Private Water Saves Lives

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Our friends at the Reason Public Policy Institute (owned by the Reason Foundation, which also owns Reason magazine) reprint an interesting article from the Economist on their Web site, summing up a recent study indicating that privatizing water services can reduce child mortality. An excerpt from the article: Among municipalities in Argentina that privatised in 1990-96, the number of households connected to the network rose by 4.2 percentage points more than in districts that remained in public hands.

Before privatisation really got under way, in 1995, child mortality rates were falling at much the same pace in municipalities that eventually privatised and those that did not. After 1995, the fall accelerated in privatising municipalities. The fall was concentrated in deaths from infectious and parasitic diseases, the sort most likely to be affected by water quality and availability. Deaths from other causes did not decline.

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  1. Ask anyone in the UK if they think that they have benefitted from privatising water supply and management. The british government simply carved up a monopoly into regional lumps, sold them off to the highest bidder (no relation), and then watched them reap huge profits from a captured market.

    I mean, seriously, think about it. You don’t like the quality of your water. Hmm. What can you do? Disconnect?

    From time time, these reports of the alleged benefits of privatising water come out. Do we really believe that making the water supply a for-profit enterprise is a prime or even contributing factor in reducing child mortality?

  2. For privatized water to work, there needs to be an open market and competition. Changing from a government monopoly to a government-protected private monopoly, which is what happened in the UK, doesn’t count.

  3. The original study which backs up the Economist article can be found here in PDF format. Provided to me by a reader of my blog.

  4. How exactly can competition work? Can I choose whose water will come through my pipes? Even assuming that this is somehow possible, how will suppliers differentiate their products? The only way one supplier will make theirs cheaper than another is to cut costs on treatment.

  5. Although I’m in the Northland now, I still have a place in Austin, TX and keep up with the news there. Water is a big deal.

    T. Boone Pickens, who used to drill oil is now trying to drill water – it’s potentially more lucrative. Problem is, anyone in Texas can punch a hole under their property and suck an unlimited amount of aquifer water from it. One guy can dry up a whole region that way.

    Which is just what Pickens wants to do. Build a pipeline west so Phoenix can water its golf courses.

    I think that’s a problem and not one privates handle very well.

  6. As the geologist in the movie, Jurassic Park, remarked, “[Life] will find a way.”

    So don’t worry about it.

    “Anything you can do, I can do better” is not just a song, it’s a commentary on the public vs. private syndrome.

    Governments have no incentives to make life better. If they do anything, they do so at very great expense — be it choo-choo’s, NASA, the military, or any of a host of so-called public “services”. (We’re talking about YOUR wallet here.)

    Whereas a private company better perform in a cost-effective way, or perish, so that another company can take its place.

    It’s such an old, hackneyed concept, I know. But it bears reminding — over and over again.

  7. It isn’t privatisation, it’s capitalization. The deal to privatize water systems also required the buyers to make big time investments.

  8. Ah yes, the power of the market. A private company makes defective widgets and goes bust, no big deal. A private company supplies contaminated water, then people get sick and die.

    Wait – you say, then there can be regulations, inspectors etc. And, since water prices can hardly be allowed to fluctuate by supply and demand, price fixing may have to be enforced.

    What you end up is with private monopolies which have all the characteristics of public utilities, while creaming off profit for their owners.

    Has everyone forgotten Enron so quickly?

  9. Bill,

    Do you think we would be better off to socialize food production and distribution? After all, people who eat contaminated food get sick and die, too! Which does indeed happen sometime, but thanks to that ol’ magic of the market, most of us eat as much cheap and safe food as we like. Therefore, to make your case, you can’t just fall back on the need for safe water; rather you need to show why markets would react to water differently than to anything else, including something as equally as important and prone to danger as food.

    As for Enron, whenever I read about the rules placed on electiricity providers under California’s so-called privitization plan, I get dizzy. Sure, if you give privates an incentive to cheat and screw people, they will. The point of free marketeers is NOT that private companies are inherently better than government bureacracies (thought the reverse DOES seem to be the point of statists), it’s that when allowed to operate freely, incentives make markets work best.

  10. “Sure, if you give privates an incentive to cheat and screw people, they will”

    Like, maybe a dollar?

    Now this doesn’t make private business bad. They are what they are and they do a lot of things well. I just don’t want them controlling the water, especially in hard times.

  11. >>I just don’t want them controlling the water, especially in hard times.

  12. You’re full of shit. A dozen companies manipulated the electric market in California. When a company fucks up and gets sued too badly they just re-form under another name and keep on keeping on. They scrimp on redundancy systems, cut corners and cheat in order to return money to their shareholders.

    There are areas like water and power and freedom (Halleburton) that should not be trusted to privates to control.

  13. I think in the future, drinking water and washing water (or whatever else you do with it) will be suplied by differnt sources. Already, I don’t drink tap water. For me it’s a matter of taste, but in other parts of the world it could be a matter of health. So, all of my drinking water is supplied by private companies at a much better quality than municipal water. Never trust the goverment to do private enterprise’s job.

  14. >>There are areas like water and power and freedom (Halleburton) that should not be trusted to privates to control.

  15. Bill wrote,

    “Private enterprise has no incentive to provide clean water except as laid down by regulation and the possiblity of being liable for damages.”

    What about the profit motive? The demand for contaminated drinking water is pretty anemic.

    “[T]he government has overall turned out to be not such a bad manager of our water resources.”

    I disagree. If governments managed water well, there wouldn’t be local shortages every summer.

    I’d also like to point out that there is already a robust private water market, just not over miles through pipes. Most of us can go to the grocery store and buy water from Magnetic Springs, Aquafina, Evian, and others, or we can have water delivered to our homes in larger vessels. Do you never drink water from these sources?

  16. Laz, it’s called Fiduciary Responsibility. Privates are legally and morally responsible to their shareholders first. Period.

    The government’s shareholders are its people – all of them.

    You can argue how well they each carry out their responsibilities but the central premise holds.

  17. “You can argue how well they each carry out their responsibilities . . .”

    Isn’t that the argument worth having? Don’t we want to know how well actual governments manage and produce drinking water, vs. how well actual private firms do (or can be expected to, from other evidence plus economic reasoning)? Comparing a fantasy government (“The government’s shareholders are its people – all of them.”) with actual private firms is not interesting or persuasive.

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