Against the Current: Privatization, Water Markets, and the State in Chile

verfasst von: Carl J. Bauer

Verlag: Springer US

Buchreihe : Natural Resource Management and Policy

Enthalten in: Professional Book Archive

Einloggen, um Zugang zu erhalten

Über dieses Buch

In 1981 Chile's military government dictated a new Water Code that radically changed the country's previous water rights system by strengthening private property rights, favoring market incentives, and reducing state regulation. Against the Current: Privatization, Water Markets, and the State in Chile is the first empirical and interdisciplinary study of water markets in Chile, which is the leading international example of free market water policies.
Against the Current: Privatization, Water Markets, and the State in Chile challenges the glowing reports given by neoliberals in Chile and the World Bank, showing that the results of this economic experiment have actually been rather mixed. Within the agricultural sector the Water Code has worked fairly well, although the market incentives to conserve water have been ineffective and water rights trading has been less active than expected. The Code's impact has been more negative at the level of river basins, where the institutional framework has revealed critical flaws in coordinating multiple water users and resolving conflicts.
Against the Current: Privatization, Water Markets, and the State in Chile combines law, political economy, and geography to analyze the disadvantages, problems, and wider contexts of water markets. This book will appeal to everyone interested in property rights, market-friendly environmental policies, the political economy of sustainable development, and the intersection of economics with law and institutions.

Inhaltsverzeichnis

Frontmatter

Chapter One. Introduction

Abstract

This book is about how free markets have affected the use of water in Chile. Since the mid-1970s Chile has become famous as the textbook case of free market economic policies. Chile’s military government (1973–1990) adopted these policies years before other countries did, applying them to a radical degree and making special efforts to institutionalize the changes for the long term. Water use is a prime example. In 1981 the military government dictated a new Water Code that transformed the country’s system of water rights: it fortified private property, introduced market mechanisms and incentives, and pared back the state’s power to regulate.

Carl J. Bauer

Chapter Two. Blueprint for the Neoliberal Model: Law, Economics, and Politics in the 1980 Constitution

Abstract

In recent years Chile has become internationally famous for the success of its neoliberal economic model and for its smooth political transition from a military regime to a democratic government. As summarized in the previous chapter, the military government was in power for nearly 17 years, from 1973 to 1990. During that time the government sought to radically transform Chilean political, economic, and social systems, in order to prevent a repeat of the crises of the 1960s and 1970s. The military aimed to cement the changes with a “new institutional order” (nueva institucionalidad) established in a new Constitution, which was approved in 1980 and is still in effect today. What is surprising, in view of the fame of the economic model, is that outside of Chile there has been little attention given to the model’s legal and institutional underpinnings. Analysts of the 1980 Constitution have concentrated on its political aspects, especially its authoritarian and anti-democratic features. They have largely ignored its economic significance, beyond noting the importance of political stability and secure private property rights. Nor do they mention the increased power of the courts in economic and regulatory affairs.¹

Carl J. Bauer

Chapter Three. Water Rights and the Law of the Pendulum: Legal and Political History of the 1981 Water Code

Abstract

The “law of the pendulum” (ley del péndulo) is a Chilean phrase that describes dramatic changes from one extreme to another. During the twentieth century such swings have been common in Chilean political and economic thought and practice, and the realm of water rights is no exception. With its 1981 Water Code, Chile’s military government swung the pendulum away from the “statist” policies of the preceding decades, which had culminated in the 1967 Agrarian Reform Law that greatly expanded state authority over water use.¹ The 1981 Code aimed to reverse that trend by strengthening private property, increasing private autonomy in water use, and favoring free markets in water rights to an unprecedented degree. It created several market mechanisms, based on separating water rights from land ownership, and attempted to foster a market mentality among water users. As a corollary it sharply reduced the state’s role in water management and regulation. The new Code follows the institutional structure of the 1980 Constitution, and like the Constitution it was written and approved while neoliberal ideology in Chile was at its most ascendant, before being somewhat discredited by economic crisis (see Chapter Two).

Carl J. Bauer

Chapter Four. Bringing Water Markets Down to Earth: Water Rights Trading in Practice, 1980–1995

Abstract

The 1981 Water Code set up the legal framework for free trading of water rights and left the rest to private initiative. This chapter looks at the results of the water market during its first fifteen years. Chilean water markets have enjoyed good press recently, shining in the reflected glow of the country’s dynamic economic growth. Influential voices within Chile and in the World Bank have praised the Water Code as a model of successful neoliberal reform, showing the benefits of privatization and free markets. Neighboring governments-e.g. in Peru, Bolivia, and Ecuador-have been encouraged by such voices, and in their admiration for Chile’s economy, they have considered copying its water law as well. Unfortunately, these claims for the Water Code’s success are exaggerated and incomplete. They rest on political or ideological beliefs rather than empirical support. A closer look at the evidence shows the Code’s impact to have been uneven, geographically diverse, and quite complicated.

Carl J. Bauer

Chapter Five. Private Property and River Basins: Water Use Conflicts, the Market Model, and the Courts

Abstract

River basins present one of the most difficult and complicated problems in natural resource management: how to coordinate multiple water uses in the same drainage. To deal with this problem requires sorting through conflicting uses which involve different sectors of regional economies, where the stakes are often high. This chapter examines how such problems have been handled under Chile’s current Water Code, with its strong free market principles. The free market approach to river basin management relies on property rights to water that are private, exclusive, and transferable. Water uses are to be coordinated through private bargaining, in a process reminiscent of the Coase Theorem. As discussed in Chapter One, the Coase Theorem states that bargaining among private property owners allocates resources more efficiently than government regulation. I argue that the Chilean case highlights that the overall legal and institutional framework is crucial to how markets work. Many proponents of free market policies, particularly neoliberal economists, oversimplify what is involved in several key processes that market forces depend on but cannot carry out themselves: defining property rights, resolving conflicts, and dealing with externalities.

Carl J. Bauer

Chapter Six. Conclusions

Abstract

Chile’s experience with free market water policies has been uneven. The 1981 Water Code has had both advantages and disadvantages, and offers valuable lessons for other countries interested in water markets and privatized water rights. The most general lesson is that market mechanisms can do some things well and others poorly-that markets are not automatic or self-regulating but depend on their social, institutional, and geographic contexts. In Chile the Water Code has worked relatively well within the agricultural sector, although the water market itself has been limited. The Code has worked much less well at the level of river basins, where the institutional framework has revealed serious flaws in coordinating different kinds of water users and different economic sectors. These flaws reflect the current (1980) Constitution as much as the Water Code, and therefore have similar implications for other areas of public policy and environmental regulation.

Carl J. Bauer

Backmatter

Titel: Against the Current: Privatization, Water Markets, and the State in Chile
verfasst von: Carl J. Bauer
Verlag: Springer US
Electronic ISBN: 978-1-4615-6403-4
Print ISBN: 978-1-4613-7942-3
DOI: https://doi.org/10.1007/978-1-4615-6403-4

Springer Professional

Über dieses Buch

Inhaltsverzeichnis

Frontmatter

Chapter One. Introduction

Chapter Two. Blueprint for the Neoliberal Model: Law, Economics, and Politics in the 1980 Constitution

Chapter Three. Water Rights and the Law of the Pendulum: Legal and Political History of the 1981 Water Code

Chapter Four. Bringing Water Markets Down to Earth: Water Rights Trading in Practice, 1980–1995

Chapter Five. Private Property and River Basins: Water Use Conflicts, the Market Model, and the Courts

Chapter Six. Conclusions

Backmatter