Tuesday, August 27, 2002

For all my grousing, the libertarian critique of government regulation occasionally has its merits. Take, for instance, the matter of water supply. A complicated morass of legislative compacts and regulatory understandings has led to a situation in which residents of Los Angeles can pay up to $600.00 for an acre-foot of Colorado River water, while agribusiness pays only $13.00 per acre-foot. The result is a massive subsidy of thoroughly inefficient use of natural resources (as a friend of mine once quipped, "Hey, I've got a great idea --- let's grow rice in the desert!"), sustained entirely by cronyism and lobbying.

Naturally, our friends from the Chicago school see privatization as a solution to this problem. (They see it as the solution to every problem). And indeed, they are getting some water delivery systems privatized. But not for Colorado water --- the wave of privatization is hitting the third world, where the World Bank is using its enormous influence to pressure governments into selling off their water delivery systems, resulting in complaints that the contractors systematicly underbid in order to demonstrate fictitious "benefits" of privatization, and then raise prices within their districts (which are natural monopolies --- there's only one set of pipes, which they control) to punishing levels simply because they can:

"We kept presenting facts showing that they were not making any investments, just raising the price of water. And any investments they made were with government money."

On the one hand, we have massive, encrusted regulation, with the water controlled largely by government; on the other, privatization and thorough deregulation. What these two situations have in common is that in each case, government influence has structured the situation so that large corporations get major benefits at the expense of the little guy.

The libertarian critique of government power frequently has its merits. Where they fall down is in failing to see the power of large multinational corporations as the other side of the same coin.


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