The most dangerous financial phrase of all - this time is different

The Observer tells us that the water companies in England really must be taken back into public ownership. Because only the public, through that ownership, can provide the socially optimal level of capital to produce the desired outcomes in terms of water quality, environmental protection and so on.

The claim is to fail to understand why they were privatised in the first place, to insist that this time, no really, it will all be different.

Now that Europe is sweltering in record-breaking heat, a second front is opening up against the water companies. And this centres on the investment needed, not just to replace leaking pipes but to support efforts to tackle the climate emergency.

Even in Britain, water is becoming a scarce resource. In the torrential storms that have become increasingly prevalent, the water runs off the land, into rivers, rages through town centres and out to sea. Parts of the country need more reservoirs, which means giving over land near cities that might otherwise be farmed, left fallow for wildlife or used for some form of development. Where aquifers are running dry due to overextraction, public bodies need to decide on the priorities, juggling the competing demands of farmers, local businesses and households.

We’ll accept the basic contention, just for the sake of argument. The water system needs more capital devoted to it in order to deal with our new world.

The fund managers who dominate ownership of the UK’s water companies have no interest in collaborating to develop a water system fit for a dry future.

That bit being arguable of course. Argue we shall, using this same industry as our example. So, why were the water companies privatised in the first place? Because vast capital investment was needed in such systems. And public ownership, state ownership, meant that such money was not forthcoming.

The theory being used by The Observer is that government will produce the socially optimal amount of investment in whatever. Not just that it is theoretically possible that the wise and omniscient planner could, but that the political process will. And yet investment in the water systems soared after privatisation - that was the reason it was done, the public finances, the political process, wouldn’t do it.

So, why is it that this time will be different? Last time around political control produced less investment that capitalist profit seeking. Why, in this time of greater investment need, won’t it play out the same way again?

The example given to us:

Dŵr Cymru (Welsh Water) is a not-for-profit business that is busily repaying debts from its previous life as a profit generator while also improving the network. It is not the only model for change, but it’s a good start.

In the privatisation process England got for profit water companies, Wales a communally owned not for profit, Scotland a state owned for profit, NI remained with local councils supplying the water. A decade after the process OfWat checked upon progress, measuring price (lower is good), water quality (higher is better) and environmental protection (more is good). In terms of who improved the most it ran England, Wales, Scotland, NI.

That is, capitalist water companies worked by the very measures the Observer is using today. Why will this time be different? Even, why revert to the system we abandoned because it doesn’t work by these very same measurements?