THE WORLD BANK: A PRIVATE-SECTOR FIX FOR A PUBLIC WATER CRISIS
The World Bank was founded in 1944 to aid and finance post-war reconstruction. Today its focus is on poverty and development issues around the world. The Bank is made up of 184 member countries, which are jointly responsible for the funding and mission of the organization. Every year, the institution provides billions of dollars in loans and grants to poor and middle-income countries in a wide range of areas, from infrastructure to health care to education.
Loans for the water sector accounted for about 16 per cent of the World Bank’s overall lending in the last decade. Seventeen billion dollars was divided equally between water supply and sanitation, irrigation and drainage, hydropower, and water resource management.
THE DUBLIN PRINCIPLES
They are: the “ecological principle” which maintains a focus on the environment; the “institutional principle” which insists all stakeholders have a voice in water resource management; and the “instrument principle” which argues that water is a scarce resource, the allocation of which should be guided by economic principles.
It is this last idea – that how we use water should be subject to economic principles – that is most relevant and most contentious in the debate about water privatization. While some say that treating water as an economic rather than social good is a fundamentally wrong commodification of one of life’s necessities, others argue that putting a price on water reflects the reality that it is a scarce resource which must be protected and valued appropriately.
The World Bank’s view on who should be supplying water has changed over the last few decades. In the 1970s and 1980s, all funding in water supply and sanitation was directed at the public sector and left governments in charge of affordable, reliable water delivery. But a consensus increasingly grew that public utilities were vulnerable to inefficiencies, political interference, unsustainable water prices and a lack of skill and professionalism.
THE WASHINGTON CONSENSUS
Joseph Stiglitz, former Chief Economist of the World Bank: With the Reagan-Thatcher kind of ideology, it became all focused on - let the markets take care of it, let trade take care of it, liberalize, privatize, get inflation down, minimize the role of the government and lo and behold, growth will occur and poverty will be reduced.Jeffrey Sachs, Economist: Where did this urge for privatization come from? Party ideology. And it’s partly powerful corporate interests, no doubt. A lot of very powerful companies got into the game. They thought they were going to get involved. They find their ways into the votes of the IMF and the World Bank. There’s no doubt about it. (read an interview with Jeffrey Sachs online)
A recent Bank document explains the impact of the Buenos
Aires private water contract: The success of the Buenos
Aires concession spurred widespread interest in PSP [private sector participation].
Supported by research, dissemination, and technical assistance, PSP became
de rigueur in most regions, starting with Latin America, but rapidly spreading
to the Middle East, East Asia and the Pacific, Africa, and South Asia.
The pendulum swung far, and came to favor PSP as a panacea to the perceived
performance problems of the Bank’s water supply and sanitation portfolio.
THE FAILURE OF WATER PRIVATIZATION
However, several high-profile failures of water privatization
have caused the Bank – and the world – to re-think the role
of the private sector in delivery this essential service. Among them was
a contract in Cochabamba, Bolivia, where skyrocketing water prices led
to street riots and the death of a protestor.
Another reality facing the Bank and other advocates for private water delivery is a growing reluctance on the part of water companies to do business in highly-volatile developing countries. Suez, one of the world’s 2 largest water companies, has suffered huge financial losses in places like Buenos Aires and Manila because of currency exchange risks and collapsing economies. Pressure from shareholders has forced the company to greatly reduce its exposure to “emerging markets” as a way to create a more attractive bottom line.
Despite some dramatic failures in the privatization of water,
the World Bank still sees a role for private companies in water delivery.
Today, the Bank is developing ways to bring back private sector investment
and mitigate the risks that dissuade rich companies from doing business
in the developing world.
the fifth estate: DEAD
IN THE WATER