Naomi Klein coined the term “disaster capitalism” to describe what is virtually the only kind of “market reform” that ever takes place in the real world. In the event of collapse or emergency, capitalist elites seize uncontested control of a state and — in collusion with global corporations — force their agenda through without opposition. And whether the “disaster” is artificial (the installation of “Coalition Provisional Authority” Bremer’s regime in Iraq, or the US-sponsored coups by Pinochet and Yeltsin) or natural (Hurricane Katrina), invariably the centerpiece of the ensuing “reform” agenda is wholesale looting. The most notorious recent example is the criminal mismanagement of the water supply in Flint, Michigan and resulting lead poisoning of the public.
Right-libertarians typically respond to criticism of government collusion with big business by saying “that’s crony capitalism (or corporatism), not capitalism!” But in the case of water privatization, such corporatism is precisely what they celebrate as examples of “market reform.” And what’s going on now in Flint is exactly the kind of thing they’ve enthusiastically supported — although they seem to have quieted down a bit since things went bad.
Cato’s chief water privatization wonk, Fredrik Segerfeldt, is typical of that ilk (“Water Socialists Are All Wet,” March 22, 2005). He defended “water privatization” against critics by actually denying that it was a genuine free market reform at all: “What they denounce as ‘privatization’ is not at all about complete deregulation and liberalisation of services. Rather, what we have seen are different forms of tightly regulated co-operation between cash-strapped developing country governments and skilled and experienced water companies.” And Reason magazine’s Ron Bailey (of course) referred to Segerfeldt by name as a champion of the kind of “privatization” he favors (“Water is a Human Right,” August 17, 2005).
You might forgive them for writing such naive flapdoodle a decade before the Michigan water loot-a-thon. But Reason’s Robby Soave wrote as late as July 2014 that “In Detroit, Democracy Isn’t Worth Saving — Privatize It All” (July 31, 2014).
Soave is typical of the dishonesty of that breed. At the very time he was lamenting the corrupt “democracy” of “Kwame Kilpatrick, Monica Conyers, or some other crime lord,” and saying “large swaths of the city should be turned over to private individuals” — explicitly framing those as the only alternatives — the privatization regime in Detroit was engaged in levels of corruption worthy of Caligula. Detroit “emergency manager” Kevyn Orr approved a plan to cut off thousands of individual homeowners’ water while not touching influential local businesses that were hundreds of thousands or millions of dollars in arrears — including industrial users responsible for the overwhelming bulk of purification costs. I’d say Snyder and Orr are every bit as much crime lords as anybody Soave named.
What’s needed, as a remedy for both kinds of corruption, is not less democracy but more. Theoretically “representative” governments controlled by entrenched policy elites are not “democratic”; they are inevitably corrupt and serve vested interests — politically connected business interests, featherbedding administrative bureaucracies, or some combination of the two. In the case of water utilities, the kind of real democracy that’s needed is direct governance of the water commons as a stakeholder cooperative owned and controlled by the ratepayers themselves.
Some people will no doubt complain, in the face of what they consider free market “purism,” that models of “privatization” like those in Detroit and Flint are “better than nothing.” But they’re not. They’re worse than nothing. There’s nothing “libertarian,” as such, about the performance of social functions by nominally “private” entities. When the “private” entity has an exclusive contract with the state to carry out functions previously performed by the state, subsists on revenue from rate-payers, and maintains a special relationship with the state, it is worse than what it replaces. For all intents and purposes the privileged firm is just a component of the capitalist state, and the fees it collects are the moral equivalent of taxes or feudal rents. The only difference is that the entity delivering the service is even further removed from even theoretical public accountability, and it adds another layer of “private” rentiers for rate-payers to support in addition to the state bureaucracy. That’s not better. It’s worse.
Local water utilities in many cases originated as natural resource commons, and were developed with distribution systems funded in common by ratepayers. In such cases, local governments that alienate the local water commons without the express permission of its rightful owners are guilty of what right-libertarians claim to consider a crime: Violating property rights. Governor Snyder and his “emergency managers” have robbed the people of Detroit, Flint and other cities just as surely as if they had held a gun to their heads and ordered them to empty their wallets. And they’re just as guilty for poisoning the people of Flint as if they’d entered individual homes and secretly doctored decanters of water with lead.