SCOPE FOR PRIVATIZATION

The Water Crisis:

The Water Crisis Bell, Brown, Morris, Hu, Thomas

Slide 2:
This is a brief overview of what the documentary Flow is about. It is not presented by any
parties affiliated with the documentary. http://www.youtube.com/watch?v=oFAEulGGaCA

Introduction:
Introduction 1.1 billion people do not have access to clean drinking water. Some nations
privatize the public water to control its distribution. When water is treated as an economic good,
it becomes more scarce and more expensive.

Slide 4:
This is a video made by the people of Mumbai near the K district. It is heartbreaking to see that
these individuals live without water nearly every day. Their water is contaminated, and like many
other countries the system of distribution is inadequate. At the end of the video they recognize
that water privatization is a bad thing for them and they need help to fight it.
http://www.youtube.com/watch?v=dAxRR90zfBw

Privatized Water:
Privatized Water Private water companies often sell bottled water that is the same quality as tap
water. Many companies wont even release quality reports to the public. Aquafina admits that
40% of their water is tap water When water is privatized, it becomes readily available to the
wealthy, which gets wasted on things that arent as crucial as the global issues.

Privatized Water cont.:

Privatized Water cont. Poor nations and poor people will be affected by this because not
everyone can afford private water. Countries like India, Bolivia, Saudi Arabia, and many more
are still experiencing scarcity (Hazarika Page 1). Farming and Agriculture is extremely difficult
for all developing nations (Northoff).

Privatized Water cont.:

Privatized Water cont. 60% of all global sickness is linked to poor water maintenance. California
even has a water cost issue, and the agriculture industry uses many gallons of water in
California(Benham). Sand, dirt, and nitrates get into the local pipes in some parts of California.

Slide 8:
http://www.youtube.com/watch?v=kPGU62Vqg1c&feature=related This video takes you on a
journey around the earth where people have little or no access to clean water. Often times when
water becomes privatized, individuals cannot pay the prices so they are forced to obtain any
water they can regardless of the quality or lack of sanitation.

Our Responsibility:
Our Responsibility The balance of nature must be maintained if earth is to live a long life. Desire
for money, power, and freedom could influence the end of the world. Members of congress or
other elected officials must take charge to influence change.

Solutions:
Solutions Treating water like an economic good will escalate the problem because it does not
follow the trends of supply and demand. Everyone NEEDS water. Avoiding this can decrease the
number of poor people that are wronged by the system, the amount of water wasted, and the
overall stress on our planet.

Opposing points:
Opposing points Privatization can help the poor population by employing some of the lower
class citizens. Privatization can also relieve he governments responsibility to clean and deal with
water, giving them more time and money.

Slide 12:
http://www.youtube.com/watch?v=31T3do2h2DM This video feature Dr. Patrick Dixon who
discusses issues that have arisen from water privatization in Uganda, Egypt, Sudan and many
other countries

Opposing points cont.:

Opposing points cont. Although the privatization of water can help some, the negatives outweigh
the positives. Overall, the privatization of water will kill not only humans but potentially the
earth.

Tying it all together:

Tying it all together Water is our most crucial substance. Our business leaders need to start
putting the balance of nature, and humanities best interest before the desire to make money. The
most efficient method of solving the problem is by electing officials that will take charge.

what YOU can do:

what YOU can do Join clubs and organizations that benefit the cause. Educate your friends and
family. Influence others by making good environmental decisions and lead by example Vote for
environmentally-minded politicians.

Advantages and Problems of Privatisation

Tejvan Pettinger May 12, 2011 economics
A look at the arguments for and against privatisation.
Privatisation involves selling state owned assets to the private sector. This is often achieved
through listing the new private company on the stock market. In the 1980s and 1990s, the UK
privatised many previously state-owned industries such as:

BP

BT

British Airways

Electricity Companies

Gas companies

Potential Benefits of Privatisation

1. Improved Efficiency.

The main argument for privatisation is that private companies have a profit incentive to cut costs
and be more efficient. If you work for a government run industry, managers do not usually share
in any profits. However, a private firm is interested in making profit and so it is more likely to
cut costs and be efficient. Since privatisation, companies such as BT, and British Airways have
shown degrees of improved efficiency and higher profitability.
2. Lack of Political Interference.
It is argued governments make poor economic managers. They are motivated by political
pressures rather than sound economic and business sense. For example a state enterprise may
employ surplus workers which is inefficient. The government may be reluctant to get rid of the
workers because of the negative publicity involved in job losses. Therefore, state owned
enterprises often employ too many workers increasing inefficiency.
3. Short Term view.
A government many think only in terms of next election. Therefore, they may be unwilling to
invest in infrastructure improvements which will benefit the firm in the long term because they
are more concerned about projects that give a benefit before the election.
4. Shareholders
It is argued that a private firm has pressure from shareholders to perform efficiently. If the firm is
inefficient then the firm could be subject to a takeover. A state owned firm doesnt have this
pressure and so it is easier for them to be inefficient.
5. Increased Competition.
Often privatisation of state owned monopolies occurs alongside deregulation i.e. policies to
allow more firms to enter the industry and increase the competitiveness of the market. It is this
increase in competition that can be the greatest spur to improvements in efficiency. For example,
there is now more competition in telecoms and distribution of gas and electricity.
However, privatisation doesnt necessarily increase competition, it depends on the nature of the
market. E.g. there is no competition in tap water. There is very little competition within the rail
industry.
6. Government will raise revenue from the sale
Selling state owned assets to the private sector raised significant sums for the UK government in
the 1980s. However, this is a one off benefit. It also means we lose out on future dividends from
the profits of public companies.

Disadvantages of Privatisation

1. Natural Monopoly

A natural monopoly occurs when the most efficient number of firms in an industry is one. For
example tap water has very significant fixed costs, therefore there is no scope for having
competition amongst several firms. Therefore, in this case, privatisation would just create a
private monopoly which might seek to set higher prices which exploit consumers. Therefore it is
better to have a public monopoly rather than a private monopoly which can exploit the consumer.
2. Public Interest
There are many industries which perform an important public service, e.g health care, education
and public transport. In these industries, the profit motive shouldnt be the primary objective of
firms and the industry. For example, in the case of health care, it is feared privatising health care
would mean a greater priority is given to profit rather than patient care. Also, in an industry like
health care, arguably we dont need a profit motive to improve standards. When doctors treat
patients they are unlikely to try harder if they get a bonus.
3. Government loses out on potential dividends.
Many of the privatised companies in the UK are quite profitable. This means the government
misses out on their dividends, instead going to wealthy shareholders.
4. Problem of regulating private monopolies.
Privatisation creates private monopolies, such as the water companies and rail companies. These
need regulating to prevent abuse of monopoly power. Therefore, there is still need for
government regulation, similar to under state ownership.

5. Fragmentation of industries.
In the UK, rail privatisation led to breaking up the rail network into infrastructure and train
operating companies. This led to areas where it was unclear who had responsibility. For example,
the Hatfield rail crash was blamed on no one taking responsibility for safety. Different rail
companies has increased the complexity of rail tickets.
6. Short-Termism of Firms.
As well as the government being motivated by short term pressures, this is something private
firms may do as well. To please shareholders they may seek to increase short term profits and
avoid investing in long term projects. For example, the UK is suffering from a lack of investment
in new energy sources; the privatised companies are trying to make use of existing plants rather
than invest in new ones.

Evaluation of Privatisation

It depends on the industry in question. An industry like telecoms is a typical industry

where the incentive of profit can help increase efficiency. However, if you apply it to
industries like health care or public transport the profit motive is less important.

It depends on the quality of regulation. Do regulators make the privatised firms meet
certain standards of service and keep prices low.

Is the market contestable and competitive? Creating a private monopoly may harm
consumer interests, but if the market is highly competitive, there is greater scope for
efficiency savings.