Democratic vs. Corporate Control of Water: A Fight for Survival

Published By Public Citizen

Perhaps the greatest theft of common resources facing humanity and the planet today is the corporate takeover of the world’s water. Global capitalists argue that our water scarcity problems will be solved by turning water into an economic good – a commodity to be controlled by global corporations and sold to the highest bidder in international markets. Yet who really believes that corporations, whose very purpose is to increase profits for their shareholders, will improve water conservation, help get clean water to those in need, and provide a water secure future for all of us?

Every crisis provides an opportunity. The world’s fresh water crises may be the most critical area of concern for global justice advocates. The fight to protect the global commons – particularly the world’s precious freshwater sources – is a fight for planetary survival that takes its lead from communities in the Global South where the fight against privatization of water has already become a life or death struggle. The movement for direct democratic control of our most precious resource – water -- has the potential to unite the vast majority of people against the forces of corporate greed. It’s not too late to assume collective responsibility for our shared water heritage and spawn a new legacy of responsible, ecologically and socially sustainable, stewardship of our watersheds, but we must act now.

The World Is Running Out of Freshwater

Despite the seeming abundance of water on this planet, less than one half of one percent of the earth’s water is able to support human life. The rest is trapped in oceans and polar ice. A modern legacy of factory farming and flood irrigation, the building of mega-dams, toxic dumping, wetlands and forest destruction, and pollution and urban sprawl has rapidly depleted the world’s limited supply of fresh water. Already, over one billion people lack access to clean water and 2.5 billion people don’t have adequate sewage and sanitation services. Consequently, over 2,112,000 people – mostly children – die annually from diseases such as diarrhea and cholera.

To add to the threats facing the planet’s lifeblood, while the world’s population increases yearly by 85 million new people, per capita water use is doubling every twenty years. This insatiable thirst is being driven mainly by modern industrial farming and manufacturing, which consume respectively 65% and 25% of water used by humans. But humanity is paying the price for the exploitation of this essential resource. By 2020, two-thirds of the world’s population is expected to lack access to clean water if the current development continues.

Conflicts over scarce water supplies threaten to destabilize entire regions and are likely to define the next century in much the same ways that conflict over oil have in recent times. Hotspots where water reserves are dwindling include the Middle East, Northern China, Mexico, California and almost two dozen countries in Africa. Israel, for example, is threatening to re-ignite war against Lebanon if the Lebanese government carries out its plans to tap a tributary of the Jordan River, which is a major source of Israel’s scarce water.

Similar border disputes between the U.S. and Mexico over the Colorado and Rio Grande rivers, which are so over-tapped that they no longer empty into the sea for weeks at a time, may soon escalate as well. In the free trade zones along the US-Mexico border, water is a precious commodity, delivered weekly to many communities by truck or cart. Clean water is so scarce that children are forced to drink expensive soft drinks or bottled water to avoid serious health risks. For the first time in history, more people now live in cities than in rural areas, so the demand for drinking water in urban centers threatens to tap water supplies traditionally earmarked for agriculture, creating a food security crisis.

Profiting from Planetary Misery

Transnational corporations see this water scarcity crisis as a huge profit-making opportunity. If corporations control the limited supplies of an element that no one can do without, they stand to gain untold fortunes. Water is the new oil. In 2001 the water services industry, dominated by just a handful of corporations, made close to a trillion dollars in profits, which is substantially more than the pharmaceutical sector and almost 40% of the oil industry’s revenues. "Water is the last infrastructure frontier for private investors," says Johan Bastin of the European Bank for Reconstruction and Development. Selling water to the highest bidder will only exacerbate the worst impacts of the world water crisis.

Throughout history, societies have viewed water as a sacred, common heritage to be protected and shared. In fact, only 5% of the world’s water is now privately controlled. Because of its vital nature, the United Nations Declaration of Human Rights recognizes access to water as a basic right of all people. The World Health Organization has identified clean water as the single most important factor in determining public health. For centuries, governments have invested public resources in constructing water and sanitation infrastructure in order to deliver safe and clean drinking water. Outbreaks of water born diseases such as typhoid and cholera were nearly eliminated from the Americas after public water utilities were developed in urban centers.

In the United States, for example, 85% of the population receives water from taxpayer-subsidized, publicly owned and operated utilities. Unfortunately, after decades of neglect and mismanagement, the Environmental Protection Agency estimated, in the late 1990's, at that time it would cost approximately $375 billion to repair and upgrade decaying water and sewage infrastructure over the next 20 years.

Corporations and investors are ramping up a concerted, multi-pronged effort aimed at forcing governments to privatize public services and to commodify water in the global commons. Already, much of England and France have privatized water systems. The result has been rate increases, deteriorating service, loss of local control and increased corruption. Since water services were privatized in France, customer fees have increased by as much as 150%. A number of public officials have been convicted of accepting bribes from companies bidding on public service contracts and sentenced to time in prison.

Private corporations seek to increase profit margins by cutting costs; hence lay-offs and inferior services almost always accompany privatization. In England, private companies fired nearly 25% of the work force, approximately 100,000 workers, when they acquired rights to the water system. Delays in service and accidents routinely follow the firing of often the more experienced personnel. Since 1999, Thames Water, the largest water and wastewater company in England, has been convicted of environmental and public health violations two dozen times and fined roughly $700,000 after allowing raw sewage to flow into open waterways, over streets, onto people’s lawns and over children’s toys—even into people’s homes.

The same multinational corporations aggressively taking over the management of public water services around the world are now vying for the lucrative U.S. market, one of the world’s largest with annual revenues estimated at $90 billion. A change to the U.S. tax code in 1997 opened the way to greater private sector involvement in the U.S. water delivery and treatment business. Companies are now able to bid on 20-year contracts that include the operation, design of new plants or upgrades, maintenance and even complete transfer of ownership of water systems to the private sector.

Until now, mainly small public utility operators have controlled the U.S. water industry. In rural areas, small, privately owned utilities were common, but multinational corporations are rapidly buying even these out. These companies have weaseled into venues like the U.S. Conference of Mayors where they peddle privatization as a simple, cost-saving solution to cities’ aging infrastructures and regulatory compliance headaches.

On a global scale, water privatization is being pushed by the World Bank and International Monetary Fund in dozens of financially-strapped countries, where global water conglomerates are dramatically raising the price of water beyond the reach of the poor and profiting from the Global South’s search for solutions to its water crises. Corporations, such as Vivendi, Suez, RWE and Bechtel, cherry pick the profitable urban water systems while letting shantytowns and rural areas fall by the wayside.

The World Bank has made privatization of urban water systems a condition for receiving new loans and debt cancellation. In Ghana in 2001, the World Bank required urban water rates to be increased 95% to prepare for privatization by making the water system appear more lucrative for international bidders. Following these rate increases, a number of people were jailed for being unable to pay their water bills. Many people who live in urban slums without access to tap water pay even higher prices for water delivered by private tanker truck operators. The poor, particularly women or girls whose traditional duties include collecting water, and babies suffer considerable hardship, illness and even death when they are forced to consume unsafe water after public supplies become too expensive.

Water for All, Not for Sale

All hope is certainly not lost. The fight to protect the world’s water from corporate control is well underway and rapidly gaining new ground. Powerful, vibrant social movements against water privatization have gained a number of key victories in countries including Bolivia, Argentina, Nicaragua, Ghana, South Africa and the United States.

In August 2002, the Nicaraguan National Assembly became the first parliament in the world to suspend private profit making in the use of water. Nicaragua has faced the privatization of its banks, telecommunications and electricity plants, but when the government, at the behest of the World Bank and the Inter-American Development Bank, began to push for the privatization of the major hydro-electric plants and the water utilities in the country, the people of Nicaragua drew the line in the sand. The Nicaraguan anti-privatization law sets an important precedent across the Americas.

In Cochabamba, Bolivia, thousands of workers, peasants, farmers, and students soundly rejected water privatization by ousting Bechtel in 2001 after the company raised water rates by up to 200% and began taking over local wells. This heroic battle was not without grave consequences, leaving one young man dead, and a number of wounded. Bechtel – a company that made $14 billion in profits in 2001, nearly double Bolivia’s entire GDP -- is now using an investment treaty to sue the Bolivian government for $25 million in estimated lost profits. The case is being heard not in a domestic court in Bolivia, but in the World Bank’s secretive International Court for Settlement of Investment Disputes based in Washington, DC. Hundreds of social and environmental justice groups and pro-democracy organizations have called on Bechtel to drop this egregious suit.

South Africa is at the heart of the international movement to demand access to clean and sufficient water as a fundamental human right. Coalitions such as Anti-Privatization Forum and Soweto Electricity Crises Committee are organizing against the illegal cutoffs of water and electricity in poor townships. South Africa is the only country to guarantee basic water rights to every person in their national constitution. Yet more than 10 million residents have had their water cut off since the government implemented a World Bank-supervised cost recovery program. More than 100,000 people in Kwazulu-Natal province became ill with cholera recently after water and sanitation services to local communities were cut off for nonpayment. Privatization has also involved the installation of pre-paid water meters – a technology that was legally outlawed in England.

The Real Solutions are Clear and Simple

The solutions to the world’s water scarcity crises are readily available: expand public and community controlled water utilities, repair dilapidated water systems, save water by installing drip irrigation systems rather than flooding, stop polluting existing supplies, increase water conservation, reclamation and watershed management just to name a few. None of this will happen if corporations are permitted to turn the global commons into profit playgrounds.

If we allow the commodification of the world’s fresh water supplies, we will lose the capacity to head off the impending water crises. We will be condoning the emergence of a water elite that will determine the world’s water future in its own interest. In such a scenario, water will go to those who can pay the most, not to those who need it. This is a scenario we cannot afford.

In the United States, organizations such as Public Citizen’s Water for All campaign are helping communities to fight the privatization of water services and corporate takeover of water supplies. They are also uniting the U.S. movements with other countries that are fighting against many of the same corporate actors to keep their water safe and protect water as a human right. This is a global movement that is just beginning to flex its power and develop new strategies to protect the global commons.

This movement shares the views that water is a common good and access to water is an inalienable human right. Water belongs to the Earth and all species and must not be treated as a private commodity to be bought, sold and traded for profit. Because the global water supply is a shared legacy, protecting it is a collective responsibility – not the responsibility of a few shareholders.

The Meaning of Privatization

Published By the State Environmental Resource Center

Overview of Privatization of Water Utilities in the U.S.

Historically, about half of U.S. water systems were privately owned. That number decreased after World War I due to the availability of government financing.

According to the National Association of Water Companies, the proportion of water services in the United States provided by private water companies, whether measured by customers served or volume of water handled, has remained close to 15 percent since World War II.

In 1995, private- or investor-owned water supply utilities accounted for about 14 percent of total water revenues and for about 11 percent of total water system assets in the United States.

While municipal water in the United States has been traditionally viewed as a public resource, private management and ownership are on the upswing, particularly by international companies. The market is now estimated at $2.5 billion per year.

The French and German conglomerates have been expanding the market of water management services in the United States.

Corporate Players

The European companies that specialize in the privatization of water services have bought America’s largest private water utilities. United Water Resources was purchased in 2000 by Paris-based Suez, the world’s largest water company. Vivendi, the second-largest French water giant, bought U.S. Filter in 1999 and became a member of the powerful U.S. Coalition of Service Industries through its subsidiary, U.S. Filter. On January 10, 2003, RWE, a German utility conglomerate, purchased American Water Works, which serves 15 million people in 27 states and three Canadian provinces and is the largest publicly-traded water company in the United States.

European-based utility giants have been bidding aggressively for new contracts to run American water systems. American Water Works, bought by RWE, now controls Illinois-American Water Co. U.S. Filter, owned by Vivendi, treats sewage for Oklahoma City and New Orleans, supplies drinking water to Tampa and Indianapolis, and recycles Honolulu’s wastewater. Suez treats sewage for Indianapolis, Milwaukee, and Springfield, Massachusetts, and supplies drinking water for Pittsburgh, Hoboken, New Jersey, and Plainfield, Indiana, through its United Water subsidiary.

Private water companies are pushing for legislation to require cash-poor municipal governments to consider privatizing their waterworks in exchange for federal money. From 1995 through 1998, the water utility industry, its employees, and their political action committees, spent less than $500,000 on campaign contributions. But in the last two election cycles from 1999 to 2002, campaign spending more than tripled to roughly $1.5 million. More than half of the sector’s campaign spending came from two large New Jersey-based companies, United Water and American Water Works, both of which are owned by foreign private water companies.

Federal Trend Toward Privatization

Both the Clinton and Bush administrations have asked for less federal regulation in deference to more state independence, and states have become more comfortable in outsourcing to the private sector certain activities that were once wholly the province of municipal government.

In 1996, the U.S. Environmental Protection Agency (EPA) released a report that identified the need for improvements in the U.S. water infrastructure. By 2001, bipartisan legislation to fund these projects had been introduced in Congress. It required utilities for the first time to consider alternate management options, including private partnerships, before they receive federal money.

In 1997, the Internal Revenue Service (IRS) extended the privatization contract limits to 20 years, which encouraged private water companies to begin expanding their operations in the United States. Liberalization of federal tax laws has helped encourage private participation in the operation of publicly-owned plants that were funded by public bonds or grants. Industry representatives are now pushing for even more incentives to use the tax code to increase privatization activity, especially in the water area.

State Trend Toward Privatization

From 1988 to 1997, the rate of privatization in the U.S. increased by more than half. In the name of smaller government, states will likely consider numerous privatization schemes in the next few years.

Reluctant to raise rates, local officials seek private partners to share the financial burdens of upgrading treatment plants and monitoring for a growing list of regulated contaminants.

Cities have viewed privatization as an option for many years. The U.S. Conference of Mayors, a nonpartisan organization of cities with populations of 30,000 or more, joined with the Washington-based industry group, the National Association of Water Companies, to lobby the Internal Revenue Service (IRS) to change language in the tax code that penalized cities with loss of tax-exempt status if they contracted private companies for more than five years.

Long-Term Water Contracts and State Actions

The number of water systems that are operated under long-term contracts by private companies has grown from approximately 400 in 1997 to about 1,100 today. Urban utilities can now enter into contracts of up to 20 years for the operation of such systems under liberalized federal tax laws. Vivendi and Suez secured 20-year, billion-dollar contracts in some of America’s largest cities, including Atlanta and Indianapolis. Cities from Camden, New Jersey, to Stockton, California, also have contracted or are looking to contract with these companies.

Privatizing Water: The Profit Stream

By Hugh Jackson, Las Vegas Review-Journal
February 29, 2004

You've got to hand it to Oscar Goodman. Most mayors go to the U.S. Conference of Mayors annual meeting and get lobbied by companies. Oscar, ever the clever one, used the meeting to let his kid's company lobby the mayors.

What's more, face time with a national collection of muckety-mucks who control purse strings usually doesn't come as cheap as the price of a rented room and a few drinks.

In fact, it's not Las Vegans who should be upset with Oscar. It's the multitude of corporate citizenry who get in the same room with all those mayors the old-fashioned way -- dishing oodles of money to the U.S. Conference of Mayors. They probably think Oscar and his kid are poachers.

See, the conference has what it calls a "Business" Council, but which should be called a corporate council, in that nearly every one of the 84 members is a large, publicly-traded corporation. Each of them pays $12,000 a year to belong to the council, and some of them fork over more than that to sponsor and support periodic shindigs like the one Oscar and his kid were attending in Washington.

And perhaps nobody has hooked up tighter with the conference than the European conglomerates on a mission to -- drum roll please -- privatize water.

The three big ones are Suez, RWE and Veolia. They belong to the conference Business Council under the names of their U.S. subsidiaries, United Water, American Water Works, and USFilter, respectively (though USFilter changed its name to Veolia Water a few days ago). They've tried to control water and charge too much for it in nations around the globe, but it hasn't worked out like the companies hoped -- it's been a big fiasco, mostly. So in the past few years the companies have focused on the United States, because ... you know, that's where the money is.

But 85 percent of the water that pours from a tap in the United States is delivered by a publicly owned and operated system, and polling shows overwhelming support for publicly-funded water systems. How's a corporation going to convince a city to hand over control of its water?

By schmoozing mayors. For instance, at January's conference meeting in Washington, Veolia footed the bill for mayors to film video presentations to be available at the U.S. Mayors Web site. The program was an extension of the "Meet the Mayors" database long-sponsored by Veolia and prominently featured in the upper right corner of the usmayors.org homepage.

And the schmoozing, apparently, works. Atlanta entered into a private water contract during the administration of then-mayor Bill Campbell, a former conference committee chair and key voice on behalf of the organization's congressional lobbying efforts. New Orleans began spending money on a privatization process under the administration of then-mayor Marc Morial, a former conference president. Stockton, Calif., privatized its water system under Mayor Gary Podesto, a prominent member of the conference's industry-sponsored "Urban Water Council" who credits the conference for turning him on to the wonders of water privatization.

But while schmooze works, privatization hasn't. Atlanta got out of its contract four years into a 20-year pact when it became clear that the private company could deliver brown water but not the promised financial savings. New Orleans has dropped $6 million in six years, only to learn that it's still impossible to tell if privatization will save any money, and the privatization process has stalled. Stockton officials sidestepped a public referendum and rammed privatization down the throats of an unwilling citizenry, only to have it thrown out in court for failing to account for environmental impacts of the deal.

Coming up empty in big cities and larger towns, the water privateers are now heading for smaller communities, like the Village of Hempstead, N.Y. If cities such as New Orleans and Atlanta have trouble obtaining credible, timely information from these companies and holding them accountable, it's frightening to think about how corporations might run roughshod over small towns. Oh, the mayor of Hempstead Village, by the way, is the current president of the U.S. Conference of Mayors.

The conference does some decent work -- a couple years ago, at the height of the congressional fight over White House designation of Yucca Mountain as the planet's one and only nuke dump, it adopted a resolution opposing nuclear waste transportation.

But the conference has also been infiltrated by corporations who actually work against the interests of the nation's cities: the big water corporations want Congress to make it harder for cities to get federal water infrastructure assistance, in an effort to put even more financial pressure on cash-strapped cities so they'll be forced to scramble for wild-eyed solutions like privatization.

So perhaps Las Vegans have a beef with Oscar after all. The next time he attends a conference meeting, instead of shilling for his kid he should make himself useful and ask his colleagues from around the country what the hell they think they're doing sucking up to companies that want to control people's water and turn it into a profit stream. Oscar's a persuasive guy. Maybe he can help stop the corporate water privatization push before it comes to a town near you.

Henderson resident Hugh Jackson is a researcher and policy analyst for the consumer advocacy group Public Citizen.