Covid-19: Disaster capitalism or an opportunity to strengthen public water?
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The financial impact of Covid-19 has been devastating for public water operators around the world, with massive drops in revenues and rising costs. There are no comprehensive global figures as yet, but data collected in June 2020 found that collection rates had fallen by 40% in many utilities, while operating expenses rose sharply due to unanticipated costs (World Bank 2020a). In the United States alone the financial impact of Covid-19 on water and wastewater utilities is estimated at more than $27 billion (Raftelis 2020, 1).
Although many public water operators have been able to get temporary support to manage this financial crisis, it is not clear that emergency funding will continue when the pandemic is over. As much as one might like to think that Covid-19 will be the contagion that finally wakes the world up to the need for adequate funding for water and sanitation, even wealthy countries and donors will find it difficult to find the resources given all the other expenses associated with the pandemic.
Alarmingly, one possible consequence of this financial crisis may be a doubling down on commercialization in the water sector. As we demonstrate in our recent book on the impacts of Covid-19 on public water operators around the world, governments and funders are stepping up efforts to promote cost recovery and privatization as a solution to the problem (McDonald et al 2020). In Colombia, for example, Empresas Públicas de Medellín has introduced emergency measures to make water more affordable to the poor during the pandemic, but they have been very clear that these are temporary reprieves from market-oriented cost recovery policies and are keen to emphasize that they are not offering "free" water. In Uruguay, legislative and managerial reforms introduced during the pandemic by the new market-oriented ruling coalition have intensified the trend towards marketization of the national water utility, OSE.
The World Bank has also used the pandemic as an opportunity to reinforce its marketized view of water services, with the creation of a specialized program on financing for water operators affected by Covid-19. The program is primarily aimed at short-term crisis management but it "could become a medium-term financing facility for the water sector….[B]uild[ing] on the experiences of previous financial crises" (World Bank 2020b, 5). The aim is to employ "blended finance models to assist creditworthy or near-creditworthy utilities to move away from purely concessional donor finance to more sustainable market financing within the context of the pandemic" (World Bank 2020b, 1).They also note that "there will likely be a need to consider new external borrowing" that require "performance contracts" with the goal of "charg[ing] cost-reflective tariffs" (World Bank 2020b, 2, 7, 8, 23). It is hard to imagine a more classically neoliberal stance.
Even more alarming, there is the distinct possibility of increased privatization in the water sector as a result of Covid-19. UN-Habitat and UNICEF (2020, 6), for example, want to "promote public-private-partnerships with multinational companies for support in provision of soap and other hygiene materials" in an effort to "engage and empower small private vendors". The World Bank (2020b), meanwhile, is pushing for more investments in water services by private companies.
Some governments also appear to be using the crisis as an opportunity to advance privatization, particularly in places where there was already a push to do so, such as Brazil (Zislis 2020). In some cases, fiscal pressures alone are pushing authorities to consider privatization, such as in the city of Philadelphia in the US (Mohler 2020). In other cases, Covid-19 has emboldened states to retract on their promise to remunicipalize water (such as in Jakarta).
Private water companies themselves also appear to be on the offensive, with some using Covid-19 as an opportunity to promote their "social corporate responsibility". Thames Water, for instance, has been advertising its Trust Fund donation to support customers in financial stress (Thames Water 2020). Suez (2020) has announced that "as a measure of solidarity, the Chief Executive Officer and the Executive Committee members have decided to donate 25% of their salaries during the lockdown period". Tokenistic gestures with no long-term impacts but another indication of how Covid-19 can be bent to corporate will.
Indeed, private water companies are generally bullish on future prospects in water and sanitation as a result of Covid-19. As Amit Horman, CEO of Miya, a private equity water company, noted in May 2020: "We don't foresee a significant long-term impact on the industry. We believe water utilities are amongst the most resilient sectors to an epidemic….Water consumption is rigid by nature and we think the sector will actually become even more attractive to investors" (Tempest 2020).
Covid-19 also appears to be contributing to a rash of mergers and acquisitions in the water sector. Some analysts are predicting a "complete restructuring of the water industry" (Maceira 2020, 3), exemplified by one of the most dramatic potential takeovers of the past 50 years: an August 2020 bid by French water multinational Veolia for a major stake in rival company Suez (Keohane 2020). As a result, Covid-19 may offer private water companies a new lease on life.
Is this "disaster capitalism" at work, with private business and their state backers aggressively pushing to (re)normalize neoliberal relations and grab opportunities to accumulate in the wake of a crisis (Klein 2007, Zizek 2020)? There are certainly signs of it, but it is not a foregone conclusion, with progressive governments, unions, NGOs, community organizations and others continuing to fight against privatization while at the same time advocating for more progressive forms of public water services.
Our book provides a critical but optimistic overview of these progressive forces, illustrating how public water operators around the world have responded to Covid-19, dealing effectively with the short-term crisis while also opening up possibilities for improved democratization and equity-oriented services in the future. Not all of the lessons transfer easily between locations, but the peer-to-peer learning and knowledge sharing documented in the case studies are an illustration of the potential for public water operators to advance a more collective form of service provision in the future.
Many frontline staff and managers have been working long periods of overtime, often without extra compensation, and frequently putting their own health at risk; all with very little in the way of acknowledgement or appreciation by the media or the public at large. Some water operators introduced new decision-making processes and innovative consumer services. Many developed public education campaigns, assuring residents as to the reliability and security of their water and sanitation systems, helping to alleviate anxiety. Public water operators have been able to develop and implement these emergency actions quickly and competently, often redesigning plans as they went.
Promisingly, these examples of positive performance by public water operators may help to curtail pressures of privatization. They may even contribute to an acceleration of demands for remunicipalization, as cholera outbreaks did during the initial waves of municipalization in the 19th century (Leopold and McDonald 2012).
We still have a long way to go with Covid-19, but public water operators around the world have demonstrated the importance of transparent, accountable and public-oriented decision making. It is important that we use this an opportunity to reclaim and remake public water in the post-Covid era.
David A McDonald
ReferencesKeohane, D. 2020. Engie 'welcomes' improved Veolia offer for Suez stake. Financial Times. September 30. https://www.ft.com/content/6b2d85e7-7035-4e94-80b6-e1e70d4c4f91 (accessed October 13, 2020).
Klein, N. 2007. The shock doctrine: The rise of disaster capitalism. Macmillan: New York.
Leopold, E. and McDonald, D.A. 2012. Municipal Socialism Then and Now:Lessons for the Global South. Third World Quarterly, 33:10, pp1837-53
Maceira, A. 2020. Towards a reconfiguration of the Water Industry. Smart: The Disruptive Water Magazine. September.
McDonald, D.A.; Spronk, S. and Chavez, D. (Eds). 2020. Public Water and Covid-19: Dark Clouds and Silver Linings, Municipal Service Project (Kingston), Transnational Institute (Amsterdam) and Consejo Latinoamericano de Ciencias Sociales (CLACSO) (Buenos Aires)
Mohler, J. 2020. A Philly suburb wants to sell its water, offering a glimpse of post-COVID America, In the Public Interest, June 28. https://www.inthepublicinterest.org/a-philly-suburb-wants-to-sell-its-water-offering-a-glimpse-of-post-covid-america/, (accessed July 15, 2020).
Raftelis. 2020. The Financial Impact of the COVID-19 Crisis on U.S. Drinking Water Utilities. Report prepared for the American Water Works Association and the Association of Metropolitan Water Agencies. https://www.awwa.org/Portals/0/AWWA/ETS/Research/AWWA-AMWA-COVID-Report_2020-04.pdf?ver=2020-06-22-153757-187
World Bank. 2020a. Supporting Water Utilities During COVID-19. June 30. https://www.worldbank.org/en/news/feature/2020/06/30/supporting-water-utilities-during-covid-19. (accessed August 20, 2020).
World Bank. 2020b. Considerations for Financial Facilities to Support Water Utilities in the COVID-19 Crisis. World Bank, Washington, DC.
Zislis, E. 2020. Privatization of Rio Water Utility Raises Concerns About Access for Favelas. The Rio Times. September 28. https://riotimesonline.com/brazil-news/sponsored/privatization-of-rios-water-utility-during-pandemic-raises-concerns-about-access-for-favelas/ (accessed October 10, 2020).
Zizek, S. PANDEMIC!: Covid-19 Shakes the World. John Wiley & Sons, 2020.
The issue with water services, IMO, is the way they combine private (e.g., water for my kitchen) and public (e.g., public health) goods. Any "solution" must take these duel(ing) roles into account.
Municipal water providers can fail, just as private providers can fail. In both cases, they need enough money to pay for necessary infrastructure and maintenance. In both cases, the poor are often "too poor" to pay their fair share. That's why it's useful to separate the issues into (1) keeping the system going and (2) maintaining access to the poor.
I have written (at least) two papers on this topic, so I won't rehash all the arguments there, but my point (in this comment) is to disagree with any "exploitation" narrative. I think, instead, that the problem is governments putting too little effort into protecting citizens from bad service -- whether it be municipal (remember that 90% of the 3 billion people lacking service are often "served" by public bodies) or private.
Zetland, David (2016). "The struggle for residential water metering in England and Wales." Water Alternatives 9(1):120-138. https://www.kysq.org/pubs/Art9-1-6.pdf
Abstract: The transformation of water services that began with the privatisation of water companies in 1989 extended to households with the implementation of water metering. Meters 'privatised' water and the cost of provision by allocating to individual households costs that had previously been shared within the community. This (ongoing) conversion of common pool to private good has mostly improved economic, environmental and social impacts, but the potential burden of metering on poorer households has slowed the transition. Stronger anti-poverty programmes would be better at addressing this poverty barrier than existing coping mechanisms reliant on subsidies from other water consumers.
Zetland, David and Bene Colenbrander (2018). "Water civilization: The evolution of the Dutch drinking water sector". Water Economics and Policy 4(3):36pp. https://www.kysq.org/pubs/NL-DWCs.pdf
Abstract: Dutch drinking water companies now deliver safe affordable water to the entire population, but this result was not planned. It emerged, rather, from an evolutionary process in which various pressures on the commons resulted in changes to drinking water systems that addressed old concerns but uncovered new problems. Our analytical narrative traces this problem-solution-new problem pattern through four eras in which a common-pool dilemma is addressed by a private-good solution (1850-1880), a club-good solution (1880-1910) and a public-good solution (1910-1950) before returning to a private-good solution in the last 1950-1990 era. Actions, like the dates just given, were not always exact or effective, as the process was shaped by changing social norms regarding the distribution of costs and benefits from improved water services. This Dutch history is unique, but its insights can help improve drinking water services elsewhere.
Dear David, I agree that far too many ‘public’ water operators have failed to provide good services, but our book looks at (relatively) positive examples of how public water agencies have responded to the Covid-19 crisis, highlighting the ways in which their public mandates and their integration with other public entities distinguish them from private water operators, which are necessarily profit-oriented and siloed in their operations.
Although the bulk of water operations in Canada is public, the federal government has been trying for decades to open the market up to private investors and operators. Unfortunately, the pandemic has provided another opportunity. The government has designated $10bn for public-private partnerships as part of the pandemic recovery, and their thirst for our public water is unlikely to dissipate. We must keep our eyes on how this money is used!