CAPITALISM NATURE SOCIALISM

VOLUME

16

NUMBER

1 (MARCH 2005)

Dispossessing H2O: The Contested Terrain of Water Privatization

Erik Swyngedouw

Let us review the circumstances once more with special reference to the health of the workers. . .they are deprived of all means of cleanliness, of water itself, since pipes are laid only when paid for, and the rivers so polluted that they are useless for such purposes. From: The Conditions of the Working Class in England, F. Engels, 1845

This paper considers how tactics of accumulation by dispossession have become pivotal strategies in contemporary global accumulation dynamics. This will be assessed in the context of the recent waves of privatization and de-collectivization of water in particular, urban water resources around the world. In the rst part of the paper, the current wave of neoliberal privatization policies is contextualized historically and politically. In a subsequent part, the central and contradictory role of the State or state-like institutions, in their Faustian pact with hegemonic neoliberal strategies of dispossession, will be detailed. This, in turn, will lead us to a consideration of the continuing centrality of governing institutions in the organization and regulation of the water sector, and to a discussion of the weakened position of the citizen vis-a` -vis these new modes of water governance. Finally, the contradictions of water privatization will be explored in conjunction with the mounting voices of protest and discontent that challenge the received wisdom that market forces provide the socially optimal access to and allocation or distribution of water. While portrayed by the pundits of neoliberalism as the panacea for all manner of social, economic, and environmental ills, we shall consider the radically contested and contestable nature of such strategies of dispossession. These sprawling forms of social resistance and the checkered success of recent privatization programs suggest that intensifying social struggle points to the possibilities of transforming the Stalinism of the market and may open the path for more progressive socio-environmental politics.

Accumulation by Dispossession: Privatizing H2O Dispossession or Privatization?

Making a buck remains a tricky business, particularly under capitalism where predators, competitors, workers, and other assorted actors tend to make life often difcult for those noble spirits who endeavour to enterprise, seek out new ways of
ISSN 1045-5752 print/ISSN 1548-3290 online/05/010081-18 # 2005 The Center for Political Ecology www.cnsjournal.org DOI: 10.1080/1045575052000335384

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earning money, and invest scarce resources in the production of valuable things. Historically, capitalists have successfully managed to adapt and adjust to changing circumstances and conditions, eagerly exploring new avenues or returning to already tried ways of maintaining a healthy rate of accumulation. Over the past two decades or so, much of political-economic analysis has focused on how innovations and changes in both products and production processes constitute the backbone of competitive development and the necessary foundation to sustain both competitiveness and accumulation. In other words, political economy tended to concentrate on how capitalism functions best when capitalists do what they are supposed to do i.e., to produce new things under more efcient conditions of production. Of course, this process also kept the focus of attention on the capitalist labor process, and on the (re)organization of labor relations on the shop oor and class relations on the wider social level. However, this classic form of accumulation through expanded reproduction (as Marx would call it) is of course only one of the possible avenues through which capital can expand and the accumulation rhythm be maintained. As David Harvey has observed in The New Imperialism,1 alongside expanded reproduction, capital also expands by incorporating resources, peoples, activities, and lands that hitherto were managed, organized and produced under social relations other than capitalist ones. In fact, this primitive accumulation or accumulation by dispossession has become a key accumulation tactic in recent years. The ofcial terminology for accumulation by dispossession is of course privatization. As the latter term suggests, privatization is a process through which activities, resources, and the like, which had not been formally privately owned, managed or organized, are taken away from whoever or whatever owned them before and transferred to a new property conguration that is based on some form of private ownership or control. Privatization, therefore, is nothing else than a legally and institutionally condoned, if not encouraged, form of theft. Of necessity, the process of privatization equates a process of dispossession. To the extent that such dispossessions are successful, a new terrain for capital accumulation opens up. Since the 1980s, a plethora of activities have been transferred to the private sector. Consider, for example, the wholesale sell-out of the state-owned or collectivized means of production and resources in former socialist countries, the successive waves of privatization around the world, and the international legal battles over property rights of gene plasm, water, indigenous knowledges, and so forth. Of course, such tactics of accumulation by dispossession are embedded within a wider discursive and ideological frame that renders such acts of theft not only legitimate, but normatively desirable. A two-pronged strategy is deployed here. On the one hand, intellectual and theoretical arguments are advanced that signal the failure of non-private modes of social organization of production. For example, state organization of production is these days invariably associated with failure. Indeed, state failure in the delivery of services, developing production, sustaining innovative dynamics, and keeping economies competitive, has become the mantra of mainstream
1

David Harvey, The New Imperialism (Oxford: University Press, 2003).

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economists and assorted conservatives and liberals. Conveniently forgetting how in many countries around the world, the state managed during the 20th century to bring water to everyone, light our houses with electricity, erect some buffer against excessive social and environmental exploitation, plan and build all manner of infrastructure, provide hospitals, make education accessible for all, and thus guarantee some sense of security, state provision has been uncritically attacked in recent years as necessarily wasteful, inefcient, and sub-optimal. Furthermore, other forms of social organization of production, such as communitarian, collective, or associational, are equally considered to operate far below what a privatized market-based system can deliver (except, of course, in the case of associational or collective production organized through share-holding). The second line of argument, in turn, revolves around the unequivocal celebration of market forces and private ownership. Mobilizing both moralistic arguments such as Hardins Tragedy of the Commons and utopian arguments about the promises of development and success foretold by free market pundits, privately owned and market organized production is invariably portrayed as leading to the most optimal output and the most socially desirable distribution of value. This twin argument forms the backbone of the current wave of neoliberalism that renders accumulation by dispossession as desirable as the next version of the Windows operating system. Yet, making a buck is indeed not that easy, even under neoliberal rule. For one, those dispossessed do not necessarily passively accept the theft of what they consider to be rightfully theirs. Secondly, once under the aegis of private capital accumulation, all manner of social tensions and conicts arise. Predatory competitors loom around the corner; recalcitrant workers raise the specter of new forms of class struggle; disgruntled consumers mobilize the weapons of the weak when it becomes clear that the initial promises fail to materialise. And the state, or other forms of collective institutional organization, must step in yet again to assure that accumulation by dispossession keeps going, notwithstanding the proliferation of social protests. Over the last two decades, water has become one of the central testing grounds for the implementation of global and national neoliberal policies. The privatization of water production and delivery services, particularly urban water supply systems, has become an important arena in which global capitalist companies operate in search of economic growth and prots. The water sector, together with many others, has become one of the battleelds over which accumulation by dispossession tactics are waged, often won by capital, and occasionally lost.

Tactics of Dispossession: How Did it Happen?

Despite the raging debates over potential or actual shifts towards privatization, there is, in fact, a long history of changes in the urban water supply sector. Indeed, since the inception of urban water systems, they have always been characterized by shifting congurations of public-private partnerships and, consequently, by different

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types of property and control regimes. Most international studies demonstrate that the organization of urban water supply systems can be broadly divided in four stages.2 The rst stage continued up to the second half of the 19th century, when most urban water supply systems consisted of relatively small private companies providing parts of the city (usually the richer parts) with water of varying quality.3 Water provision was socially highly stratied, and water businesses were aimed at generating prots for the investors.4 (As Engels already contended, water pipes are laid where people can pay for the service; a process that is simultaneously excluding those deprived of the necessary means to access such privatized provision.) This was followed by a period of municipalization, primarily prompted by concerns over deteriorating environmental conditions and calls for a sanitized city.5 In the United Kingdom as elsewhere in Europe this took the form of a municipal socialism concerned with providing essential public goods at a basic, often highly subsidized, rate.6 Protability was without any doubt a secondary concern and subsidies came from the general tax income (from either the local or the national state). This municipalization was also supported by local elites whose health and environmental conditions were equally negatively affected by deteriorating sanitary standards in the city. It was during this era that water supply systems were consolidated in the global North, leading to a citywide standardized coverage of domestic water supply coupled with a comprehensive sewage disposal system (albeit without treatment of sewage waters). Countries and cities in the developing world began to emulate this model in the development of their own urban water works.7 The third phase started approximately after the First World War when the water industry, together with other major utility sectors (such as electricity and telecommunications), became part of a growing national concern. The national state, with varying degrees of intensity of control, regulation, and investment, took a much greater role in public services provision.8 Water infrastructure became together with other major infrastructure works and programs part of a Fordist-Keynesian
See John Hassan, A History of Water in Modern England and Wales (Manchester: University Press, 1998). Alain Corbin, The Foul and the Fragrant (London: Picador, 1994). 4 Erik Swyngedouw, Social Power and the Urbanization of Water Flows of Power (Oxford: University Press, 2004). 5 Pierre Cornut Pierre, Over WaterDe Belangen van het Drinkwater in het West-Europa van de 21ste Eeuw (Brussels: Vrije Universiteit Press, 2003); Matthew Gandy, Water, Modernity and Emancipatory Urbanism, in Loretta Lees (ed.), The Emancipatory City Paradoxes and Possibilities (London: Sage, 2004), pp. 178191. 6 Harold J. Laski, W. Ivor Jennings and William A. Robson, (eds.) A Century of Municipal Progress 1835 1935 (London: George Allen & Unwin, 1935); Robert Millward, Emergence of Gas and Water Monopolies in Nineteenth Century Britain: Contested Markets and Public Control, in James ForemanPeck (ed.), New Perspectives in Late Victorian Economy: Essays in Quantitative Economic History 18601914 (Cambridge: University Press, 1991). 7 Danilo Anton, Thirsty Cities: Urban Environments and Water Supply in Latin America (Ottawa, ON: International Development Research Center, 1993); Swyngedouw, 2004, op. cit. 8 Stephen Littlechild, Economic Regulation of Privatized Water Authorities (London: HMSO, 1986); David Parker, Privatization and Regulation: Some Comments on the U.K. Experience, Occasional Paper No.5. CRI, CIPFA, London, 1997.
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State-led social and economic policy. The investments in grand infrastructure works (dams, canals, networks) were part of, on the one hand, an effort to generate and/or support economic growth, while, on the other hand, assuring a relative social peace by means of re-distributive policies.9 Three objectives were central to this Fordist period of expansion of water provision: the creation of jobs, the generation of demand for investment goods from the private sector and, nally, providing basic collective production and consumption goods (like water, education, housing) at a subsidized price for wage workers and industry alike.10 In some instances, water provision was nationalized (as in the U.K. and many developing countries). In other cases, although management remained under the auspices of municipal authorities, the state played an ever-increasing role, particularly in nancing infrastructure projects (for example, in France, Ecuador, Spain and Israel), but also by means of greater regulatory intervention. It was indeed also during this period that a variety of regulatory bodies (for social, economic, quality, or environmental regulation) were established, usually by and at the level of the national state. These institutional changes also assured that a particular constellation of stake- holders (consumers, unions, etc.) would become involved. In short, the water sector became an integral part of the Fordist and corporatist state form. During the fourth and most recent phase, roughly starting with the global recession of the 1970s, a period associated with the demise of state-led economic growth and the subsequent transition to post-Fordist or exible forms of economic development and state guidance,11 a major shift took place in the public/private interplay in the water sector. First of all, mounting economic problems in the context of high social and investment spending resulted in growing budgetary difculties for the national (and often local) state. This necessitated a reconsideration of the direction of state spending and resulted in reduced expenditures in the welfare sector, as well as supporting debt-ridden industrial sectors and infrastructure programs.12 The low prices, the subsidized water investments, and the aging water infrastructure, combined with a still growing water demand, put an even greater pressure on state budgets a pressure that ran counter to the above processes. This was particularly acute in the developing world. The borrowing bonanza of the 1970s, when western capital was desperately seeking outlets in the Third World to recycle overaccumulated capital (petro-dollars, in particular) that could not nd protable investments in the crisis-ridden developed world, turned increasingly sour during the 1980s as the debt mountain rose.13 Debt repayment problems, combined with desperate attempts
Frank Moulaert and Erik Swyngedouw, A Regulation Approach to the Geography of the Flexible Production System, Environment and Planning D: Society and Space, Vol. 7, 1987, pp. 327 345; Matthew Gandy, The Making of a Regulatory Crisis: Restructuring New York Citys Water Supply, Transactions; Institute of British Geographers, Vol. 22, 1997, pp. 338358. 10 Paul Herrington and Catherine Price, What Price for Private Water (London: Public Finance Foundation, 1987.) 11 Moulaert and Swyngedouw, op. cit. 12 Pierre Ruys, Structural Changes and General Interest: Which Paradigms for the Public, Social and Cooperative Economy? Annales de leconomie publique sociale et cooperative, Vol. 68, 1997, pp. 435451. 13 Stuart Corbridge, Debt and Development (Oxford: Blackwell, 1993).
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from Western nanciers to safeguard their positions, prompted a whole range of imposed Structural Adjustment programs aimed at stabilizing the international monetary order but left states in the developing world with the unenviable task of cutting expenditures, privatizing, and dismantling their regulations. Second, the call for greater competitiveness as a means to redress the economic crisis of the 1970s and early 1980s prompted a quest for efciency gains and greater productivity through cutting red-tape, labor-market deregulation, and greater investment exibility. This, in turn, was accompanied by privatization tendencies as a means to pursue both of the above recipe-solutions to the crisis of Fordism. Moreover, the growing globalization of the economy and the accompanying change in the nature of competition, the greater availability of private capital achieved by means of deregulation and de-territorialization of nancial markets, and the imposition of strict budget norms (by the European Union or the International Monetary Fund) further accelerated the shift of the boundary between the public and private sectors in water management more in favor of the private sector. Third, the standard democratic, but corporatist, channels of government often infused by the presence and active lobbying power of social organizations most notably unions proved to be a considerable barrier to implementing swift policy changes. The political-economic conguration has, consequently, changed in important ways, resulting in new institutional arrangements (see below) that permit a more business- or market-oriented management that is more in tune with prot-making strategies.14 Fourth, the growing environmental problems and, consequently, the proliferating number of actual and potential conicts in the management and regulation of the hydrosocial cycle15 proved to be a serious challenge for traditional forms of organization and implementation of water-related activities. In a context in which civil society-based environmental groups became more vocal and powerful while access to new exploitable water reserves became more difcult, systems of governance had to become more sensitive to these issues. In particular, questions of restricting or controlling demand (demand management) as a strategy to lower water consumption, and hence taking away the pressures on expanding the urban water resource base and ecological footprint of the city, became more loudly heard. The internalization of all these tensions within a fundamentally state-owned and state-controlled sector like water became increasingly difcult.16
Bob Jessop, The Future of the Capitalist State (Cambridge: Polity Press, 2002). For a theoretical elaboration of the notion of the hydrosocial cycle, see Erik Swyngedouw, Maria Ka ka and Esteban Castro, Urban Water: A Political-Ecology Perspective, Built Environment, 28, 2, 2002, pp. 124137. 16 Erik Swyngedouw, Homing In and Spacing Out: Re-Conguring Scale, in Hans Gebhardt, Gunter Heinritz., Reinhard Wiessner (eds.), Europa im Globalisierungsprozess von Wirtschaft und Gesellschaft (Stuttgart: Franz Steiner Verlag, 1998), pp. 81 100.
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Finally, and perhaps most importantly, investors began to search for new frontiers for capital investment. Water presented itself as a possible new source to mobilize and harness as it offered the possibility for turning H2O (again) into capital and prot. This privatization of the commons through a strategy of accumulation by dispossession became increasingly central to accumulation dynamics as the standard routes of restructuring of existing capitalist-economic processes and investments in new products were no longer sufcient to absorb the ballooning volume of capital in search of protable investment avenues. Indeed, water, together with other common pool goods like genetic codes, local knowledges, and the like, are rapidly becoming part of such accumulation strategies.17 Nature itself has long resisted full commodication, but in recent years, nature and its waters have become an increasingly vital component in the relentless quest of capital for new sources of accumulation. The new accumulation strategies through water privatization imply a process through which natures goods become integrated into global circuits of capital; local common goods are expropriated, transferred to the private sector and inserted in global money and capital ows, stock market assets, and portfolio holdings. A local/global choreography is forged that is predicated upon mobilizing local H2O, turning it into money, and inserting this within transnational ows of circulating capital. Consequently, local resource systems become part of the strategic checkerboard of global companies. The rush towards privatizing water continues relentlessly, and by 2002 constituted a global market valued at more than $45 billion US.18

Private H2O, Collective Waters

In a context of commodication and demands for privatization, the traditional state-led way of managing the triad of demand-supply-investment decisions becomes fundamentally transformed. If the prot motive, either for public or private companies, becomes the yardstick against which performance is measured19 and the price signal a key instrument for regulating the demand/supply nexus, the contradictions between these moments in the economic process take a rather different turn.20 In an external context, in which expanding demand is seriously discouraged for environmental reasons, while investment needs to be maintained to extend, replace, and update the network, the balance sheet equations for water supply companies become rather specic. With a given demand structure and increasing
17 Cindi Katz, Whose Nature, Whose Culture? Private Productions of Space and the Preservation of Nature, in Bruce Braun and Noel Castree (eds.), Remaking Reality: Nature at the Millenium (London: Routledge, 1998), pp. 4363; Karen Bakker, Privatizing Water: The Political Ecology of Water in England and Wales, Unpublished DPhil Thesis, School of Geography and the Environment, University of Oxford, Oxford, UK, 1999a. 18 www.thewaterpage.com 19 Stephen Martin and David Parker, The Impact of Privatization: Ownership and Corporate Performance in the U.K. (London: Routledge, 1997). 20 Stephen Littlechild, Economic Regulation of Privatized Water Authorities and Some Further Reections, Oxford Review of Economic Policy, 4, 2, 1988.

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investment, protability and hence the sustainability of market-led water companies can only be maintained via either productivity increases and/or price increases. But both are problematic. Productivity increases are generally capital and technology intensive and almost invariably lead to a rising organic composition of capital and a reduction in the work force. And while water rate hikes are possible, they remain politically sensitive and might lead to socially perverse effects. The social conict after the privatization of Cochabambas water works in Bolivia is a case in point.21 What happened in the U.K. when water was privatized in 1989 is another. The water price immediately increased signicantly, and many non-paying households were cut off, while companies and their shareholders gained considerable prots.22 In the second round of price setting in 1999 (and after the government introduced a windfall tax on what were considered to be excessive prots of the privatized utilities), price increases were more modest, immediately resulting in a major reduction of the labor force in the water industry and calls for a partial re-collectivization of the water infrastructure.23 In 2003, the British water utilities demanded from the regulator the right to increase water price with up to 70 percent in order to be able to meet the necessary future investment requirements. In the meantime, 19 percent of the British households 4.4 million are in arrears with their water bill payments.24 In a context of increasing demand and expansion of either total or per capita demand, the volume of prots can be maintained by means of an expansion of supply. In this context, it is interesting to note that the productivist logic25 of water supply companies continues unabated, despite mounting calls for a more restricted water use. Furthermore, given the long-term and capital-intensive nature of investments in water infrastructure, there is a rather weak incentive to engage in major long-term and capital-intensive investment programs. Put simply, there is a clear disincentive to invest in not directly protable long-term activities like leakage control in contrast to productivity-enhancing investments that improve short-term protability. Finally, in the context of geographically limited supply and demand, in which most companies operate while simultaneously being exposed to a rapidly globalizing competitive environment, there is a tendency for privatized water companies to internationalize activities, either by bidding for new concessions, by taking over existing privatized
Peter H. Gleick, Gary Wolff, Elisabeth L. Chalecki and Rachel Reyes, The New Economy of Water The Risks and Benets of Globalization and Privatization of Fresh Water, (Oakland, California: Pacic Institute for Studies in Development, Environment, and Security, 2002); Carlos Crespo, Structural Adjustment and Water Supply in Bolivia: Managing Diversity, Reproducing Inequality, in Roger Zetter and Rodney White (eds.), Planning in Cities Sustainability and Growth in the Developing World (London: ITDG Publishing, 2002), pp. 189202. 22 Karen Bakker, Paying for Water: Water Charging and Equity in England and Wales, Transactions of the Institute of British Geographers New Series, Vol. 26, 2001, pp. 14364. 23 Karen Bakker, An Un-Cooperative Commodity (Oxford: University Press, 2003b). 24 Pamela Taylor, Debt a Water Industry Issue, paper presented at the Water U.K. Information & Learning Conference on Debt Management, London, 7-16-02. 25 See Erik Swyngedouw, The Contradictions of Urban Water Provision, Third World Planning Review, 17, 4, 1995, pp. 387405.
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water businesses elsewhere, by means of mergers, acquisitions and/or diversication into other sectors, or by selling their know-how overseas. It is not a surprise, therefore, that the state or other parts of the public sector have to mediate these contradictions. In the U.K., for example, Yorkshire Water proposed to collectivize the network part of the water supply system, while keeping the managerial part in private hands. The Welsh water utility also moved away from private ownership to some mix of public and private management.26 It seems that this kind of public-private partnership in which the public sector is responsible for long-term xed capital investments (and much of the costs associated with them) while the private sector organizes the protable supply management part of the system is the likely outcome of a privatized water business. The escalating infrastructure replacement and extension costs, their long turnover time, and long-term investment uncertainty result in a very low return and a general caution on the part of water companies to invest in such capital equipment.

Dispossession and the State: A Faustian Pact Regulating Dispossession

The water privatization business foregrounds also one of the central myths of the neoliberal model, i.e. that privatization means getting the state off the back of the economy and rolling back regulatory red tape. In contrast to this often-repeated refrain, in the water sector, the state or other governing arrangements (from multilateral organizations like The World Bank, IMF, or the EU, to national, state or local governments) are centrally involved in regulating and organizing privatization and dispossession. They change laws, rules, and conventions and produce new legal and institutional frameworks that permit and regulate privatization, often imposing all manner of conditions that force privatization through. In addition, governments provide numerous nancial and other incentives to lure private companies and foster private sector involvement. After privatization, a state controlled regulatory institutional framework invariably has to be implemented just to make sure that companies enjoying a natural monopoly condition behave in competitive ways. Without the various state levels paving the way and imposing conditions that guarantee privatization and then secure protable operation afterwards, this accumulation by dispossession could not possibly take place. The state is, in other words, a central actor in establishing and maintaining market principles. This Stalinism of the market privileges one model for managing water while excluding alternative modes of organization.
26 OfWAT Ofce of Water Services, The Changing Structure of the Water and Sewerage Industry in England and Wales (Birmingham: OfWAT, 2000); Karen Bakker, From Public to Private to . . . Mutual? Restructuring Water Supply Governance in England and Wales, Geoforum, 34, 3, 2003, pp. 35974.

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New institutions, most notably in the eld of economic and environmental regulation, accompany every privatization program. As Bakker has pointed out in the context of the U.K., the regulatory game that started with the privatization (and ostensibly deregulation) unleashed a certain regulatory creep, which has subsequently developed into a top-heavy institutional-regulatory body.27 Given the territorial monopoly-character of the privatized water companies, all sorts of regulatory procedures, such as investment target-setting, pricing, environmental standards, abstraction and leakage standards, quality assurance, and the like, have been implemented. Having shifted from a situation in which the state both owned and regulated the water system to one in which there is a sharp institutional separation between regulation and ownership has inevitably led to a situation in which regulations have become formal, overt and statutory.28 Rather than de-regulating the water sector, privatization has resulted in a profound re-regulation of the water market and the emergence of a considerable quasi-governmental regulatory structure. In the process, the set of social actors involved in the institutional and regulatory framework of the water sector has been signicantly altered, with a new geometry of social power evolving as a consequence.

The struggles over the boundary between the public and the private terrain operate primarily through two interrelated axes: rst, environmental standards and, second, market imperatives. The tension between these becomes contained in the pursuit of environmentally friendly marketization, while the public/private tension is meditated through debates over the form that the commodication process should take. Unanticipated consequences of these debates are seen in the changing character of knowledge within the water sector. Information that was once in the public domain becomes commodied, takes on commercial signicance, and is often treated as condential. In the context of a shift to governance, knowledge management is central to playing the regulatory game. Retaining control of technical institutions remains an important vehicle for government bodies (at a variety of scales) to preserve its relative advantage within negotiations. But despite the apparent centrality of such debates about public and private spheres, it is clear that state-led command-and-control strategies remain the key mechanism for the implementation of environmental regulations.29 Governments are not just instrumental as initiators and facilitators of privatization; they also play a central role in guaranteeing protability or insuring companies against adverse political or economic conditions. For example, the World Bank insured International Waters concession in Guayaquil, Ecuador to the tune of US $18 billion against all sorts of risk, including political instability.
Karen Bakker, 1999. op. cit.; Karen Bakker, 2000. op. cit. Erik Swyngedouw, Ben Page, and Maria Ka ka, Sustainability and Policy Innovation in a Multi-Level Context: Crosscutting Issues in the Water Sector, in Panagiotis Getimis, Hubert Heinelt, Grigoris Kafkalas, Randall Smith and Erik Swyngedouw (eds.), Participatory Governance in Multi-Level Context: Concepts and Experience (Opladen: Leske & Budrich, 2002), pp. 107 131. 29 Graham Taylor, State Regulation & the Politics of Public Service: The Case of the Water Industry (London and New York: Mansell, 1999).
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The Buenos Aires water concession is suing Argentina over the loss of income and prot after the collapse of the Argentinean Peso.30

Dispossession and Democracy: An Unlikely Twin

Needless to say, the transfer of water control and delivery from the public to the private sector involves a change in the choreographies of social and political power. With political and public involvement waning, the power of the citizen is reduced. Moreover, to the extent that water is turned into money and capital, and water users into water customers who pay for water (rather than citizens entitled to access to water), the choreographies of political power around water are fundamentally overhauled. Principles of business secrecy, absence of participation, non-transparent decision-making procedures and the like, characterize the privatized organization of the water sector. Although a vital and local good, the decision-making frameworks are taken away from local or regional political control and relegated to executive boardrooms of global companies. This leads to autocratic forms of water governance and regulation with limited or no democratic control. Of course, the new regulatory institutions may provide some space for stakeholder participation, however tenuous this might be.31 A host of new institutional or regulatory bodies have been set-up (in the U.K. appropriately called Quangos, for quasi-NGOs) that have considerable decisionmaking powers but operate in a shady political arena with little accountability and only limited forms of democratic control. These institutional changes have been invariably dened as part of a wider shift from government to governance.32 Whereas in the past, water management and water policy were directly or indirectly under the control of a particular governmental scale i.e., either at the national and/or the local (municipal) level in recent years there has been a massive proliferation of new water-related institutions, bodies, and actors that are involved in policy-making and strategic planning at a variety of geographical scales. The successive generations of water-related directives and regulations at the EU level and the tortuous process of implementing an integrated EU policy in the form of the European Water Framework Directive have resulted in growing powers of the Commission over water-related issues. The political history of the successive stages of negotiating the framework directive suggests a rather tumultuous path in which various actors, such as national governments, water providers, the European Commission, the European Parliament,

30 David Hall and Emanuele Lobina, Water Privatization in Latin America, Public Services International Research Unit, University of Greenwich, Paper Presented at PSI Americas Water Conference, San Jose, Costa Rica, July 2002. 31 See Swyngedouw, Page and Ka ka, 2002, op. cit. 32 Erik Swyngedouw, Authoritarian Governance, Power and the Politics of Rescaling, Environment and Planning D: Society and Space, Vol. 18, 2000, pp. 63 76; Bob Jessop, 2002, op. cit.

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and NGOs of a variety of kinds, played different roles, while their inuence changed over time.33 The combined outcome of the above has been a more or less signicant (very signicant in the case of the U.K., less so in the case of, say, the Netherlands) re-conguration of the scales of water governance. As Bob Jessop has pointed out for other domains of public life, the national scale has been re-dened (and partially hollowed-out) in terms of its political power, while supra-national and sub-national institutions and forms of governance have become more important.34 Privatization, in turn, has led to the externalization of a series of command and control functions. The result is a new scalar gestalt of governance, characterized by a multi-scaled articulation of institutions and actors with varying degrees of power and authority. The overall result, therefore, is a glocalization35 of the national government, both upwards to the supra-national level and downwards to the sub-national level. This results in a more complex articulation of varying geometries of scale-dependent forms of governance. In sum, national governmental regulation is simultaneously up-scaled and down-scaled, with an accompanying change in the choreographies of power, both between and within institutions. Finally, accumulation by dispossession itself, of course, results in much greater power and autonomy for the companies themselves in terms of strategic and investment decisions. Privatization de facto means taking away some control from the public sector and transferring this to the private sector. This not only changes decision-making procedures and strategic developments, but also affects less tangible elements such as access to information and data. Traditional channels of democratic accountability are hereby cut, curtailed, or redened. A plethora of new institutions has been formed at a variety of geographical scales. This proliferation of governing bodies has diminished the transparency of the decision-making process and renders it more difcult to disentangle and articulate the power geometries that shape decision-making outcomes. In practice, it can be argued that the transition from government to governance has encouraged despite the multiplication of actors and institutions involved in water management the transfer of key economic and political powers to the private component of the hydrosocial governance complex.36 This, however,
33 For a detailed analysis, see Maria Ka ka, The Water Framework Directive: a New Directive for a Changing Social, Political and Economic European Framework, European Planning Studies, 11, 3, 2003b, pp. 299316; Maria Ka ka and Ben Page, The EU Water Framework Directive Part 1: European Policy-Making and the Changing Topography of Lobbying, European Environment, 2003, Ben Page and Maria Ka ka, The EU Water Framework Directive Part 2: Policy Innovation and the Shifting Choreography of Governance, European Environment, 2003. 34 Bob Jessop, The Transition to Post-Fordism and the Schumpeterian Workfare State, in Roger Burrows and Brian Loader (eds.), Towards a Post-Fordist Welfare State? (London: Routledge, 1994), pp. 13 37. 35 Erik Swyngedouw, The Heart of the Place: The Resurrection of Locality in an Age of Hyperspace, Geographiska Annaler B, 71B, 1, 1989, pp. 3142; Erik Swyngedouw, Neither Global Nor Local: Glocalization and the Politics of Scale, in Kevin Cox (ed.), Spaces of Globalization: Reasserting the Power of the Local (New York/London: Guilford/Longman, 1997), pp. 137 166. 36 For a more detailed analysis, see Swyngedouw, Page and Ka ka, 2002, op. cit.

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has not happened in a social vacuum and has rather fuelled a constellation of social and political conicts, not least because of the consequences of an increasingly privateoriented governance model for the sustainability of socio-environmental systems.

Cracks in the Mirror: The Contradictions of Dispossession Urban Water: Public Good or Private Commodity?
The recent shift towards turning H2O into a global commodity has profound implications for the social and political meaning and cultural valuation of water. First of all, water is turned into prots and capital accumulation by private or public/private institutions. Supplying water therefore becomes a means to achieve economic objectives: capital accumulation and prot maximization. To the extent that private companies do this, water-related activities become just a strategic element within a predominantly corporate strategy of companies that are becoming rapidly and strategically multi-utility and international. Creative internal accounting techniques between subsidiaries of multi-utility companies have become common strategies for maintaining or boosting share value. Second, non-economic uses and functions of water must then be regulated by governmental institutions that often face serious opposition, conict, or other constraints in the face of powerful private agencies. Third, it becomes increasingly difcult, if not impossible, to integrate water policies within a wider urban, social, or economic policy that would involve cross-subsidization, alternative uses of water, or a socially stratied policy. Fourth, this shift inevitably entails a change in the geometry of social power. Private actors and companies become much more powerful voices in strategic water-related decisions, at the expense of other civil society organizations or the state. Fifth, while the water cycle operates on temporal rhythms that are part of the larger environmental and climatic system, the economic part of the hydrosocial cycle is nevertheless increasingly forced to operate under the standard discounting periods of corporate strategists and of economic cycles. Sixth, the privatized nature of crucial parts of the water cycle diminishes the transparency of decision-making procedures and limits access to data and information that could permit other social groups to acquire the relevant information on which to base views, decisions, and options. Finally, water production and distribution becomes incorporated into an increasingly global economy and a global civil society in which investment ows, nancial capital markets, and investment decisions shape the contours in which the urban water economy operates. In sum, the shift from public good to private commodity alters the choreography of power through which the urban hydrosocial cycle is organized.

The Supply/Demand Nexus and the Investment/Pricing Conundrum

At a moment when the price signal becomes a central organizing principle of water markets, and in a context of relatively xed supplies, demand management

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becomes a tricky business. Monopolistic market control that is inevitably associated with water supply networks demands a strong price-regulation by the State or other governmental agencies. In addition, efforts to reduce water consumption for environmental reasons are countered by cost-recovery requirements that hinge on price-setting and produced quantities. Invariably, water companies are operating in the two-pronged wedge of price-setting regulatory systems, on the one hand, and costly technological/organizational investments to enhance productivity on the other. The triad investment/price/supply becomes very difcult to manage, particularly in a context of increasing pressures to reduce demand. There is a continuing tendency to increase supply despite rhetorical attention to demand management. The costly introduction of water saving technologies is, at best, slow, while major efforts are made to increase supply despite often formidable opposition. It is becoming abundantly clear that the price signal is insufcient to regulate the allocation and efcient use of a resource like water.

Globalization Through Shared Control

At a global scale, an accelerated process of concentration and consolidation is taking place that is rapidly leading to a fairly oligopolistic economic structure of water utility companies, with two (French) companies controlling about 70 percent of the global privatized water market.37 This tendency has been further accentuated by the recent collapse of Enron, one of the leading global multi-utility companies. This raises difculties of regulating global companies (particularly with respect to environmental and social standards, investments, maintenance and infrastructure upkeep). Indeed, the market does not exist as a playing eld without the actors making it work. The small number of global water companies produces an oligopolistic form of market organization. Only a handful of companies control the water market. In fact, two French companies, Ondeo (Suez) and Vivendi (now Veolia), take an overwhelming share of the water market, with Thames Water (part of the German multi-utility RWE) and SAUR trailing far behind in, respectively, third and fourth place. The dominance of the French is related to their long-term preferential access to the French water market. This gave them a competitive edge in international markets once they became more deregulated and were prepared for the privatization onslaught. Moreover, the French had more than a century of experience with a public-private partnership model where the public sector owns the infrastructure while the private companies manage the water service. By contrast, the Anglo-Saxon model is based on full privatization (infrastructure and delivery), and the export of this model has resulted in several failures or under-performing utilities. The ve top companies are invariably involved in basically every urban privatization scheme in the world. Moreover, for big projects, it is not unusual for the big four
37 David Hall, The Water Multinationals, Public Services International Research Unit, University of Greenwich, Occasional Paper (mimeographed), 1999.

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or ve to share the spoils and either manage water systems jointly or carve up the concession into two geographical areas, each controlled by one of the global players. For example, in Budapest, Vivendi has a joint venture with RWE Aqua, and in Sidoargo, Indonesia, RWE runs one part of the system while Vivendi controls the other half. These joint ventures and joint bids for contracts further erode whatever limited competition exists in the market. The market for privatizing urban water is far removed from the competitive environment that neoliberal pundits hail as the savior of ailing economies in the Third World. Needless to say, such oligopolistic control provides considerable leverage for the corporate mandarins when negotiating terms with local or national states.

Cherry-picking as Strategic Device

Servicing urban residents with reliable potable water services is not an easy business. It requires signicant long term investment and complex organizational and management arrangements. And protability is by no means assured, particularly in urban environments where many people have difculty paying and problematic access conditions.38 In short, only some urban water systems are likely to generate the prospect for long-term protability, while others will continue to require subsidies and support if they are to continue to improve service delivery. Recent experiences have indeed shown that global private companies only really go for the nice bits those that have some meat on the bone. That means that only big city water works are considered worthy of privatization. And within those cities, areas with high-income residents with proven ability to pay are of course the valued customers of the privatized utilities. This of course leads to strategic cherry picking from the part of the companies.39 The promising utilities (in terms of prospects for prot making) are cleared for privatization; the smaller and usually less protable utilities remain in public hands and require continuous subsidization. Moreover, contractual obligations have to be written into concession arrangements to force companies to expand service provision in poorer areas. Rarely, however, do private service providers full all the terms of their contractual obligations.

Corruption as Institutionalized Practice

The inevitably strong link between the state and the private sector in privatization schemes opens up all manner of corrupt practices. They may be illegal, but more often than not, belong to the standard arsenal of agreed practices and accepted procedures. Needless to say, forms of bribery, under-the-table deals, greasing hands to
Erik Swyngedouw, 2004, op. cit. Stephen Graham and Simon Marvin, Cherry-Picking and Social Dumping: Utilities in the 1990s, Utilities Policy, 4, 2, 1994, pp. 113120.
39 38

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facilitate certain contractual arrangements and nancial contributions to political allies, all are part of the standard tool-kit of practices that privatized water utilities use. The concession contract for Jakarta with Thames Water (now RWE) had to be renegotiated after allegations of corruption. Bribery scandals were also associated with the concessions in, among others, Grenoble, Tallinn, Lesotho and Kazakhstan. Enron, Vivendi, and Suez have all been accused of making payments to political parties in return for favors. Equally unsubtle but fully legal inducements for privatization are offered by national states and international organizations. For example, World Bank loans to the water sector are generally conditional upon spending a considerable share of the loan on managerial and other streamlining measures to prepare the groundwork for water privatization. In the case of Guayaquil, Ecuador, for example, the InterAmerican Development Bank provided a $40 million loan under condition that almost half of it be spent on preparing the privatization bid of the public water utility.40 In sum, international loans and other arrangements are regularly used as a means to push through this neoliberal agenda.

Water and Market Risk: The Globalization of Water and Uneven Development
To the extent that water companies operate increasingly as private economic actors, they are also increasingly subject to standard market risks. While providing a fundamental and essential service, the economic survival of water operations is not necessarily guaranteed. Takeovers, disinvestments, geographical re-allocation, bankruptcies, inefcient operations, political risk, and the like are endemic to a private market economy. In fact, this uncertainty and uidity is exactly what market dynamics are supposed to produce i.e. to weed out under-performing companies, and reallocate economic resources from less to more protable activities. This raises particular questions with respect to the long-term sustainability of market-based urban water supply systems. In the absence of strong incentives to enhance productivity or efciency, and given the high cost and long time horizon of xed capital investments in water infrastructure, private companies may fail to keep water systems running efciently. This would, in the medium term, lead to a situation in which the State (at whatever level) has to get involved again in the water sector in more direct ways. The tendency to leave the network/infrastructure part of urban water networks to the public sector, while protable operational and private companies secure managerial activities, is an indirect subsidy of the private sector by the state. In market terms, it distorts the operation of the market. In fact, in a context in which risk of failure of the water supply is too dramatic to contemplate, the state will have to remain (or become again) a key player in organizing water supply systems. This will become
40

David Hall and Emanuele Lobina, 2002, op. cit.; Erik Swyngedouw, 2004, op. cit.

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even more pronounced as environmental and sanitary standards in urban areas continue to decline.

Struggling Against Dispossession: A Checkered Success

Needless to say, the processes outlined above do not go uncontested.41 A plethora of local and global resistance movements have sprung up that contest the hegemonic logic of water privatization and ght for alternative modes of water management. The twin tension between continuing increasing demand for urban water, on the one hand, and the mounting pressure to allocate water to other functions, on the other, has caused socio-spatial tensions and conicts over water abstraction, water allocation, and water use to proliferate. Accumulation by dispossession in the water sector has indeed generated all manner of social struggles and conict that highlight the fundamental antagonisms that are generated through such tactics. Of course, the plethora of social struggles is as broad as the range of strategies and tactics of dispossession. While social struggle within the dynamics of expanded reproduction of capital generally take a clear class-character, the social struggles around tactics of dispossession show a rather different choreography, usually centered on questions of ownership, control, participation, community interests, and the like. While all these forms of struggle are related to and generated by the dynamics of accumulation, the specic choreography of such struggles takes specic and often highly localized forms. This complicates attempts to form translocal coalitions because both the stakes and conict arena may be vastly different from place to place. Yet, the mobilization against strategies of accumulation by dispossession in the water sector are widespread. The case of Cochabamba, Bolivia, has by now become the iconic example of successful resistance. After mass mobilization and considerable social and political struggle, International Water, the concession holder of Cochambambas water supply system, was thrown out of the country, and the water utility returned to public ownership. In Buenos Aires, the water contract had to be renegotiated after Argentina was forced to give up its dollar/peso stabilization policy in the aftermath of the economic crisis that rocked the country in early 2002. In Spain, millions of people marched in Madrid to protest the previous conservative governments new water policies. In Porto Alegre, the alternative globalization movement has made water one of the pivotal arenas around which to mobilize social actions. Struggles in South Africa, the Philippines, Brazil, Ghana, Turkey, India, Korea and Indonesia, to name just a few, testify to the mobilizing effects generated by accumulation by dispossession. These myriad struggles not only testify to the deep discontent communities express when confronted with pervasive tactics of dispossession, but they also signal to the powers that be that such blatant neoliberal class politics will face considerable
41 Ricardo Petrella, La Manifeste de lEau (Bruxelles: Editions Labor, 1998); Maude Barlow and Tony Clarke, Blue Gold: The Fight to Stop the Corporate Theft of the Worlds Water (New York: New Press, 2002).

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resistance. This in itself will make the changes for successful privatization i.e. turning local waters into global capital less of a certain prospect. Indeed, increasingly, water companies themselves nd that the promised honey-pots of large prots in the water business may not be as plentiful as portrayed by the World Bank and other pundits of liberalization. Some have begun to withdraw from the water sector. Water does indeed remain a highly contested good. And in a context in which still far too many people die from lack of access to good quality water, the social struggle for water has to be turned into a struggle for fundamental human rights.