The Rise of Big Water
Qin Huairen went back to Changzhou, the city of his birth, in 1977. He was 42 years old and had spent his entire adulthood working as an iron-ore prospector in southern China. He had arrived there in 1957, just before Mao Zedong’s delusional Great Leap Forward, when peasants were supposed to drive China to industrial supremacy by smelting steel in their villages. Gangs of them denuded entire mountainsides—Qin saw ancient forests vanish in a day—to fuel backyard mills that couldn’t make steel but could and did poison the fields. Ten years later the Cultural Revolution, Mao’s attempt to drive China into permanent revolutionary ecstasy, led to deprivation so intense that villagers stripped the remaining forests for fuel and ate most of the nation’s birds. Qin went back to Changzhou with a clear vision of the environmental damage that China was doing to itself. Soon after his return, the country instituted its free-market economic reforms, setting off three decades of frenzied growth. Neither Qin nor anyone else could have anticipated that the ecological devastation of the Great Leap Forward was nothing compared with what China’s real leap forward would bring.
Changzhou, where Qin grew up, is a city of 3.4 million people, about 100 miles up the Yangtze River, China’s most important waterway, from Shanghai. The Grand Canal, built more than two millennia ago to link northern and southern China, loops around the city center, eventually crossing the Yangtze. From the Grand Canal extend dozens of smaller canals, a spiderweb network once jammed with men in fishing boats and women doing laundry. Along the banks there used to be rice paddies irrigated by canal water—Changzhou is located in one of China’s most prominent rice belts.
Changzhou had been a traditional silk center. As the market reforms took hold, new textile factories sprang up along the canals and on the city’s periphery. Dark, brutally shabby, operating around the clock, the factories today spin the fabrics used in America’s shirts and sneakers and S.U.V.’s. In the process they flush vast quantities of waste—dyes, inks, bleaches, detergents—into Changzhou’s canals. The canals channel the waste into the Yangtze, where it joins sewage from the hastily erected apartment complexes that house the factory workers. First the fish died, Qin remembers. Then the water turned dark. Walk across the ancient bridges today, he says, and the smell will “make you choke.”
Qin became a teacher at a middle school and was determined to make himself a force for good. Slight and energetic, with a ready smile that fills a gaunt face, he spent the years between 1985 and 1995 helping his students draw water from the canals, perform simple tests on the samples, and send the water and the test results to the city government. Every year the results got worse.
Fearful of the water in the canals and the river, the people of Changzhou frantically began digging wells. Today, visitors to the city see advertisements spray-painted by the thousands on the walls of buildings: the Chinese characters for “well digging,” followed by a cell-phone number. So many wells have been dug in Changzhou that its groundwater has been over-exploited, and the local ground level has sunk by two feet. The city has officially banned new wells and mandated the installation of pollution controls, but China’s endemic corruption ensures that neither measure has much meaning. Meanwhile, farmers have stopped irrigating their paddies with canal water, because the rice is absorbing heavy metals. Cancer rates in the city are climbing, Qin says.
To the idealistic Qin, the way ahead was obvious. If Changzhou’s people could only be educated about the environment, they would demand a massive cleanup—and they would get one. Qin created the grandly titled Changzhou Environmental Education Research Society, headquartered in an unheated room in his middle school. He delivered spirited eco-homilies to local citizens, and distributed copies of his laboriously printed reports documenting the degradation of the city’s water supply. He came up with ideas for environmental projects that children could pursue, and circulated them to the city’s classrooms. Qin is the sort of man who keeps a steady eye on the future—“Teach the children,” he says, “and they will teach their families”—and somehow maintains his faith in the power of reasonableness and goodwill. “The government,” he told me without a trace of irony, “will take care of us.”
In September 2005, the Changzhou city government finally took a dramatic step—but it was not a step that Qin would ever have imagined. Rather than forcing local factories to clean up after themselves, Changzhou decided to outsource the job of managing its water supply to a French company named Veolia—one of a handful of corporate giants now scrambling to take over city water systems around the planet, especially in the often polluted and water-short developing world. These water companies might be thought of collectively as Big Water. Today about 10 percent of the Earth’s population is served by private water companies, according to Pinsent Masons Water Yearbook, an industry bible. The figure is far higher in urban areas and the proportion is growing fast.
Big Water makes an argument straight out of Economics 101. The best way to deliver water to people’s homes efficiently, the water barons argue, is to put the process in the hands of the market. If water is scarce, then raise the price—let the law of supply and demand take over! If people want water that is not only plentiful but actually clean, then raise the price again. The market will find the point of balance between what consumers want and what they can afford. And if the water company does not make good on its promises, it can be ejected in favor of another firm. The threat of competition will force utilities to be accountable.
Cash-strapped cities in nations from Argentina to Albania have begun to turn over their municipal water systems to Big Water, often under lease arrangements that can continue in force for decades. Some of the poorest places in the world have been suddenly exposed to the discipline of the market. All too often, the results do not resemble the cheerful predictions of Economics 101. In the messy real world of unstable governments, corrupt bureaucrats, and volatile currencies, Big Water has often been unable—and sometimes unwilling—to deliver what it has promised. Rather than supinely allowing the market to work its magic, fearful customers have reacted to abrupt price hikes by filling the streets. Public fury has led to the cancellation of water contracts on three continents—only to have new managers discover that the former public utilities cannot easily be reconstituted, because the state no longer has the necessary engineers and administrators.
The battle over water is also being fought on U.S. soil. More than a century ago, the majority of U.S. water systems were private, according to Peter Gleick, the president of the Pacific Institute, an environmental think tank in Oakland. “Because the private systems were not serving the poor in the cities,” he says, American municipalities “moved to a public water system”—they bought out most private companies and placed them under public ownership. Public water systems have supplied drinking water to 85 percent of Americans since the Second World War. But rising populations, aging infrastructure, and laws mandating increasingly pure water are pushing cities across the country to consider returning to the past. Cities that have gone private with drinking water or wastewater treatment include Atlanta, Indianapolis, Milwaukee, and Lexington, Kentucky. Some have met with fierce resistance—angry town meetings, newspaper op-eds, and, this being America, costly downpours of litigation.
At bottom, the fights are all about the same thing, says Oliver Hoedeman of Corporate Europe Observatory, an anti-big-business group in Amsterdam. “Nobody ever looked at their water bill and said, ‘Oh, this is too costly—I guess I won’t drink anything this month.’ ” Putting the control of water into private hands, Hoedeman says, “is asking for abuse.”
The stakes—environmental and political—could hardly be higher. According to a report prepared by the International Water Management Institute (I.W.M.I.), a respected international research group, one person out of every three on the planet today lacks reliable access to freshwater, whether because the water is unsafe, unaffordable, or unavailable. Some 2.6 billion people, the World Health Organization estimates, have inadequate sanitation—they do not even have proper latrines that prevent wastes from spreading into the environment. “Every day more children die from dirty water than H.I.V./aids, malaria, war, and accidents all put together,” says Maude Barlow, national chair of the Council of Canadians, a citizens’ advocacy group, and the co-author of Blue Gold: The Battle Against Corporate Theft of the World’s Water. The water crisis, she says, is not something that besets only the megalopolises of the Third World. France instituted water rationing last summer; Thames Water applied for a drought order in London; Los Angeles is in its driest rainy season in more than a hundred years. According to a 2003 survey by the European Environment Agency, nitrates, toxins, heavy metals, or harmful micro-organisms contaminate groundwater in nearly every European country and former Soviet republic. That same year, the U.S. General Accounting Office reported that “water managers in 36 states anticipate water shortages locally, regionally, or statewide within the next 10 years.” By 2025, according to the I.W.M.I., all of Africa and the Middle East, and almost all of South and Central America and Asia, will either be running out of water or unable to afford its cost.
Water, Barlow says, “is the most important environmental and human-rights issue of them all.” Global warming is a present reality, but the worst consequences of pumping carbon dioxide into the atmosphere will be felt decades from now. Meanwhile, she says, “the world is running out of fresh water today.”
China is in particular trouble. The country’s State Environmental Protection Administration grades water on a scale from one to five, with three being minimally acceptable and five a direct health hazard. According to sepa, for much of their length, five of China’s seven main river basins are rated at four or five—poisoned by rampant industrialization. Almost half of China’s municipalities—and most of its rural areas—have no systems in place for treating waste at all. Between a quarter and a third of China’s population still do not have piped water. So desperately short of water is northern China, home to about 500 million people, that the country is undertaking the largest water project in human history—three enormous, 700-mile channels that will send about 12 trillion gallons of water a year from the South. In order to build just one of those channels, the government will force up to 400,000 people from their homes. Prime Minister Wen Jiabao has stated flatly that China’s water shortages and water pollution threaten “the survival of the Chinese nation.”
To deal with their water crisis the Chinese have—astonishingly for a country with a long history of suspicion toward foreigners—opened their doors to Big Water. Scores of Chinese cities have outsourced part or all of their water treatment and distribution to private companies; at least 40 ventures are with the French alone. Veolia, probably the fastest-growing foreign operator in China, now manages water systems in 17 Chinese cities, including Changzhou and Shanghai.
The bitter global struggle over water remains almost unknown in the United States, where older toilets send more clean water down the drain in a single flush than many Africans use in an entire day. Americans can perhaps be forgiven for thinking that they live in a golden age of water. Competing brands of bottled water glisten in refrigerated displays, vying with one another in proclamations of health and purity. Meanwhile, much of the rest of the world worries about where to get the next drop, how much it will cost, and whether it will be lethal.
Bad for Humanity, Good for Business
Veolia Environnement, the $38 billion company that administers Changzhou’s water supply, operates out of a neoclassical building in Paris, just a few blocks from the Arc de Triomphe. The company’s water division, Veolia Water, serves 108 million people in 57 countries, has 70,000 employees, and is the world’s biggest water-services provider. Connoisseurs of ironic juxtaposition would savor the contrast between Veolia’s Paris headquarters and the manic, gritty clamor of Changzhou. The quiet lobby atrium is sleek and glassy, with flat-screen monitors depicting a multicultural parade of smiling, satisfied customers. Electronic gates give admittance to the offices only after the presentation of a special badge, its bulbous nubbin crammed with circuitry.
Antoine Frérot, the chief executive officer of Veolia Water, works in a large, upper-floor office. Frérot, 48, was trained as a civil engineer, and he retains an engineer’s technocratic confidence. By way of background he gives me a short lecture on the power of human ingenuity. Thirty years ago, when he began his career, he explains, the Seine was a very dirty river. “We had to stop our water-treatment plants one day out of every two because they were overwhelmed by the pollution,” he recalls. Eventually the company realized that the solution was to treat the tide of pollutants not as a cost but as a potential profit center. Instead of simply absorbing the expense of cleaning the water, he says, Veolia used the techniques it had learned to create “a new industry of liquid-hazardous-waste treatment” and marketed it to the polluting factories. Now, he says, the Seine is vastly cleaner. “This is what we do,” he concludes. “Water is God’s gift, we always say, but He forgot to lay the pipes.”
Veolia’s assonant, content-free corporate name conceals a long history. The company was founded in 1853 by Napoleon III, France’s last emperor, and was financed by Baron de Rothschild and Charles Lafitte, with figures from France’s nobility among its founding members. The Compagnie Générale des Eaux, as it was then called, became an essential part of the emperor’s plan to modernize his country. Signing decades-long contracts to expand, modernize, and operate the water systems in France’s biggest cities, C.G.E. became integral to the national infrastructure—a private enterprise holding a public commission, and entrusted with the water supply even of the glorious capital.
In the 1980s the company suddenly woke up to the possibilities of modern financial markets, and realized that it could use the huge revenues generated by its millions of water customers to buy other companies. It eventually changed its name to Vivendi and purchased, among other foreign companies, Seagram, the liquor-and-entertainment giant, for $34 billion, and the publisher Houghton Mifflin. Vivendi’s C.E.O., Jean-Marie Messier, an investment banker, celebrated his string of acquisitions by moving his family to a $17.5 million duplex apartment on Park Avenue.
At its peak the former water company had more than 2,000 subsidiaries and made no sense at all. Capping it off, Messier invested heavily in dot-coms. Vivendi’s fate may have been sealed in 1999 when James K. Glassman, the co-author of the somewhat premature Dow 36,000, gave Vivendi his official blessing as “a great company.” The inevitable, debt-fueled implosion occurred three years later. To raise desperately needed cash, the company spun off Vivendi Environnement—the original water company. In 2003, to avoid unpleasant associations with the past, it changed its name to Veolia.
Under its new chairman and C.E.O., Henri Proglio, Veolia was as ambitious as the old Vivendi had ever been, but much less noisy. Scoffing at the glittery confluence of the media and Wall Street that had so entranced Messier, Proglio avoids puffery to the extent of refusing to allow Who’s Who to print an entry about him. (Veolia declined to let him speak with Vanity Fair.) He has proudly claimed that he has never owned a tuxedo. Corporations, he says, must act as positive environmental forces. Proglio is caustically dismissive of “the Messier era” of investment in the dot-com bubble. “Water, like oil, is getting scarcer,” he told the French newsweekly Le Point in an interview in 2005. “We’re living on Earth in 2005 with the same amount of water that was available in 1900, while in the meantime the global population quadrupled.” What’s bad for humanity can be good for business; Veolia’s revenues increased 12 percent in 2006.
Veolia needed to grow quickly, because it was saddled with debt—$19.4 billion at the beginning of this year—much of it a legacy from Vivendi. Happily for the company, the European Union wanted to promote European businesses overseas, especially businesses that were already leaders in their fields. The world’s top three water companies are European. In addition to Veolia, the others are:
• Suez. A descendant of the enterprise that built the Suez Canal in the 1860s, Suez became an energy holding company that is now 90th on Forbes’s list of the world’s 2,000 largest public firms. After expanding its water operations at a dizzying rate, it acquired Lyonnaise des Eaux, one of France’s biggest utilities, in 1997; it now operates in 31 countries and had 2006 revenues of $58.6 billion. Last year Enel, the Italian energy giant, publicly mulled a takeover. In an eyebrow-raising move, the French government scuppered the deal by approving a merger between Suez and state-controlled Gaz de France. The final decision on the merger will not occur before July.
• Thames Water. Called “Britain’s most hated utility” last August by the left-leaning Independent newspaper, Thames provides water for most of London. It was created in its present form in 1989 as the Thatcher government privatized many of Britain’s public functions. After Thames expanded internationally, in the 1990s, RWE, a German energy combine, acquired it in 2001. Last October RWE sold Thames for $14.9 billion to a consortium headed by Macquarie, Australia’s biggest investment bank.
Compared to these European giants, American water ventures are small—even those from the Bechtel Group, which was awarded the contract to rebuild Iraq’s bombed-out urban water and sewage systems. (The company says it completed most of the projects, but many were soon sabotaged.) Indeed, the No. 1 U.S. firm, American Water, doesn’t quite exist—it is an RWE subsidiary that is in the process of being spun off. Understanding its advantage, the E.U. has leaned hard on other countries in trade talks to let European companies take over the management of their water supplies, and the intensive lobbying has worked.
Because urban populations are growing rapidly, city water systems everywhere are under pressure. Most of the world’s hardest-pressed cities simply can’t pay for the investment themselves, and thus have to borrow the money. Among the main potential sources are global bodies such as the World Bank, the International Monetary Fund, and the Asian Development Bank. These institutions are staffed by economists who deeply respect the power of free markets. They are predisposed to look favorably on governments that agree to outsource as many of their activities to the private sector as possible.
The intellectual argument in favor of the free market is straightforward. I heard a version of it from John Briscoe, who was for 10 years the senior adviser on water at the World Bank (he now is its director in Brazil). Briscoe keeps a doggerel poem by the late economist Kenneth Boulding on his wall that reads, in part:
Water is politics, water’s religion, Water is just about anyone’s pigeon.… Water is tragical, water is comical, Water is far from the pure economical.
Many of the world’s water problems arise, he contends, because the sacred aura around water induces governments to treat it “as common property—it’s free to use, no matter what you do with it and how much you use.” In consequence, huge quantities are wasted. Farmers over-irrigate their fields. Landlords don’t fix leaky pipes. Factory owners feel free to pollute. Governments don’t extend and improve water networks, because they can’t pay for it. All over the world, Briscoe says, “you have these hugely under-funded, very inefficient services producing very bad service. There’s a hydraulic law of subsidies: they go to where the power is. They don’t have enough to operate the system properly, so the existing system rations water, and of course it’s the elite that gets to the front of the queue.”
That was the situation in the United States 40 years ago, Briscoe says. “What happened is that we raised the effective price of water.” Regulations forced farmers, landlords, factory owners, and ordinary Americans to pay for more-efficient water equipment—drip-irrigation systems, low-capacity toilets, water-treatment facilities, and so on. Per-capita water use in the United States fell by more than a quarter. But in the developing world, Briscoe believes, the situation is too dire for public utilities to fix themselves. In Africa, for example, “there is not one case of a utility that was horrible that has reformed itself and become well functioning. It has never happened.”
The World Bank, he says, made five loans in a row to improve Manila’s public water system. At the beginning, “something like 60 percent of the water was not accounted for. Half of this was leaks and half of this was stolen and diverted and not paid for.” After five loans, the figure was … 70 percent. “Then you come to loan No. 6 and you say, what are we going to do?” The obvious answer, he says, is a private company with a clear contract that forces accountability. “If we didn’t do that, we should be executed for not doing it.”
Briscoe adds: “My grandmother would understand it. It’s arithmetic—it’s the most basic human incentive.”
As one might expect, this argument seems equally clear at Veolia, which has its own success stories to tout. “When we took over Bucharest six years ago, the average [per capita water] consumption was 400 liters a day,” Frérot says. “Today it is around 200 liters.” Some of the conservation came from charging more, he says. “But much of it came from simply fixing leaks” in the distribution system. Incredibly, it is not uncommon for cities to lose half of their water to leaks. (Until an aggressive repair program in the 1990s, leaks cost Mexico City as much as 40 percent of its water supply; the city drained its aquifer so fast in the last century that the ground level sank 30 feet.) Combined with pressure from the European Union and the international banks, arguments like Briscoe’s have led countries around the world to embrace Big Water. By 2000, according to United Nations statistics, governments in 93 nations had begun to privatize their drinking-water and wastewater services.
Buenos Aires was one of the first big cities to go private. Unable to keep up with the city’s rampant growth, the Argentinean government in 1993 turned over its municipal water utility to a consortium formed by Suez, along with Vivendi, Aguas de Barcelona, and several local firms. (The choice of the politically powerful Suez was apparently aided by pressure from the Élysée Palace.) An Enron subsidiary took over the water system in the adjacent province of Buenos Aires. With the new private company operating the water supply for perhaps 10 million people, the World Bank issued excited press releases celebrating the rapid expansion into outlying neighborhoods. Hopeful governments signed similar deals in Australia, Indonesia, the Philippines, and South Africa.
But the Buenos Aires experience turned out to be nothing to celebrate. The consortium hired friends of the Argentinean president at high salaries even as it demanded rate increases for water supplied to millions of poor and working-class people. Some recently connected neighborhoods also discovered that the company had not installed proper drainage systems. The new water, having no place to go, flooded basements and streets. Demonstrators took to the plazas, chanting slogans and waving banners. When Argentina went into an economic tailspin at the end of 1998, many people could no longer pay their bills. Suez and Aguas de Barcelona pulled out of the consortium in 2005.
To its dismay, the Argentinian government, which took over the system, then discovered that the public water utility could not readily be brought back to life—the federal government took a year to approve the enabling legislation, and the city had to re-create the system almost from scratch. “This is one of the hidden costs of privatization,” says André Abreu, a water activist at France Libertés, a nonprofit organization run by Danielle Mitterrand, the widow of the French president. “It’s very hard to reverse. If a poor city makes a mistake, it is worse off than when it started.”
Similar protest campaigns occurred in Uruguay, Ghana, India, Indonesia, Malaysia, the Philippines, and South Africa. In Cochabamba, Bolivia’s third-largest city, the new private water utility, controlled by a subsidiary of Bechtel, increased water bills “up to 200 percent and sometimes higher,” according to Jim Schultz, executive director of the Democracy Center in Cochabamba. (A Bechtel spokesperson has said that rates were raised by an average of 35 percent.) Demonstrators fought the police in club-swinging mêlées that left dozens wounded. Activists barricaded most of the major highways, and the president declared a “state of siege.” Meetings of more than four people were banned. Further violence induced Bechtel executives to flee the city, and the government rescinded the contract. Later, Bolivia’s president resigned.
Reeling from the protests, the water multi-nationals lowered their profile. Big Water largely withdrew from Latin America; after piously announcing that it would not go where it was not welcome, RWE began selling off most of its water holdings. Meanwhile, smaller, regional companies grabbed market share. But Big Water was far from beaten. The European giants were in fact turning their eyes toward the biggest target of all: China.
“As Black as Soy Sauce”
It would be safe to say that Long Cun (Dragon Village) lies off the beaten path. A small cluster of ramshackle farmhouses, it is just down the Liu River from Liuzhou, population 1.3 million, the furiously modernizing commercial center of the southwestern province of Guangxi. To reach the village from Liuzhou, visitors must negotiate a one-lane dirt road that winds around Guangxi’s famous karst hills—the rounded, fairy-tale peaks familiar from Chinese landscape painting. The drive takes almost an hour, though the distance is scarcely 10 miles. In Liuzhou, the streets are full of chattering people on cell phones. In Long Cun, the streets are full of wagons drawn by bulls. As the geographer David Harvey once observed, modernity isn’t a time. It’s a place.
Like most Chinese cities these days, Liuzhou is ringed by walled-off industrial zones jammed with factories (more than 1,000 in Liuzhou) making automobile engines, processed foods, LCD screens, steel for ships, and the paper and plastic goods that fill American kitchens and living rooms. One such industrial zone lies on the river between Long Cun and Liuzhou. The centerpiece, its smokestacks easily visible from the village, is the sprawling Liu River Paper Mill. The tributary into which it dumps its wastes is, as local residents bitterly observe, “as black as soy sauce.”
Before the coming of the mill, Long Cun drew its water for drinking and cleaning directly from the Liu River. After the mill, the villagers had to boil their water, a recourse that kills bacteria but does not eliminate pollutants. Then a new hydroelectric dam was built downriver. It slowed the Liu’s current, concentrating the toxins powerfully. Villagers sued the factory, but got nowhere. The authorities “came and looked at the mess, but they didn’t fix it,” says Huang Fengju, a Long Cun farmer and mother of two. The factory owners must have known the right people in the city government, Huang assumed. There’s a way things get done in China, and that’s just the way it is.
Last November the city of Liuzhou handed down its solution. Rather than forcing the mill to clean up, it forced the village of Long Cun to connect to a city-run well—part of a far-flung system whose central network is operated by Veolia. A one-inch plastic pipe with a gray spigot soon appeared in front of Huang’s house. The other villagers got plastic pipes, too. Although the water still needs to be boiled, it is better than what Huang had before. But it costs twice as much. When Long Cun got its water from the river, the village council charged two renminbi—about 25 cents—a month per person, no matter how much anyone used. The Huang household paid a total of about two dollars a month. Now the rate is higher, and it also fluctuates according to how much water is consumed. Today, that same Huang household pays about four dollars a month. The price by middle-class Chinese standards is extremely low. But most Chinese are not middle-class, and the villagers of Long Cun are flat-out poor. A typical village household earns $20 to $30 a month.
To economists with their spreadsheets in faraway places, the new pricing system in Long Cun represents progress. A flat fee encourages waste—there’s no penalty for carelessly letting the tap dribble all day. And indeed Huang, prodded by higher prices, behaves the way those models of Homo economicus say she should. She carefully monitors how much water she uses. Multiply her behavior by 1.3 billion, this view suggests, and China may solve its water problems—Economics 101 to the rescue. Meanwhile, the foreign companies providing the water to those hundreds of millions of people stand to make an enormous amount of money.
Implicit in the free-market scenario, however, is the assumption that families can actually pay the higher prices—and are willing to accept them. This leads to a curious ambiguity, if not an outright clash of interests. On the one hand, Beijing has repeatedly proclaimed that it needs Western know-how, and that Western water companies must be allowed to operate freely. On the other hand, Beijing doesn’t want its own Cochabamba riots. Qiu Baoxing, China’s vice minister of construction, said last September that the government would limit customer water fees to at most 20 percent of the cost of supply. If Western firms such as Veolia can’t charge more than 20 percent of their costs, how can they possibly turn a profit? “I wanted to find out how they can make money with low, underpriced water tariffs,” says Seungho Lee, a University of Nottingham researcher who recounts the recent history of Shanghai’s water supply in a new book, Water and Development in China. Lee says he repeatedly pressed this issue with Veolia managers in Paris and Shanghai. “In a French way, I never got a direct answer,” he says. When I put the same question to Rémi Paul, a vice president of Veolia’s China division, he too replied in a French way. He would say only, “We have, I believe, a very good understanding with the government.”
The conflict between private profit and public need will be played out in dozens of Chinese cities. The larger dynamic, though, is uncompromising. As Liuzhou and other cities surround themselves with more and more factories, poisoning the environment in the process, the cities will have to connect the polluted regions around them to city water systems. In addition, they will have to build sewage-treatment plants. But most Chinese cities can’t afford to do either of these things. To help with its sewage, Liuzhou two years ago borrowed $100 million from the World Bank. Then it signed a 30-year contract with Veolia. Naturally, the company will need to recoup its investment. Local residents learned that the city planned to raise the cost of water.
The city fathers have not gone out of their way to explain to the citizenry that water prices are going up in order to pay back a company headquartered a few blocks from the Arc de Triomphe. As an experiment, I asked my translator to post a short description of the Veolia contract on one of Liuzhou’s Internet bulletin boards. The reaction was immediate—surprise and apprehension. “Our water supply controlled by foreigners? Are you kidding?” wrote one person. “Who’s ready to start digging wells and assembling rain collectors?” asked another, imagining a movement to evade the foreign water-bill collectors. “What do we do if the foreigners poison our water?” wondered a third. “Oh my God … “
The historic center of Liuzhou occupies a promontory in a big oxbow of the Liu River. Toward the northern tip is a beaten-up public square near an area that city maps label Maojin Chang—Towel Factory. The name comes from a factory nearby that went out of business before the current wave of modernization. Most of the neighborhood’s inhabitants still live in the shuttered factory’s dormitories. Many are pensioners; some are farmers who were thrown off their land to make way for the factories outside town, and who now live as boarders. Because ever more factories crowd the banks of the Liu, the cost of water treatment is rising to match. In just a few hours of wandering around the kiosks, benches, and doorways of Towel Factory square I found half a dozen men and women who were paying a quarter or more of their income just for water.
Economics 101 does not readily apply to neighborhoods like this one. A few blocks away, in Baisha Cun, lives an elderly man named Wei Wenfang. Until 1975, he explains, water was free: you simply dipped a bucket into the Liu. You could literally see the bottom of the river back then, he says. He proclaims this fact a second time, more loudly, for emphasis. But now Wei pays almost $10 a month—more than a quarter of his pension—for water that is nowhere near as good. He is afraid of what will happen when the price rises further. When I ask if he could save money by conserving water, Wei barks with laughter. Each water meter in Baisha Cun, he says, covers 60 to 70 apartments, many of which are sublet to more than one family. The total bill is divided equally among the residents. “There’s no way to save,” he says. “Your efforts are just lost in the mass. That’s the way it is all over the city.”
Evidently a local character, Wei has drawn a small crowd as he theatrically offers his thoughts. Now he looks about pugnaciously. But there is no disagreement.
The Judgment of Wu
Urban planning is easier in a dictatorship than in a democracy. Since its founding, in the 13th century, Shanghai has occupied the west bank of the Huangpu River. The east bank had always sustained the farms and gardens that provided food for the big city. Seventeen years ago the Chinese government decided that this arrangement was unsatisfactory. It bulldozed the villages and in a hot-brained hurry effectively threw up a brand-new city, called Pudong (“East of the Pu”). Pudong now has the world’s fifth-tallest tower (an even taller one is under construction nearby), and about three million inhabitants, most of them middle-class, housed in faux-Mediterranean villettes as deracinated as so many Orange County strip malls. China, in short, built a city the size of Chicago in less time than it took Boston to complete the Big Dig.
In 2010, Shanghai will host a world’s fair. Like the 2008 Olympics, in Beijing, it is intended to be a showcase for the New China. Three-quarters of the fairgrounds are in Pudong. Seventy million visitors, it is expected, will attend, and everything they see must be orderly, modern, and clean. To make this happen, Shanghai is kicking out some of the factories that used to line—and pollute—the Huangpu River. It also sold a 50-year, 50 percent stake in Pudong’s water utility to Veolia, for $243 million.
Water services entail four basic functions: purifying the water that goes into the system, delivering it to households and businesses, cleaning up the water that leaves those homes and businesses, and extending and repairing the network of pipes, pumps, and plants. Simple to describe, these tasks are hair-pullingly complex on the ground; the technical challenge of building and operating a water system that can supply the daily onslaught of morning flushes and showers while not overwhelming users at light times is the sort of thing that keeps engineers in heavy demand.
In Pudong, Veolia has done it all. Since 2002, when the contract was signed, Veolia has laid almost 900 miles of large-diameter pipe, hooked up 300,000 new structures to the growing water system, built sewage and water-treatment plants, and hired 7,000 local workers, training them so well that Veolia now has only four non-Chinese employees in Pudong. On the ninth floor of its new office tower Veolia created a customer-service call-in center—a novelty in China—staffed round the clock by young women in powder-blue Veolia uniforms. Down the hall is a war room dominated by a 12-foot-wide LCD monitor that displays the real-time status of every water connection in Pudong.
Smooth operation is a testament to the power of private enterprise. It takes formidable organization to deliver water to so much new construction—though even here, incredible to Americans, the water must still be boiled. (Habituated to bad water, the Chinese people don’t expect to be able to drink it straight from the tap.) To let Veolia recoup its costs, Shanghai is gradually raising water prices—not enough to make Pudong’s nouveau riche blink, but enough to ensure that they will not leave the taps on all day. “This model is a unique combination of private efficiency within overall public ownership,” argues Rémi Paul, who “hopes and believes” it can be extended throughout China. He has a hard time understanding why there have been protests against private water companies. So does his boss, Antoine Frérot, who chalks up the worldwide resistance to “a small minority of global activists,” mostly from the “hard left parties,” who are using water as an excuse to “contest globalization, capitalism, and all private companies.” Indeed, as both men point out, public water systems have often been disasters, especially in the Third World. “Private companies can better manufacture cars” than governments, Frérot says, and water “is exactly the same.”
Such views try the patience of Au Loong Yu, a Hong Kong labor and environmental activist. Water, he says, is simply not an ordinary consumer good, like lamps or shirts or smoothies. People can’t put off buying water until they have a little more money in the bank. In democratic countries the citizenry has some recourse if prices on vital goods and services rise too high—they can get the government to intervene, or vote it out of power. But China isn’t that kind of place. “I don’t have anything against private enterprise,” Au says. “But in countries with no democratic input—either because the state is too weak or, as in China, too strong—these companies can become dictators themselves.” Hong Kong owns and operates its own water supply, Au notes. Because the city enjoys a measure of democratic self-rule, there is some chance that citizens can change policies they don’t like. “They have to listen to us,” Au says of the local authorities. “I don’t want someone in charge of my water who only has to listen to the shareholders.”
The rise of Big Water is due in part to politicians from wealthy nations twisting wrists in poor nations on behalf of influential corporations. More important, though, is the catastrophic failure by governments around the planet to provide services so basic to modern life that some activists regard them as human rights: affordable, potable water and safe sanitation. To make an end run around intractably venal public sectors, institutions like the World Bank and the International Monetary Fund push forward the private sector: Big Water and its regional competitors. But business cannot provide openness and accountability if the governments to which it answers are closed and unaccountable. Indeed, in such circumstances private enterprise can simply become an unwitting instrument of oppression—as in China, where provincial authorities use it to paper over the environmental havoc of unrestrained industrialization.
In Barlow’s view, the solution to bad government is not the market, but good government. Yet both the activists and their nemeses in the World Bank and the I.M.F., distracted by the decade-long ideological battle over Big Water, have barely begun to use their diverse sorts of leverage to push governments to safeguard their natural resources and operate utilities in ways that actually serve the public. The prospect of these bitter opponents working together in any way seems unlikely. But the crisis over water is so unprecedented in scale that anything may happen.
A few months ago in Changzhou’s northern edge I came across two women trying to wash laundry in a filthy inlet of the Yangtze. One gave her name as Wu—no first name. She was desperate, she said. The government had turned over the family farm to a chemical factory, giving her husband a job in it. But her husband soon lost the job and was out of work. Meanwhile the factory had polluted the family’s well water, forcing the Wus to shift to a newly installed water line from the city. Now no money was coming in, and they couldn’t pay their water bill. Mrs. Wu knew that a foreign company was running the utility. She knew that prices were rising and that this was supposed to curb waste. “I’ve had all that explained to me,” she said. “It must sound good if you’re rich.”