Will privatized water systems really be a free market opportunity?
There is legislation in New Jersey that would allow municipalities in the state to sell their public water systems to private companies without having to hold a public vote. Currently, voters in each municipality are required to approve a ballot measure to sell public water utilities before it is allowed.
The bill is awaiting New Jersey Governor Chris Christie’s signature.
Currently, about 45 percent of the state’s population lives in municipalities where companies – as opposed to the local governments – operate the water systems. In the overall United States, only about 13 percent of the population lives in an area with privatized water systems.
Interestingly, there are other states that also don’t require a ballot measure to sell water utilities to private companies, which include Illinois, Pennsylvania, and California. These tend to be leftist states where they preach the virtues of democracy, so this seems to be a bit of a contradiction.
It is hard to say where a libertarian should come down on this issue and there are arguments to be made on both sides. While I don’t preach the virtues of “democracy”, things are often better off when left to a ballot measure as opposed to a vote of “representatives”.
On the other hand, this bill doesn’t prevent a vote from happening and perhaps it should be left up to each municipality to handle the issue. The decentralist in me says that this bill is a good thing as it relaxes state restrictions on local government.
Of course, regardless of the arguments, the reason this bill is going forward is because the state is in financial turmoil. The EPA estimates that New Jersey will need $41 billion over the next 20 years to repair its water and sewer systems. This may explain why some of those other states make it easier to sell off water utilities.
Water Socialism vs. Water Fascism
If you are a strong believer in the free market, you should be warned before you get too excited. While selling water utilities is considered “privatization”, it is not as if government is being taken out of the equation.
When the utilities are owned and operated by the government, this is socialism. In this case, it is water socialism. When it is so-called privatized, it is water fascism. The utilities may be owned by a private company, but the government is still calling the shots. And the company that owns the water systems will have a government-granted monopoly.
Here is the worst part. Companies can still charge taxpayers for the purchase of water systems. So even water privatization may still be water socialism.
A 2010 study showed that residents in municipalities with private water systems paid an average of 64 percent more in rates. If this holds true, then it is more a shifting of resources or a shifting of how residents are being taxed.
In a way, an advocate of less government could easily argue against this so-called privatization. If local municipalities sell off water systems, they will get more money to spend, or at least be able to spend it on other things besides water and sewer infrastructure. Meanwhile, the company that now owns the utilities raises rates. Taxpayers really could end up paying more.
Regardless of this, I believe that advocates of smaller government should always favor decentralization. It is really up to each municipality on how to handle the situation, whether that is done by local officials or directly by the voters.
The politicians in New Jersey, just as elsewhere, have had a tax and spend party for a long time now. This spending didn’t include keeping up the infrastructure. Now they are trying to find the least painful ways to get out of it, at least for them. We should expect more of this in the future across the country.
