Photo by Sampo Sikiö
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Jyväskylä is the
first Finnish municipality, which has decided to part-privatize its water
services, intending to sell 30 per cent of the municipal company. What may look
as an attractive option at first sight to generate finance for the
municipality, is however a potentially highly dangerous initiative. The
experiences of water privatizations elsewhere in Europe counsel caution.
Globally, water privatisation
became widespread in the late 1980s and throughout the 1990s. In Europe, the
biggest change took place in the UK, when the Thatcher government privatised
all water companies throughout England and Wales in 1989. During the 1990s,
further privatisations occurred, for example, in central Italy and especially
in Central and Eastern Europe after the end of the Cold War. During the 2000s,
however, in response to increasing criticisms, the privatisation of water
services started to stall. More and more municipalities took water services
back into public hands such as Grenoble/France in 2000.
The supporters of privatising public services argue that thanks
to the competitive pressures of the ‘free market’ four benign consequences
would result: (1) the production of services becomes more efficient; (2) the
quality of the services is improved; (3) the cost of services for the consumer
is reduced; and (4) companies providing these services can still make a profit.
The private provision of water too, they argue, is subject to the same
beneficial market pressures, overlooking that water supply is, in practice, a natural
monopoly, and consumers are not free to choose from whom they will buy their
services.
These corporate profits have come at the expense of consumers, who have
seen their water bills increase drastically. In the Italian region of Tuscany,
for example, privatisations in the late 1990s, early 2000s resulted in an
average increase in water charges of 24 per cent. In some communities, the
increase was even a staggering 120 per cent. In the UK too, corporate profits have been
financed by users. Even though operation costs have remained the same, water
bills have increased by 50 per cent since privatisation. In recent years, large
investment banks and pension funds have discovered British water companies as
profitable investment opportunities in an otherwise rather volatile global
financial climate. Unsurprisingly, almost 27 per cent of the average Thames
Water customer bill was paid to satisfy return on investment between 2010 and
2015 (Bayliss
2017: 388).
In short, water privatisation is
not about how to provide best water. The main purpose is to generate private
profits. Rather than being about efficiency and universal access to
water, this discourse of superior private services facilitates a redistribution
of income from people to private companies. That only 30 per cent of the Jyväskylä water services are to be privatized does not
change the fact that this envisaged private-public partnership would have to
operate under market conditions with profit maximization as primary objective.
As European examples also show, privatisation is neither inevitable nor
irreversible. In Greece, despite the pressures of the Eurozone crisis, to date broad
alliances of trade unions and social movements have successfully defended the
highly profitable and efficient public water companies in Athens and
Thessaloniki against privatisation. When the Irish government wanted to
introduce additional water charges in 2014 as part of a move towards water
privatization, large demonstrations, a widespread non-payment campaign and the
physical blocking of the installation of water meters forced the government to
withdraw its plans in 2016.
In 2012 and 2013, the Right2Water coalition of trade unions and civil society organizations collected almost 1.9
million signatures across the European Union in the first successful European
Citizens’ Initiative on ‘Water and Sanitation are a Human Right’, opposing the
liberalization of the water sector. Finland was one of the 13 countries, where
enough signatures were collected to meet the required national quota.
Moreover, re-municipalisation pays off, indicating where the real
savings may lie. In 2010, when water had been taken back into public hands in
Paris, the new water provider ensured savings of about €35 million. Water
tariffs were reduced by 8 per cent as a result.
Jyväskylä may want to think again, before it embarks on a water
privatization journey, other cities in Europe and beyond have reversed due to
negative experiences.
A shorter version of this blog post was first published in Helsingin Sanomat
on 5 February 2020.
Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
University of Nottingham/UK
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