4 May 2011

Full cost pricing, the poor, or both?

On 19 April in Berlin, I joined a debate in favor of the following proposition:
Is cost recovery pricing the best way to ensure the poor have access to good water services?
I was seconded by Dr William Muhairwe, Managing Director of the NWSC Uganda.

Arguing against full cost pricing were Wenonah Hauter (Executive Director of Food and Water Watch) and Anil Naidoo (Blue Planet Project Organizer for the Council of Canadians). Wenonah and Anil are colleagues of Maude Barlow.*

The conference used the provocative URL of "water meets money," and that name alone was enough to attract 15-20 anti-corporate greed protestors (there were about 450 attendees at the conference).** Their attendance was particularly ironic, since it was corporate money that upgraded Berlin's water system over the past ten years (at lower cost than was expected of the previous, public-only management).

We won the debate. That was not such a surprise with a crowd that has fought to get adequate money for water services. What I thought interesting was the way that Wenonah and Anil chose to argue their position.

Rather than pay attention to the ongoing failures of water service, governance and political leadership in places where the poor lack water service, they claimed that corporations should pay more taxes. Although it sounded like they were presenting talking points instead of responding to the position that William and I presented, I guess that they were thinking that this pot of money combined with the UN-backed human right to water would deliver services. But their argument was weak on several levels:
  1. They failed to address governance failures.
  2. They failed to acknowledge successes of full cost pricing in places like Uganda (and many others).
  3. They failed to consider how higher tax revenues on corporations (should they even be collected!) would somehow get to water providers, and THEN support water services to the poor.
I concentrated on two points:
  1. Subsidies to the poor (via income transfers or even some for free, pay for more water prices) are not incompatible with full cost pricing within a water utility.
  2. Subsides from the central government (or aid agencies) are unstable and come with strings attached. Given the problems that governments face (from the US to India), it seems folly to link water services to political games that would rank water way down the list of priorities.***
My partner, William, presented even stronger points. He spoke from experience of delivering water to the largest cities in Uganda. Compared to him, Anil sounded way more "let's sing kumbaya, guys" than realistic.

But don't believe me, listen to the whole debate here [MP3 backup]. The first few minutes of my statement were not recorded. Here are my notes [pdf]; I didn't use them all.

Wenonah also made some funny claims about my previous ideas (she totally misunderstood all-in-auctions and called me a Stalinist for my idea of pricing water per person). Here's her take on the debate, which includes the classic line "...is it any surprise that we lost 75% to 25%? Anyway, Anil and I knew we won the debate on the merits and ethics of our arguments." Sounds like something that Gaddafi, Mugabe or Mubarak would say (as defenders of Their People).

Bottom Line: You can't change someone's mind when they cannot understand a logical argument or the lessons of success and failure.

* I've written about FWW and Barlow in the past.

** Unfortunately, the protesters did not attend the debate, as their group could not reach a consensus.

*** Wes Strickland has a great post explaining how economic and physical sustainability go hand-in-hand

H/Ts to KB and MD


Carlos A. López Morales said...

I don't think of you as a libertarian economist... I think you're more informed than what I think are libertarian economists... Do you consider yourself as a libertarian economist?

Damian said...

libertarian economists are quite informed...

As to your debate opponent -Wenonah said "The truth is that there is no better place to really figure out what they are up to. (The debate)... gave us real insight into the newest plans of the global water cartel"

Why must she assume there is a plan? There is no cartel, no worldwide plan, nothing of the sort. Just differences of opinion in how to help people. I think she panders to the anti-corporate crowd and the conspiracy theory crowd to dismiss argument.

JWT said...

Mah Daddy used to say, "There is nobody so blind as the one who can't see". About sums it up.

David Zetland said...

@Carlos -- yes, I am a libertarian economist. I think she meant it as slander, but I see myself as someone who tried to minimize government interference in markets and personal choices. That does NOT mean that I oppose regulations or laws to protect people from the adverse impacts of others, btw :)

Jay said...

Steve Chapman has a post regarding things people believe at www.reason.com that fits with the bottom line. Facts are unimportant in many situations. Chapman wrote about "birthers", but I've seen the same behavior on many topics.

Bear said...

I see Zetland as a libertarian paternalist economist (I expect he appreciates the reality that some folks are are not organicly impaired are too still too stupid to completely escape the need for social or government support/supervision)...

Carlos A. López Morales said...

David, yes. Economics should lead us to oppose interventions when they don't make sense and to support regulations when they do.
I think pretty much the same and wouldn't consider myself as libertarian (nor liberal nor conservative)...That's why I asked...I think libertarians (or the stereotype I have for them) don't make that small but important distinction (Regulation is very often required) and seek for plain government minimization...

Jamie Workman said...

Congratulations, my friend.
But I gotta tweak ya a bit. A debate like this is meant to be fun and ennobling to all sides and a bit of modesty (false or otherwise) might go a long way!
Remember the advice: "be humble in victory and gracious in defeat"?
So, now that we all have a clear reaffirmation of your manifest strengths and the other side's abject failures, I'd be curious whether you found any redeeming arguments or fair points on their side to acknowledge, and any possible shortcomings on your own that gave you even the slightest pause upon reflection?
None whatsoever?

David Zetland said...

@Carlos (et al.) -- labels ("libertarian" etc.) are always imprecise, especially when you try (and fail) to compare two people under one label.

It's like dating a girl named Sue who you don't like and then not liking all girls named Sue.

@Jamie -- you know, I wish I could find redeeming features wrt the topic. There were none. But I totally agree that corporate corruption is terrible. Unfortunately, that's off topic.

Joel W said...

Why are the anti-water pricing people always from Canada? Apparently Canada needs you...badly.

On that note David, I saw this position that looked perfect for you to apply for:



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