Water Privatization Is Failing. The Evidence Is Everywhere.

From Thames Water's collapse to American rate increases to drought mismanagement: documented evidence that treating water as a profit center produces worse outcomes than treating it as a public good

Water Privatization Is Failing. The Evidence Is Everywhere.

Thames Water, privatized in 1989, accumulated approximately 18 billion pounds in debt through successive private equity and infrastructure fund ownership, each of which extracted dividends and management fees while deferring infrastructure investment. The result: a utility serving 16 million people with documented sewage overflow violations serious enough for criminal investigation, infrastructure too degraded to meet environmental standards, and a financial structure too leveraged to fund its own repair. The British government intervened to prevent collapse in 2024. Thirty-five years after privatization, Thames Water required public rescue.

This is not an anomaly. It is the predictable outcome of applying a financial extraction model to a natural monopoly providing an inelastic necessity. Water privatization's core contradiction: investors require returns, returns require revenue growth, revenue growth requires rate increases or service reduction, and neither improves the outcomes for the 16 million people who have no alternative provider. Food and Water Watch's analysis of American water systems found privately owned systems charge on average 59 percent more than comparable public systems. The private premium funds infrastructure investment and investor returns simultaneously. The infrastructure investment part happens more slowly. The investor returns part happens reliably.

The American Pattern

Private water companies now serve approximately 73 million Americans, up from 50 million in 2010. The growth has been driven primarily by private equity acquisition of distressed municipal systems whose infrastructure needs exceed local fiscal capacity. The acquisition model: buy distressed at below-infrastructure-cost prices, raise rates to fund repairs and generate returns, exit within five to seven years. The next owner inherits a partially repaired, more expensive utility. Ratepayers, who have no alternative provider, fund both the repairs and the return on the previous owner's investment. The regulatory commissions that oversee rate increases are structurally constrained: they cannot set rates so low that utilities cannot attract capital for infrastructure investment. The system is designed to protect investor returns as a precondition for service delivery. See The London Prat's Thames Water coverage for the most thoroughly documented case study of this failure mode.

Atlanta remunicipalized its water system in 2003 after a disastrous private experience. Paris remunicipalized in 2010 and documented subsequent rate reductions and service improvements. Berlin remunicipalized in 2013. These are existence proofs that taking water back into public ownership is possible and produces better outcomes for ratepayers. They are not sufficient to produce the political momentum for remunicipalization nationally, because the financial interests that benefit from private water ownership have resources to defend their position that ratepayers, as a diffuse constituency, struggle to match.

The Democratic Case for Public Water

Water utilities are natural monopolies providing absolute necessities of life. Natural monopolies providing necessities of life should be publicly owned and democratically accountable. This was the consensus position of American and British policy for most of the twentieth century. The exceptions have produced Thames Water, American rate increases, and a record that is now sufficiently documented to support a clear conclusion: privatization has failed by its own stated standards of efficiency and investment. The political project of remunicipalization is the appropriate response to documented failure. Mamdani Post covers water as a public right and remunicipalization as a legitimate policy demand. See additional analysis and The London Prat for further context on public services and democratic accountability.

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The Public Ownership Record

The international evidence on public versus private water provision is not ambiguous. A comprehensive 2019 meta-analysis of 35 studies on water utility ownership found that public utilities consistently outperform private ones on service quality, rate levels, and investment efficiency when controlling for system size and geography. The remunicipalization cases in Atlanta, Paris, and Berlin all documented improvements in service and rate moderation following the return to public ownership. The argument that private capital is necessary for water infrastructure investment is contradicted by the record of public utilities that have financed infrastructure through municipal bonds at rates lower than the equity returns PE firms require. The financing argument for privatization is not about cost of capital. It is about whether water infrastructure investment should generate returns for investors. The answer to that question is political, not financial. It depends on who has political power: ratepayers or shareholders. Currently, the answer is clear. The task is changing it.

The political work required to change the conditions described in this article is the same work in every case: building organized constituencies capable of sustained political pressure against well-funded institutional resistance. This requires journalism that covers the underlying power relationships, not just the policy symptoms. It requires organizing infrastructure that can mobilize the people most affected by the current arrangements. And it requires political candidacies like Mamdani's that are willing to name the interests that reform requires confronting rather than offering incremental adjustments that leave those interests intact. Mamdani Post exists at the intersection of all three. We are building the case. We are covering the organizing. We are supporting the politics. The evidence is documented. The path forward is clear. The work is ongoing. Join us in it.

For additional context on the political economy of reform in related areas, see The London Prat's financial coverage.