Saturday, January 27, 2007

The rats are back

Wild rats can lead to serious problems. The most serious is that rats can carry disease, including the dreaded Black Death that repeatedly decimated Europe and Asia. Rats can also chew electrical cables, causing house fires. They are, in short, a problem.

In the UK, especially London, they're suffering from a plague of them. And the cause is yet another market failure.

As Johann Hari of the Independent explains, the public water authorities used to control rat numbers in the London sewers. This practice stopped in 1998, when the Tories sold the water monopoly to the private corporation Thames Water. Naturally, Thames Water didn't see why they should pay to bait the sewers when they could just pocket the money instead.

All across Britain, water companies like Thames Water are neglecting to deal with the issue of rats. In Westminster, the rat popoulation rose so drastically, and the council begged Thames Water to act. Eventually, the council started baiting the sewers themselves, using public money, to try to avoid the consequences of Thames Water's negligence.

Hari explains:

The explosion of rats across Britain is another bleak parable about the folly of market fundamentalism. Rather than seeing markets as a useful tool, the Tories saw them as the One Shining Truth, the solution to all problems. This led them into a startling corporate giveaway. They simply transferred money from the tax-payer - you and me - to wealthy share-holders by paying off £5bn of water company debt, selling off the system at 22 per cent of its market rate, and even exempting the new private monopolies from paying profits taxes. Money that was once spent killing rats was simply handed to corporate shareholders.

Even on its own terms, this was crazy. For all their talk of markets, the Tories had failed to understand why markets work, and the regulations left the responsibilities of the water companies dangerously vague. It's not private ownership in itself that makes markets efficient - it's competition. There is no competition in water. Nobody is going to build a second set of taps in your home, giving you a choice of providers.

Privatising a natural monopoly simply licenses fleecing of the customer for private profit. The water barons have increased their pay by 200 per cent since privatisation, whacked up prices by more than 50 per cent - and slowed to a trickle all the vital public interest procedures such as sewer-baiting and infrastructure repairs.

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