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Our water, Their Profits

By Jonathan Leavitt

July 08, 2003

Introduction to the issue

Twenty years from now, there will be a war somewhere in this world that is propelled forward by our countries economic interests. Call it a hunch. As a result of this war, many of us who have somehow remained out of jail under the Bush/Cheney/Ashcroft administrations and their successors, will take to the streets to march in protest. But the signs this time won’t say “No Blood for Oil”, instead they will say “No Blood for Water”. Instead of “Whose Streets, Our Streets!” it will be “Whose Water, Our Water!” This is how important this issue is on the world stage and this is why we must begin putting the issue of globalization and control of water on the front burner for social justice activists all over the country.

Many of us believe that “water is a basic human need, and therefore a right, and should not be treated as a commodity’. Corporations and those who believe in the corporate model deny this and will do whatever it takes to move the issue of control over water into the market forces that have given us war upon war, the corporate model that gave us Enron and WorldCom, the corporate model that gave us the disaster in Bophal, India, and the Exxon Valdez, the corporate model that has given us 42 million African citizens with an HIV death sentence hanging over them, the corporate model that has given us CIA sponsored coups of democratically elected leaders, and the corporate model that has given us the worship of one basic principle, that those who have money will always be making decisions for those without.

What oil is in today’s geopolitical framework, water will soon become. The World Bank has predicted that by 2025, 2/3 of the world’s population will run short of fresh drinking water. The bottom line is that corporations want a piece of the $82 billion dollar U.S. market (9.3 billion is the bottled water industry) ($400 billion dollar market worldwide, including the $35 billion dollar bottled water industry)

If there is any doubt the issue of who controls the worlds water should be a priority issue for social justice activists, we need only look at two points: The first point is that a mere 12% of the world’s population uses 85% of the world’s water. And of course this 12% does not live in the under industrialized (“3rd world”). This mirrors the relationship between the current “power” commodity of oil and its usage on a global scale. The second important and telling point is the recent War In Iraq.

First our government spends hundreds of billions of dollars of taxpayer money on the destruction of a country over a twelve-year period. Now they are handing our rebuilding contracts of hundreds of millions of dollars to multinationals like Bechtel. A significant part of this rebuilding will be geared towards the repair of the Iraqi infrastructure including the water delivery system in Iraq. Much of this was destroyed at the end of the first Gulf War (for no military reason) and resulted in over 5,000 Iraqi children dying every month from water related illnesses. This means that nearly ¾ million children died as a result. This is a war crime in no uncertain terms.

So will this new Iraqi water system be operated for profit and at the expense of Iraq’s poor? Of course it will. Just look at how advancing U.S. troops tried to make the people of Basra pay for water from Kuwait before the British took over the city. And given the ideological bents of both Bechtel and the Bush administration we can expect a push to fully privatize Iraq’s rebuilt infrastructure and most certainly their water delivery system.

In other words what these brilliant minds have devised is the “perfect closed circle” for corporate economics. Taxpayer’s money, which comes disproportionately from working family’s is used to create opportunities through the military industrial construct and then US corporations reap the benefits through enormously lucrative contracts. They will receive all the financial benefits with none of the risk. Massive corporate welfare backed by the most powerful armed forces in the history of the world.
(See “CALLING THE SHOTS: Bechtel and U.S. Policy in the Middle East” available at

Background on the privatization of water
and related trade treaties

Over the last decade we have seen a significant rise in attempts by corporations both national and international to get control over one of the last great sources of available public funds. These of course are local municipal budgets and the public spending that goes in support of everything from public education to trash pickup to water delivery systems. Almost every community has begun the slow devolution from the public sector model to the corporate model. The process of globalization has accelerated this push for privatization.

With promises of greater efficiency and cost savings for strapped communities, these corporations have begun making in-roads into what has always been a relative safe haven for local control and autonomy from the growing influence of the corporate model. Not content with simply calling all the shots in the world of International politics and economics through the IMF and World Bank and the spider web of international finance, not content to call all the shots via their powerful federal government lobbyists working out of Washington, not content to call the shots at Statehouses across the country, they now want to finish their assault on government by the people by bringing their failed model in to our backyards. As is so often the case, the first wave of this new corporate assault was aimed at disenfranchised communities whose economic distress was seen as the perfect weakness to exploit.

It’s important to understand that there is a history of privatization of water delivery systems that date back hundreds of years. In fact, many of the first contracted water delivery systems were done by private companies. But the circumstances of the country were much different then. There was very little public infrastructure or municipal revenue sources that could support municipal building projects of this scale.

The nature of corporations was different as well. Multi-national trade treaties did not exist in the format we are familiar with today. And corporate charters were reviewed every year to see if the corporation had served the public good. Thankfully by the time corporations received their “personhood” (with all the rights of a US citizen, but none of the responsibilities) through a number of bad Supreme Court rulings, most of these private water efforts had moved into public hands. So as we speak today in the United States, we have roughly 85% (about 60,000 cities or towns) of our water delivery systems in the hands and control of public municipalities.

Now however it is a new age, and corporate America has spent the last thirty years trying to figure out how it could escape the basic concepts of democracy through the creation of international trade treaties where local decision making (still accessible to regular citizens and responsive to citizen outcry) could be overruled.

Here’s how these trade treaties and globalization of our local economy work using three distinct examples. The first is taking place in Nottingham, NH where USA Springs, plans to build a water bottling plant. It has applied for a permit to pump hundreds of thousands of gallons of water a day from an aquifer that underlies Nottingham, Barrington, and other towns in 3 watersheds. This could mean pumping 310,000 gallons per day, enough to fill one million 20 oz. bottles every 24 hours. USA Springs has said it plans to sell the bottled water in Europe

In a letter to US Representative (now Senator) John E. Sununu, US Trade Representative Robert Zoellick said that “nothing in the WTO agreement requires local authorities to permit bulk extractions of water that would be contrary to sound resource management and conservation or that would create hazards to human health. Of course, once local authorities decide to permit bulk water to be extracted from an aquifer, bottled, and sold as an article of commerce, WTO rules would likely apply to the sale of that article of commerce.”

The State of New Hampshire claims the right to determine whether a large groundwater withdrawal such as the USA Springs proposal would harm other groundwater users. If the State grants a permit to withdraw a certain amount, it believes it reserves the right to change the amount at a later date. And under the GATT, General Agreement on Tariffs and Trade, quantitative restrictions affecting exports are prohibited, but exceptions can be made for natural resource conservation. Unfortunately the GATT trade agreement that dealt primarily with goods is no longer the main agreement of trade issues and has now been both updated and overtaken by the WTO and more severe trade agreements such as GATS which sets up privatization of services and TRIPS which governs and pushes forward Intellectual Property Rights which corporations use to make profits out of GMO seeds, or to prevent developing countries like Brazil from providing cheap HIV medicine for its poor.

Under the soon to be enacted GATS, General Agreement on Trade in Services, there are no exemptions for natural resource conservation. Under the GATS section on domestic regulations, any regulations considered “more burdensome than necessary to assure quality of service” are considered unfair barriers to trade. A trade tribunal would resolve the determination of whether or not regulations are considered fair or unfair. In other words, if the state of New Hampshire opens this door up even a crack, then the tentacles of these trade treaties will have enough maneuvering room to work their poison.

As another important example of how trade issues relate to the issue of water is the example of when Sun Belt Water of California sought to suck up tankers of bulk water from lakes in British Columbia. In response to public pressure the Canadian government denied the request and passed a law prohibiting bulk water exports in the future. However as a foreign investor under which NAFTA grants new rights and privileges, Sun Belt Water took its case to NAFTA for arbitration. Under NAFTA, foreign investors can directly sue if they believe government action has taken place which is “tantamount to expropriation” of their property, i.e. if government regulation or law harms its ability to profit from its investment. If it wins, the government must compensate it for its losses. Similar provisions are likely to be in FTAA.

If Canada loses they will either have to change the law or pay billions to compensate the corporation for “future expected profits”. The same principle might eventually apply to the state of New Hampshire under soon to be enacted trade treaties and its battle with USA Springs.

The other scenario is taking place in many more cities and towns across the country and the world, including my hometown of Lawrence, MA currently faced with the possibility of their water works being turned over to United Water / French Suez.

This is how the corporations work in this particular scenario. First, they identify communities whose finances are shaky (Tax base weak resulting in a small budget, no room for capital improvements, bonding capacity already reached) and whose water delivery system needs significant replacement work or a complete overhaul. Then they connect with local “players” to serve as ambassadors of the privatization concept. (i.e. former councilors)

Keep the process as “closed” as possible. For example, make no effort for citizen input on the process. Meet in private. Avoid any and all publicity about the process. (This allows all the “players” in this kind of process (law firms, engineering firms, firms that handle municipal finance questions) to benefit richly off the process alone. For instance Lawrence has paid out nearly $4,000,000 for Wall St. Consultants already. These are names you will hear over and over again…. Hawkins, Delafield and Woods, Malcolm Pirnie, Advest, Inc when you look into water privatization all over the country.

Then they begin to circulate carefully designed public relations materials to both elected officials and the residents of the community. In these public relations pieces they list the glowing recommendations that come from citizens in communities that have relationships with the multi-national, clients of the company, and of course both employees and representatives of organized labor.

This multi-national will also begun making promises about what it will bring to the city. It lists its “Community Initiatives” like a “Buy Lawrence First” policy, scholarships to the Boys and Girls Club, Adopt a School Program, Urban Outreach Program, and support for Minority and Women Owned Small Businesses.

Let’s start with a “Buy Lawrence First” policy. Exactly what kinds of materials and services will a water treatment plant need from the small businesses of Lawrence? Probably none. But it sure sounds good and looks great in print. Next, there is the promise of scholarships to local youth. Well this will be useful since by going with United Water / French Suez, many local fathers and mothers will lose their water Department jobs. Jobs that would have helped pay for college for local residents.

Then there is the “Adopt a School” program that will probably entail sending corporate speakers into 5th and 6th grade classes to tell them how great corporate economics are and that many of them should look into the exciting career opportunities in the world of water delivery systems. “Urban Outreach” for these multi-nationals means learning how to say, “Your water rates have gone up again” in both English and Spanish.

And as for the last promise of support for “Minority and Women Owned Small Businesses”…These corporations know that it is these groups that are most likely to oppose this corporate takeover. These are the groups that best understand who corporate economics works for (and who it doesn’t work for). So they want to appease them with false promises and token pledges of support.

Ramifications for the Community

The ramifications for the community begin on the economic level. Most communities are overextended in terms of revenue for public services. In Lawrence our community’s water revenue goes directly into an “enterprise fund” that is used solely for water related issues. It’s criminal that during difficult fiscal times, communities are being misled into handing over one of the few sources of revenue they have under their full control and a public service that pays its own way.

There is also the fact that money normally circulated back into the community via a public workforce (and almost guaranteed to be spent locally) is now shipped out to distant foreign shareholders. And lastly is the reality that privatization and globalization of our local economy leads to rate increases. Corporations must seek to maximize their profits. Once the workforce has been slashed at the beginning of the privatization, the only remaining way to maximize profit is to increase water rates.

· In Cochabamba, Bolivia, Bechtel (who also just received almost a billion dollars worth of infrastructure re-building contracts for Iraq) oversaw a water privatization project that drove household water rates up to $20 a month in a city where most families earned $67 a month, and imposed draconian financial restrictions on water use. When the people rose up to protest they were brutally repressed and seven died. (Eventually the people succeeded in taking back the water system and Bechtel is still trying to force the city to pay $40 million for “expropriation”.)

· In Manilla in the Philippines, a Bechtel water privatization scheme led to a 400% increase in water rates.

· In Pekin, Illinois water rates increased 204 percent over eighteen years of privatization by American Water Works.

· In Nelspruit, South Africa, water rates rose by more then 400% between 1995-2000 after the system was privatized.

We also need to consider the history of privatization and globalization that fosters corruption. For example

· Suez and Vivendi have been convicted of bribing government officials to obtain contracts.
· French Suez officials had to flea Indonesia after the government was overthrown, because of their collaborations with the dictatorship resulting in the water delivery system being thrown into complete disarray.
· And only four months ago the mayor of Atlanta pulled out of the biggest contract in the nation, with United Water – Suez. The city found evidence that the company failed to perform maintenance, billed the city for work it didn’t do, ignored customers cries for service, cut staff to dangerously low levels and occasionally delivered filthy, brown water.

And finally on the economic front is that privatization and globalization in our local economy leads to job losses.

· In Atlanta the work forces was slashed from nearly 700 jobs to nearly 300.
· Following privatization in England, over 10,000 workers were let go.
· Following privatization in the Philippines half of the original workforce was let go.
· Following privatization in Indianapolis nearly 200 workers were laid off.

The issue of local control is also vitally important to understand. Companies are accountable to shareholders, not consumers. If CEO’s and corporate boards don’t seek to maximize their profit, then they are subject to lawsuits on behalf of these shareholders. This means that rather then being held accountable by the residents of a city or town, multinationals will conduct business by the terms of what will increase their bottom line for the short term.

We need to keep in mind that Privatization and globalization isn’t simply a matter of signing off on a local company to do some contracting for a city/town. Instead we are dealing with an almost irreversible process. The fact is that once the infrastructure of a system has been turned over to privatization all the “institutional memory” is lost from the city. When it comes time to renegotiate a contract, the corporations hold all the cards because it would require a huge capital investment from cash starved cities to re-claim. Cities and towns are then at the mercy of these corporations.

For example the city of Chattanooga, tried to buy back its water system from American Water Works, in response to exorbitant fire hydrant rates. During the battle, American Water Works paid lawyers and public relations firms more then $5 million. Unable to match this campaign, the city had to abandon its buyback efforts. And under closed trade tribunals (the highest law of our land), a private corporation can challenge the reversal of privatization as being an act of “expropriation” and win huge financial settlements from cities or towns.

The remaining issue for us to consider is the quality of Water. Privatization and globalization of our local economy undermines water quality. Corporations can reject local, state, and federal laws that apply to water quality again as “barriers to free trade” and are backed up by the lobbying group for private water companies, the National Association of Water Companies (NAWC). NAWC intensively lobbies both Congress and the EPA to prevent higher water quality standards from being adopted.

A likely scenario to be repeated here in the United States is the situation that took place in Walkertown, Ontario, seven people died and 2300 others became ill as a result of E. Coli contamination in the drinking water. The private company charged with testing the water knew the water was contaminated. But under regulations designed to encourage privatization, they were not required to report it.

Alternatives to H2O Privatization

Those advocating the corporate model want you to turn a blind eye to this history of success (while simultaneously turning a blind eye to the destructive history of corporate economics that has ruined our environment, our sense of community, our democracy, and the lives of hundreds of millions of the worlds citizens held hostage by this beast.

“IF IT AIN’T BROKE, THEN DON’T FIX IT. We can’t allow ourselves to be fooled. This issue is simply not that complicated. For hundred of years local cities and towns have been providing safe, clean and cheap water to their residents. That’s the history. We need to continue this tradition of public control and community ownership by building public water treatment plants through a cities own bonding capacity and an increase in both state and federal funds for this purpose.

Estimates are that the US Water System would need $140 billion dollar investment between now and 2016 in order to meet standards. This is the equivalent of perhaps a dozen nuclear submarines. I guess if you put the question to 100 people whether they wanted their tax dollars invested in more nuclear madness or towards safe drinking water for themselves and their families, they would choose the safe drinking water option.

On a more global scale, we need to look at South Africa’s recently enacted constitution (generally seen as the most forward thinking in the world, with the exception of the fact that they mistakenly granted corporations “personhood” in their constitution) guarantees water first for its people, second for nature, and third for the economy. The deep ecologist in me might argue the ranking of the first two, but it is important that this kind of legal protection gets codified into laws that can be used to protect communities in the future

We also need to continue towards the Cancellation of 3rd world debt, increase non-military foreign aid budgets, tax speculation and designate revenue for worldwide water system infrastructure, put global financing under the control of grassroots organizations not the IMF and World Bank, and much more.

We also need to adhere to certain principles when considering any water related issue. (These are taken from the Blue Planet Project):

1) Water belongs to the earth and all its species
2) Water should be left where it is whenever possible
3) Water must be conserved for all time
4) Polluted water must be reclaimed
5) Water is best protected in natural watersheds
6) Water is a public trust and must be guarded at all levels of government
7) An adequate supply of clean water is a basic human right
8) The best advocates for water are local communities and citizens
9) The public must participate as an equal partner with government to protect water
10) Economic globalization policies are not water sustainable

This article was written by Jonathan Leavitt. Jonathan was the founder of the Massachusetts Green Party and is currently the Executive Director of the Massachusetts Anti-Corporate Clearinghouse. (MACC) PO Box 1382 Lawrence, MA 01842 (978) 683-3967

Information for this workshop was compiled from numerous sources including Public Citizen, published articles by Sean Donahue, Jonathan Leavitt, David Westerling, Forbes Magazine, NACLA: Report on the America’s “Privatization and Its Discontents Jan/Feb 2003”, Standards and Poor’s Corporate Ratings, Texas Center for Policy Studies, Corporate Research E-Letter #23, Alliance for Democracy Dispatches, Arnie Alpert at NH AFSC, and others