Terence Corcoran
Financial Post
May 15, 2001

The first anniversary of the Walkerton, Ont., water tragedy is approaching. Already the professional groundskeepers of public opinion are raking the town for the official laying of the blame ceremonies. They appear to have narrowed it down to two culprits, the Harris cutbacks and privatization. Despite overwhelming evidence that Walkerton is the product of gross inadequacies inherent in public sector ownership and major instances of individual public employee incompetence, opinion nevertheless appears to have gelled around the cheap political conclusions.

There is still time to reverse this opinion. The final reports of the judicial inquiry into Walkerton are not due for many months, so the inquiry could surprise everyone. But news reports and sources who follow the commission suggest the inquiry remains fixated on government cutbacks and Tory bureaucratic snafus as the cause of the water crisis. And privatization. “Privatization angered health ministry staff,” said a story last week on the latest inquiry testimony.

The national reaction to North Battleford’s water crisis is another sign that the real lesson of Walkerton – that government operation and funding of services is inherently flawed – has failed to reach the public. WWhen a politically driven bureacratic system breaks down, the first response is to call in more political bureaucracy. In what appeared to be a bout of mass hysteria in the wake of North Battleford’s crisis, everyone in the country began insisting that Ottawa set national water standards and begin shipping money out to rebuild the systems.

But regulation wasn’t North Battleford’s problem. Saskatchewan already has tough regulations in place, they just weren’t being followed. Slapping another layer on top would add nothing. After national regulations fail, then what? The United Nations?

Government ownership and bureaucratic control are at the heart of the water system breakdowns. There is no incentive to invest in new plants and services, no reason to meet standards unless routinely policed by some higher regulatory authority, no incentive to operate efficiently.

In North Battleford, officials in the town of 14,000 complained that they need $14-million to build a new sewage system. Capital spending requires planning, a build-up of reserve funds, taxpayer consent to raise taxes to fund the project. Why is it that in the public sector, major capital investment costs often seem to land on the populace like total surprises. Roads are run down, sewage pipes allowed to rot, infrastructure deteriorates until suddenly, out of the blue, massive reconstruction costs loom and there’s no money. Whatever happened to long-term capital planning and the practice of building reserves?

At least part of the answer is the fact that local politicians and their provincial masters, have made their careers spending current dollars on current consumption while neglecting capital and infrastructure. And the capital programs that were fast-tracked – mandatory recycling being one example – often followed the hot political trends at the expense of investment in core facilities. Even when governments set up grand infrastructure spending programs, much of the money is squandered on political patronage and unnecessary programs.

The results are Walkerton and North Battleford, boil-water notices in hundreds of towns across the nation, and a multi-billion-dollar investment shortfall. So far, though, the official answer to this growing national crisis has been to promise more of the same – more regulations, more political interference, more bureaucratic procedures based on a model that has proven dysfunctional.

Walkerton and North Battleford appear set to smear or ignore privatization as the alternative to the public ownership disaster. Eventually, though, the tide will have to turn in favour of privatization, a message that strongly comes across in a report for the Walkerton Inquiry by Elizabeth Brubaker of the Energy Probe Research Foundation. In The Promise of Privatization, Ms. Brubaker outlines the history of recent privatization moves in Canada and elsewhere. Private companies are investing tens of billions in water systems in the United Kingdom. “You just couldn’t contemplate that kind of expenditure in the absence of privatization,” said one U. K. official. Greater efficiency, lower costs, better service, major health and environmental benefits are among the benefits of privatized water services. (For a copy of Ms. Brubaker’s paper, try searching for The Promise of Privatization at http://www.walkertoninquiry.com.)

The Walkerton anniversary will prompt scores of anniversary reviews, most of which are likely to be based on hanging the wrong party. The cause of water system failures are perverse government incentive systems that would be reversed by a real and tested alternative.