Water distribution is a monopoly - rather like other utility distribution, including telephones while they are tied to roadside poles.
So ownership should never be placed in private hands. However, as I mentioned to Brad, competitive efficiency can be attained by putting the operation in the hands of management firms chosen by lowest bid..
Anything can be written into a contract, including replacement of infrastructure. Bids should only be accepted from performance bonded companies. (The bonding companies will filter out the inefficient.)
I guarantee (without any specific knowledge) that most, and perhaps all, "privatization" in the US rests on a network of special pleading, inside bargaining, and outright bribery. (Maybe in Britain too, Keith.)
I am not putting forward the definitive answer - there may be better ways of doing it. But the general philosophy should be never to sell the rolling stock, but always to run it by competitive bid.
The kids in my courses get a section on degrading capital. When corporations and governments are strapped for cash, they put off replacing the lathes, or maintaining the bridges (as do homeowners for that matter).
That the bridge may be getting dangerous isn't something that bothers the memory, whereas a new park has obviously good political implications. So, leave bridge repair for another 6 months, while we get the park built.
This allows these concerns to move along happily as though all was well - even though they are actually weak in the knees.
Harry
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Stephen wrote:
It reminded me of an excellent & lengthy account of the privatization in Cochabamba, Bolivia (which is mentioned in this piece) that I read in the ATLANTIC or NEW REPUBLIC or??Anyway, the whole business seems just awful ... the outer limits of commodification. Adam Smith was quite clear in his mind that some necessary goods could not realistically be expected to turn a profit and it would necessarily be the task of the state to supply them. I don't recall if he included waterworks on the list but it would seem to be a candidate. The USA has been neglecting its infrastructure (while building up its arsenals) and now the pipes are coming home to burst (and bridges to collapse and rail-lines to buckle). You can ignore your sewers and waterworks for 5 years to fight a war (1940-45) but you can't keep on ignoring them for 50+ years after that. Seymour Melman has been going on about all this for some time now. About 10 years ago he computed that the cumulative spending of the US Department of Defence since 1945 was roughly equal to (tho' somewhat greater than) the actual value of ALL CAPITAL GOODS attached to the surface of the United States (schools, roads, rail lines, buildings of all sorts, etc.)!!! That is, *every* "man"-made object (not counting clothes or groceries) in the USA could have been replaced in the period 1945-1995 with the money spent on missiles and bombers with some small change left over. Yesterday's NYT has a piece about the city of Atlanta having to fire the water company (subsidiary of SUEZ) they had contracted to run their water system. The company couldn't afford to fix the pipers *and* make a profit without jacking the rates higher than satisfactory to the city. The company claimed that the city had misrepresented the state of the plumbing. (You'd think the company would have looked into that itself ... caveat emptor!). "As Cities Move to Privatize Water, Atlanta Steps Back," The New York Times (10 February 2003) by Douglas Jehl http://www.nytimes.com/2003/02/10/national/10WATE.html Off the top of my head, it seems to me that "privatizing" the supply of a good in a situation where there can be no real competition - most if not all "utilities" - can never make sense or make a difference. If you insist that the electricity be supplied by a private corp., then the corp. gets a licence to have a monopoly of supply (& guarantee of income) in exchange for which it is highly regulated. Why not just leave the operation in public hands so that everyone is a "shareholder"? For the supply of water to be profitable it must be at the expense of something - wages? water quality? assurance of future supply? ... something's got to give. Brad, your comment on the article ("Cholera and the age of the water barons") was: > Perhaps Irag, oil, and the like are a smoke screen hiding this kind of > hanky panky by the world bank and corporations. I'm missing a step here. How does the water case shed light on the oil case? best wishes, Stephen Straker
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