Africa Energy & Resources Latin America Rights Security, Trade and the Economy Steven Chadwick The United States of America Uncategorized

Water Privatization – Part 2 of 2


This article is a continuation of Water Privatization Part I, in which the possible benefits of exposing water to market forces were explored. This article, however, addresses the opposing viewpoint. It demonstrates that despite several arguments in favour of privatization, there are also many conceptual difficulties that reduce its credibility as a viable system of water governance.

As the earth’s population continues to grow, so too does the rate at which human activity releases hydrocarbons into the atmosphere. As a result, global temperatures are expected to rise and the effects of climate change will become more pronounced. The majority of the international scientific community concludes that this will result in intensified hydrologic variability across the globe, a reality that is bound to introduce new adaptive challenges to countries that have traditionally been considered water-secure. These challenges will be most pronounced in countries that have already been experiencing issues of water security. According to the World Bank, 1.6 billion people currently live in countries with absolute water scarcity, a number which is expected to rise to 2.8 billion by 2025.

In the effort to prevent water scarcity from progressing, politicians, scientists and economists alike have been working to invent clever new methods designed to conserve this precious resource. One of the most controversial means of doing so is arguably one of the simplest. It suggests that the most logical way to conserve our water would be through privatization, thereby treating it like any other tradable commodity. As discussed in Part I of this article, there are quite a few possible benefits to water privatization, the most important being increased allocative efficiency. Nevertheless, opponents of this idea are numerous and not without valid points of their own.

One of the primary arguments against water privatization is an ethical one, and holds that exposing water to market forces would violate access to water as a fundamental human right. As mentioned in Water Privatization Part I, the United Nations is one of the main proponents of maintaining water as a public resource. Through its adoption of Resolution 64/292 (issued on July 29, 2010), the UN calls upon state and non-state actors alike to “provide financial resources, help capacity building and technology transfer to help countries, in particular developing countries, to provide safe, clean accessible and affordable water and sanitation for all.” Furthermore, the UN Committee on Economic, Social and Cultural Rights published what is known as General Comment No. 15 at its 29th session in November 2002. General Comment 15 asserts that the water is a human right, the three components of which include availability, quality, and accessibility.

Rights-based arguments such as this are typically founded on the assumption that water is intrinsically valuable, and therefore not comparable to regular commodities like electricity or gas. This viewpoint is not without merit. There can be no doubt that every human being requires water to survive and that water is a non-substitutable resource. Given its importance, there is strong argument that it should be afforded greater protection in the form of a government monopoly regulated by elected officials as opposed to being controlled by private entities immune to the demands of the electorate.

A second argument against water privatization asserts that by giving control to multinational corporations and other private entities, prices will increase beyond what is necessary for conservation. There are several factors that support this assertion. Perhaps most significantly, it is well known that corporations are required to provide monetary returns to shareholders, and are not responsible for the greater good of the community in which they operate. A report by the non-profit consumer rights advocacy group “Public Citizen” has outlined this problem quite well. In Perkin, Illinois, for example, water prices increased 204% over 14 years after a subsidiary of Water Works Co. began operating the city’s water system. The report also noted how in Nelspruit, South Africa, the British company Biwater increased rates by more than 400%, forcing citizens to drink from the river and resulting in a severe cholera epidemic.

Third and finally, the consequences of water privatization are known to disproportionately affect the poor. The case of Bolivia’s water privatization scheme stands as pertinent testament to this fact. In the 1990s, some of Bolivia’s water systems in the country’s poorest regions were put up for sale to private investors, a decision made with guidance from the World Bank. One of these areas, Chochabamba, was purchased in 1999 in the form of a 40-year lease by Aguas del Tunari, a subsidiary of the London-based International Water Ltd. and the San Francisco-based Betchel Corp. After Aguas del Tunari took control of Cochabamba’s water infrastructure, water prices began to soar and Cochabama’s residents were unable to bear the increased cost. The situation became so dire that in February 2000, Cochabamba experienced an eruption of violent protests that soon spread to other regions in the country, forcing Columbian President Hugo Banzer to place Bolivia under martial law and terminate Aguas del Tunari’s lease.

Protests in Chochabamba, Bolivia following the privatization of the city’s water supply.

As can be seen, the problems associated with this type of outcome duplicated on a large scale are fairly recognizable. If a only a few private actors control the majority of the world’s water, these actors will have the capacity to select who can and who cannot have access based on ability to  pay. When considering that water is required to sustain life, there can be no doubt that those deprived of water will seek to acquire it, whether by peaceful or violent means. Overall, the concept of water privatization is one that is fraught with numerous advantages and disadvantages. The problem is deciding whether or not the benefits of following through with privatization will outweigh the costs. What is clear, however, is that modern rates of consumption (especially in developed states like Canada) cannot continue at their current levels. Something must be done to curb the flow of wasteful water use and encourage its conservation before the tap runs dry.

Steven Chadwick
Steven Chadwick was the Program Editor for International Business and Economy and Strategic Reserve at the NATO Association of Canada. He completed his Honors Specialization in International Relations at Western University, graduating with Distinction. Throughout his undergraduate career, Steve volunteered with the student-run anti-genocide coalition “Students Taking Action Now: Darfur” (S.T.A.N.D), where he held the positions of VP Corporate Sponsorship, Vice President, and President. He has recently completed his first year of law school at Queen’s University Faculty of Law, and is interested in the fields of international trade litigation, corporate finance, and securities regulation. While at Queen’s, Steve also volunteered for Pro Bono Students Canada where he worked for the Kingston Chamber of Commerce and advised local businesses on the process of contract formation. In his spare time, Steve enjoys traveling, competitive basketball and playing guitar.