We’re delighted to feature this guest post by Erik Swyngedouw, Professor of Geography at the University of Manchester. This is the first of a series of blog posts by speakers at our Water Symposium next week.
Recent experiences with water privatization experiments have shown that turning water services into profitable and socially acceptable businesses is not an easy task. And demands for full-cost recovery of water-related activities reduce the possibilities for cross-financing and cross-subsidization.
The very term full-cost recovery is an oxymoron. It is self-evident that all investment project costs need to be recovered by someone somewhere. The key question is really a political one – that is, who will be responsible for the recovery of what kind of costs.
When full-cost recovery is discussed in the context of water projects, it invariably refers to the view that water projects should be self-sufficient (i.e. that the cost of investment should be met fully through water rates – that cost recovery is organized via water consumers). This limits the possibilities of cross-subsidization to managing the tariff structure of water delivery in a redistributive manner. This, in turn, precludes the financing of projects from local, regional or national tax revenues or, through development aid, from tax revenues raised elsewhere. However, this has been the only way through which successful development of large-scale water works was achieved in the past in the global North, particularly in terms of solving the contradiction between the collective character of the system and the private organization of its management.
There is no evidence that this will be any different in the developing world. Mobilizing tax revenues permits mobilizing resources obtained from elsewhere or from other activities into collectively more desirable ones. Therefore, the narrow definition of full-cost recovery needs to be replaced by a much wider social and political-economic understanding – one that permits systemic forms of redistribution of financial resources.
In sum, questions of investment in collective commodities such as water are never independent of the question of (re)distribution. To the extent that the water economy is publicly or privately organized (or a mixture of both), these modalities of redistribution will be organized differently.
The pivotal social and political struggles for the years to come will exactly revolve around the modalities of subsidization. In other words, the struggle over mediating the tension between providing bundled territorialized and socialized hydro-social networks, on the one hand, and the private appropriation of surplus value, on the other, will be the pivot around which the social struggle over the construction of hydro-social infrastructure and access to water will be fought. While the private sector effectively claims that private-sector participation will be dependent upon public financial support, there is increasing pressure on public institutions to sustain private-sector investment by means of significant public financial support.
While we have argued above that uneven access to water is primarily a question of economic or monetary power, achieving the Millennium Development Goals for water necessarily implies a major redistribution of capital resources. Guaranteeing access to clean and safe water requires the transfer of considerable amounts of investment capital whose return will have to be carried by the more wealthy sections of the world’s population. This is independent of the question of whether the actual management of water supply and delivery should be publicly or privately organized. The latter question is one of efficient management. Around the world, both public and private (or mixed) companies have proven that they can be effective and efficient. However, the public–private debate should not overshadow (as it has done over the past decades) the question of the origin of the required investments to secure access to water. The private sector, because of the structural requirement for a normal return (profit) on investment, cannot guarantee access to water to social groups with insufficient effective buying power (or, in some cases, willingness to pay) or investment in projects of an uncertain return. The only strategy that can offer a mass solution is one based on subsidies and, thus, on redistribution of capital and income. Moreover, a public organization of investment and of distribution permits considering a much wider range of technological, organization and managerial options.
The key issue, therefore, is not about whether or not water is (or should be) a commodity or commoditized. Water is a commodity to the extent that delivering the right volume of water of the right quality to the right place requires major investments of capital and labour, and these have to be made available and paid for. The central concern is who will pay for what part of the hydro-social circulation process. Adequate and reliable access of water for those who lack access will require a major transfer ofcapital and systematic and sustained cross-subsidization. It is exactly the recognition of water as a commodity that permits effective cross-subsidization. However, the question of subsidization is necessarily a political one that needs to be addressed at local, national and transnational levels. Cross-subsidization of investment requires embedding issues of water access and distribution within appropriate institutional frameworks that discuss, democratically and openly, such questions of distribution. In fact, in the same way as a decision to privatize or ring-fence water services (and to insist on its full-cost recovery) is a political one, so are issues of cross-subsidization. Indeed, if the above argument is correct, then the question of who decides on both investment and distribution becomes an eminently political question, and one that relates directly to issues of democracy and of the distribution of political power.
In conclusion: private-sector participation in the water sector remains limited and the prospects for future private-sector investment rather dim. This leaves no other alternative than public financing to cover the bulk of the required investment. It would be a mirage to believe that the MDGs can be achieved on the basis of massively increased private sector investment in the water sector. It has not happened in the recent past despite great pressure on all actors. The results of the existing experiments are mixed, to say the least, and the prospects for enhanced investment in context of total privatization are not promising. Equally, the call from alternative ‘people’s non-governmental organizations (NGOs)’ to improve water access by improving local-level stakeholder participation and citizen’s involvement can easily prove to be a mirage, too, as a solution for solving the socio-hydraulic problems of the world’s big cities. Without massively enhanced national and international public support, the MDGs will remain an empty promise.