The Right to Water Paradox:
How Commoditization and “Collective Bargaining” Can Bring Water to the Poor Rural Masses.

Joseph J. Opron III

Introduction

In the wake of the great depression, the world sought out alternatives to the neoliberal socioeconomic policy that had failed it. Drunk with power, progressives around the world replaced laissez-faire capitalism with state owned industry and trade protectionism. In the 1980s, when leftist ideology failed to meet the needs of society, laissez-fairre capitalism rose again to prominence. Today, laissez-faire capitalism has once again proven incapable of sustainability, and the world is once again seeking a new way forward. In light of this opportunity, ideological progressivism is again making its charge. However, progressives would be remiss to make the same mistake of indulging in ideology like it did in the wake of the great depression. Instead, progressives should take this opportunity to break free of the cycle of ideological purism and usher in a new era of pragmatic solutions to socioeconomic challenges.

Perhaps the greatest challenge for the upcoming century and beyond is providing an exponentially growing population with access to a finite supply of water. The IMF, World Bank, and major water corporations have pushed for privatization of water infrastructure. This laissez-faire approach to improving water access to third world nations has proved to range from inadequate to disastrous for the citizens of the countries where it has been implemented. However, the prevailing progressive approach provides no viable alternative. Instead of proposing a pragmatic solution to water distribution, the progressive approach to solving the problem has been to lobby for an international “right to water” and to fight against the privatization of municipal water distribution.

This paper proposes a pragmatic solution to the problem of clean water access for the rural poor of the third-world that avoids the pitfalls of the ideological purism. Part I provides a brief overview of the problem of water access in rural Latin American and around the world. Part II identifies and analyzes the neoliberal solution to water access issues. Part III identifies the progressive solution to water access issues. Part IV explains the role technology has played in solving water access issues and offers commentary on how ideological purism has stifled the proliferation and growth of important technologies. Finally, Part V incorporates the previous sections into a pragmatic, ideology-free solution to water access issues.

Part I. Water Access Issues

Access to clean drinking water is a global problem. In 2006, waterborne diseases were estimated to cause 1.8 million deaths annually and about 1.1 billion people lacked proper drinking water.[1] In Latin America alone, there are over 75 million people without access to clean drinking water and over 116 million without adequate sanitation facilities.[2] Of those without access, over 80 percent live in rural areas.[3] The United Nations’ Millennium Development Goals aim to halve the number of people without safe water by 2015.[4] Current spending on new water infrastructure in developing and emerging countries is very roughly $80 billion a year. This will have to more than double over the next 20–25 years, to around $180 billion, to have a chance at reaching the goal.

Part II. The Neoliberal Solution

Currently, the vast majority (approximately 95%) of water is delivered through subsidized, public means.[5] However, the past two decades have seen a breakdown in the traditional, state-centric model. Large water corporations such as Suez, RWE, and Vivendi and international organizations such as the IMF and World Bank have been key actors in the charge for the privatization of municipal water utilities. The argument they bring is a familiar one; government run utilities are inefficient bureaucracies that would be efficient if market forces were allowed to run their course.[6] By effectuating these efficiencies, they promise to be able to lower costs to the end consumer and increase access to those currently without access to clean water.[7] In order to ensure necessary cost-recovery and eliminate wasteful use of resources, these organizations often also require that countries remove subsidies to indigent consumers.[8]

During the fiscal crisis of the 1980s and 1990s, many countries were faced with balance of payment deficits which threatened to destroy their nation’s economies. [9] In response, many Latin American leaders turned to the IMF for financial assistance. During this time, the World Bank’s stance on water utilities also took a drastic change from endorsing public run utilities, to the neoliberal model of minimum government interference.[10] As one of the conditions of assistance, the IMF often required these countries to privatize and end subsidization of their municipal water delivery and sanitation services.

Despite the presumably good intentions of these actors, the results have been disastrous for the citizens of these countries, especially the rural poor. As the following two case studies demonstrate, the neoliberal model of privatization of water distribution has failed where tried in Latin America.

A. Argentina

For years, the public utility in Buenos Aires, Argentina, Obres Sanitarias de la Nacion (OSN), provided comprehensive water services to the city’s residents.[11] However, a population boom in Buenos Aires generated a need for a huge infusion of capital to service the city’s new residents.[12] The World Bank offered hundreds of millions of dollars under the condition that the water be privatized.[13] The 1993 privatization deal in Buenos Aires was lauded by the World Bank, the Argentinean government, and the water industry as an international success story.[14] The company promised to reduce rates by as much as 27%, provide the necessary increased access capabilities, and build a new sewage treatment plant.[15]

By all relevant measures, OSN failed to live up to its promises. Water rates in Buenos Aires rose 20% and the company reneged on its contractual obligation to build a sewage treatment plant.[16] Now more than 95% of the city’s sewage is dumped into a local river.[17] Furthermore, Suez constantly used its control of water distribution as leverage to negotiate rate increases by threatening to suspend service and planned expansions. In most instances, the undertrained government regulatory team was suspiciously willing to comply with OSN’s demands.[18] In 2006, President Kirchner ended the contract.[19] Suez is now brining claims against the Argentine government using the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) to recover the full value of its contract.[20]

B. Bolivia

In 1999, the Bolivian government granted a 40-year contract to Aguas de Tunari for the management of Cochabamba’s water system.[21] The World Bank insisted that no subsidies be granted to the nation’s poor.[22] Water rates immediately increased for some by as much as 200%.[23] In a country where the minimum wage is less than $100 a month, many families were paying water bills of $20/month.[24] Unable to pay and desperate for water, the people to took the streets in protest.[25] This started with peaceful demonstrations and ended with a clash with nearly a thousand police officers who responded to the demonstrations with tear gas and live bullets.[26] The incident injured over 175 citizens[27] and resulted in one person being killed.[28] The government finally caved to public pressure and terminated the contract. In 2001, the corporation initiated arbitration proceedings with the World Bank seeking lost future profits totaling over $25 million.[29]

C. Where the Agreements Went Wrong.

Whether it is an authoritative government or a private corporation, it is seldom wise to concentrate the power and responsibility of managing a public utility in the hands of a single actor that does not have a cognizable level of accountability. When entrusted with such great power, self-interest of the corporations will trump the best interest of the public.

In the two examples outlined above, the absence of a system to hold water corporations accountable to public needs was a large contributor to the failure of the agreements and, thus, was problematic for all parties involved. As private corporations, water companies are expected, if not entitled, to make a profit. To the extent that mass demonstrations were aimed at the exorbitant profits these companies made during the term of these contracts, the aims of the demonstrations were misplaced. However, with nowhere else to turn but to the streets, it is no surprise that the people of Argentina and Bolivia did just that. The absence of an alternative place for the citizens to air their grievances with the water corporations was a fatal flaw in the design of the contracts. If the citizens of the rural communities that rose up in protest had local representatives entrusted with the power and resources to air their grievances to the corporate executives and government officials who were located far away from the problem, perhaps the corporations would have had the time to fix the access and cost problems. Instead, intense public protest virtually foreclosed any possibility of continuing the arrangement. Thus, the government was forced to once again bear the burden of an underfunded system it could not afford, the corporations lost the opportunity to continue to benefit from their investment, and the people were still without a viable long-term solution to their water access problems.

Furthermore, the concentration of control of a public water system in a private company raises the unique problem of alienating the characteristic of water as a public good. Throughout history, water has been treated as a natural right.[30] In fact, in most societies, it still remains illegal to privately own water.[31] Thus, it is no surprise that any attempt to alter this tradition will be met with at least some degree of resistance. In the examples above, the water systems of two cities was abruptly and radically transformed from a public to a private good. Just as a representative system would be beneficial for helping keep corporations accountable, it would also provide the population with a sense of ownership of their water.

Finally, central to any argument for privatization is the claim that free markets are the supreme tool of efficiency; through the principles of supply and demand, and open competition, markets will find the best price for the consumer at a rate that will reward the producer with a profit for its effort.[32] However, in the above examples, none of these forces were in play because the countries essentially granted monopolies to the water companies. The effect of this grant was simply a change in ownership. Although municipal water systems are perhaps a natural monopoly, tools such as open bidding, performance based contracts, short interval contracts, and bundling of profitable and non-profitable service areas can be utilized to harness the power of market forces to reduce costs and increase access. These solutions will be covered in more detail in Part V.

Part III. The Progressive Approach

Progressive solutions to water access issues have primarily focused upon one or more of the following elements: 1. lobbying for an international “right to water”; 2. Resisting efforts to privatize municipal water systems; and 3. encouraging the development of cooperatives as an alternative to public and investor-based-private ownership.

A. Promoting an International Human Right to Water

On January 20, 2003, the United Nations Committee on Economic, Social and Cultural Rights issued a General Comment on the “Right to Water.”[33] The committee established a “human right to water [that] entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses.”[34] The Comment posited that the “Right to Water” exists in the International Covenant on Economic, Social, and Cultural Rights.”[35] Specifically, Article 11, paragraph 1, of the Covenant specifies rights “including adequate food, clothing and housing.”[36] The Committee held that “The right to water clearly falls within the category of guarantees essential for securing an adequate standard of living, particularly since it is one of the most fundamental conditions for survival.”[37] Moreover, the Committee held that the right should also be seen in conjunction with other rights enshrined in the International Bill of Human Rights , foremost amongst them, the right to life and human dignity.[38]

Moreover, the Committee declared that State parties have an “immediate obligation” to “take steps towards the full realization” of the aforesaid right.[39] Additionally, states have an obligation to “prevent third parties from interfering in any way with the enjoyment of the right to water and must adopt legislation necessary to ensure the right to water.”[40]

The UN has certainly done a service by defining a “Right to Water.”However, it lacks the authority to bind sovereign nations/ multi-national corporations to the notion. The enforcement of rights found in the International Covenant on Economic Social and Cultural Rights is highly questionable. The United States is not a party to the treaty. Furthermore, although the United States is a full party to its sister treaty, the International covenant on Civil and Political Rights, it took reservations to a number of its provisions. Moreover, the US has declared that the rights are not “self-executing.” Thus, the rights enumerated in the treaty are not directly enforceable in U.S. courts. Finally, “entitling everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses” is overly vague and well beyond the means of third world countries at the core of the water access problem. Thus, although the “right to water” is a moral victory and a noble cause, it does little to help solve the problem of insufficient funding.

B. Encouraging cooperatives

Perhaps the most tangible solution presented by the left is the consumer-owned water cooperative. Generally, cooperatives sprung out of the industrial revolution as an alternative to privately owned enterprise.[41] Today, more than 800 million people are members of over 740,000 cooperatives worldwide that are organized to provide a wide variety of goods and services to their members.[42]

Water cooperatives have historically been utilized to provide utility services where the prospect of private investment was lacking due to a perceived lack of profitability or government inability to meet public needs[43]. Water cooperatives are usually privately owned by the members of the cooperative. The members are also the end user of the product or service produced by the cooperative.[44] Profits are not pursued and if obtained, are generally reinvested in the cooperative.[45] Members cannot withdraw and reallocate their investments; the only way members can capture the value of the cooperative’s activities is through the use of the service.[46] Thus, in their role as owner and consumer, it is in their best interest to keep costs low.[47] Furthermore, a cooperative is generally very receptive to the needs of its members because they utilize a representative democracy model.[48]

One successful example of a water cooperative can be found in Santa Cruz, Bolivia. SAGUAPAC (Cooperativa de Servicios Públicos Santa Cruz Limitada) utilizes the model described above to provide water to 95 percent of its coverage area, a total of over 96,000 members.[49] Perhaps its greatest accomplishment is accommodating a booming Santa Cruz urban population’s ever-increasing demand; a problem the central government was growing increasingly unable to deal with.[50]

Despite its successes, the SAGUAPAC, like its government-run predecessor, has found it difficult to acquire adequate funding for infrastructure improvement.[51] The World Bank, to its credit, was necessary to step-in to provide financing for the operation.[52] Thus, water cooperatives offer only an incomplete solution for poor rural areas at the heart of the water access problem discussed in this note.

Part IV. The Role of Technology

Ideologically purist solutions have also stifled development and use of water access technologies. It is axiomatic that private enterprise is a primary driver of innovation and inventions. However, as it stands right now, private enterprise has little incentive to invest in technological solutions to clean water access problems in poor rural areas. Poor rural citizens have little resources to pay for clean water, so any inventions aimed at solving the problem have to focus on operating at little to no cost to the user. Such an invention would provide little to no expectation of profit. Thus, corporations have no incentive to provide large amounts of research and development resources toward their advancement.

Despite the lack of private sector investment in low cost solutions to the rural water access dilemma, great strides have been made by universities and non-profit organizations. One such example is UV Waterworks, a UV light filtration systems created by Ashok Gadgil of the Lawrence Berkeley National Laboratory.[53] UV waterworks is a small apparatus which water flows through and is disinfected by ultraviolet light bulbs.[54] Gadgil’s invention has made it possible to greatly reduce the cost of providing clean drinking water to the rural poor. His device is able to kill 99.9% of the pathogens and bacteria in a water supply for a rural community of approximately 1000 villagers at a cost of only $0.05 USD per villager, per year.[55]

Part V. A Pragmatic Approach

A. Analysis of Ideology-Based Solutions

As shown in the preceding sections, solutions clouded by ideology fail to address the complexities of the problem of water access for the rural poor. The neoliberal model has not provided a solution because it has failed to recognize that citizen will not risk water becoming a pure commodity; in order to successfully privatize a municipal water supply without massive citizen resistance, water needs to retain at least some of its characteristics as a public good. Conversely, the progressive rights-based approach has failed to deliver any tangible benefit for the rural poor because the international right to water, assuming one exists under current international law, lacks enforceability. Moreover, water cooperative and government run utilities are unable to raise sufficient capital to make critical updates to failing infrastructure as economies go bust and populations boom. In light of this fact, private capital investment is inevitable, and, thus, the left’s resistance is futile.

Because it is clear that neither model is sufficient to address the problem of rural water access on its own, it is imperative that the discussion break free from the shackles of ideology and embraces pragmatism. This section provides a rough model of how a system might look that harnesses the best elements of each approach: 1. the financial resources of privatization from the right; 2.the social awareness and collective action from the left; and 3. the technologies currently not being utilized by either approach.

B. The Latin America Water Alliance

For centuries, labor unions have stood as proof that a balance can be struck between human rights and private enterprise. In the mid 20^th century, faced with the reality that socialism’s inefficient ownership of the means of production was insufficient to provide for a vibrant economy, workers sought a way to enjoy some of the security of socialism while benefiting from the wealth and efficiency of private enterprise. The answer was to collectively bargain with the private owners.

The right to clean water movement as well as the multi-national water corporations can learn much from the labor movement of the 20^th century. Like the workers of the early 20th century, municipal and national governments need to concede that the financial and tactical resources of the private sector are needed to solve their problem. In order to address the growing need for infrastructure expansion and improvement, governments must realize that privatization is inevitable. As discussed in Part I, water privatization is very unpopular in Latin America following some disastrous IMF experiments. However, privatization might still be possible if packaged to Latina America as an alternative to IMF loans, and analogous to collective bargaining.

The first feature of the Latin America Water Alliance is the alliance itself. Like the workers of the 20^th century, Latin American nations should join forces to gain bargaining leverage over the multinational water companies. [56] There are many sought after urban centers in Latin America that would make such a proposal hard to refuse for the multinational water corporations.

C. Service Zones

Once an alliance is formed, the alliance should define “service zones.” Each service zone would ideally consist of lucrative urban centers, as well as rural areas that traditionally are not cost effective to service. Each service zone would then be presented to the major water companies for competitive bidding. Service zone contracts should also be awarded for limited intervals. Furthermore, each service zone should have elected representatives sufficiently localized to keep the Alliance and water corporations aware of problems and accountable to the terms of the contract. Finally, each corporation bidding on a contract and each member of the Alliance must be incorporated in a country that is a signatory to the New York Convention to ensure effective and binding arbitration for dispute resolution.

D. Urban and Rural Grouping

Packaging necessitates the need for water corporations to address the question of access to the neglected rural poor. For example, if a company wanted to receive a contract for Mexico City, it must also accept the responsibility of ensuring water delivery to surrounding villages that historically have not had access to clean water.[57]

As described in Part I, much of the failures of prior water service contracts in Latin America stemmed from poor areas that were neglected because of high cost of delivery and infrastructure improvements. However, given the lack of accountability of the corporations, this result was to be expected. Furthermore, government run water distribution systems are also notorious for neglecting poor rural areas. Under the service zone scheme described above, water corporations will be incentivized to use and invest in the development of tools such as UV Waterworks. The UV Waterworks system is already likely efficient enough to make it possible for water corporations to take on the responsibility of providing for the rural areas with very little burden considering the value of the urban centers.

It is important to note that accepting the responsibility to provide for rural areas as part of a service contract does not imply that corporations will need to provide remote villages with running water like their urban counterparts. Such an expectation would be unrealistic because the prospect of recovering the cost of the investments necessary to carry out such an operation are bleak, and the private sector is unwilling to take such a risk.[58] Service zone contracts should be drafted with terms that are fit to meet the needs of a village without placing unrealistic expectations on the water corporations. While it may be necessary to provide running water in Mexico City, surrounding villages only need enough water to meet their personal drinking needs. Furthermore, despite the great strides publicly funded research has made, the infusion of private capital into research and development promises to produce even more efficient methods to make the dream of universal water access a reality.

Another key failure of government run systems and corporate monopolies is the lack of competition. It is axiomatic that competition drives down prices. A monopoly is the absence of competition. Thus, monopolies are inherently inefficient. However, water distribution is generally thought of as a natural monopoly. That is, a single firm in charge of a water utility “can serve the entire market at a lower cost than would be possible if the industry were composed of many smaller firms.”[59] Thus, in order to benefit from market principles, and to ensure that water corporations are continuously striving to provide the most competitive price and best service, service zone contracts should be limited to intervals that are as short as possible. If lucrative service zone contracts are continually up for bid, it will ensure that corporations are continuously seeking ways to lower costs and increase access.

E. Engaging the Democratic process

By utilizing the cooperative democratic model, the rural poor, through their elected representatives, will have a voice to express their discontent and contractual provisions to hold corporations accountable to performance standards. The exact contours of such a system will have to be solidified through trial and error, but the Santa Cruz model described above should provide a good starting point. Whichever model is chosen, it will be a great advancement for the rights of the rural poor because currently they suffer for want of representation.

F. Enforcement and Dispute Resolution

In order to ensure that member nations and multinational corporations are able to justly and effectively resolve disputes about the performance of the service zone contracts, each member nation and home nation of the corporations must be signatories to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the "New York Convention". The New York Convention states that “[e]ach Contracting State shall recognize arbitral awards as binding.”[60] Furthermore, in order to ensure neutrality and efficiency, it would also be prudent to create special arbitration panel for water issues.

Conclusion

In their quest for finding a model for solving water access issues, proponents of neoliberal and progressive solutions have both traveled down the treacherous trail of ideological purism. Although there is no single clear path forward, this paper demonstrates that, by moving beyond ideology and combining the best elements of each approach, a workable framework can emerge, and society can take a great leap forward in solving a great crisis which endangers the lives of millions every day.

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[1] WHO, Global Water Supply and Sanitation Assessment 2000 Report, World Health Organization, Geneva.

[2] World Bank, The World Bank and Water Supply and Sanitation in Latin America and the Carribean (June 2006), http://go.worldbank.org/FDQX4E3EM0.

[3] J. Budds & g. McGranahan, Are the Debates on Water Privatization Missing the Point? Experiences From Africa, Asia, and Latin America, 15 Environment & Urbanization, 87, 109 (October 2003).

[4] United Nations Millennium Development Goals, http://www.un.org/millenniumgoals/environ.shtml.

[5] Wolff, Beyond Privitization: Restructuring Water Systems to Improve Performance, 91, Pacific Institute (December 2005).

[6] See Generally J. Budds & g. McGranahan, Are the Debates on Water Privatization Missing the Point? Experiences From Africa, Asia, and Latin America, 15 Environment & Urbanization, 87, 91 (October 2003).

[7] Id.

[8] Id.

[9] Infrastructure Performance and Reform in Developing and Transition Economies: Evidence from a Survey of Productivity Measures, Antonio Estache, World Bank, 2005, http://www.wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2005/03/06/000090341_20050306101429/Rendered/PDF/wps3514.pdf.

[10] See Andres Olleta, The Wrold Bank’s Influence on Water Privatisation in Argentina: The Experience of the City of Buenos Aires, 3, International Environmental Law Research Centre (2007).

[11] Public Citizen, Water Privatization Fiascos: Broken Promises and Social Turmoil, 2 (2002).

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] See Olleta, supra note 10, at 13.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Public citizen, Water Privatization Case Study: Cochabamba, Bolivia, 3, http://www.citizen.org/documents/Bolivia_(PDF).PDF.

[22] Id.

[23] Public Citizen, Water Privatization Fiascos: Broken Promises and Social Turmoil, 5 (2002).

[24] Id.

[25] Id.

[26] Democracy Now, April 13, 2001, Bolivian Security Forces Crack Down On Water Privatization Protest March, http://i1.democracynow.org/2001/4/13/bolivian_security_forces_crack_down_on

[27] Public Citizen, Water Privatization Fiascos: Broken Promises and Social Turmoil, 5 (2002).

[28] Id.

[29] Public citizen, Water Privatization Case Study: Cochabamba, Bolivia, 4, http://www.citizen.org/documents/Bolivia_(PDF).PDF.

[30] Vandana Shiva, Water Wars, 21 (South End Press 2002).

[31] Id.

[32] See J. Budds & g. McGranahan, Are the Debates on Water Privatization Missing the Point? Experiences From Africa, Asia, and Latin America, 15 Environment & Urbanization, 87, 97 (October 2003).

[33] U.N. Econ. & Soc. Council [ECOSOC], Committee on Economic, Social, and Cultural Rights, General comment No. 15: The right to water (arts. 11 and 12 of the International covenant on Economic, Social and Cultural Rights (January 20, 2003).

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id.

[39] Id.

[40] Id.

[41] World Bank, Water Supply and Sanitation Sector Board, Working Notes: Consumer Cooperatives: An Alternative Institutional Model for elivery of Urban Water Supply and Sanitation Services?, 3 (January 2006).

[42] Id.

[43] Id.

[44] Id at 6

[45] Id.

[46] Id.

[47] Id.

[48] Id.

[49] Id. at 8.

[50] Id.

[51] Id. at 19.

[52] Dirty aid, Dirty Water: The UK Government’s Push to Privatise Water and Sanitation in Poor countries, 59, World Development Movement (February 2005).

[53] Water Health, Better Technology Means Better Water, May 1, 2009, http://www.waterhealth.com/water-solutions/technology.php.

[54] Id.

[55] UV Waterworks: Reliable, Inexpensive Water Disinfection for the World. CBS Newsletter, 6 http://eetdnews.lbl.gov/cbs_nl/nl9/waterworks.html.

[56] Although this Note does not suggesting collective bargaining per se, it is important to note that whenever two or more parties join to bargain together it impairs the ability for them to bargain on their own. This is one a several problems that may arise out of the “collective bargaining” advocated in this Note. However, these issue are beyond the scope of this Note.

[57] This model is inspired by the former “bell system” operated by AT&T wherein the company engaged in cross subsidization of weak markets with the proceeds from profitable markets. For more on this subject, see generally Victoria A. Ramundo, The Convergence of Telecommunication Technology and Providers: The evolving State Role in Telecommunications Regulation, 6 Alb. L.J. Sci. & Tech. 35 (1996).

[58] See J. Budds & g. McGranahan, Are the Debates on Water Privatization Missing the Point? Experiences From Africa, Asia, and Latin America, 15 Environment & Urbanization, 87, 109 (October 2003).

[59] The World Bank Group, Beyond Economic Growth Student Book, www.worldbank.org/depweb/english/beyond/global/glossary.html

[60] United Nations Conference on International Commercial Arbitration, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (1958)