We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Multinationals are evil, obviously

I occasionally take a look the Observer newspaper to see if that sister publication to the Guardian has improved; sometimes it has good things in it – I like its sports coverage – but its write-ups on business issues never change from a sort of anti-globalista, Keynesian mish-mash. An article in this Sunday’s paper about the supposed crisis of shortages of drinking water is no exception:

The midday sun beats down on a phalanx of riot police facing thousands of jeering demonstrators, angry at proposals to put up their water bills by more than a third. Moments later a uniformed officer astride a horse shouts an order and the police charge down the street to embark on a club-wielding melee that leaves dozens of bloodied protesters with broken limbs.

A film clip from the latest offering from Hollywood? Unfortunately not. It’s a description of a real-life event in Cochabamba, Bolivia’s third largest city, where a subsidiary of Bechtel, the US engineering giant, took over the municipal water utility and increased bills to a level that the poorest could not afford.

Yup, those evil foreigners, and worse, Americans!

Welcome to a new world, where war and civil strife loom in the wake of chronic water shortages caused by rising population, drought (exacerbated by global warming) and increased demand from the newly affluent middle classes in the emerging economies of Asia and Latin America.

If water is so scarce (it is not, two-thirds of the globe is covered with the wet stuff) then those evil capitalists would surely be investing like hell to create more of it, by irrigation, building reservoirs, desalination plants, etc. If demand from all those “affluent middle classes is rising” for the good things of life, that seems like a great market to tap (‘scuse the pun). Greater revenues for the water companies, particularly if they are allowed to compete for business rather than protected as monopolies, will surely drive increased investment in water, no? But as far as the author of this article is concerned, the very idea of allowing foreign, private companies to operate such utilities is beyond the pale.

The question for countries as far apart as China and Argentina is whether to unleash market forces by allowing access to private European and American multinationals that have the technological know-how to help bring water to the masses – but at a price that many may be unable, or unwilling, to pay.

If the problem is that people cannot afford to pay supposedly higher water bills, then the problem is lack of income; protecting state-run utilities and resisting the investments of mulitnationals is daft; surely, if the underlying problem is poverty, then the solution is more trade, more capital flows, more investment, right?

As Cochabamba illustrates, water is an explosive issue in developing countries, where people have traditionally received supplies for free from local wells and rivers. But in the past 15 years rapid industrialisation, especially in places such as China, has led to widespread pollution and degradation of the local environment.

“For free”. Well, someone had to dig that well. Someone had to lift the water out of it, transport it, purify it, etc. When people say that water should be “free”, they pay no heed to the expenditure of effort in getting water and conveying it to where people want it the most. Multinationals are rather good at figuring out how to do this.

Max Lawson, senior policy adviser for Oxfam, says: ‘We are sceptical that private-sector involvement is the solution for very poor countries. In fact, there is an argument that much greater public sector involvement and cash is needed to channel supplies to where they are most needed.’

Another pretty good reason for not giving a penny to Oxfam, in my opinion.

Some earlier reflections on water.

15 comments to Multinationals are evil, obviously

  • Brian

    ‘For Free’ : NewSpeak for ‘Paid for by Somebody Else’.

  • TedM

    Johnathon,

    You forgot to mention how this harms the
    chilrun.

  • ResidentAlien

    My part of Florida has been suffering from a prolonged drought. We have restrictions on when we can water our lawns and calls to restrict housing development. As in most of the US, the water company is a state (well actually county) owned monopoly and no consideration has been given to simply increasing the price of a resource for which demand exceeds supply.

  • Frederick Davies

    …drought (exacerbated by global warming)…

    Oh, sure; and when it rains too much and they get floods it is due to Global Warming as well.

  • I hope you washed your hands after reading that filfth.

  • Robw

    Another pretty good reason for not giving a penny to Oxfam, in my opinion.

    Just how many reason are there not to give any money to Oxfam? They certainly seem willing to address poverty by creating more of it.

  • Lascaille

    I think this is more to do with transition between a barter and a cash economy; previously, water from wells has been ‘free’ only in the sense of not being available for cash – the wells have been dug generally as a cooperative effort by the people of a village/settlement/whatever simply on the basis of need. The water is ‘free’ but the labour is paid for on a non-cash basis – the currency is simply the ability to survive in a certain location vs the inability to survive in that location.

    When you refactor that with a cash deal, although the quality of the water may be better due to the additional expertise, the poorest are unable to ‘afford’ the water because they operate outside of the cash economy – on an indepdenent scale they are able to offer sufficient labour to offset the costs of the water, the demand for the unskilled labour is not there – largely due to the ‘levelling up’ of local standards due to the above-mentioned deals.

    While I agree with your general points you do have to remember that many of these countries are hugely corrupt and elitist, and that many of these ‘upgrades’ are designed to raise the standards and cost of living in the city to make life untenable for the slum-dwellers, who have basically come to the city one a one-way ticket and are not making a visible contribution to the lives of the middle-class.

  • Bolivia is awash in water. Lake Titicaca, the biggest fresh water lake in the world is there, also numerous rivers. Bolivia is a tropical land, with abundant water, not a desert.
    People in Cochabamba don’t lack water, what they lack is pipes and pumps to bring the water to the homes i.e. water works.
    Bechtel was contracted to lay the infrastructure. They were authorized to cover their costs by charging for the water they supply. Those who don’t want or can’t pay, are free to live as they lived before: without Bechtel supplied water. (They carry their water from wells and rivers). Nobody is forced to connect to the system.

    People, of course, prefer to riot and confiscate the water works after they have been laid, rather than pay. But, with Bechtel out and not running the system, and not pumping the water, they’ll get idle and rusting pipes in the ground, but no water.

    That’s standard socialist wisdom and practice.

  • Ben

    Jacob,

    I fear that’s not the case. People were banned from collecting rainwater in the deal Bechtel did with the Govt. They acted immorally but let’s not forget that Bechtel did not hold one single gun to one single head. It was the Bolivian government that gave it’s people such a raw deal and they are the culprits in this scenario.

    Friends of Capitalism often automatically stick up for corporations but they forget that corporations can indeed be bloodsucking rent-seeking leeches. Without a government to hold the gun a corporation cannot coerce and this is what needs to be remembered.

  • Paul Marks

    Ben

    How would a “ban on collecting rain water” work?

    Would people be sent to prison for having a water butt?

    How would anyone know they had one?

    As for the Bolivian government – it is a crack brained leftist outfit.

    Bolivian govenrments have been nationalizing things, and messing up what they steal, since at least the 1930′s (the nationalization of oil and other things).

    In 1952 the Revolution nationalized vitually everything (years before Cuba) and even smashed up the large farms.

    So much for “eliteist”.

    The only elite is the state.

    Of course things are returned to private ownership from time to time – when they have fallen apart.

    And what Jacob describes happens.

    The private company spends a fortune repairing the mess – and then gets hit when it tries to pass on the price.

    It is not just in Indian (sorry “Native American”) dominated countries like Bolivia (although, the last time I heard, Santa Cruz was still holding out).

    In Argentinia price controls, in the face of vast government inflation, are destroying the utilities.

    Argentinia has, of course, been defaulting on its debts every couple of decades for the last one and half centuries.

    I do not agree that corporations are wicked – by they are often run by people without a clue about politics (although they think they know a lot “we can always bribe so and so”).

    It is not just the banks lending money that they never get back, it is people investing a fortune in all sorts of enterprises.

    And tben seeing them either stolen openly – or stolen by the instalment plan of price controls and other regulations.

    There are some Latin American Presidents who balance the budget, do not impose endless regulations and do not steal enterprises (the President of Honduras from 1931 to 1948 springs to mind – governed well in the face of the Great Depression and World War II).

    But such men are few and far between, normally even in the 19th century the story was of endless revolutions and other theft and messing about.

  • Sunfish

    Paul Marks:

    How would a “ban on collecting rain water” work?

    Would people be sent to prison for having a water butt?

    Don’t laugh. I don’t know how Bolivia does it, but in Colorado USA that’s actually possible.

    I don’t think it’s ever happened, but we have some very strange notions of water law here.

  • Jacob

    How would a “ban on collecting rain water” work?

    Yeah, I too would like to know.
    They don’t collect rain water in Bolivia, as it rains only 3 or 4 months a year (in most parts). What would they drink the rest of the year?
    They get water from rivers and wells, as I said.

  • On the other hand Bechtel isn’t blameless. They pay bribes to get a fat contract that allows them to charge good prices for water, prices that nobody will be able to pay. (Any contract in a “developing” country involves bribes of government officials).
    They invest a lot of money and build the works, and then, either it is expropriated (with some meager compensation in the best of cases), or people just steal the water and fail to pay the bills, and the government is unable and unwilling to help Bechtel get payd. (The government has changed in the meantime…)

    So – what kind of deal did Bechtel do ? Didn’t they know what was going to happen ? Aren’t they big fools ?

    The same happened to Enron, who built a power utility in India.

  • Paul Marks

    Sunfish.

    Perhaps Colorado should go back to miners law. I am not an archocapitalist, but if the law is getting odd…..

    And it will get a lot odder if the Progressive types keep getting stronger.

    Jacob.

    Quite so.

  • LotsaWata

    Only about 2% of the copious quantities of water mentioned in the post are fit for consumption.(Link)