As panic-stricken investors desperately seek out the next economic bubble to create and ultimately burst, a growing trend of the last decade may indicate where market stability could be sought in the form of infrastructure funds. Moving private investment into public sectors would provide reliable profits to financial institutions such as Goldman Sachs, who closed down their fledgling Infrastructure Partners fund over a year before the present financial woes. The fund sought multinational investment in areas such as toll roads, airports and ports, as well as a vital public utility: water.
Infrastructure assets get their appeal for investment firms by being long-term and inflation-indexed returns that guarantee investors some protection in a recession. This appeal is enhanced when the government shows that they are experiencing a shortage in public funds for infrastructural upgrade, repair and expansion. As an example, with news that federal funds to repair crumbling highways have been gutted to provide for a costly occupation of the Middle East — among other debt disasters — the government’s desire to find “cost-effective” solutions in the private sector shouldn’t surprise anyone. Of course, it’s unlikely the public as a whole would ever feel the effects of investment in a municipal airport as the number of airline passengers continues to further decline. However, the public does use water in their homes everyday.
The privatization of water is nothing new for the rest of the world. The World Bank has often coerced economically unstable and debt-laden nations into privatizing state infrastructure in order to receive loans. Though presented as a way that allows investors to alleviate the debts of the state, the burden of infrastructural investments often carries over to the consumer, who ends up getting gouged at the faucet. This was the case for Bolivia in 2000 during the Cochabamba water protests when the multinational joint venture Aguas del Tunari took control of the nation’s water supply. Though they managed to pay down debts, the investment raised water rates an average of 35 percent to about $20 a month in a nation where the average household income was around $100. It is unfathomable to think one-fifth of someone’s income could go to just water.
While the United States may not be in the same financial threshold as Bolivia when they experienced hyperinflation, we are still prone to the panic that may cause absorption of public drinking water by private investors. Stockton, California privatized the city’s water department in 2002 under a $600 million deal that had private utilities gleeful with the hope that cities across California would quickly follow suit. Despite typical marketer rhetoric that the move to privatize utilities would provide cheaper services and improved quality, the result was neither. In the first two years, the costs on the consumer went up almost 10 percent and residents complained about smells from the plant due to the firm cutting back on odor-control chemicals to save costs. Fortunately (or, rather, unfortunately), after an 8 million gallon spill of raw sewage into the San Joaquin River, the Stockton City Council took steps to reclaim their water department in what would be a costly recovery for the city.
What people should recognize is that we must become ever cautious about what market hysteria may drive us to do. We must not hesitate in demanding and vocalizing the protection of public water. Without doing so, we put ourselves into a vulnerable position in the future by being at the mercy to political actors and marketers who end up salivating at the thought of moving to privatize something as fundamentally common and vital as public water is.