Is Water Privatization a Smart Move?

Water privatization has spurred scientists, environmentalists, and business executives into a heated debate.

Water is of fundamental importance to human life. Without it, humanity would be able to neither survive nor thrive.

Today, water serves multiple critical purposes through its many uses, which are not limited to drinking, watering crops, cooking, personal hygiene, and cleaning. With both growing populations and increasing demand for water surpassing the available supply, researchers worry that the water crisis is going to get worse with time. There has been strong moral debate about whether governments or private businesses should be responsible for the supply and distribution of water due to the fact that water is a scarce resource that demands humanity’s utmost attention.

Water scarcity is a problem of paramount importance that has been worrying scientists over the past years. In 2015, NASA’s satellite data revealed that 21 of the world’s 37 large aquifers are severely water-stressed, which means that water supply is decreasing at alarming rates. Human life in countries like Jordan is already being threatened by both an increased desertification as well as a growing population.

Given that water is essential for human life, what should governments do to assure that the next generations have sufficient access to it?

The pros and cons of water privatization and treating the scarcity of water

**An Argument Against Private Water Markets:**

Water privatization will lead to the inefficient, ineffective, and unethical use of water supply for many reasons.

Water is a Human Right

For starters, water is an undeniable human right. At the same time, privatization of water will lead to the inefficient use and distribution of water, as businesses will pursue profits over and above the need to conserve water.

Even though water is of critical importance to humanity, its use and distribution have created strong debates. The fact that 1.1 billion people, which is equivalent to one-sixth of Earth’s total population, do not have access to clean, running water makes the issue an intense moral debate.

Moreover, environmentalists’ projections of water supply indicate that, by 2025, about one-third of Earth’s population will struggle to have access to such vital resources. Not only will water shortages directly impact the well-being of countless people across the globe, but will also harm the ecosystems which contribute towards the production of food worldwide. Such consequences will lead to both poverty as well as the politicization of water.

Water is a basic human right and should therefore not be privatized, as privatization will imperil such irrefutable rights.

Privatization Will Harm the Lower Social Class

Water privatization will directly harm the lower social class and developing nations, as they will be unable to afford water bills and, consequently, be forced to resort to drawing water from wells, dams, and springs where such water may be contaminated, resulting in deaths from water-borne diseases.

It comes as no surprise then, that statistics show that nearly 3.4 million death cases reported every year are linked to water-related diseases.

Is Making Profits out of Water Ethical?

Privatization will lead to businesses putting profits over and above human’s needs, which will likely threaten both the access and quality of water. If water is privatized, then rather than focusing on the efficient use and distribution of water supplies to help conserve and preserve water, companies will push to higher levels of water consumption to maximize profits.

Because water is a basic human right, it should be freely available to all. However, if water is privatized, then businesses will unethically transform this right into a need, enabling only those customers with the capacity to afford water to have access to it. Given that humanity’s ability to survive depends on water, as there are literally no substitutes for water, such vital resources shouldn’t be treated as a means towards generating profit and should not be denied based on one’s income level.

How water scarcity can be improved, water privatization benefits — Will privatizing water encourage people to make better use of this scarce resource?

Does privatizing water makes infraestructural sense?

Furthermore, privatization of water will negatively impact both developed and developing countries due to the fact that public utilities currently account for the efficient distribution of water.

While in the US (a well-developed nation), for instance, 85% of people get access to water from public utilities, 97% of the population in developing countries depend on public systems. This means that privatizing water will lead to massive infrastructural changes that will directly impact a huge portion of the population.

At the same time, although developing nations have the strongest need for water, they also face the greatest risks of privatization efforts failing – as weak government regulations might lead to monopolies and operational inefficiencies. Furthermore, entrusting the management of this essential resource to private entities can lead to difficulties in assuring that companies ensure supply in low-income communities, where consumption is lower.

What we can learn from georgia’s 1990 water privatization failure

The effectiveness of water privatization was tested in Atlanta, Georgia in the 1990s. Scientists and researchers thought the test would reveal the benefits of water privatization. The results, however, showcased the terrible consequences of it. Even though the operating costs of water distribution were minimized, the citizens in Atlanta paid a high price, as private companies mistreated the water supply.

During the 5-year testing program, Atlanta’s citizens suffered from excessive chlorine levels in their water supply, operational inefficiencies, and plenty of water leaks. As a result, privatization contracts were ended.

Water privatization should be avoided to prevent humans across the globe from suffering the consequences of it. Water privatization prevents humans from accessing one of their most important natural rights and an essential element for their survival. Water privatizations lead to the immoral, unethical, and ineffective supply and distribution of water. For those reasons, governments ought to be responsible for the efficient supply, distribution, and conservation of water.

**An Argument For Private Water Markets:**

Water privatization and the creation of water markets are the optimal solutions to the growing scarcity of water. Water should be privatized – meaning that it should be run not by the government, but by private enterprises – for several reasons.

Benefiting from Market Competition

For starters, unlike governmental organizations, privatizing water supply will enable market competition, which will force operating firms to lead technological advances that will result in the more efficient use of the resource. At the same time, higher prices will prompt civilization towards a more conscious use of water.

Furthermore, privatization opens up an opportunity to develop cap and trade mechanisms for water that can work as an incentive to reduce organizations’ water consumption. All the mentioned reasons will empower a more efficient use of water supply.

A person drinking water in his kitchen, the water scarcity problem — If water supplies were privatized, would its consumption be better managed or will the quest for profits worsen the world’s water scarcity problem?

Water privatization will enable competition for both profits and market share. The pursuit of profits will force firms operating in the water supply industry to invest in the implementation of efficient processes to stay competitive in the market and look for innovative ways to outperform rival firms.

There’s no incentive for innovation in the public sector

The private sector is potentially capable of injecting technological, financial, and managerial resources, something that the public sector may be unable to obtain because of both fiscal and bureaucratic constraints as well as a lack of adequate incentives. It’s unrealistic to think that the public sector – independently of how politically stable it might be – will be able to achieve the same efficiency as a private marketplace due to the fact that they do not have any incentive for innovation due to the lack of competition they face.

In fact, there are many examples that prove the public sector doesn’t have a good record of providing optimal water management practices. According to Christen, “utilities run by governments usually run inefficiently, tariffs don’t cover their costs, they’re overstaffed, they typically lose half their water supply through leaky pipes, and they generally provide unreliable and rationed service.”

Thus, while governments tend to focus on short-term goals – often driven by what they seek to achieve before the next election – businesses will, on the other hand, focus on delivering results that are sustainable in the long run. Self-interest and the free market mechanism, in this case, is the right solution to ensure that water is being properly managed.

Higher water prices will lead to higher conscientiousness

If the price of water rose, people would carefully examine how they use water, for what purposes, and in what quantity. Privatizing water is, as a result, the optimal solution to water scarcity since the creation of financial disincentives will help lower the chances of ever reaching the tragedy of the commons.

This strategy will prevent people from irresponsibly over-consuming water by internalizing costs and rethinking the value of water.

Water will be more valued and conserved if it came at a cost

Water privatization will lead to marginally higher water prices, which will increase the perceived value of water. Currently, the US, and many other governments throughout the world that have not adopted water privatization efforts, are commercializing water services at substantially low prices that do not account for scarcity or other preoccupying costs.

For instance, water bills are lower than cellphone bills in the United States nowadays. This worrying matter is due to the fact that governments subsidize water supply in order to align with the idea that water is an essential need for life, and should therefore be treated as a basic human right. Yet, this idea seems problematic when, simultaneously, scientific research is presenting concerning revelations about how the lack of water supply for human use, agriculture, and natural ecosystems will have terrible consequences for future generations.

Such discoveries serve as proof that the government’s extremely short-oriented mindset of water being treated as a basic human right can lead to devastating consequences in the long run.

Water bottles being distributed and manufactured in a water factory to symbolize water privatization

Benefits of a cap-and-trade system

Water privatization opens up the possibility of transferring ownership, which creates an incentive to use the property more productively. According to environmentalists Dosi and Easter, “water laws must be changed so that water users can sell or lease water for varying lengths of time.” After all, cap and trade offers stimulate companies to invest in more efficient technologies in order to reduce the costs of buying new permits throughout the years.

The state of California serves as a perfect example to prove the effectiveness of cap and trade programs. Recent data show that California’s use of cap and trade programs in its air pollutions policy has enabled great success, as just 3 percent above its 2020 goal of reducing emissions to 1990 levels. California’s strategy has not only driven emissions down, but has also enabled its economy to take off.

While this example is based on air pollution, the same could be done with water. Although I concede that the argument for treating water as a human right is valid and significant, I insist that organizations should be emphasizing the future of our planet and the well-being of the future generations that will lead the world of tomorrow. Water privatization presents a strong opportunity to fight water scarcity. Through market competition, higher water prices, and cap and trade programs, water supply can not only be controlled, but also be effectively managed.