WATER FOR SALE

CATO INSTITUTE

Contents

Preface...........................................................ixAcknowledgments...................................................xi1. Introduction...................................................12. Aqua Vitae.....................................................73. Shortage of Good Policies, Not of Water........................134. Water Rights-The Solution to Many Problems.....................295. Markets and Conflicts..........................................376. The Price of Water.............................................437. The Possibilities of Privatization.............................598. Hazards of Privatization.......................................799. The Poor Need Water, Not Ideology..............................111Notes.............................................................119References........................................................127Index.............................................................137

Chapter One

Milagros Quirino and Fely Griarte live in a poor part of the Philippine capital, Manila. For most of their lives, lack of clean and safe water was a major problem. They had to do with only a few liters of water a day. Usually they bought it from a neighbor family that owns a deep-water well. About 3,000 families in the neighborhood used to share three such wells. "We often had to get up at 3 A. M. to make sure we would get water," said Fely. "And if there was a power cut and the water pump did not work, we would have to wait another day." The quality of the water was poor, and it had to be boiled before use.

The situation Milagros and Fely experienced, and worse, is shared by many. Throughout the world, 1.1 billion people do not have access to clean and safe water. This figure has held constant for decades. Most of them live in poor countries. The shortage of water has fearful consequences in the form of poverty, disease, and death. Ninety-seven percent of all water distribution in poor countries is managed by public suppliers, who are responsible for more than a billion people being without water. To overcome this problem, some governments of impoverished nations have turned to business enterprise for help, usually with good results.

In poor countries with private investments in the water sector, more people have access to water than in those without such investments. Moreover, there are many good examples of business enterprise successfully improving water distribution there. Millions of people who previously lacked water mains within reach are now getting clean and safe water delivered within a convenient distance and are spared all the privations that water shortage entails.

Milagros and Fely are among these lucky few, since they happen to live in a city where reforms have been undertaken. Two private companies have taken over the water distribution and have reached millions of residents who previously were not served by the public utility. During that time, connections to the water supply systems were not possible because the families have no land titles. The residents, therefore, were delighted when staff from one of the water companies, Manila Water, in a special project targeting poor neighborhoods, came to their area in 2000 to introduce the project, in which residents no longer need land titles to be served by the company. They now not only have access to clean water 24 hours a day, but the water is cheaper. While they used to pay 100 pesos for 1 cubic meter, the cost is now only 15 pesos, including 7 pesos set aside for operation and maintenance. Milagros and Fely, together with millions of other Manila residents, are much better off.

But the "privatization" of water distribution has stirred up strong feelings and has met with resistance in various parts of the world. Googling for "water privatization" on the Internet yields 1,750,000 hits, many concerning various kinds of opposition to the involvement of commercial interests in water supply. And indeed there have been violent protests and demonstrations against water privatization all over the world, not least at the G8 meeting of June 2003, which, ironically, was held in the French town of Evian, famed for its mineral water.

The water supply issue has been the subject of a succession of activities at the supreme level of international politics. The United Nations has discussed it, and several UN agencies are very actively addressing water supply in poor countries. One of the organization's Millennium Development Goals is to halve the number of people in the world without access to safe drinking water. Three World Water Forums have been devoted to world water supply. These meetings have been surrounded by protests and demonstrations, and some of them have been virtually sabotaged by hard-line opponents of privatization. There is feverish international activity concerning the world's water supplies, above all in poor countries, and a very fierce debate is in progress concerning the role of business enterprise and the market in this context.

Opponents of privatization look askance at the possibility of making money from people's need for water and fear that the poor will have this fundamental necessity taken away from them if they cannot pay for it. Water, they argue, is a human right that the public sector is duty-bound to provide to the population. Claude Gnreux, vice president of the Canadian Union of Public Employees, has put the argument simply: "Water is a basic human right, not a commodity to be bought, sold and traded." Other opponents use slogans like "People do not drink money, we drink water" and "No profits from water."

Simplistic arguments like this do not present any alternative solution and are founded on ideological conviction, not facts.

Many of the active protagonists in this debate are the selfsame nongovernmental organizations (NGOs) and individuals within the anti-globalization movement who used to campaign for restrictions on international trade. Having lost the debate on free trade, they are now looking for new adversaries and new expressions of international enterprise to attack. Public-sector employee unions and other organizations with a powerful vested interest in water remaining under public auspices constitute another group. A third group is the media, which have given the issue generous but slanted coverage. These three groups are found above all in affluent countries. Activist organizations in developing countries make up a fourth group, albeit more limited. Let us take a closer look at these different groups, as an introduction.

Given the capital failure of the public sector to supply poor people with clean water, the positions and actions of antiprivatization activists are hard to understand. In light of the overwhelming evidence, one cannot help drawing the conclusion that they are driven by an ideologically inspired aversion to enterprise, coupled with fear on the part of vested interests of losing their privileges. These groups share a belief in the superior ability of the public sector to deliver what citizens want, along with a profound suspicion of the market economy and business enterprise in general and Western big business in particular.

The American Corpwatch organization claims that business interests are waging an aggressive campaign for control of the world's...