nomic experts argue on both sides
of the dispute, those in favor of
privatization adhere to a set of
idealistic views and the belief in a
perfect system of privatization.
The conflict of interest and moti-
vation for profit evident within
the water market and develop-
ment organizations make this
flawless system next to impossi-
ble, and the effects of water pri-
vatization thus far are certainly
evidence of this fact. Countries
that have made the switch to pri-
vately managed water resources,
including Bolivia, India, Mexico,
and the Philippines, soon realize
that privatization was not the im-
peccable solution it was thought
to be. Instead, privatization leaves
a path of economic and social
destruction in its wake. Water
privatization is not the answer to
our problems.