Can Corporations Help Save Baltimore’s Crumbling Water System? (1/2)

December 2, 2014

Emanuele Lobina, author of a new report "Troubled Waters" argues private water companies could spell disaster for the city's water system

Emanuele Lobina, author of a new report "Troubled Waters" argues private water companies could spell disaster for the city's water system



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Story Transcript

JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore, a city where last year it was announced that in order to maintain its aging water system, it needed to hike water rates 42 percent over the next three years. Now the city is planning to pay a private contractor up to $500,000 to study how to improve its water infrastructure. Rudy Chow, director of the Department of Public Works, says he wants the benefits of private enterprise while maintaining the water system in public hands. Here’s what he said.

RUDY CHOW, DIRECTOR, BALTIMORE’S DEPT. PUBLIC WORKS: I want us to stay as a public agency with the integrity and caring of the citizens, yet operate with the creativity, knowledge, and experience of the private sector to gain efficiency and knowhow. In essence what I’m asking for and want us to transform to is that I want the city to have the best of both worlds. We are not motivated by profit. Our vision is very clear, as I stated earlier, in the environment and the [safety] and well-being of our citizens.

NOOR: But activists warn this contract could lead to the private takeover of the water system and argue this could be disastrous for city residents. According to a recent report, events in Baltimore are part of a larger trend of not only growing privatization of public water, but cities actually spending money, millions of dollars, to buy back control of their water systems. This report, published by Corporate Accountability International, which is active in the campaign in Baltimore, is called Troubled Waters: Misleading Industry PR and the Case for Public Water.

We’re now joined from London by the report’s author, Emanuele Lobina. He’s principal lecturer at Public Services International Research Unit at the University of Greenwich in the U.K.

Thank you so much for joining us.

EMANUELE LOBINA, PRINCIPLE LECTURER, PUBLIC SERVICES INT’L RESEARCH UNIT: Thank you. Thank you for having us.

NOOR: So Baltimore is considering a public-private partnership to address its water needs. And as you heard, the city says that it’s not going to privatize its water. But you argue that this is really privatization by another name. Talk about what you mean.

LOBINA: Well, precisely just that. In the water sector, public-private partnerships are simply a euphemism for privatization. In the water sector, water privatization effectively takes a number of forms. And the majority of times, these forms are–take the French model. The French model is that of public-private partnerships.

And this is something that has been recognized for a long time by World Bank officials and experts, by U.S. academics, by the U.S. National Science Council. Effectively, there is, at the moment, a Mediatic marketing campaign trying to diffuse the idea that privatization is exclusively the sale of assets to the private sector. But effectively water privatization has for a long time been identified with a range of contractual arrangements, which include public-private partnerships. So, effectively what we are doing is to refer to the same things.

Privatization is a number of contractual arrangements that we usually refer to when we talk about public-private partnerships or outsourcing to the private sector. And so, because of this, public-private partnerships are just a euphemism for privatization, just a more apparently innocuous and friendly way of calling just the same thing with a different name. But we are always referring to water privatization.

NOOR: So we reached out to Veolia. It’s one of the companies that’s submitted a letter of interest for that $500,000 contract in Baltimore, and we asked them to respond to your report. They, not surprisingly, were critical of your report, and they said that their public-private partnership models are extremely successful. The best evidence, they said, is that they have a very high renewal rate of 97 percent. What is your response to that?

LOBINA: Well, first of all, the report does not argue that Veolia is one of the major water multinationals. The report does not argue that Veolia does not possess very strong marketing skills. Actually, it identifies that as part of the problem rather than the solution.

The response to that statement is basically that there is a [pattern (?)] in the private water industry does not only refer to Veolia, but sewers as well and other private water operators, whereas the private water companies, the multinationals, have a number of ways of putting their interests, which are informed by profit maximization, over and above the interests of the communities they are supposed to serve.

And they can do that because they have been in the industry for a long time, they know all the tricks of the game, whereas the local authorities who they are dealing with have, well, little and limited experience. Also, they have the advantage, the private operators, of knowing the system, what goes on into the system, whereas the local authorities are only trying to guess what’s going on with the system. So, as a result of that and this pressure of profit maximization, which is strong, what we can see is that there are patterns of false promises of privatization on false prices of water, PPPs, systematic problems with exceedingly high tariffs or failure to deliver on expected investments for the number level of tariffs, a number of other problems.

What we can observe is that these problems are systematic. There are patterns of problems that are so diffuse in so many different countries under so many different legal and regulatory systems that they cannot be just down to chance. This is why we identify the cause of these problems into the profit maximization imperative of the private sector. Also, the fact is that in many cases public authorities, local authorities who are not satisfied with the contracts they have signed, and they don’t know what to do, they don’t know how to get out of those. There are–.

NOOR: So I want to jump in real quick. Veolia also said that in 2014 and in 2013, only one community among 550 served did not renew with Veolia. Continue with your response.

LOBINA: Yes. There is a rigidity that local authorities are faced with once they sign a public-private partnership contract. And, for example, there are all sorts of pressures, and the private water industry knows what levers to use to exert that pressure. One of these pressures, for example, is the threat of multimillion compensation for damages in case the local authorities decide to terminate the contract. This is why, for example, in a number of cases in France, including in Paris–.

NOOR: And it’s important to again mention that this is a French company. It started in France. So it’s important to bring up the situation that’s currently unfolding in France.

LOBINA: Yes, absolutely. I mean, what I would like to say first, however, is what happened in Paris. And then I would say why that is symbolically powerful, I would say, very important. In Paris, which is the city where Veolia has its headquarters, and Veolia provided water services for 25 years. In 2009, the City of Paris decided to terminate the contract, not unilaterally, just waiting for the contract to expire, naturally, and not renew it. And the reason why they wanted to do that, they decided to do that, even if they were not satisfied with the performance of Veolia–and Suez was serving the other half of the city–both contracts were terminated, by the way, in the same way–just failure to renew the contract and its natural expiry.

The reason why the city of Paris decided to put an end to the private contracts in this way was because they didn’t want to go to court and face the risk of a multimillion compensation. So this is just an illustration of how powerful this threat is of the potential litigation in case of unilateral termination.

And also this is–however, I would like to say that this is telling us that the example of Paris is symbolically powerful because (A) Veolia, like Suez, has its headquarters in Paris, and (B) they both have been providing water services to the city of Paris while on the right bank of the River Seine, the other one on the left bank of the River Seine, for 25 years, after which the city decided to put an end to that unsatisfactory experience.

This is also–this has also marked a very strong acceleration in what is the emergent global trend of /rɪmɪnəs pɑrəˈzeɪʃən/.

NOOR: That wraps up the first part of our discussion with Emanuele Lobina about his new report Troubled Waters: Misleading Industry PR and the Case for Public Water. Go to TheRealNews.com for part two of this interview.

Thank you so much for joining us.­

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