Portside - The newly released report on water privatization [by the] Public Services International Research Unit... identifies worldwide deceptive practices used by the water privatization industry. For example, it has become common in the United States that, when public infrastructure is privatized, for the public “partner” to receive a large up-front payment in exchange for a multi-generation contract that effectively makes the private contractor the owner of the asset.
Part of what makes water privatization attractive is the promise to provide modern innovations as part of the deal. In fact, this study finds that the true innovation is not technology but, rather, the up-front payment made to the public.
Cash-strapped governments are thrilled to get what seems to be so much money that it can solve all their financial needs. However, they do not understand how such a long contract will play out and find it hard to resist signing the contract. It is for just that reason that France outlawed up-front payments as part of privatization two decades ago – it distorts decision-making.
The US not only permits up-front payments, they are standard in American infrastructure privatization contracts. It is not surprising that would be the case, given the view that government can do nothing right while the private sector is always efficient. What most people do not understand is that the privatization industry owes no obligation to the public. Rather, private corporations’ obligation is owed only to shareholders, and that obligation is to maximize profits for its shareholders.
The report finds that private water corporations meet their duty to maximize profits to their shareholders by “a) weakening their greatest competitor, the public water sector, b) opening up the water market and creating business opportunities for themselves, and c) removing as many obstacles as possible to the profitability of their operations.”
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