Inequality and Inaction: A Puzzle of Environmental Justice in India

ritwick.jpg

On a blistering summer day in May, protests against the proposed expansion of a copper smelter run by Sterlite, a unit of the megacorporation Vedanta, reached boiling point as thirteen people were shot dead by the police in Thoothakudi, Tamil Nadu (Tuticorin). Fumes and waste from the plant have long since irreversibly polluted the air and water, with citizens suffering from respiratory issues, building up to cancer. Reports suggested that at least one person in every household within five kilometers from the plant was sick. This was the culmination of several protests over two decades against the expansion of the plant, and its very existence. Despite universal suffrage and the semblance of equal democratic rights, the clear and articulate demands of the people were met with bullets, reflecting an imbalance of power in a staggeringly unequal society.

To policymakers and privileged folk alike, projects such as the Sterlite copper smelter are representative of India’s ‘development’. To alleviate us from our ‘backwardness,’ the state has pushed for global and local firms to invest in the extraction of resources and raw material. These narratives of progress pervade economics textbooks, government statements, election rallies, and social media, even as the costs of ‘development’ are pushed onto the poor.

The trade-off between environmental degradation and ‘development’ has often been analyzed. The standard framework applied by microeconomists looks at the marginal benefits and costs of economic activity to society as a whole. However, such benefits usually accrue disproportionately to particular groups: for example, a multinational company with the tender to mine resources or wealthy consumers of copious amounts of electrical power, furniture, or other goods produced through the exploitation of natural resources, and so on. The resultant losses, meanwhile, are widely distributed, impacting some groups more than others in an often obvious manner. Tribal peoples and villagers are often especially harmed by natural resource extraction, like those displaced by the Sardar Sarovar Dam on the Narmada River, a project representative of the kind of development  pursued around the globe. The project began with an attempt to tap the river waters and provide electricity and water for irrigation and consumption in a drought-prone region covering three states in western India - Gujarat, Maharashtra, and Madhya Pradesh. However, what has followed since are broken promises by governments and firms, violations of environmental and ethical guidelines, and large-scale displacement of the marginalised and poor. Meanwhile, dams are placed so they will never threaten to flood areas where the elite or privileged reside.

The question is – why do democratically-determined governments amid universal suffrage enable the rich and powerful to impose costs on the poor, who outnumber the rich significantly? The answer lies in relative power (the differences in power between individuals and groups), which comprises several factors:

(i) Individual characteristics such as wealth, gender, ethnicity, race etc.
(ii) the number of people involved

Intuition suggests that in a democracy, a poor majority can exercise power over a wealthy minority.
However, reality is not as straightforward. Here, I investigate why the Indian state (and other states under capitalist regimes around the world) consistently favours the wealthy elite over others, even within a democratic framework. The state exhibits such a class bias through three channels, reviewed as follows.

First, consider interpersonal channels: powerful members of government are more likely to belong to richer households and may therefore favour their own social group more. It takes significant personal wealth and privilege to run for office in India, and it is clear that elected representatives have become wealthier over time, as a group, comprising a class that owns most of India’s productive assets. While personal wealth itself is important, those socialised into capitalist norms and ideals through their privilege are more likely to believe that private property and free markets ought to be protected and fostered. These politicians share a moral universe with capitalists, as their thoughts have been generated in a similar social milieu (in terms of caste, class, and typically gender). It is through this process of socialisation that candidates are likelier to favour one class and caste over others.

Second, consider political channels. It takes a huge amount of money to finance an election campaign, more than what a single person or family might own. For a politician, it is not only sensible but necessary to take money from heads of corporations and rich developers over the process of campaigning. Populist positions and smarter policies easily get drowned out by someone else flexing their financial muscle – just ask any party in India trying to go toe-to-toe with the incumbent party Bharatiya Janata Party (BJP) and their vastly superior financial firepower. Thomas Ferguson’s investment theory of party competition describes parties as maximisers of campaign funding, which enables them to maximise votes - with money clearly being primary. Furthermore, a quid pro quo arrangement is at work: politicians finance election campaigns from business, and return the favour by greasing their wheels when in power. In the Indian context, restrictions on lobbying are essentially non-existent. Any contribution below Rs 2000 (~$29 USD) to a party doesn’t have to be reported, and one can make several of these transactions completely anonymously. A finance bill enacted by Parliament recently created a new system of ‘electoral bonds’ which allow individuals to donate to parties anonymously and without public scrutiny, and included provisions allowing firms to donate to a political party without any sort of declaration. The BJP has relied on heavy corporate support to dominate national and state level politics since 2014, outmuscling parties with fewer funds.

Even in cases where poorer candidates opposed by the wealthy win—an increasingly rare outcome both in national and state parliaments — capital exerts its influence through through the mechanisms of state revenue collection and global capital flows. When capital is mobile, businesses may simply threaten to shift most of their production elsewhere unless regulations are relaxed and taxes are lowered. Time after time, members of the Indian government have hailed Foreign Direct Investment (FDI) and have set up special economic zones (tax exemptions, subsidies on electricity, lax labour laws, etc.) to cajole multinational corporations to invest.

While SEZs may relax labour protections, the general standard of labour laws remain poor in India and other developing countries. Nike, Apple, and other large corporations have infamously found comfortable homes in sweatshops in the developing world, continuing a process of expropriation, bereft of labour legislation or levied taxes. Various pundits have cried out to make labour laws more flexible in an economy which is already largely informal, and increasingly casualised. The obsession of policymakers with increasing India’s position in the World Bank’s ‘ease of doing business’ rankings reflects a neoliberal zeal that has pervaded discourse since economic liberalization in the early 1990s. States refusing to capitulate to firms face a loss of tax revenue through corporate and income taxes, without which the government may be unable to fund vital public programs. The fact that even states with left-wing incumbents (such as Kerala after 2006) have eagerly set up SEZs proves the point that ultimately, the influence of capital is nearly omnipotent.

What we see, then, is a rat race to the bottom - developing countries, in a bid to rapidly grow and catch up to colonial powers are vying for foreign investment, attainable only by capitulating to the interests of capitalists. Through this last channel, capital can easily choke the reform policies of any leftist officeholders, and assert itself in developing countries in pernicious ways, typically at the cost of the poor.

The third channel of this bias is discursive. Neoliberal thought, dominant around the world since the 1970s, has found a home in the Indian government among several others. In a country with top-down decision-making and planning, unelected experts have long since dominated discussions on economic policy, often driven by mainstream economic thought. Furthermore, they have gained even more importance of late. The governor of the Reserve Bank of India (RBI, central bank of the country) and the Chief Economic Advisor are positions that may have existed for some time, but never before have these posts received so much attention from the government and from the public. The World Bank and IMF dominate discussions surrounding development, and in this process relegating any decentralised planning or bottom up decision-making by locals and those most affected by policies. Mainstream economic thought has taken precedence amongst governments across the world, as can be seen from tendencies towards austerity, free markets, private property, free trade, etc. In the context of glaring inequality in India, the question is, what environmental policies get implemented in a democracy under the control of rich, how are those policies rationalised, and how do they work against the poor?

Economic theory defines an activity as socially beneficial if its marginal benefits to society exceed its costs. In a laissez-faire scenario, costs imposed on parties not involved are simply ignored, and production takes place until there are no marginal benefits to be gained by the firm from production. In the real world, sanctions and government intervention may restrict environmentally-degrading activities, but polluting economic activity may still exceed the optimal level (where Marginal Benefits = Marginal Costs, for society). A classic example of the imposition of costs on third parties is the continued unabated stream of toxic waste that goes untreated and ends up in rivers and oceans, which has remained an object of outrage for locals and environmental groups for aeons.

Free-market advocates and mainstream economists have often responded to such critique by arguing that the allocation of property rights can achieve a socially optimal solution. The economist Robert Coase famously argued that if winners (Sterlite) can compensate losers (farmers, etc.) for degrading their locale or polluting their environs, or if losers can compensate potential winners for not engaging in activity that degrades the environment, then efficiency can be achieved via the sale of property rights. In a scenario of conflict between the rights of locals (typically poor and marginalised) and the motives of a powerful corporation, do both groups stand on equal footing? It is unlikely. The winners are likely to be more powerful, in particular due to the strong positive linkages between power and wealth.

These linkages most clearly manifest themselves in the allocation of rights themselves. Those who are not allocated rights often initially may be unable to pay for them: it is inconceivable for a small farmer, for example, to pay large corporations like Sterlite to not foul their air. Yet, despite the inability of the poor to pay for their own protection, the Coase theorem judges this situation as socially optimal, precisely because it takes the distribution of rights as given, ignoring inequality and power.

This unjust situation can be theoretically avoided. If rights to resources are allocated to the victims of pollution themselves, then a better outcome is possible, whereby large corporations or the government have to compensate locals for pollution-related damages. However, rights are rarely given to locals, and the state often uses its machinery to abet environment-degrading activities.The wealthy, by flexing their financial muscle, easily bend incumbent political parties to their will. Power, defined as the ability to bear transaction costs (costs to get a deal done) through lobbying or more direct political action, simply overruns the interests of powerless and impoverished. Local governments, such as Panchayats (village level governments), have no jurisdiction over crucial local resources, and state or union governments simply impose themselves on people, even in a federal state. Vedanta’s excesses in conjunction with the state-run Orissa Mining Company and Sterlite’s success in crushing dissent against its obvious malpractices in Thoothakudi have besieged locals who have been pushed to either face the prospect of fighting an indifferent state and global capital, or simply leave their homes and livelihoods behind and to survive in a more precarious position.

It is telling that government officials never approve of locating factories or power plants in areas where the privileged live, work, or have a stake in. Instead polluting factories and waste disposal facilities are typically located in communities least able to resist them – usually marginalised communities underrepresented in political decision-making. In terms of value, in the way economics defines it, an elite residential area is worth far more than a run-down village. The logic of consumer surplus—and corresponding judgements of economic value–is measured in terms of the ability to pay, which is of course greater among the wealthy. What is missed is that market values don’t correspond with the actual welfare loss constituted by the sacrificed lives, residences, and livelihoods of the poorer people affected, whose losses are considered by cost-benefit analyses to be of lower economic importance, despite the fact that they clearly lose everything they have.

It is possible that those who lose out in the process of the allocation of property rights in a capitalist regime are uninformed about the costs imposed upon them by environmental degradation, and therefore do not act against their imposition. An individual’s preference (i.e. willingness to pay) for clean air depends on the availability of information about air quality and effects of pollution on health. With increasing inequality, relevant information often fails to reach the poor or marginalised. Even assuming information reaches these communities, they are surely unable to prioritise it due to their class position. Air pollution causes damage over the long run, and the poor, who are structurally undermined, have to prioritise immediate, desperate needs like employment, food security, shelter etc. due to far tighter budget constraints than the rich.  

Ideally, the poor would want clean air too, but the lack of food is a far more immediate threat to survival. Starvation deaths still persist in India, and in a scenario like this, air pollution might not even be a concern. Imagine not being able to eat three meals a day and being asked to not use wood fires as they cause air pollution. As mentioned earlier, polluting firms, and not locals, are assigned de-facto property rights over local environs, simply because of the crippling nature of class dynamics. Therefore, the poor are expected to pay the price for ‘development.’  In such cases, mainstream cost-benefit analyses mask a glaring reality: that decisions to undertake projects such as the Sardar Sarovar Dam or the Sterlite Smelter benefit a small, elite, minority at the expense of others.

The process of demanding the victims of environmental damage to cope with losses has been relentless. The poor are often on the receiving end of propaganda that seeks to legitimise discomfort faced by them, claiming that it is ‘worth the cost’ - often repeated by those who receive the benefits of environmental damage, and are far removed from the very real tragedies that affect the poor and marginalised. Such rhetoric has been wantonly displayed by the current government in the context of demonetisation - an overnight ban on large currency notes, which affected daily-wage and casual labour the most. The rhetoric was simple: the poor should bear the shock to help curb black money (income and assets on which taxes haven't been paid), as soldiers too sacrifice their lives on the border. Such nationalistic rhetoric overlooks the very real damage caused to people, and diverts attention away.

Due to the permanence of environmental degradation, the losers often belong to future generations of the poor whose interests are not accounted for in decision-making processes, and a veritable ‘tyranny of the contemporary elite’ operates in full force. The unborn rich and elite have their interests protected over the living poor. The benefits of creating factories accrue to the current generation (the owners of the factory, not everyone), and and both current and future generations have to bear the subsequent losses (increased air and water pollution). Simply put, future generations (of the poor) are not present to defend themselves, nor to ensure the provision of resources for their own purposes.

When losers from environmental degradation are less wealthy than the winners, then degradation is greater than the actual social optimum, and vice versa. Therefore, state action and decisions concerning the same will consistently favour some groups over others depending on the distribution of wealth in society, which is usually highly concentrated. This process plays out strikingly in in India– along caste, gender, and class lines–and in the rest of the world.

Economic activities driven by the production of goods demanded by the rich, such as power generation, are likely to undermine the economic interests of the poor, particularly in a recently-electrified country with particularly large inequalities in energy consumption like India. This is not to say the poor don’t benefit from such activities, but that historically the benefits of capitalist production have accrued to the rich in a disproportionate manner. Similarly, the rich also derive more producer surplus from environmentally-degrading activities, as they control most capital stock and the means of production (often described in terms of equity).

Further exacerbating the unconsidered costs of development is the irreversibility of environmental damage. For example, the floodplains of the Yamuna River, if untapped, could be easily and quickly utilized, as shown by the annual ‘World Cultural Festival’ hosted by Sri Sri Ravi Shankar and his cohorts in recent years. The festival has resulted in rapid ecological degradation; the National Green Tribunal estimates the damage caused by overexploitation of the floodplains to be ₹42 crore ($7.78 million USD), not even taking into account the adverse effects on nearby farms. Even if adequate reparations by the offending parties were to be paid, the damage will be difficult to undo: rehabilitation of the floodplains will take at least ten years to complete, and harvests will continue to suffer in the process. Although it may yet pay rehabilitation costs, the state has not compensated farmers adequately, a reflection of the farmers’ lack of agency and rights over their own environs.

These patterns hold both within and across countries. With the increasing concentration of wealth with imperialist powers in the 20th Century, the global environmental costs of profit-driven capitalist growth was imposed on countries that were colonised. In some cases, these costs were very direct - dumping of waste, violating environmental policy in developing nations, and so forth. The 2006 Cote d’Ivoire toxic dump spectacle stands out as a prime example of rich companies based in powerful countries meting out direct costs on poorer nations, often in conjunction with local profit-seeking firms. In other cases, there was an attempt to indirectly impose costs on developing nations. Industrial, often imperialist nation-states continue to oppose the idea of differentiated responsibilities enshrined in the Kyoto Protocol, dismissing the fact that the bulk of the damage was caused by industrial, often imperialist nation-states.

Patterns of technological change also depend on economic and political influences, and can therefore affect the distribution of environmental harms. Profitability acts as the guiding motives in markets, and if policies make dirty technology profitable, then there is no incentive to invest in researching cleaner technology. Furthermore, the development of technology that is less harmful to the environment may be restricted by vested interests who own the patents to devices that could be used in green technologies, but refuse to permit these uses in order to ward off competitors.

Patents are not the only restriction placed on renewable development by political forces. Similarly, funding in universities in Mumbai and Delhi has been cut by the government as part of broader, World Bank-approved austerity measures. This is likely to restrict research pursuing innovations in sustainable and renewable energy (big oil lobbies the government, so the above may not be a coincidence).

While these hurdles remain, it is important to understand that conflict over policy will always exist. One step towards levelling the playing field may be to allocate special, democratically-allocable polluting rights to local citizens. These rights could ensure that any big project that harms the environment requires referendum approval, with special majority required to pass. Even though these measures are subject to elite capture and the problems mentioned above, they still deepen democracy by reducing veto points and improve the bargaining power of those who face the cost of pollution more directly. In India, federal legislation enacted in 1992 created decentralised local self-governments at the village level called panchayats. One can hope that further legislation in this direction can bring about more accountable policy, keeping in mind the rights of the local people. However, with the government in India frequently passing legislation that tightens the linkages of influence between capital, class, and power, such legislation may only be a pipe dream.

In this light, it isn’t surprising that the state so brutally clamped down on the peaceful protest in Tuticorin. It is no coincidence that of those killed by state police, a majority were known leaders of the movement against Sterlite. Outrage expressed by political elites was limited and the state was unapologetic, and will continue to be, as long as financial muscle can easily translate to real power – the keystone of capitalism.

Ritwik Shukla is a researcher, with an interest in political economy, inequality, and public economics. He has a master's degree in economics from the Delhi School of Economics.