In any such examination it is important to acknowledge that even the most expansive models of the commodification of water and risk ‘sharing’ still assume a situation of initial state control or ‘ownership’ over water in its various forms. Property constructs are variable and, as Fisher (2004) notes, can range from property held by the state, an individual, a community or an ‘unowned’ commons. Whether the posited ‘unowned commons’ of economic-resource theory can exist in reality is a moot point (for a discussion, see Fisher 2004: 201). Here in Australia, as noted, most debates about the degree and nature of privatisation in relation to water coalesce around the character of ‘public ownership’ rather than querying the initial vesting of the resource in the state. Typically in natural resources contexts, such vesting occurs through statute. In this regard, the Australian High Court has been called upon to determine the nature of Crown [Government] ‘ownership’ of natural resources in the seminal case, Yanner v Eaton. In that case, the Court accepted that:
‘Property’ does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of ‘property’ may be elusive. … Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or resource rather than a legally endorsed concentration of power over things and resources.’ (Yanner v Eaton at paras 17–18 per Gleeson CJ, Gaudron, Kirby and Hayne JJ).
While recognising the integral link between property and its legal designation and enforceability, the High Court clearly distinguished Crown ownership or property in a resource as being distinct from ‘private property’. The Court concluded that the Crown’s property was an atypical form of property, (Yanner v Eaton at para. 26 per Gleeson CJ, Gaudron, Kirby and Hayne JJ). Property in the Crown is, in effect, the mechanism by which the state asserts regulatory control over access to the resource. Accordingly, the powers of the Crown must be interpreted in the light of the legislative scheme, which vests that property. While Yanner v Eaton was concerned with the ‘vesting’ of wild animals in the control of the State under Queensland statute, the judicial reasoning has particular consequences for current debates surrounding privatisation of water. The conception of property as pertaining to a socially approved ‘power’ over resources, and the distinction between state ‘regulation’ and private rights (otherwise known in formal legal terms as ‘the beneficial interest’), highlights the public-interest dimensions of Crown property or ‘ownership’ of water resources. Thus, this ‘socially endorsed power’ could comprehend a range of public-interest criteria including conceivably ‘a duty’ to ensure minimal rights to water, environmental protection and intergenerational equity (Fisher 2004: 209).
In Victoria, for example, there has been an attempt to clarify the respective interactions of state ‘control’ of the water resource and arrangements with the private sector through a constitutional entrenchment of the public responsibilities for water (Sections 96, 97 Constitution Act 1975 Vic). Such a view of property, state control and private property that emerges from the foregoing analysis represents a more nuanced approach to ‘property rights’ and the gradations of ‘privatisation’. Many analyses of rights in water tend to concentrate upon the imposition of private property rights without proper regard to the wider context in which such rights exist. These analyses typically move to focus upon ‘private property’, security, trade, transfer and transactional arrangements without duly recognising the relationship of such rights in the context of state ‘ownership’; which, in turn, must be conceived more widely than simply as a conduit from the vesting of the water resource to points of allocation to individuals. What then is normative role of the state in articulating property in water? For whom does the state ‘act’ and in what capacity? Many answers are conceivable: Current urban water consumers? Current business interests? Water users beyond the immediate urban spatial scope? Future generations of water users? The environment?
Consequently, if the state is held to hold an atypical ‘common property’ in water, it becomes important to explore how water might need to be considered under a broader rubric of state responsibility as part of its ‘invisible’ hand in the market. Clearly there are public-interest outcomes that markets, when constructed as the aggregation of consumer preferences, simply cannot achieve. Typically, markets do well in allocation and efficiency but less well on issues of broader social and spatial distribution and equity (Bakker 2000; for a contrary view, see Heaney et al. 2006). One of the central arguments made for adopting a market-based or property-rights approach to water-resource regulation is that markets allocate scarce resources more efficiently than the public sector. Public-sector limits on scarce resources, such as water restrictions imposed under legislation, it is argued, are inefficient as they impose the same level of restrictions on all water users without regard to the ‘value’ that users may have for the water. Some arguments are made that these government legislative measures are appropriate only as interim ‘emergency’ instruments (Quentin and Ward 2007: 8). However, it is suggested that a market-based approach allows those who have a higher-use value for water (and are able to pay to higher prices) to use scarce resources more efficiently. Property rights, it is suggested, provide an incentive to use the water resource more efficiently as other users can be excluded (Posner 1998). While this is an over-simplification of complex arguments, one major assumption not addressed is the assumption of scarcity as a ‘natural’ phenomenon. By contrast, it is suggested here that scarcity and use value are notoriously relative constructs. Indeed, it might be argued that private property, rather than being the ‘solution’ to natural scarcity, simply puts in place a private law regime for rationing (that is, state supports private law regulatory forms to ration the resource). Whether the rationing takes place according to a public-law or private-law regime, necessarily law is involved, rather than the situation being one with a pure market-based ‘solution’ and the other being a ‘state’ law-based regime. The articulation of the normative objectives for these legal regimes then becomes critical in any determination of the relative merits of the regimes for ensuring long-term water security and sustainability.
In particular, it is argued that privatisation may produce a ‘win-win’ between the parties to any water value-exchange transaction but fails to deal with third-party effects, including environmental degradation (Glennon 2005). Moreover, even if we concede that the role of governments should only be to intervene in situations of demonstrated market failure, the range of situations is potentially quite wide. Accordingly, the equation of efficiency in water-resource allocation with Pareto optimality (that is, allocating water to its highest value use) is sufficient to satisfy social-welfare objectives needs further exploration. In this context, the view that water could be conceptualised within a rights-based paradigm may offer a useful counterpoint.