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June 2002, Volume 4, Number 6
Edited by Jim Hightower and Phillip Frazer
The greater villains are loose in our world today, literally thirsting to take things that are yours and mine—and this time they might make off with the greatest plunder of all: our water.
Yes, the ideologues and greedheads who brought us the fairy tale of energy deregulation and the Ponzi scheme of Enron are aggressively pushing for deregulation and privatization of the world’s water supplies and systems. They are determined to turn this essential public resource into another commodity for traders and speculators—a private plaything for personal profiteering.
In just the past few years, trans-national conglomerates already have privatized all or parts of the water systems of Atlanta, Berlin, Buenos Aires, Bolivia, Casablanca, Charleston, Chattanooga, Ghana, Houston, Jacksonville, Jersey City, Lexington, New Orleans, Peoria, Ontario, San Francisco, and many other places.
It amounts to a corporate “water rush.” In our country, private control has rapidly become global control: The largest U.S. firm, American Water Works, was recently swallowed up by RWE of Germany (which also got Azurix in Enron’s fire sale); Suez Lyonnaise of France took our second biggest company, United Water Resources; and Vivendi of France grabbed U.S. Filter.
In Fortune’s paean to the corporatization of water, Suez Lyonnaise was lionized as being “more than a water company. It’s a fresh invention.” This is the same gibberish that, until only a year ago, was being heaped on Enron, Global Crossing, World Com, and other hucksters whose only invention was a new way to package the age-old shell game.
There’s nothing fresh or inventive about global corporate greed thrusting its way throughout both the industrial and developing worlds to establish empire. Suez Lyonnaise knows a lot about that. It is the descendant of the corporation that built the Suez Canal in 1858 under the patronage of Emperor Napoleon III. Suez marches on, expanding its multibillion-dollar water empire by 10% a year.
As for picky concerns that cities, states, and entire nations ought not surrender control of their water supply to the whims of corporate empire builders, the CEO of Suez retorts: “We must rise above national egotism!”
This is where the political weasels come in. From the mid-seventies to the present, just about every politician from mayoral to presidential candidates of both major parties have caved in to the privatization ideologues, campaigning and governing as tight-fisted, no-more-taxes, business-minded conservatives.
So local pols have frittered away public funds on building flashy sports palaces for privately owned teams, and national pols have cooked up trillion-dollar tax giveaways to the richest people in the country—and all of the pols have let America’s crucial water systems fall apart. To fix decades-old leaking pipes, sputtering pumps, and the other faltering parts of the water infrastructure will require an estimated $11 billion a year more than governments now are spending.
Faced with this unpleasantness, weaseling politicians have simply escalated their weaseling. Rather than being straight with people by saying, “Look, we’ve got to get our public house in order,” the pols at all levels have thrown open the doors of our house to any corporate flimflammer with a medicine wagon, a talking pony, and a bottle of that old magic elixir: Privatization!
lousy service, non-functioning fire hydrants—and no control over the culprits.
Anyone thinking that a dose of good old corporate efficiency is just what their cranky, antiquated utility needs should check out the excellent reports that Public Citizen has written on the broken promises of water privatization.
Take the case of United Water Resources, which had humble origins as the Hackensack Water Co. In the mid-nineties, however, the company got ambition, dressing up in the sleeker corporate name of UWR Inc. and going on an expansionist binge that quickly made it the second-largest corporate water fiefdom in the U.S., before UWR itself was swallowed by Suez Lyonnaise last year.
The company and its executives have hauled in millions in profits and personal gains from its privatization adventures, but its customers have been soaked. In Atlanta, UWR promised dramatic cost savings, which it proceeded to get by whacking the city’s water staff from 731 employees to only 327. Among the “savings” this produced:
• Debris and rust started turning up in residents’ water. At first, UWR honchos denied there was a problem. But, hey—the tap water was brown! Even then, it was four months before the company did anything.
• Fire hydrants started coming up dry or inoperative. Again, executives tried to deny that there was a problem. Then, when it was pointed out that this was life-and-death stuff, UWR tried to shift the blame (and the cost), saying that after the company repaired or replaced a hydrant, it was the city’s responsibility to test it to see if it actually worked.
• Complaints piled up about impossibly slow service on everything from repairing leaks to installing water meters.
Likewise, Jersey City has been hosed by UWR. The company is paid millions in annual fees to bring its corporate efficiency to this municipal water system, but instead it has produced a chorus of complaints about billing errors. It turns out that, as in Atlanta, UWR’s “efficiency” is based on cutting staff—in this case, it subcontracts meter reading to a low-wage firm. No problem, though, for when the complaints about misread and broken meters roll in, UWR service representatives have simply been directing irate citizens to municipal employees.
What a deal—UWR privatizes the water revenue, but socializes the problems! Worse, the company is not required by its contract to open its books or justify its fees. It simply sends a bill, which is not subject to public review.
In Jacksonville, Florida, UWR’s ownership and operation of the water system was so outlandish that citizens have taken it back in a $219 million buyout. In its brief, five-year stewardship, the corporation’s chief efficiency was in getting rate increases from the Florida utility commission. Monthly bills shot up by an average of $9.44 in 1997; then the company went back to the trough a year later for another 12.5% rate hike. By instituting public control, residents of the Jacksonville area are expected to enjoy an average cut of 25% in their water and sewer bills.
While most media have gushed about the boundless promise of privatization, they have been practically mute about one of the most sweeping developments taking place in water management: deprivatization. As in Jacksonville, officials in many cities that have sipped the tainted waters of corporate control have been struggling mightily to regain public control. But it’s not easy, for monopolization of a water market turns out to be a cash cow for corporations, and once they get it, they cling to it.
• Chattanooga, Tennessee. American Water Works (now RWE) has owned Chattanooga’s water for a long time, but Mayor Jim Kinsley led a 1998 move to buy the system, noting that public ownership could cut rates by 25% and save $100 million. There was also the matter of AWW gouging the city on fire-hydrant fees and a secret effort by corporate executives to export Chattanooga water to Atlanta.
AWW refused to negotiate a sale, instead rushing to court, launching a massive multimillion-dollar PR campaign, and resorting to dirty tricks like hiring an agency to snoop on the mayor. Outspent, the city finally settled, allowing AWW to keep its ownership. But the corporation did agree to cut fire-hydrant fees from $300 a year per meter to $50, and to submit any water-exporting scheme to voters for approval.
• Huber Heights, Ohio. In 1993, a Florida-based company decided to sell its water holdings, including the water system it owned in this suburb of Dayton. The city tried to buy it, but couldn’t match the deep pockets of American Water Works. Local folks feared the worst—and got it. As soon as AWW took control, it raised rates by a third. It also contracted to deliver two million gallons a day of Huber Heights’ water to an industrial park outside the city. City officials initiated eminent-domain proceedings to buy back the system.
Once again, AWW ran to court and launched a massive PR campaign, but in a referendum voters overwhelmingly supported the effort to reclaim their water. Even after the 1995 buyback, however, AWW has kept the city tied up in legal knots, requiring that Huber Heights still keep piping its water to the industrial park.
• Pekin, Illinois. When Citizens For Locally Owned Water (FLOW) began a buyout campaign here two years ago, our friends at American Water Works launched their usual PR blitz, spending a million bucks to assert that city officials don’t have the expertise to run a water system. This was a bit ironic, since AWW had run the system into the ground, failing to keep up infrastructure, failing to maintain fire hydrants in working order, and providing slow service —all while averaging rate hikes of more than 10 percent a year.
However, AWW’s big-money PR hustle won in a narrow victory in a non-binding referendum, so the buyback is on hold. But FLOW is not going away, and it points out that at AWW’s current rate of infrastructure upgrades, it’ll take the company 268 years to replace Pekin’s deteriorating water mains.
Water privatization doesn’t work because its fundamental promises are lies. Far from bringing “market forces” to bear, these corporations are handed a monopoly and face no competition. Wielding monopoly power, they slash staff, lower wages, compromise service, cut corners on quality, skimp on long-term investment, raise rates—and call this “efficiency.” Any savings derived from these tactics are routed into extravagant executive-pay packages, luxurious corporate headquarters, bureaucracy for the parent conglomerate, lavish advertising and lobbying budgets, and profits.
All of this is done behind closed doors, for these private empires are not subject to the open-access and disclosure rules of public agencies. Then, when the peasants rebel, the faraway CEO dispatches an army of PR flacks and lawyers, overwhelming the financial resources available to local citizens and governments.
Not content to control our water systems, corporate powers are now selling the water itself. Through court actions, lobbying, trade deals, and bribery (campaign contributions), the law is being perverted to turn public bodies of water into a tradable commodity, like pork bellies. Speculators and corporate hustlers are claiming a right to buy, sell, extract, and move massive amounts of fresh water:
• Texas oilman and corporate raider T. Boone Pickens has just forced a state water district to authorize him to pump and sell up to 65 billion gallons of water a year from the Ogallala aquifer, sending it by pipeline to San Antonio, Dallas, or other water-short cities. The Ogallala, which underlies the Texas Panhandle and is the water source for the whole area, already is severely depleted and can’t be replenished, but Pickens plans to poke holes into it, mine the water, and reap colossal profits by selling it to the highest bidder.
• Keith Brackpool (I don’t make up these names), a California corporate farmer and fat-cat contributor to Governor Gray Davis, also is trying to become a water baron. With the governor’s backing, his Cadiz Inc. proposes to suck water out of the aquifer underlying federal land in the ecologically fragile Mojave Desert, then sell some 20 billion gallons of this public groundwater each year to Southern California cities, reaping up to a billion bucks for Cadiz.
• Ric Davidge, an Alaskan water-preneur who previously was an aide to the infamous James Watt, has a deal for San Diego, which imports almost 100% of its water. Davidge wants to siphon some 65 billion gallons of fresh water a year out of two Northern California rivers, pipe it into inflatable bags bigger than three football fields, then tow these “bladders” by tugboat to thirsty San Diego. He says this will save fresh water that otherwise would “disappear” into the Pacific Ocean. (Hello, Ric—river water running into the sea is an essential part of the ecological cycle.) Davidge admits that there are many questions he can’t answer, but, he says, “We need new ideas.” New, yes. Loopy, no.
I suppose it will not surprise you to learn that this global corporate rush for the “blue gold” of our public water resources is being ably aided and abetted by our own government.
Deep inside NAFTA, for example, is tucked a little nasty called Chapter 11, which water corporations already are using to force local governments to break the dam and turn loose their water for private exploitation. Also, with our government’s blessing, the World Bank and IMF routinely pressure Third World nations to privatize their water systems.
Now, the White House and Congress are ratcheting up their privatization push here at home with a sneak attack called the Water Investment Act of 2002. Despite its boring title, S.1961 contains a stick of dynamite in Section 103(J)(1)(b). This proviso says that a local water project in your city cannot get federal financing unless the local government “has considered” privatizing your water system. Upgrading and expanding water systems is hugely expensive, and cities must have federal support to do the job—but S.1961 would make this funding conditional on whether cities consider turning over their water to private corporations.
This boondoggle is pushed by a powerhouse lobbying outfit called the National Association of Water Companies, and it means that your local water board will have to spend your tax dollars offering your public water supply for sale—knowing that Big Water corporations will sue the hell out of them if they don’t get their way.
Substituting private interest for public interest has not exactly been serendipitous in the energy sector—so why in hell should we give corporations (foreign-based ones, at that) our water? At least government entities are supposed to be legally and politically responsible to We the People. But corporations maintain (and the law agrees) that they are responsible solely to their big stockholders—an elite group that invariably includes the CEO. In water, the stockholders’ interests inevitably will conflict with the public’s.
Plus, corporations are anti-democratic, used to making decisions in secret—and, as Enron has taught us, hiding their financial shenanigans in a labyrinth of offshore accounts. Take the case of Azurix, a high-flying water privatizer that was not really a company but a convoluted consortium of more than 50 limited partnerships and interlocking subsidiaries created in the secretive tax haven of the Cayman Islands. Its creator was none other than Enron. Now it’s owned by RWE.
Water is one of life’s necessities, which is why we must treat it as part of our commons—the wealth that we hold in trust so it will be there for all of us, not only for today, but for all of our tomorrows as well.