Samizdata

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.