Water is precious to life on earth. Healthy organisms, ecosystems, and weather cycles depend on it. A sufficient supply of clean water is the critical first step to improving public health in every society. Just because everyone needs water, however, doesn't make managing it easy. Developing countries are struggling for water. The World Bank says $600 billion is needed in the next decade to avoid water shortages.

Even though Earth is mostly water, only about 1% of it is available freshwater. And with global water consumption tripling since 1950, some claim it's only a matter of time before the strain on the world's water supply becomes too great: 29 years according to Paul Ehrlich, Sandra Postel, and Gretchen Daily. If you live where the Colorado River used to drain into the sea, or where the Aral Sea once existed, the time may already be now. How we manage scarce water resources is increasingly vital, for public health as well as the health of wetlands, salmon runs, and other ecosystems. That makes water delivery systems among the most important enterprises.

America's water management ideology flowed from the Progressive Era doctrine of a century ago. Political leaders used tax-exempt government bonds to fund facilities and enabled bureaucracies to provide their burgeoning cities with water. As a result, 85% of Americans drink water from government-owned companies. Public water companies, they thought, could easily, efficiently, and reliably supply municipal water.

The Progressives were wrong. Time, and a recent study of California's water industry by the Reason Foundation, has proven them wrong. The Reason Foundation surveyed private and public water companies in California and discovered that both offered comparable services. To provide those same water services, however, the government-owned companies relied on tax exemptions and subsidies.

The private companies fended for themselves, and did so more efficiently. Their water cost consumers only three-fourths that of public water. Inefficiencies of government-owned water companies go beyond cost to consumers. Their operating expenses per connection were 21% higher. They required more than double the number of employees per connection. Accordingly, salaries of public water companies ate up almost three times as much of the operating revenue as the private companies. Public companies also spent nearly double their private counterparts on maintenance.

The good news for Californians is that even their wasteful government water companies are more efficient than some third-world water companies. Most Latin American utilities require between ten and twenty employees per thousand connections (compared with 1.62 for private- and 3.49 for government-owned firms in Calif.). No wonder that developing countries which are dominated by government-owned water industries "require" massive bailouts. No wonder the specter of water shortages looms so closely.

The bad news is that 78% of Californians receive their water from wasteful public authorities. The Reason Foundation finds that subsidizing public water passes no savings on to the consumer. The subisidized inefficiencies effectively flush public funds that could instead be spent on more worthwhile undertakings or reduced taxes.

Public water companies are protected from competition. Bloated payrolls, extravagant expenditures, and addiction to subsidized capital characterize government water works. Government-owned agencies in California notoriously accumulated large cash and investment incomes. The Irvine Ranch Water District, for example, invested $32.5 million in an apartment complex and another $12 million in two other real estate developments. Allowing government agencies like water companies to speculate with public money leads to the financial nightmare that vexes Orange County today.

Privatization presents an attractive alternative in the U.S. and elsewhere. England privatized its water industry in 1989. French cities has been contracting their water systems since the 19th century. Some international firms found great success in supplying water to developing nations badly in need of competent and competitive water systems. In Buenos Aires, the government water authority was so inept that privatizing offered huge benefits. Privatization has brought $4 billion in infrastructure investment, improved government pipelines that previously leaked half of their water, and resolved the chronic summer water shortages. This approach conserves the environment while promoting healthier and wealthier consumers in Brazil.

In America, municipal budgets are tightening. Mayors increasingly seek new capital. And proliferating environmental regulations make the water business ever more difficult for city bueaucracies. These factors make change certain. Privatization of much of the water industry is likely.

Ironically, public water companies were intended to protect the sacred municipal water supply. What really happens in socialized water systems, however, is something quite different. Water and other resources are wasted and public health is at risk while political interests are protected. Now, as Mr. Clinton claims the "era of big government is over," we can find support for innovative ways to provide public goods. It takes courage to overcome the outmoded Progressive thinking. Fortunately, thanks to the Reason Foundation and others, the common sense to see the benefits of privatization is becoming more common.