Privatizing Water Works

(Note: On Sept. 15, the Midland Daily News published a letter to the editor from a Midland resident who asked Mackinac Center Director of Fiscal Policy Michael D. LaFaive to provide evidence that privatizing public water supplies improves the quality or cost of water. On Sept. 21, The Daily News printed LaFaive’s response. An edited version of LaFaive’s letter appears below.)

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Sept. 21, 2005

To the editor of The Midland Daily News:

The Midland Daily News printed a letter by a Midland resident criticizing my Detroit News Op-Ed for recommending privatization of Detroit’s water system. The writer claimed privatization wouldn’t work and challenged the Mackinac Center to "give one example anywhere on the planet where water quality or the price or conservation has been improved by privatizing a public water supply." Here you go:

  • Quality. In February 2005 three University researchers published their study "Water for Life," which detailed the result of Argentina privatizing 30 percent of its water systems in the 1990s covering 60 percent of the nation’s consumers. They found child mortality dropped eight percent nationwide and by a staggering 26 percent in poor areas as a direct result of privatization.

  • Price. Total "price" is frequently improved by water privatization because taxpayers are often no longer on the hook for subsidizing operations. It is not uncommon to see investor-owned water utilities provide the same if not better services for 20 percent less cost than their government rivals. In the 1980s, England privatized 100 percent of its water utilities to lower the cost of providing that service.

  • Conservation. In 2002 the General Accounting Office, a nonpartisan branch of the federal government, reported that private companies often save money by conserving water pumped from municipal systems. ‘Unaccounted for’ (or leaked) water can account for over 25 percent of the water pumped. One private company in Georgia was able to prevent the loss of 50 percent of water its government client had been wasting.

The letter writer should research the literature on water privatization before making such sweeping challenges.

Michael D. LaFaive
Director of Fiscal Policy
Mackinac Center for Public Policy


Michael D. LaFaive is director of fiscal policy for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.