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Great Lakes Article:

Water, Land and Labour:
The Impacts of Forced Privatization in Vulnerable Communities

Halifax Initiative Coalition
June 2003

This report was written by Derek MacCuish of the Social Justice Committee on behalf of the Halifax Initiative Coalition with a contribution by Christopher Frankel and editorial assistance from Robin Round, Gord Walker and John Mihevc.

This document can be found online at:


Privatization is one of the most forcefully trumpeted pillars of the neo-liberal economic platform. Corporations and international financial institutions (IFIs), decrying government ownership as inefficient, inept and costly, insist that private ownership is the path to efficient, rational use of resources. In their drive to attract foreign investment, governments the world over are shedding regulatory responsibilities, softening environmental laws, and turning control of resources over to national and transnational corporations.

Privatization is not a recent phenomenon, nor is it being applied solely within developing nations. The catastrophic worldwide recession during the late 1970s, the crushing debt crises faced by many African and Latin American countries in the early 1980s and the transition to market driven economies in Asia, Eastern Europe and Latin America during the early 1990s, combined to highlight the critical issue of inefficient state enterprises and prompted a shift towards harnessing the private sector in the pursuit of economic growth. Canada and the United States deregulated extensively from the late 1970s onwards and western European countries, notably Germany, France and the United Kingdom, began relinquishing control of public utilities in the early 1980s.3

The international financial institutions, the International Monetary Fund (IMF) and the World Bank, have used their considerable power as providers of finance and arbiters of the main international debt relief program to lead the push for privatization. Privatization of public services and natural resource extraction is now a central component of IMF and World Bank program and project work in developing countries. For most impoverished countries, it is a condition for development assistance and debt relief. The institutions are committed to privatization as the primary method of economic reform, arguing that the performance of privatized firms is superior to that of stateowned enterprises.

These institutions make broad assumptions of benefit but often neglect to adequately consider local conditions, especially social and environmental vulnerabilities that are not reflected in cost efficiency analysis. Most developing countries have put up for sale, or are planning to offer, hundreds of enterprises to private ownership. These involve an array of firms in many sectors, with varying degrees of operational efficiency.

This paper reviews the impacts of privatization in two broad spheres of concern:
1) public services, because of implications for the poor, and
2) natural resources, because of implications for the environment, national ownership and control of extractive methods.

The starting point is that substance upon which all life depends - water. The paper then examines aspects of privatization in mining and public utilities (electricity, transport, communications), closing with a brief look at the implications for working people, and organized labour in particular.

This review of experience in these three broad areas - water, land and labour - indicates that broad assumptions about the benefits from privatization are an error. For the poor especially, privatization as a whole has not brought better service at an affordable price. Improvements that may result from privatization of public services have too frequently been limited to the areas that are most profitable.

In some cases, privatization has had deadly consequences. The worst cholera epidemic in South Africa's history broke out after water supplies were privatized, then made unavailable in poor rural communities. The cholera infected 160,000 and killed some 200 people between Oct. 2000 and early 2002. Water that had been provided to the communities without charge, even under the apartheid regime, was cut off when local residents could not afford to pay the rates the new owners began charging. As result of the rate increases, poor people began using other - unsafe -sources of water. Privatization of water did not bring an improvement of service. Instead, it brought disease to thousands and death to hundreds. It has brought death in other parts of the world too.

Union leaders in Colombia are being assassinated for their opposition to privatization of public services. Teachers are gunned down for opposing corruption, or cutbacks in education budgets. City workers are killed for voicing opposition to a private takeover of municipal services. Each year, more union workers are assassinated in Colombia than in all the rest of the world put together.

In India, poor people have been denied health care when clinics are privatized. Those who are denied access continue to suffer and eventually die, excluded from a health care system that is increasingly elitist. Doctors who challenge the privatization agenda have been targeted by security agencies. They have been arrested and their offices raided.

Privatization of electricity can mean that urban wealthy and middle class neighbourhoods can hope for improvements to service that is, justifiably, criticized as unreliable. Poor communities and especially the rural poor, on the other hand, will not benefit from privatization of the services they might otherwise expect.

A review of experience in communities across the globe reveals that poorer communities not only have not benefited from privatization, but that people in these communities had the most to lose in the first place. In many cases, they did not gain anything at all, but lost access to service, in some cases, access to a service they had come to rely upon.

In looking at instances of privatization globally, there has not been a generalized improvement in quality or availability of service, or other benefits to communities that are economically disadvantaged. In case after case, the conclusion to be reached is that the removal of service and ownership from public hands in impoverished communities has repeatedly resulted in a decline in access to public services, and a removal of national control over the natural resources that could play a prominent role in the economic development of impoverished nations.

In these circumstances, this paper then questions whether the IFI's are playing an appropriate role by demanding privatization as a central condition of development assistance and debt relief, given their stated objective of social and environmental protection and improvement? If the objective is the improvement in services and living conditions for the poor and vulnerable in the communities served, it is not being met. If the objective is the establishment of economic stability and growth, with an assumed increase in social well being as a result, again the conclusion must be that the objective is not being met.

Privatization of an industry may be a viable policy option in certain circumstances. The decision to privatize a state-owned operation should be made at the national level, in a transparent and accountable manner, with demonstrated social benefit. The process we are now witnessing - imposed, sweeping and ideologically driven - has had devastating consequences in too many places. Given the evidence of social and environmental harm that too often accompanied the process, it is inappropriate for the IFI's to require privatization as a standard condition for assistance and debt relief.

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