These multinational corporations have grown so large as a result of globalization that they have sufficient economic power to take over or strongly manipulate national governments, initially only relatively small third-world governments, but later, larger developed governments too, effectively running whole countries. In Robinson's future history, the metanational corporations become similar to nation-states in some respects, while continually attempting to take over competitors in order to become the sole controller of the interplanetary market.The newly released report on water privatization Troubled Waters: Misleading Industry PR and the Case for Public Water, Public Services International Research Unit (PSIRU) suggests that we are closer to that reality than we realize.
The report identifies worldwide deceptive practices used by the water privatization industry. For example, it has become common in the United States that, when public infrastructure is privatized, for the public "partner" to receive a large up-front payment in exchange for a multi-generation contract that effectively makes the private contractor the owner of the asset.
Part of what makes water privatization attractive is the promise to provide modern innovations as part of the deal. In fact, this study finds that the true innovation is not technology but, rather, the up-front payment made to the public.
Cash-strapped governments are thrilled to get what seems to be so much money that it can solve all their financial needs. However, they do not understand how such a long contract will play out and find it hard to resist signing the contract. It is for just that reason that France outlawed up-front payments as part of privatization two decades ago – it distorts decision-making.
The US not only permits up-front payments, they are standard in American infrastructure privatization contracts. It is not surprising that would be the case, given the view that government can do nothing right while the private sector is always efficient. What most people do not understand is that the privatization industry owes no obligation to the public. Rather, private corporations' obligation is owed only to shareholders, and that obligation is to maximize profits for its shareholders.
The report finds that private water corporations meet their duty to maximize profits to their shareholders by "a) weakening their greatest competitor, the public water sector, b) opening up the water market and creating business opportunities for themselves, and c) removing as many obstacles as possible to the profitability of their operations."
The one thing that imposes accountability on a private company is vigorous market competition with many sellers and buyers. Infrastructure privatization seems to take on the role of a public entity, but because it is a monopoly, it has no competition and no market accountability. There is also no public sector accountability, such as open meetings acts, freedom of information acts, or other forms of oversight, because privatization means the asset is private.
The study finds, "The reality is private contracts and commercial law shield private water corporations from nearly all risks, meaning they have no incentive to behave efficiently . . [and have a] track record of raising rates and failing to invest adequately in water systems." In fact, the private water industry lobbies aggressively to amend recently enacted water legislation to extend public water funding to subsidize the private sector.
The report describes how water privatization imposes a second cost on the public – it degrades democracy. The author provides many examples of ways in which the "private water industry's political interference threatens the democratic governance and sustainable management of public water systems."
In some cases, contractors have stolen money that was required by law to be returned to the public. In other cases, private water companies have been willing to harm the public opposing issuing boil-water notices when water becomes contaminated. After all, a private company's duty is to maximize shareholder profits, while it has no duty to the public.
This well documented report reads like a crime novel. For example, "In East Cleveland, Ohio, a consultant bribed the former mayor's office in order to secure a no-bid contract for CH2M HILL to run the city's water system. The contract eventually paid out $3.9 million to the corporation for services that the city had been providing for less than half of that amount. The former mayor and the consultant have been convicted of racketeering, and the city sued the corporation for $14 million for breach of contract."
from here plus a short interview with Katherine Sawyer, Organizer, Think Outside the Bottle & Public Water Works!
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