Acton Institute Powerblog

Should Water Have A Price?

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In a front-page article of the March 20-21 edition of the Vatican’s newspaper, L’Osservatore Romano, entitled “L’aqua bene comune per tutti” (“Water: Common Good for All”), an Italian political scientist laments that a basic necessity of life is bought and sold.

Riccardo Petrella of the Catholic University of Louvain in Belgium is rightly concerned that a billion people do not have access to clean drinking water. While he criticizes world leaders for not making this problem a top priority, his main target is actually the economics of treating water as a commodity.

He blames economics for creating a shortage of water: “This approach does not recognize any human and social rights, there are no public goods or services just private economic goods and services based on economic interest. The commodification of water is accompanied by a privatization of the water supply. In this context, shortages are accepted as ‘natural’, inevitable….”

This is a prime example of combining good intentions with bad economics. Petrella mistakenly assumes that economic goods and common goods are mutually exclusive, when in fact prices help regulate the production and distribution of a natural resource.

Only a small part of the global water supply has actually been privatized. Over the last twenty years or so, the process of privatization has been accelerated, and the availability and the quality of water has generally improved. This is not only true for Western countries but also in less developed countries.

Take Chile as an example. It aggressively privatized its water industry and has vastly enhanced access to water for the poor. Usage of potable water went up from 63 percent to 99 percent for the urban and from 27 percent to 94 percent for the rural population after the introduction of markets for trading water rights.

In contrast to what Petrella asserts, privatization, rather than being a cause of water shortage, is increasingly seen as a remedy to this problem. In Saudi Arabia, for example, privatization was introduced after a shortage of water caused riots in November 2006. The government had exacerbated the problem by subsidizing water to keep prices low. This led to an inefficient and careless usage of water. Riyadh had to change course and is now planning for half the population to be covered by private water companies by 2010.

It is misleading to suggest a contrast between private enterprise and the common good since the market tends to channel resources to where human demand is strongest and can fill gaps in investment and expertise where the public sector fails. It’s certainly no violation of human rights to promote a competitive market for something as essential as water.

Bernd Bergmann

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