Despite the rhetoric of free market advocates the goals of governments and private companies in supplying services are quite different. Governments attempt to provide reliable services that a maximum number of people can access at a cost they can afford. Of course, they do not always succeed in this goal, particularly when they do not have access to affordable capital. Private companies, on the other hand, have a legal obligation to maximise their profit and shareholder value. Sometimes this coincides with providing a cheap, widely available, reliable service but often it doesn’t, particularly when it comes to essential services that require expensive infrastructure to distribute.
The rationale for privatisation comes straight from free market ideology. Those advocating privatisation and private provision of public services claim that private ownership and competition ensure that there are incentives to minimise costs, to improve management practices, and to get employees to work harder. However there is little evidence that private or public ownership makes a difference in how efficient an organisation is. For example, experience in the US and the UK, where public and private enterprises supplied electricity contemporaneously, has consistently shown that public enterprises can provide a reliable service at lower cost to ratepayers. Similarly, in England and France municipal governments offer water services at cheaper rates than privately operated water services.
In fact the cost of essential services tends to go up rather than down after privatisation. In most countries around the world where water and electricity has been privatised or deregulated, residential rates have increased, often dramatically.
Increased rates for essential services have left the poorest unable to pay and without access to these essential services, even in the wealthiest countries.