Water

[UptonStellington]

I recently watched the film, "The Corporation," where privatization was scrutinized by way of describing the water disaster in Bolivia.

The deal was apparently that the IMF would give Bolivia money if they agreed to privatize their water supply, and this was done through the French company Suez.

I'm wondering if anybody has any information on this?

There were riots in Bolivia from the prices being too high, but I'm curious as to whether the market was left free, or whether the IMF simply contracted one company to come in and gave them the market?

According to CBC (http://www.cbc.ca/news/features/water/qanda.html) these water privatization schemes have had mixed results around the world.. I'm wondering what the cause of this is...

[KendallJ]

I recently watched the film, "The Corporation," where privatization was scrutinized by way of describing the water disaster in Bolivia.

The deal was apparently that the IMF would give Bolivia money if they agreed to privatize their water supply, and this was done through the French company Suez.

I'm wondering if anybody has any information on this?

There were riots in Bolivia from the prices being too high, but I'm curious as to whether the market was left free, or whether the IMF simply contracted one company to come in and gave them the market?

According to CBC (http://www.cbc.ca/news/features/water/qanda.html) these water privatization schemes have had mixed results around the world.. I'm wondering what the cause of this is...

hmmm... take a country whose people have been used to "mob politics" for centuries, who has had more governments than years of independance, privatize their water system, and get them to pay higher prices for something they used to get subsidized on the backs of whatever wealthy exist there (which is not many).

There is a big problem with governements thinking that they can bend market forces to their will. That thinking is statist. What this means is that any attempts to privatize anything within the framework of a notably statist government will necessarily have mixed results. Lasseiz faire is the only thing that works in the end.

Oh, by the way, I'm Bolivian. I don't know a lot of their history, but enough to know that this privatization idea is a joke.

Edited April 16, 2008 by KendallJ

[UptonStellington]

hmmm... take a country whose people have been used to "mob politics" for centuries, who has had more governments than years of independance, privatize their water system, and get them to pay higher prices for something they used to get subsidized on the backs of whatever wealthy exist there (which is not many).

There is a big problem with governements thinking that they can bend market forces to their will.

... I can imagine. I'm trying to find out HOW they bent market forces to their will... it seems to be scarce information. But I'm sick of hearing claims of, "oh look what privitization did to Bolivia!"

How exactly is the Bolivian notion of privatization a joke? ... I have a gut feeling that it is a statist notion -- that they think handing off their water and giving some company monopoly rights to do business qualifies as "privatizing" their water...

... But I'm looking for some actual evidence of this...

[KendallJ]

... I can imagine. I'm trying to find out HOW they bent market forces to their will... it seems to be scarce information. But I'm sick of hearing claims of, "oh look what privitization did to Bolivia!"

How exactly is the Bolivian notion of privatization a joke? ... I have a gut feeling that it is a statist notion -- that they think handing off their water and giving some company monopoly rights to do business qualifies as "privatizing" their water...

... But I'm looking for some actual evidence of this...

From the few articles I saw on it.

Privatization -> higher prices -> riots because they didn't like the prices -> govt backs down

It seems really quite that direct. And Bolivians are really good at complaining, since the mob works so effectively there.

Are you suggesting that because there was a riot that there was a mistake made in the privatization? Why doesn't anyone ever say, "Just look what natilization did to Bolivia." It one of the poorest countries in the world and has a Castro style strongman in power. Pointing at it's foibles with privatization as an example of how the free market doesn't work is useless. It's too damn statist to matter.

[UptonStellington]

re you suggesting that because there was a riot that there was a mistake made in the privatization?

No, sorry -- I'm trying to find out exactly what the terms of the privatization were -- was it free-market, or was this an instance of the government only letting one private corporation come in and control the water supply? In other words, did the IMF say: "Bolivia is now fair game. Whoever would like to sell water there, best of luck." or was it more a case of the IMF going to Suez and giving them an exclusive contract to sell water, so long as it's "clean and at a low price" ?

I made the assumption that maybe water prices were high because there wasn't competition permitted, only privatization. But that's not a completely accurate assumption, for several reasons. Plus, you have a point -- the Bolivians, being used to having socialized water being paid for by the already affluent, would probably complain no matter what.

[UptonStellington]

You know what, thinking about it, one of the things that I hadn't really considered was this: Bolivia is, was and has been in such economic peril for a long time. It is one of the few countries where "Shock Therapy" didn't pan out as it was supposed to, or didn't have a lasting impact. In the film, they make it out to seem as if the water corporation (now I'm reading that it was an American firm, Bechtel) comes in and starts arbitrarily charging higher prices for water, just because they are greedy businessmen. But honestly, in such a poor country, is it really feasible to think that the actual COST of supplying water to people would not be higher? From what I've read, they had to build new infrastructure and things like that. OF COURSE that cost is going to be reflected in rising prices at first.

[gags]

I know very little about the situation regarding water privatization in Bolivia, but I saw this article recently regarding water privatization here in the US:

http://www.mackinac.org/article.aspx?ID=2554

It might be of some interest to you.

[UptonStellington]

You know what, the more I think about this situation, the more pissed off I am getting. Kendall, you are exactly right:

Privatization -> higher prices -> riots because they didn't like the prices -> govt backs down

You know what bothers me about this? Take a look around at all the people who, whenever they refer to us as a "consumer culture," do so as if it's an insult. They always criticize the "excessive waste" that is "encouraged under capitalism." These people inevitably go on to advocate a "sustainable culture," and for a majority, the ideal means of implementation for this goal is government intervention.

But if you really want a "sustainable culture," there is NO other way of doing so but through a free market. If the market were laissé faire, we would actually be able to see the real costs of things, since price in a free market is a gauge of the cost of utilizing one set of scarce resources against some other use -- it isn't arbitrarily set. It simply would cost more (at first) to bring clean water to the people of Bolivia -- there is no way of getting around this fact. But when the government arbitrarily reduces the price (or does away with it completely) in order to please its constituents, they are encouraged to WASTE. They use more of that product than they can actually afford -- more than it actually COSTS, because they have no realistic idea or way of knowing how scarce that resource actually is...

And when the government tries to provide a service to the people, when it tries to provide for free, scarce resources which have alternative uses, and it ignores the costs, that government is acting in the most unsustainable way possible. These "free resource" situations always look great at first, but they are doomed to failure -- just look at the Soviet Union. The cost has to be paid somehow; unfortunately, in the USSR, the cost wasn't only paid through rationing (which is going on in Bolivia with water right now)...

I can't stand the premise that businesses are "unsustainable." ... isn't number one on the business's list of priorities to be sustainable, so that it can go on making a profit in the future? What the hell kind of business model would endorse a fire sale on a resource so that it can get short term profits and then go out of business because it used up all of that resource? And maybe one or two crazies would do this, but I can't buy the idea that an economy as a whole would voluntary act that way!

Sorry this got so off topic, that's my rant.

[mrocktor]

I don't know about Bolivia, but here in Brazil when they say "privatization" they mean "private companies operating government concessions under governmental rules and scrutiny". It works a lot better than full state run companies here, though.

[Zip]

While I absolutely agree that a completely free market is the only real solution I can't help but think that in a place like Bolivia going directly from state control and management to a full on, full price, free market is just stupid when you consider the political and social realities of the place.

Principal and theory is one thing but the realities of situations must be considered or your going to be in for a soup sandwich no matter how correct your premises.

[UptonStellington]

Zip, I agree with you to a degree, and that is not what I was advocating (my rant was just something that was bothering me about the mindset of people HERE, and it was sparked by thinking about Bolivia) -- although "shock therapy", which is essentially what you describe (as far as I'm aware of it) did ultimately work quite well in a few countries with similar backgrounds, like Chile and Poland.

I have not studied the situation enough, but for whatever reason, it didn't work in Bolivia. Perhaps it was their raging hyperinflation beforehand, or maybe just the mindset of the people. A people's mindset is crucially important when introducing any sort of market reform -- I have Russian friends who tell me horror stories about the things people do in order to sabotage their neighbor because they are still of the opinion that private property is theft and that everybody should be equal.

[Zip]

Ok, understood.

I believe that the failure is people oriented. Markets are reactionary, People create those reactions for good or ill. All you have to do is watch the price of oil to figure that out.

[y_feldblum]

The very existence of the IMF is collectivist/statist in nature. The promised reward for which the IMF is demanding "free market reform" is collectivist/statist in nature. The means of accomplishing said "free market reform" are collectivist/statist in nature.

Everything the IMF/World Bank is and does is dictatorial socialism beneath a veneer of freedom.

What more evidence is necessary?

[SBP2009]

I'm not particularly familiar with the Bolivian water issue, nor have I watched "The Corporation." The people who have said "You HAVE TO watch this movie" are all lunatic leftists, so I countered with something along the lines of "You want a horror documentary? Maybe I will make one called 'The Government.' I could have an unlimited supply of sequels and die of old age before I even cover the horrors perpetrated by governments in the 20th century."

They then followed up yammering about how "EVIL" and "PSYCHOTIC" companies are and held up the Bolivian water issue as a prime example. I may have made some sort of comment to him that contained "Comrade" and "Getting your collective panties in a bunch." But I digress.

As I understand it, the film states that one company was given total control over all the water in Bolivia, and that people were getting arrested for trying to collect rainwater. The people then rise up and storm the facilities of the water company, seizing control of it. Conveniently, this act happens to re-nationalize the water facilities. One company being given total control over a resource in an entire company, and their monopoly supported by government force, is so far from being an example of a "free market" as to not require any further discussion.

As I have said, I have not seen the film, and gleaned this information from leftist blather. If events unfolded as I have described, it seems to me that the Bolivian government set up the monopoly water company as a straw man to direct the rage of the masses against the purported representative of capitalism. It may have been the Bolivian government's way of getting out of the IMF orders. Again, "capitalism," of the government-granted cartel variety, set up as a straw man and creating support for socialism.

If I ever want to waste two hours and become angry for a few days, I may watch "The Corporation." But I doubt I will ever want to subject myself to such Marxist garbage.

[aequalsa]

As I have said, I have not seen the film, and gleaned this information from leftist blather. If events unfolded as I have described, it seems to me that the Bolivian government set up the monopoly water company as a straw man to direct the rage of the masses against the purported representative of capitalism. It may have been the Bolivian government's way of getting out of the IMF orders. Again, "capitalism," of the government-granted cartel variety, set up as a straw man and creating support for socialism.

I have not seen the film either, but if the IMF is involved then it's a virtual guarantee that capitalism is not.

As far as where to find out a little more about the issue, a book I read a while back('Confessions of an Economic Hitman') went into a number of different IMF schemes he had supposedly participated in. I am pretty sure he discussed Bolivia in part of the book, though I thought it was regarding their power company. Either way, it's a good book and explains how the IMF operates well.