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Water: Human Right or Commodity?
Water is a vital natural resource that humans are unable to survive without, human society is dependent upon and social relations form around. Water is both a public good distributed by governments due to the health benefits derived from its consumption and an economic resource as water in its liquid state within the hydrological cycle can be managed by public and private entities and sold as a commodity (Merrett, 2004). These opposing views creates controversy as the two contradict one another resulting from the complexity of water as a commodity and the subsequent interference of water as a human right. Consequently, there is a global debate over how water is valued and controlled. With a strive to meet the UN’s Millennium Development Goals and rising interest in political ecology, solutions to provide water adequately and affordably by improving water service supplies globally have been developed (Bakker, 2003). Privatisation of water supply systems includes the transfer of property rights, water concessions or management contracts to the private sector, reducing state involvement from public services and is widely debated as an effective solution to alleviate the problems associated with inadequate supply and access to safe water for drinking and sanitation. Poverty is a global concern as population pressures are a growing burden, exacerbating the issue and interfering with the fundamental right to water (Bakker, 2003). This is most evident in the developing world: over a billion people do not have an adequate supply of drinking water and over two billion people are subject to water-borne infectious diseases due to lack of sanitation systems (Langford, 2005), between thirteen and fourteen thousand deaths occur as a result. In contrast, in developed countries water is seen by the majority as a basic amenity where supply is continuous and of the highest quality (Gleick, 1998). The right to water on a global scale is not equal as seen through the unnecessary suffering in developing countries, which is preventable if international and local entities acknowledge those excluded from the requirements of access to water and sanitation (Gleick, 1998). In response to this, neoliberal reform policies to promote the privatisation of water services have been implemented internationally since the 1980s (Castro, 2008). Commodification alters the right to water by transforming it into a commodity, bought by consumers rather than supplied, as a right, to citizens. Privatisation of water service providers has occurred alongside commodification producing different scenarios worldwide (Castro, 2008). On one hand, it is advocated that the ownership and management of public utility services by the public sector is significantly reduced by neoliberal reformations in order to solve the problems associated with the allocation of water resources (Castro, 2008). On the other hand, commodification of water services has worsened inequality, poverty and socio-economic conditions in certain countries. Consequently, there is a persistent transfer of ownership of water supply systems between state and private sector and the subsequent transition between water being valued as a human right and public good under state provision and as a commodity after provision undergoes privatisation and water is commodified. Although the transfer of ownership and management of water resources and the subsequent water issues presented in this essay are not a new phenomenon, the scale at which the occur and the countries adopting privatisation methods has produced complex outcomes (Langford, 2005). Results from the introduction of privatisation in developing countries often counter intended outcomes as demonstrated by case studies. The extent of poverty alleviation and the adequate provision of safe and affordable water in the context of the privatisation of water resources are examined in this essay. Academic papers, documents issued by the government and Aguas Argentinas in Argentina as a case study will be analysed to demonstrates the benefits and disadvantages of water provision being privatised. This essay provides a comprehensive discussion on the extent to which water as a commodity is the more efficient means to reduce poverty and inequality.
Lit Review what authors say – is it accurate
Promoters of private sector involvement argue government failures, low efficiency and low-cost recovery associated with publicly provided services cannot provide enough water supplies to the one billion people that lack access (Bakker, 2007). Additionally, in the 1990s, subsidies and investments to ensure the correct operation under state authority could no longer be financed by the government of Argentina (Estache, 2003). Kirkpatrick (2004) stated in an article that investment and efficient management of water services is an essential objective to improve the allocation of safe water. A theory is that private run firms are the more efficient sector relative to the public sector (Kirkpatrick et al., 2004) therefore, privatisation is a requirement to achieve this objective and reduce water scarcity.
In previous decades, privatisation was an idealistic solution to recover stagnate economies (Prasad, 2006). However, several journal articles and academic papers which utilise case studies to reveal an overriding outcome, contrary to this theory. They state that the privatisation of water resources has produced complex outcomes and may not necessarily be more efficient at allocating water resources than the state (Prasad, 2006). Anti-privatisation campaigns that support the human right to water has spread internationally, highlighting the devasting effects privatisation has incurred, especially on developing countries. Affordability issues rising due to price hikes, health issues resulting from poor access and exploitation of consumers as private firms seek to create profit (Prasad, 2006).
There is evident ambiguity regarding public versus private ownership of water supply systems/ This has sparked dispute amongst the state and government entities as to which sector should be in control (Chenoweth, 2017).
Debates over privatisation in literature is apparent and this essay will use the different perspectives to illustrate the most effective solution to water scarcity.
The transfer of ownership of the water supply infrastructure and management to the private sector often begins with the introduction of private-sector participation and commercialisation. To achieve this transition of management for financial gains, management objectives require updating. Supplying water at subsidies rates and as a right to all citizens is no longer the principle followed by businesses supplying water instead, water is sold to those who are willing to pay as water becomes increasingly perceived as a commodity through the process of commodification (Bakker, 2003). Citizens will lose their right to a water supply service if water is redefined as a tradable commodity rather than a public good, as water will now have to be purchased when water supply ownership and management is under private control.
Background to Case study – Buenos Aires, Argentina
Map of Argentina showing Buenos Aires urban, suburban and outer peripheral ring.
After the involvement of that state in the management of water services was considered inefficient by the World Bank and the success of several privatisation schemes in developing countries, Buenos Aires accepted a public sector reform of its water supply services to improve performance indicators. Aguas Argentinas implemented the neoliberal policies to administer the water supply services under private control in Buenos Aires (Olleta, 2007). This case study demonstrates the negative impacts privatisation can incur on consumers contrary to the objectives of a private firm. When water is a commodity, private firms have the potential to exploit customers, interfering with the economic theory that successful privatisation schemes have followed, as shown by the evidence from the Aguas Argentinas case study.
Buenos Aires has been subject to high unemployment rates, especially in suburban areas, reaching 24.2 percent in 2002, after historically low fluctuating figures between 4 and 6 percent since the 1970s (Castro, 2008). Income inequality significantly worsened, increasing by 26.8 between 1974 and 2003, reaching a gap of 36.3 of household income per capita between the top and bottom tenths of the population (Castro, 2008). The number of people living in poverty within the outer peripheral ring of the metropolitan area was statistically significant. In 2002, 70 percent lived in poverty and 30 percent lived in extreme poverty. These economic indicators showing poor performance and an economic collapse in 2001, occurred along side the introduction of private sector participation in 1993 and its eventually reduction of involvement in water supply services in 2006 (Castro, 2008). The reduction of concessions operating in developing countries was implemented by Aguas Argentinas to focus on low-risk areas such as the European sectors (Castro, 2008). Initially implemented in 1993, policies were cancelled 13 years later in 2006. The socio-economic climate in Buenos Aires was in better condition than the average for Argentina before the introduction of privatisation ownership of water supply services (Castro, 2008).
Discussion – “water for all precludes private sector involvement.” Bakker 2007
The right to water and sanitation was recognised by the United Nations Committee on Economic, Social and Cultural Rights in 2002 and is a prerequisite to other laws, such as the right to food, which is based on the assumed availability of water (Bakker, 2007). This requirement is supported by declarations, international law and is practised by the State (Gleick, 1998). As water is a non-substitutable resource and human life is dependent on access to safe drinking water (Gender, water and sanitation, 2006), states are obligated to provide water to all (Bakker, 2007). International understanding of water as a fundamental requirement that is essential for life dictates that citizens adopt a human right to its access irrespective of their ability to pay for the provision (Bakker, 2003). Contradiction arises when water is sold as a commodity as market mechanisms require consumers to purchase the resource although, not all have the capacity to afford water. As an increasingly scarce resource however, the efficiency of both sectors will determine the relative effectiveness at distributing water.
Policies to produce and distribute water efficiently have been implemented and produced a rapid expansion of privatisation since the 1980s (Castro, 2008). The failure of the state to provide safe and accessible water to all and the reduction of problems associated with publicly-managed public services such as inefficiency, waste of scares resources and pollution is the foundation of advocacy for neoliberal reforms (Olleta, 2007). The transfer of the financial burden from public to private sector further justifies privatisation of water supply services (Castro, 2008). This was determined to be a solution, based on neoclassical economics, to improve the allocation of water by making it more affordable and of a higher quality to a larger scope of people, reducing the number of those in poverty. Privatisation based on economic theory suggests that when water supply infrastructure is under private sector ownership economic performance, especially efficiency, is improved (Prasad, 2006). Access and water quality improve as water is supplied with better infrastructure from increased private sector investment into the capital-intensive industry (Baer and Montes-Rojas, 2008). In theory access to a safe water supply, can alleviate the impact of the poverty trap: a vicious cycle where those living in poverty become deprived and are forced to consume unsanitary water leading to health issues and diseases ensuing an inability to join the work force and earn income, ultimately exacerbating the issue of poverty (Prasad, 2006). To further endorse privatisation, as a scarce resource, water must be efficiently allocated; the anthropocentrism of human rights may inflict a further pressure on the hydrological systems that provide the resource to which we are dependent on (Bakker, 2007). Therefore, by allocating the right to water, there is a failure to recognise ecological rights, exacerbating water scarcity and potentially poverty. Ecological rights are taken into consideration when water is commodified, as the hydro social relationship between consumers and the environment is modified. Water is used more efficiently used when it is supplied in quantities at cost-reflective prices relative to is consumption compared to it use when citizens have a right to the public service. The transition of how water is perceived when privatisation occurs results in the more efficient use of water and is treated as a scarce resource more effectively than with state provision. (Bakker, 2003). Hence, the support from ecological activists as water conservation is an ensuing feature of privatised markets. This implies that water should be a commodity however, ….. disagrees saying that the privatisation of markets produced negative results and steers away from the objectives of privatisation. This holds more substance because the context is considered in comparison to economic theory which evidently did not hold in Argentina as shown by the worsening of economic indicators.
Social context is considered when case studies are used, and these examples often go against the neoclassical economic theory. In Buenos Aires, Argentina, the impact of privatised water supply systems against the socio-economic climate is analysed. In less developed countries (LDCs) the required investment to improve water supply services was not provided by the public sector, justifying private sector involvement (Castor, 2008). However, research shows inequality and poverty characterised by the access to water services in LDCs has been worsened in Buenos Aires, by these shifts towards private sector ownership of water services. It is evident that there was a significant worsening of economic indicators such as employment and income inequality and that policies introduces in the 1980s were not achieving their objectives. Privatisation policies that benefited consumers in developing countries had an adverse effect in Buenos Aires due the economic collapse. Results may have been beneficial if policies had been adapted accordingly however, what is evident is that results from one country are not representative of all and pre-conditions must be considered.
Consumers can be exploited due to the profit incentive within privatised markets. By 2002 Aguas Argentinas created an 88.2 percent increase in water bills relative to a 7.3 percent increase in the consumer price index (Castro, 2008). Consumers therefore had less purchasing power for a natural resource many were already excluded from in adequate supply and quality beforehand. Water as a commodity creates controversy due to the increasing water rates associated with some schemes of privatisation, consumers are therefore paying an excessively rising price for a basic human resource leading to public opposition (Kirkpatrick, 2004). However, with water being essential for life, it should be allocated to all not to those who can pay the highest price to create profit margins for the private company. Therefore, water was insufficiently allocated when considered a commodity due to the power of private firms. A method to combat this is regulation, rules are implemented and adhered to by authoritative bodies such as the World Bank, this will prevent price hikes and prevent the exclusion of the poorest customers from purchasing water. In contrast, the chief executive of SAUR International informed the World Bank that regulation would increase the risk of worsening the performance of Aguas Argentinas. By implementing the same privatisation policies from Europe and the large demand for new connections in developing countries the risk was heightened (Hall, 2002). Evidence suggests that the strict regulation provided burros with water, which hadn’t been achieved before and improved the distribution of water in Buenos Aires however, other performance indicators were worsened. Furthermore, distribution to burros has since been achieved without private firms which profit incentives.
Water can move to private monopoly control from public control without the introduction of a competitive market (Bakker, 2003). Without other private companies owning a share of the market, a private monopoly can increase prices to exploit customers as no competitors supply water to customers. In addition, only those with enough funds can purchase water as a commodity, worsening the inequality gap especially in developing countries. In Buenos Aires the increase in price was set to all with no exclusions or measures to protect the poorest in the population. Additionally, private firms are incentivised to construct infrastructure and allocate water to wealthier neighbourhoods in order to potentially exploit wealthier consumers, resulting in a lack of provision to the poorer communities that display higher risk. Privatisation amplifies inequality further regarding distribution of water supplies as the poorest are unable to pay or access an adequate supply (Gender, water and sanitation, 2006), displaying a significant regressive aspect of neoliberal reforms. This is evident in Buenos Aires, with a significant proportion of the population living in extreme poverty in response to regressive price hikes 9 years after the introduction of neoliberal reforms. This evidence shows the uneven distribution of water exacerbates poverty further when the natural resource is seen as a commodity in the context of neoliberal reforms. This contradicts the theory that privatisation improves the coverage of water provision.
To prevent monopolies abusing their power governments need to intervene through regulations therefore, the state is still involved in the supply of water. Monopolies may be required to meet standards, maintaining their efficiency and keeping prices low.
In Argentina, 70 percent of the population in 1999, were served by private water services. This began to decrease after the collapse of the private business, Aguas Argentinas.
The shift towards private sector ownership and management and water resources in the 1990s was a method based on economic theory made successful through efficient management, direct involvement with customers and lack of political interference in developed countries. Results from introduction of these policies in LDCs such as Argentina have been revealed to show complex results, where the involvement of the private sector was negatively influenced by economic flaws, attracting political debate to spark international anti-privatisation campaigns to improve socio-economic conditions. From discussion it is evident that Buenos Aires’ existing inequalities were reinforced by private firms’ policies and investments, if the socio-economic context is considered before privatisation occurs, conditions may improve as policies can be manipulated to better suit the stage of a countries’ development.
In Buenos Aires connections to the burros were made improving the scope of people water was distributed to however, poverty was still exceedingly high as illegal connections were cut off.
A range of performance measures must be analysed to determine the most effective sector to manage water supply systems. By analysing one measure in isolation e.g. efficiency gains, a full comparison of the ability for one sector to provide water effectively is not made and provides a poor indication of the long-term effects of privatisation. Furthermore, analysing effectiveness for one country may not be representative of outcomes for all as privatisation sequences are not unidirectional. From the case study it is evident that the initial economic and post-privatisation conditions dictate the distributional impacts and are not determined by the
With the constant transition and shifts between state and private owned infrastructure and ownerships of the provision of water, water is seen as both a human right and as a commodity depending on which sector has ownership and management of water services and infrastructure in specific countries. In Buenos Aires, with anti-privatisation campaigns significantly on the rise, privatisation may reverse, and water will be a public good once again and the right to water will adopted by citizens.
The impact of privatisation on the poor, who have the greatest need for clean water in adequate supply, is the most substantial; price hikes disproportionately affect the poorest and private monopolies avoid the poorest regions, exacerbating local inequalities. This provides evidence that the interest of private companies to create profit is supported by privatisation and there is a disinterest in the unique needs of individual communities.
Privatisation outcomes are clearly complex, answers can be developed by completing further research that has not been possible in the essay due to data limitations. Aguas Argentinas has been used as the case study to justify arguments in this essay, showing the complexity of results from privatisation in developing countries due to the under development of social relations relative to developed countries. This precondition of less developed countries reduces consumers capacity to afford water as a commodity and interferes with market mechanisms. The collapse of private sector participation and the rejection of their policies ensues. To obtain similar benefits as in developed countries, adaptions will need to be made to protocols and management based on the local socio-economic environment they are being implemented in.
Results from developing countries privatisation schemes are relatively recent therefore, further research is required to understand why schemes often collapse.
As discussed in this essay it is privatisation that in theory handles the scares resource more effectively and ultimately provides people with the access to safe and clean water that is affordable however Argentina as a case study, has shown socio-economic inequalities worsened during the implementation of privatisation policies.
Dependent on private firms choice to invest in capital which increases effieceny. Profits are created for financial stability and to keep shareholders happy. Money for the investment in infrastructure may be used as interest and dividend payments. In the UK, state expenditure on the aging infrastructure would be reduced in private firms invested in infrastructure rather than dividend payments. Prasad, N., 2006.
Limited choice with privatisation and are now seen as customers. Previously citizens understood they had a right to water when supplied by the state. Prasad, N., 2006.
Micro good macro bad – must take into account local context – missed with economic collapse? Hard to set standards for business as well. Prasad, N., 2006.
Reducing poverty and inequality in the access to services (Castro, 2008).
Financial burden not passed on to private investors from public. Castro, 2008
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In terms of market environmentalism, environmental externalities are considered and are incorporated into the full price of the economic good.
How is private good –
Environmental goods more efficiently allocated if treated as economic goods. Allocated to highest value users, higher price because environmental and economic cost incorporated.
If the theory of state failure is accepted, the private sector provides the efficiency required to manage and distribute water as a scarce resource. (Bakker, 2003).
How is private bad
When water is viewed as a public good under state provision, externalities are considered. Public health associated with the supply of water
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