Critique of the practices of Coca Cola and Pepsico, and the protests by communities in India, are being labeled as liberal, anti-development and unwarranted. A free market analysis – an analysis within the capitalist framework – also shows that these practices are unethical.

In our current worldview, we find it impressive when an individual or entity is able to make large profits through hard work, entrepreneurship, and increased understanding of how the system works. So, from that perspective, there really is nothing wrong with Coca Cola making millions selling flavored water. That the drink is unhealthy is a problem of the consumer – why does the consumer, aware of the health effects continue to buy it. And if the consumer continues to buy it then why blame Coca Cola or Pepsi.

Good point.

Often however, we forget to account for the externalities that an entity dumps on the community in making those profits. So we would agree that an entity manufacturing products using slave labor is a crime. The company makes large profits by using contributions of people without appropriate remuneration.

Or we would accept that an entity making large profits by dumping toxic wastes into the community is a crime. It is a process where the entity is not paying for the cost of its process that makes large profits for this entity; instead, the larger community pays for this waste – either by processing the waste or through disease and their health.

In both cases, larger society has been paying for the cost of the process that makes profits for the entity in question; clearly that is not fair and is exploitation of the larger community. That the community in question could not resist this exploitation or did not realize that this is a crime does not make the act pardonable. The entity clearly could not make such profits without such exploitation.

We, this civilized society, would surely find this unpardonable?

Externalities are thus costs of a process of production that are not paid for by the entity that is engaged in this venture for economic profits. They could also be defined as the economic cost of the impact of some process of production on society that is left unpaid for by the entity that owns this process.

If a certain company keeps its profits high by dumping its wastes on the neighboring community instead of taking care of the waste, that is unethical. The company does not pay for the cost of the hazardous waste thus adding to its profits. In addition, by dumping the waste on the neighboring community, toxins seep into the soil and the water table thereby poisoning the food and water, thus affecting the long term and short term health of the community. Who pays for these costs? In addition, there are ecological costs of this damage.

If the corporation makes millions by draining the water table of a community without paying for the costs of recharging the water table, this corporation is dumping its externality on to the community. The dropping water level economically affects the community in numerous ways – less access to water, loss in livelihoods, more cost of irrigation, short term and long term displacement, among others. The corporation does not pay for these externalities.

Besides, the dropping water levels has ecological effects on the area – effects that we are only now beginning to even quantify and even those methods are quite subjective.

While Coca Cola and Pepsico make millions from these processes, the cost of these processes borne by the communities. Would these costs have reduced the profits of Coca Cola or Pepsico? Certainly. In fact, it is not clear that these companies would be profitable if they paid for these costs.

To save costs and increase profits, Coca Cola and Pepsico are thus making millions while at the same time affecting communities by dumping these costs on the community. The dumping of these externalities is causing even more problems to these communities. This is criminal.

While all of this may be true, supporters of Coke and Pepsi point out that this is true for other entities as well. Why then are the protestors targeting Coke and Pepsi.

It is certainly true that other entities have been involved in similar unethical processes. While judicial and legislative processes have not been able to resolve them completely, these processes have been active and to some extent successful. Laws have been made to prevent dumping of effluents from tanneries or from paper or sugar mills, for example. Entities disrespecting these laws have had action taken against them.

Unfortunately, given the clout of Pepsi and Coke, it has been impossible to take action against these companies. In addition, given their clout, they have been able to influence processes of legislation globally. For example, a collaborative effort has been lobbying successfully against WHO recommendations of healthy sugar intake levels for children.

Thus Coke and Pepsi are not only dumping their externalities on communities, they are effectively preventing laws that can be made to stop their practices. They are not only being criminal, they are actively subverting democratic processes. Numerous examples of such influence exist.

For example, while the chief of KPCB has been charged with wealth incommensurate with income and has been involved in giving clear sheets to environmental malpractices of Coke in Plachimada that have been proven by national and international agencies, no investigations have been started against Coke. Similarly, in UP, while Coke has encroached on community land and the sarpanch has been suspended for corruption, no investigations have been started against Coke.

Thus, Coke and Pepsi are unethical not only from the free market perspective. Given their influence, communities have no choice but to protest democratically. Unfortunately, even that option is being taken away by police option.

And we are being told that the protests are unwarranted. How distorted this stories has become!

Related Articles:
Dialectics of a Judgment: Coca Cola Vs the People of Plachimada
Boycott Coke on Ethical Grounds
International Day of Campaign Against Coke
Resisting Coke: No Pulp Fiction
Ten Reasons to Boycott Coca-Cola