Externalities have been viewed as a necessary evil in the path of economic development. Friends, in response to an earlier article, have said so with a caveat that we need to be mindful of the externalities.

We need to be mindful indeed. For the externalities that we have buried under the fine print � a mere caveat � in the process of development, of economic progress, threatens to hijack that progress.

Let us take an example. When waste to energy plants were set up in the western world and in Japan, it promised much. Energy would be generated while trash � the perennial problem of development � would be taken care of. It was a double whammy. Oh, some noxious fumes might be generated in the process. But that�s a small externality, a fine print, in this process that will give much to society, help cities with their trash and even help energy.

The noxious fumes, it turned out, had a large amount of dioxins � one of the most toxic chemicals known on this planet. It�s a by-product which can be formed when any mixture of aromatic chemicals is thermally degenerated. It has caused much havoc � accumulating in mammary glands and affecting babies. Eventually, environmental agencies � including the EPA � has required that plants running such operations must have a slew of online control systems to monitor levels of dioxins. The process became too expensive to run and now most of these technologies are migrating to the third world, looking for places without these regulations.

In the effort for progress through Waste to Energy plants, what was the impact of increased populations with cancer on the local economies? On the state treasury? What was the impact on the lives of these people?

In a very different example, in Plachimada, Coke is accused of drawing millions of gallons of water every year and has caused the water levels to drop. Agriculture in this area has become difficult � the top soil in various areas has cracked. This in the moderate rainfall area in the high rainfall state of Kerala. That has been the by-product of this mode of development in Plachimada.

But what are the effects of these externalities? In Plachimada, while Coke has given a couple of hundred jobs � and most of these are not full time salaried positions � to people, water levels have affected the ability of many more to provide subsistence to their families. Thousands of families from nearby villages are affected. What is the cost of thousands of people not being able to make a living? What is the cost in terms of health, in terms of education and in terms of dependence on the state?

I must add that the plant has also been dumping its waste � giving it to the local communities as free fertilizers. The free fertilizers have heavy metal wastes and this has affected the food cycle making the food toxic. Coke initially said that this was false but after BBC stepped up with an investigative report, Coke says that the local plant was not following international standards. These practices � all in the name of more profit, and economic development � have also produced added externalities.

As the situation worsens, these communities will migrate from these agrarian communities where they were able to subsist to large cities, often to live in slums. They are not going to the cities because they wanted to live in slums � they are going because activities for so called economic development have taken away their ability for livelihood. What is the cost on these cities?

The same has been true with respect to dioxins, or other forms of chemical dumping. It is affecting the ability of local communities to live healthy � what is the cost of that? And are we being selective when we account for this economic development?

The same has been true with a number of mining projects. What is the cost of thousands of people who have been thrown out without rehabilitation of any kind and thousands who have been given some minimal compensation � alms if you will � when they could protest no longer in the face of growing immediate hunger in their families? Families whose land has been taken away and who have been pushed into even worse conditions in slums in large cities.

What is the cost of families who live in the neighborhood of tailing ponds where the effluents from these mines are discharged? Over time, various heavy metals from the mining processes get into the water table making the land non-irrigable or the food toxic. What is the cost of the health of these families � and there are thousands of them. What is the cost of them not being able to earn a livelihood? And what is the cost of them having to move from the agrarian sector where they could earn their livelihoods and live in slums in the cities ? Are we in fact creating more unemployed through these processes?

Many of these projects provide decent paying jobs to a small community and provide large profits to a few. But a large community has being paying for these gains by their health, their ability to procure livelihoods, their ability to be employed. And we must remember that these are people who are hard working � often working much harder than most of us.

It raises the question of fairness. But it also asks the question of economics itself? Are we claiming economic growth by not accounting for large swathes of our community that are paying for these externalized costs? Are the externalized costs in fact as large as the economic development we claim?

In which case, should the question of externality not be addressed as an important question rather than a fine print that we will get to at a later point?

- Sanat Mohanty

Related Links
The Company We Keep
Market Critique of Coke Policies
P.M. Manmohan Singh and Swaraj
Address to President Kalam
Who Does the Government Serve