As America’s infrastructure crumbles, water privatization becomes more likely

America is literally falling apart. Our bridges and roads are crumbling; our airports, railroads, and ports are disintegrating. Things aren’t looking good. And by far the most troubled area of U.S. infrastructure is also probably the most indispensable: water. All across the country, states are struggling to fund, manage, and repair their ancient, disintegrating systems–many of which hemorrhage ungodly amounts of water on an annual basis.

The raw data for water loss is really quite shocking:

  • In most cities, infrastructure is in such a state of disrepair that breakdowns occur daily. Houston, TX, for instance, saw an estimated 700 water main breaks every single day in 2011.
  • Those leaking pipes lose untold billions of gallons of water annually. In the city of San Jose alone, it’s estimated that the city’s systems lose 23 billion gallons of water every year.
  • To put these figures into perspective, Next City reports that national water leakage is enough to drown both Manhattan and Chicago on an annual basis.

Clearly that’s a lot of precious cargo lost. Yet if everybody agrees this is a huge problem, critics remain divided on how best to remedy the situation. The trending solution also tends to be the most contentious, and (many agree) dangerous: privatization.

The Push for Privatization 

For many years there has been an organized effort by private actors to move America’s water systems towards privatization.

Some of the biggest players advocating for water privatization in the U.S. are corporate advocacy groups.

Other cheerleaders for the initiative include the poster-boys for the 1%, the billionaire Koch Brothers — who, in 1980, called for “the privatization of the inland waterways, and of the distribution system that brings water to industry, agriculture and households,” along with practically every other major infrastructural element of American society.

Over the years, a plurality of Koch-related organizations have pushed water privatization as part of a wider agenda of supposedly “libertarian” policies.

In 2012, the Competitive Enterprise Institutea think tank backed by the Kochs, wrote a long report arguing that “competitive bidding” offers a “way out” for American infrastructural decline. “As decay takes hold of one water network after another, it becomes clear that the old ways of doing things are inadequate to the task at hand,” proclaims the report. “By opening up the bidding process…municipalities can let competition decide the future of their underground water networks.”

In 2013, another Koch backed think tank, the Cato Instituteoffered a summary of why private ownership is superior to public ownership:

Federal agencies don’t have the strong incentives that businesses do to ensure that infrastructure projects are constructed and operated efficiently…when Washington makes mistakes it replicates them across the nation…federal infrastructure…usually comes part and parcel with piles of regulations…

This is the standard frame used time and again as the rationale for privatization: government is inept, wasteful and incapable of properly managing public resources, while private industry is competent, efficient and responsible.

Why, exactly? In the logic of capital, the profit-motive is often touted as the indispensable carrot that fuels corporate efficiency, which is sorely lacking in state and federal governments. Private industry (so argues private industry) is better than government because public officials have no proper motivation (i.e., money) to efficiently manage public resources.

Yet based on the track record of companies like American Water and Nestle shamelessly screwing over their customers in the pursuit of higher returns, one might argue that that same profit-motive is the very element that makes private ownership a terribly inefficient alternative to government — especially when it comes to managing a resource with perfectly inelastic demand, like water.

The Many Failures of Private Water Stewardship 

In Crumbling Infrastructure, Crumbling Democracy, academic Ellen Dannin lays out her argument for how privatization contracts are endangering democratic institutions:

  • Privatization allows companies to assume the power of local government, while avoiding all of the transparency. Dannin notes that key provisions in privatization contracts give “private contractors power over decisions that affect the public interest and are normally made by public officials and subject to oversight, disclosure, and accountability—none of which apply to private contractors.”
  • Privatization deals often make government “the insurer of the private contractor’s financial success,” meaning that if the company experiences unforeseen financial losses, it can hold the local community accountable for these losses. So called “compensation events” are written into most privatization contracts, and are exactly what they sound like: guarantees of a certain amount of income for the company investing in the community in question. This essentially makes communities indentured to the corporation for its own resources.
  • Cost-Benefit Analysis doesn’t really factor into most decisions to privatize. Dannin notes that most legislators decisions to privatize don’t consider the long-term. Due to compensation events, or other unforeseen externalities, the decision to privatize may, and often does, come with unforeseen financial costs.

Despite warnings like these from academics and public advocacy groups, the overwhelming push seen in the U.S. is to trend water management towards private power. Support for these initiatives comes from the highest levels of government.

The WRRDA: Saving U.S. Water or Ushering in a New Age of Privatization? 

In 2014, a federal bill, The Water Resources Reform and Development Act (WRRDA), seemed to offer the beginnings of a solution to the U.S. water predicament. Hailed as the “first step” towards repairing infrastructure, the bill promised to reform unnecessary government bureaucracy and mainline new water projects. The bill was pushed hard by Republicans in the senate, but also garnered enough Democratic support to be billed as strongly bipartisan legislation. President Obama signed the bill into law on June 10th, 2014, saying that the WRRDA would “put Americans to work modernizing our water infrastructure and restoring some of our most vital ecosystems.”

Yet advocacy groups have protested certain clauses within the bill that they say further legitimize public-private agreements, which they warn effectively “opens the door for privatization” on a national scale. Following the bill’s passage, Corporate Accountability International’s Public Water Works! issued a statement, saying “We are alarmed by the implications of this bill, which would open the doors to an increase in water public-private partnerships in the U.S. and effectively subsidize water privatization.”

Public-private relationships have been flagged by many progressives as a means of paving the road to full privatization of public institutions. Reportedly, the bill:

…seeks to encourage public private partnerships, under the idea that public funding alone can’t fill the gap. A project carried out by a private entity is eligible for WIFIA financing, but the project must be publicly sponsored, and the local public agency must support the project.

Additionally, the Water Infrastructure Finance and Innovation Act (WIFIA), the amendment that allows for this, allows private actors to put their own money into public infrastructure projects, which means they get partial legal claim to public domains.

David Vitter, via Wikimedia Commons

David Vitter, via Wikimedia Commons

While the idea of the public and private sectors working together to solve problems sounds great on its face, there’s every reason to believe that the politicians who crafted WRRDA had less noble goals in mind. Many of the congressional leaders who pushed it through not only are going to be given the boon of local district projects (Republicans overwhelmingly benefited), but also have strong ties to industries that stand to benefit from further privatization. Republican David Vitterwho said that the bill is “a jobs bill that is very much needed in our weak economy,” has large ties to industrial construction corporations that will likely see business in conjunction with new private infrastructure projects. Vitter, who has accosted Obama in the past for attempting to pass climate change reform (a look at his healthy campaign subsidies from the oil and gas industries shows why), isn’t exactly the type of person you’d hope would be shepherding legislation related to natural resources and the public interest.

Yet the WRRDA essentially conforms to his worldview — the kind of worldview that sees Nestle selling your own water back to you at $5 a gallon and chalks it up to the invisible hand of the market. The bill enables companies and private actors to cash in on public infrastructure in a big way, subjecting taxpayers to the whims of corporate power instead of local government. And if there’s some promise of more expedience and efficiency than the lumbering groups like the Army Corps of Engineers, then we’re yet to see whether those promises will be kept.

Clearly America’s water systems are in dire need of a fix-up. Yet given all the evidence of the potential dangers of privatized water, it bears some consideration whether the public-private friendliness of bills like WRRDA are the right path to take.

Lucas Ropek is a journalist based in Massachusetts. He worked for the Working Families Party in NYC on issues of income inequality and worker rights. His interests include U.S. foreign policy, pop-culture, and freedom fries.

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