Book Review: The case for privatization of water supply

That’s it, I did it and I want to tell the world about it. It’s been a long but entertaining journey of a bit more than 100 pages, and I finally went through. Deep down in the dark water of privatization but notwithstanding appealing intellectual ideas. So, if I could do it, so can you!

I believe you wonder what this great book that caught my attention for weeks is about. The book is titled, “Water for Sale: How business and the market can resolve the world’s water crisis” published in 2005 by the Cato Institute. As is evident from the title, it deals with water and more specifically about water supply in developing countries. In this book, the author Fredrik Selgerfeldt offers a practical and workable solution to bring safe water to the poor: privatization of the distribution and defined property rights on the resource. It’s been a long time that I was looking for such a book, tackling political problems such as water supply mostly from an empirical point of view, comparing where privatization has worked, where it hasn’t and why. Through many examples, the author demonstrates that there is less waste, spillage and misallocation of this resource when market forces are at play. Obviously, the main counter argument to privatization regards prices. Intuitively, water prices would be much higher in a market oriented system. If this is a correct assumption, at what cost, Selgerfeldt asks?  Subsidizing water prices has left out about one sixth of the worldwide population without safe water, causing death to the poorest. One shall recall that water has an economic value before having a social value, such as food. Ignoring this fact would have the following consequence: the public authority would subsidize the price of water for the richest part of the population, since the poorest does not have access to water mains at all. Besides, there is often an opportunity cost for the poor; those who don’t have access to safe water have to fetch it one way or another, in most cases through ‘illegal’ channels, where people get ripped off. Is that the idea of justice you think of?

I am however concerned by one fact. Selgerfeldt maintains that water supply is a natural monopoly, that is why there is a need for public intervention and that concessions should not be granted with exclusive rights. Fair enough, but what would happen in the case of corruption, especially in countries where the rule of law is overridden?