In a world where access to clean water is increasingly scarce, we can expect to see a fundamental shift in how water is managed, and by whom.
There exist different forms of water privatization: management contracts (private operators are responsible for running a system), lease contacts (assets are leased to a private operator), concessions (private operators are responsible for running an entire system often for several decades), and full privatization (the private operator also owns the assets).
Privatization of water, in many cases, has led to far more efficient distribution systems, by which peoples have been less likely to go without water. Public water or state-run water systems are often ignored, or the water supply is heavily subsidized for industry and agriculture, leading to excessive consumption. This, however, is a problem with government, and not the concept of publicly managed water systems.
Privatization must not be confused with commercialization. Privatization suggests a shift in management from public to private. Commercialization, on the other hand, introduces new management institutions, the most prevalent of which being free market competition.
Free market competition is an institution with immense driving power, capable of maneuvering and dictating who can have access to water based on economic incentives. It is often argued that a free market is by far the best model for efficiency in resource management. It is believed that, like any commodity, the price of water will reduce and the quality will remain sufficient; that consumer demand will create enough competition. It is also believed that the assignment of a monetary value to water will make people less likely to waste it, thereby leading to greater conservation.
As nice as this sounds, free market enterprise is not an inevitable result of privatization. Because most water is publicly managed, a single government may sell water rights to a single corporate entity, very often a multinational. Ownership of water is a conceded to corporations; these corporations, secure under long-term contracts, have little to fear and little incentive to offer “competitive” prices for water.
The commercialization of water does not guarantee a healthy competitive market and efficient use of resources; it is possible, but it is not certain. What is certain, on the other hand, is the focus of the enterprise: profit. Profit supercedes all other interests, even what is best for a people. To illustrate this point, Aguas de Tunari in 2000, after gaining control of water in Cochabamba, was quick to raise the price of water to the point where many people were unable to afford it. The result was the declaration of martial law in Bolvia, and widespread protestation until the company was forced to abandon its operations.
Without privatization, what should nations do to prepare against future water crises? Education regarding responsible management of water is foremost on the list of priorities. For underdeveloped geographic locations, The International Water Management Institute recommends each community to work together to address its unique demand for water, and engage in many small-scale water storage projects.
Proponents of water privatization argue that efficient developments in water infrastructure will never occur without the impetus of privatization. Intelligent governmental involvement in water management projects will be imperative; successful governments must also have mechanisms built into them by which they can be held accountable by their peoples.
The only way to effect real change is to organize and educate at the civil level, and then demand it. The free market, up to this point, has done nothing to prevent the putrification of global freshwater supplies. While free market Pollyanna capitalists believe firmly that the market, given the right incentives, will eventually unveil a solution, those most in need of freshwater know realistically that such a change will not occur in a penniless environment. The demand for water is obvious and dire, as is the demand for oil; we do not see oil companies attempting to curb demand for petroleum with schemes for fuel-efficiency.