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D!SSENT Number 27, Spring 2008
World water scam
Almost twenty years of documented cases of the failure of privatisation and the growing opposition to the World Bank and the water service companies in every corner of the globe have revealed a legacy of corruption, sky-high water rates, cut-offs of water to millions, reduced water quality, nepotism, pollution, worker layoffs.
Maude Barlow, Blue covenant: The Global Water Crisis and the Coming Battle for the Right to Water, Black Inc. 2008.
Australian cities have reached the point where there are no further ‘natural’ water resources available to be exploited but by acknowledging that residents have an inalienable right to potable water and that protection of public health has the highest priority it is feasible to develop water services that do not increase environmental stresses.
Ed. Patrick Troy, Troubled waters: Crisis in the Urban Water Supply, ANU E Press, 2008.
As the Canadian Maude Barlow, board member of Food and Water Watch and the International Forum on Globalisation, points out, the three global water crises—dwindling freshwater supplies, inequitable access to water and the corporate control of water—pose the greatest threat of our time to the planet and to our survival. The key to avoiding deepening conflict over water between nations, rich and poor, public and private interests and the environment and industrialised humans is to make access to potable water necessary for healthy life a human right endorsed by the United Nations and other relevant international agencies, including the World Bank and the World Trade Organisation. She describes how these bodies and international forums with high-sounding names such as the World Water Forum have been captured by the major water multinationals—with the co-operation of countries such as the US, Canada, Australia and China—to block moves to make water a basic human right.
The E book edited by Patrick Troy, visiting fellow in the Fenner School of Environment and Society, ANU, looks at the history of the development of urban water services in Australia. It describes how centralised water utilities have imposed a path dependence on consumers by requiring households to be linked to the centralised water reticulation and sewerage systems for good historical reasons related to public health. New technologies associated with improving the safety of water tanks, composting toilets and the separation of grey water from potable water (which is only necessary for 10 per cent of water, i.e. for cooking and personal hygiene) have changed this. There is no technical reason why all Australia’s major cities cannot establish potable water as a human right for essential needs while freeing up choices for the supply of non-potable water. The main barrier to this, apart from vested interests, is households which would have to take greater responsibility for their use of non-potable water. The vested interests are both private interests who see profit opportunities in privatisation of the water system, and the senior management of public water utilities who see personal opportunities opening up from privatisation and resent the cultural transformation inherent in allowing competition for the supply of non-potable water services.
Barlow describes how water policy consensus is shaped in giant global forums. Since 2000 the World Water Council, the United Nations and the World Bank have hosted a series of high-profile summits on water which purport to be ideologically neutral but are really designed to open water utilities up to privatisation.
Barlow describes the Second World Water Forum (The Hague, March 2000) at which thousands of local community representatives turned up in the expectation that they would be part of a real dialogue on the world water crisis: ‘instead they found a tightly-controlled agenda with panels held in huge auditoriums extolling public-private partnerships and speakers from only the major water corporations including Suez and Vivendi (Veolia’s predecessor), the major bottled water companies, including Nestle, and the World Bank. No civil society organisations were given a role on stage or off, and all dissent was resisted’.
At the United Nations World Summit on Sustainable Development held in 2002 in Johannesburg ‘it was water and sanitation—and their attendant profit-making opportunities—that dominated the Summit … the water companies wanted to cash in on the lucrative contracts that would open up if the summit endorsed private-public partnerships as the major delivery model to implement the UN Millennium Goals … In this quest they were supported by a major new $US1.9 billion undertaking of the European Union called the EU Water Initiative’.
If the corporate takeover of world water succeeds Barlow points to three consequences: there will be no incentive to stop pollution because it is the destruction of existing water supplies which is helping create water scarcity and drives up prices and profits; only the rich will have access to clean water because investment in infrastructure will flow to where the money is, rather than to where it is needed; and nature will have to fend for itself as the commodification of water is really the commodification of nature.
As Barlow makes plain, there is an innate preference by the operators of privatised water for high technology solutions where the economic ‘rents’ from investment can be more readily captured by the international cartel which is rapidly gaining a stranglehold on the industry, compared with the often small-scale, low-tech, environmentally-sensitive solutions to delivering potable water to households on an equitable basis. This may help explain why there are seven desalination plants being built in mainland capitals and the Gold Coast. These plants will cost $8.7 billion according to the optimistic estimates of their state backers, produce water four to six times the cost of dam or aquifer water and generate pollution equal to an additional 700,000 to 800,000 cars on city roads each year. With the possible exception of Perth, with sensible planning, none of these desalination plants is necessary and none appears to have been subject to an effective, public, cost-benefit analysis or environmental effects statement.
The main spruikers for this high-tech approach to urban water supply are self-professed champions of rational economics—the federal and some state treasuries and the Productivity Commission. Their argument seems to be, ‘let’s set a market for water by introducing competition’. This opens the way for privatisation. The Productivity Commission in its 2008 paper on urban water reform revealed an implicit preference for desalination plants. But the only way private operators will risk producing water four to six times the cost of dam water is with a ‘take or pay’ contract for the 30-year life of the plant (the government would have to pay whether it takes the water or not). This is the antithesis of competition. For instance, in Victoria if instead of attempting a back-door deal for a 150 gigalitre desalination plant on a 30-year contract, the government announced that it was looking for 150 gigalitres of water on a 30-year ‘take or pay’ contract the desalination plant would fail on price alone.
The Productivity Commission says desalination water is a superior product which can attract a higher price because supply is assured. It isn’t. The lethal chemical by-products used to clean the osmosis membranes through which the salt water is forced means certain risks are intrinsic to the process.
In Troubled Waters, Peter Spearritt says ‘Resorting to desalination plants constitutes one of the great policy failures of our times. State Labor governments, increasingly keen to prove how pro-business they are by placating their property industry lobbies, have gone down the track of desal plants with remarkably little analysis about the longer-term implications for both demand management and environmental costs.
‘In embracing its desalination plant, the Gold Coast Council can now proudly claim to be the least sustainable major city. With less than 2 per cent of its travel by public transport, its heavy reliance on air-conditioning and its desalination plant, residents of the Gold Coast will shortly produce more carbon emissions per head than any other major Australian city. What a great claim for Australia’s surfing holiday capital.
‘All this is the more extraordinary because both the Sunshine Coast and the Gold Coast have regular and quite healthy rainwater … it would have been more sensible [if] households installed water tanks of 10,000 to 20,000 litres to get a rebate. It is not too late for this policy change to happen’.
It is hard to avoid the conclusion that the debate about water across Australia has already been corrupted in favour of foreign water multinationals. The Queensland Water Commission has given up on rainwater tanks, according to Spearritt, and in its latest draft report suggests ‘another six desalination plants up and down the coast, all located in the region’s diminishing open space, including two of its sand islands. Yet most of SEQ has, and is predicted to have, a reasonable rainfall’.
Spearritt explains that all this is happening in a secretive environment with risk-averse public servants, where speaking your mind is not encouraged and where ‘a number of university water-research centres get funding from firms who stand to make millions of dollars out of desalination infrastructure’.
The chapter by Janice Grey and Alex Gardner dealing with pressure for third-party access to sewage and public sector sewerage infrastructure as a route to privatisation echoes the problems associated with structural separation of telecommunications, electricity and rail transport. According to this chapter ‘it is legally possible to “unbundle†various aspects of the wastewater sector (for example by separating out extraction, treatment distribution, household connection, billing, maintenance and construction of infrastructure) in order to create spaces for third-party competitive involvement. [But] if obligation is broken up and shared along the supply chain, it may be easier to avoid responsibility for system failures. If there is a problem, it is always potentially the fault of somebody else’.
According to the project finance newsletter published by NAB (nabCapital), quoted by Lee Godden, water assets are highly attractive to the financial engineers who have made a fortune out of earlier waves of privatisation: ‘from a banking perspective, there is a tremendous opportunity (in construction of water infrastructure), particularly if it is financed in a PPP-style arrangement. The capital markets, the banking markets and equity markets have a strong appetite for this type of risk’.
Godden looks at the argument that a property rights approach to water scarcity will allocate water more efficiently. She argues that water as private property, ‘rather than being the “solution†to natural scarcity simply puts in place a private law regime for rationing (that is, state-supported private law regulatory forms to ration the resource). Whether the rationing takes place according to a public-law or private-law regime, necessarily law is involved, rather than the situation being one with a pure market-based “solution†and the other being a “state†law-based regime’.
Furthermore, ‘if we accept its fundamental ecosystem qualities, [water] is not an infinitely substitutable and transferable resource. It has localised environmental, equity and distributive-justice implications… Clearly water, in situ, provides many important social, cultural and economic values that cannot be captured by property and exchange constructs as these are currently conceived under market environmentalism’, Godden concludes.
This is not an argument that cuts much ice with the Rudd Government or its most influential official advisors in the Treasury or the Productivity Commission and its unofficial advisors with a vested interest in water marketisation. Treasury head, Ken Henry, argued as follows in a speech in March: ‘in a well-functioning market, drought-induced increases in price would provide the signal for investment in supply, including things like desalination plants, new dams and water-recycling plants. When brought on-stream, these investments would reduce the price of water’. Bollocks.
According to the 2008 Productivity Commission discussion paper, ‘competition could be fostered. For example, a dam’s capacity could be divided into entitlements and auctioned’. Why? To provide a competitive fig leaf for privatisation.
The paper reeks of the ideological agenda of the economic rationalists who are as firmly ensconced under Labor at both the state and federal level as they were under the Howard Government. The paper said: ‘Further governance reforms to the centralised monopoly model could improve outcomes—dividend policies could be more commercially based and water utilities given greater autonomy in making investment decisions…a more competitive urban water framework potentially could deliver better outcomes’.
This mindset which pretends that setting up a market for water is the necessary precondition for solving the looming water crisis in order to profit from the growing scarcity of potable water was reflected in the preliminary communiqué of the 2020 Summit. This is not surprising. The Co-chair of the Population, Sustainability, Climate Change and Water session (with the Minister for Climate Change and Water, Penny Wong) was Roger Beale, a director of public private partnerships associated with privatised infrastructure in Sydney and Brisbane, and the Lead Facilitator was Jennifer Westacott, National Partner in Charge of Water Reform at KPMG.
The penny still hasn’t dropped. The 2020 Summit was a Rudd Government celebration about the fact that the rank and file members of the ALP are no longer part of the policy-making machinery of the ALP. This is a position apparently supported by a right-wing cabal within the NSW state cabinet. It has decided it can ignore the overwhelming majority of delegates to the NSW state conference who voted against the privatisation of the state’s electricity-generating assets. The opposition within the state conference also reflects public opinion polls, which makes the cabal’s decision even more disturbing.
What we are seeing is a putsch by the parliamentary wing of the Labor Party against the membership. It is an old dispute. In the 1920s it was resolved in favour of the party with tripartite institutions (Conference, Executive and Caucus) which were put in place in order to maintain some disciple over the parliamentarians. Vere Gordon Childe in his 1923 classic, How Labour Governs, said: To sum up then we may say that the system of control from below adopted by the Labor Party from its inception has been proved necessary by the selfish and cowardly opportunism which has distinguished the workers parliamentary representatives’.
For some time Labor has atrophied into a self-perpetuating oligarchy. The tension between the oligarchs and the true believers is nothing new and will continue for as long as the party has something worthwhile to contribute to the political process. But Rudd seems to have taken concentrated power into the Office of the Prime Minister as a result of Caucus cravenly giving up its power to elect the ministry.
Given the corruption of the pre-selection process, it is not surprising how easily state Labor governments have been captured by ‘the big end of town’. This process has been facilitated by the politicisation of the public service.
Put starkly, the idea that potable water should be accepted as a human right (as conceived by Barlow) or as an inalienable right (as argued by Troy), is not a certainty—even if it had overwhelming public support. But exposing the unholy alliance between the financial engineers, senior bureaucrats and the majority of Labor ministers in federal and state governments is a first step—particularly in the context of a concerted global push which has already undermined the integrity of parts of the United Nations, the World Bank and the WTO. Even so, it will take real courage to oppose this diabolical combination of vested interests.
Kenneth Davidson
