Home > Uncategorized > Can water be non-neoliberal? The Dutch case

Can water be non-neoliberal? The Dutch case

Dutch drinking water is despite the absence of the use of chlorine the best. According to Science. Look also here. And here is Wikipedia. The secret? Good maintenance (according De Volkskrant of today, no link). And state of the art purification (without chlorine). Also, Dutch water companies do not have to pay dividends. They are government owned companies at arms length of the bureaucrats. They do not have to pay dividends and have, therewith, the money as well as the long term orientation to care about their product. This is a conscious choice. According to Wikipedia (didn’t know this before preparing this blog, thank you mister Pronk): ‘In 2004 the Netherlands passed a law which prevents any privately owned company from providing drinking water services to the public‘.

In the meantime in Greece…

‘Maintenance’ is a favorite Dutch passtime – has something to do with centuries of experience with the consequences of badly maintained flood defences. But the long term orientation and the use of funds is clearly linked to the legal structure of the water companies. It is a non-neoliberal thing. Aside: such government production seems to work best when simple, clear  final products (not to be confused with the production technology) which do not change too much in the course of time have to be produced and a long term time frame is necessary. Some examples are flood defences, water and parts of public transportation, sewer systems and roads. And bridges.

  1. Hein ter Meulen
    February 29, 2016 at 7:30 pm

    Isn’t it terrible that you have to explain this again? Good drinking water is a classic public good (as are flood defences).

    • merijnknibbe
      February 29, 2016 at 7:56 pm

      Let me be clear about this:
      1) Water is not free in the Netherlands and everybody has a water meter. As such, these state companies do a better job than many market based companies.
      2) I count my blessings: the Netherlands have a culture in which such state companies are not used to parachute incompetent political affiliates or family members in cosy jobs. In cultures where this is permissible market solutions might work better than state companies.

      But the Dutch water system is an example which imo shows that, especially when products are simple, stakes are high and a long term strategy is key, state companies sometimes just do better.

  2. blocke
    March 1, 2016 at 2:40 pm

    “In cultures where this is permissible market solutions might work better than state companies.”

    When I read statements like this in this blog, the indication is that there is much more that should go into policy formulation, in this case culture, than economic principles. Fine, but these suggestions are never carried through in the blog. Does this mean that economists are not qualified to comment on historical-cultural matters. If not why are they not pushing eagerly to bring those who are qualified into the discussion?

  3. JP
    March 1, 2016 at 6:55 pm

    Marijn – your statement is not entirely true. Until 35 years ago, we had a well functioning publicly quoted water company in mid Brabant. It built a sturdy infrastructure that we still enjoy today. There are other examples as well. In general, I do concur with your analysis, however. These private companies in public hands without corrupt interference, do a good job in providing a good product for a decent price. The lowest price possible? Probably not, but a fair price that allows those companies to take a long term view. I feel this latter thing is key.

  4. March 3, 2016 at 3:21 am

    In 1600 monarchs in Europe were all powerful. Including control of economic arrangements and actors. There was little room or tolerance from the monarch or aristocracy for “business” persons or “markets.” Recommend you watch episodes or “Upstairs/Downstairs” or “Downton Abbey.” Both dramatize these arrangements extending into the late 19th century. In this situation the “classical liberals” argued that reason was the foundation of the good life and certainly of individual freedom. All individuals (men I mean until the 20th century) were free and equal, having inalienable rights to these and the right to choose their own leaders. These rights included private property and the right to take part in “private” economic transactions. It’s not difficult to see how liberal economics derived from these foundations. Thus you have Adam Smith, Ricardo, etc. Who argued that the best economic arrangements were those created by individuals in market transactions. The government (for the classical liberals, the monarchy and aristocrats) was the persecutor and enemy of such transactions and thus must be prevented from participating in them. There was little empirical evidence to support such reasoning, and most liberals did not seek any. They “knew” individual rights and the freedom of individuals was better than monarchies, and they wrote and theorized accordingly. Individuals needed little oversight, the liberals concluded. They would seek their own best interests, setting up governments as they saw fit to aid this process. And they would respect one another’s rights and would treat others fairly in economic interactions. To do otherwise would endanger theory says each individual’s best interest. Even the reinvention of democracy by European liberals was sacrificed on the altar of private, free markets.

    In 1929 these theories were ravaged by worldly events. They had been ravaged before but the size of the downturn in 1929 and the interconnectedness of the world’s economic arrangements made 1929’s ravage almost an extinction event. The theories simply didn’t reflect events actually observed, that decimated the lives of many and destroyed most western governments. But the welfare of business and banking elites who had taken the role of the monarchy and aristocrats they replaced was dependent on these theories, whether they worked or not. So after some more theorizing and the recruitment of some academics (economists), and after weathering a period of government regulation classical economics was born again. Now called neoliberalism, it revolved around the same basic assumptions – free markets good-government regulation bad; markets control government good-democratic choice by all bad; each individual gets what s/he deserves good-sharing wealth bad. But the theories still have little relationship with events in the world not controlled by the theorists. But more and more of the world is being remolded to fit the theories. Few things or people today are not commodities, or easily convertible into commodities. Witness electricity, food, water, health care, etc. So far the Dutch water system has escaped the remolding. But only for now. Sales of bottled water from Nestlé Waters, PepsiCo and Coca-Cola are expanding exponentially, pushing out “tap” water of equal quality, but at 100 times the price for tap water. For-profit water companies like Veolia or Suez are scooping up non-profit water companies around the world, including the US. And there still is little empirical investigation of whether markets really are or can be free, or even if they were do they provide the better choice for economics interactions in terms of the total welfare (not just money) of all the participants.

    • blocke
      March 3, 2016 at 11:41 am

      Sorry Ken, your history is full of anachronisms. Absolutism never meant that the absolutist prince was all powerful. In France, the privileged orders gave up their political power to the king, but they kept their privileges, the most important of which was tax exemption. The French revolution was begun by people who paid little or no taxes, the 1st and 2nd Estates, who objected to the king’s ministers trying to tax them. Quit mixing post WWII situations with the Old Regime, and making the neoclassical economic that triumphed with US leadership after WWII, the dominant school in economics before WWI. Historians, who know something about the history of economic thought won’t let you get away with it.

  5. March 3, 2016 at 10:06 am

    ken zimmerman—very interesting history (or herstory if you are pc). i know in west virginia some people still use various springs to get their bottled water. you see the cars parked near the spring which comes off of the mountain. we used to get it there too. but other places in west virginia, companies have bought the land where the springs are, and they bottle it and sell it, mostly in washington dc area. (a few people also make ‘moonshine’ up there to this day and ship it to dc—some is good (if you like alcohol) and some is poison — sometimes they use old car carberators to make it so its loaded with chemicals. their families have been doing this since prohibition). i hear even california with the drought, and india, nestle, coca cola, and pepsi are still selling bottled water—they have privatized it (competing with agricultural interests, ranchers, golf courses and luxury lawns, and also environmentalists and native americans who want to preserve trout and salmon habitat.. )

    • March 3, 2016 at 1:17 pm

      My short history as you suggest simplifies a long period of complex events. But from the period 1600 through the 19th century European monarchs were, to simplify once again “dethroned.” And as you note the clergy and aristocracy were part of this subjugation of monarchs in France, and elsewhere. As were the growing merchant and “money-focused” members of the ‘third estate.” They helped inspire the economic theories and actions that protected their position both in the rebellion against monarchy and their greater control over society in general. Not surprisingly they later turned on the aristocrats and peasants/farmers who had pressed with them for democratic reforms. I say not surprisingly because these merchants and bankers tended to have a narrow focus on their own control of society and government. As to your statement about “anachronisms” you need to explain that one to me a bit further.

  6. blocke
    March 3, 2016 at 2:50 pm

    Anachronism: using ideas drawn from one historical period to explain events in another, where they do not apply, i.e., trying to make Frederick the Great a great German hero, or trying to make Prince Eugene of Savoy, a French traitor for serving the Habsburgs in their fight with France. Or in this case, trying to make 19th century ideas of autocracy or a 20th century view of the totalitarian state synonymous with absolutism.

    • March 4, 2016 at 7:19 am

      To be frank with you I wasn’t even considering either 19th century ideas of autocracy or any 20th century view of the totalitarian state when I wrote about 17th and 18th century absolutism. I was actually thinking about King John’s almost schizophrenic views on the absolute right of kings to rule. John seesawed between claiming he was king by the will of God and by the will of his Barons. Or maybe just a way for him to keep the wolves away from his door. And also Louis XIII of France. All of his biographers label him an absolute monarch. One of the first in Europe. Louis’ successors carried on the absolutism, with the exception of Louis XV. But Louis the XVI still paid for the claim of absolutism with his head, being guillotined on January 21, 1793. Seem claims of absolute monarchs had become unpopular by then.

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