Morning Roundup: Water Privatization and Dignified P2P Lending

by Rob Katz, NextBillion.net - Development Through Enterprise - Microfinance on Jun 26, 2008

There have been some interesting base of the pyramid-related topics afoot in both the mainstream media and the blogosphere lately, including a call for water privatization in developing countries and a self-critical blog post authored by the founder of a media-darling BoP startup. Without further ado, what follows is a quick roundup of the latest rumblings and grumblings in the base of the pyramid world:

Water privatization is not a new concept, nor an uncontroversial one. The latest to take up the banner is George Mason economics professor and Marginal Revolution author Tyler Cowen. I admire Cowen and read his blog regularly – he's particularly good at making esoteric economics arguments come alive in readable language. He authored an opinion piece in Forbes back on June 19 entitled Pay For It, in which he argues that government-run water monopolies in developing countries should be completely deregulated.

Of course, Cowen is not blind to the perils of deregulation:

But for all the problems deregulation can bring, the status quo seems much worse. And it's worth asking what these higher prices are relative to. Carrying water on your head costs much more--in terms of both money and effort--than piped water. If you're a poor person, wouldn't you rather face a private monopolist, selling you water through pipes, than not have any water company at all? Whether we like it or not, those are the real world alternatives.

Even so, Cowen's arguments seem awfully academic and not the least bit practical in a real world sense. Yes, base of the pyramid consumers are willing to pay for clean, safe water. But full-on deregulation? It's likely that it would negatively impact the poorest of the poor at the price of improving service for the middle and emerging middle classes. Besides, it's politically infeasible; see Bolivia, Cochabamba.

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