Development: The Lessons of Bhopal

The lure of foreign capital is stronger than environmental worries

THE BHOPAL TRAGEDY of December 3, 1984, in which at least 2,300 people died and more than 200,000 were injured, brought together two critical issues facing not just India but most of the Third World today: the role that Western multinational corporations will play in development, and the degree of environmental risk that poor nations are willing to accept as the price of rapid industrialization. Although Indian shareholders owned 49.1 percent of Union Carbide India Ltd. and government policy had required that the plant be staffed entirely by Indians, the corporation was almost universally perceived in India as an American company. Thus it seemed a foregone conclusion that the disaster would generate an anti-American, anti-capitalist outbreak of the first order, and perhaps a wave of Luddism as well.

The disaster apparently resulted from an unlikely conjunction of irresponsibility and misjudgment. “There were maintenance problems that would not have been tolerated at a plant in the United States,” Jackson B. Browning, Union Carbide s vice president for health, safety, and environmental affairs at the time of the disaster, told me. Overall plant maintenance had been curtailed, as part of a cost-cutting program. A refrigeration unit designed to cool the methyl isocyanate had inexplicably been shut off. A gas neutralizer and a flare tower that were supposed to handle escaping gas could not withstand pressure as strong as that released in the incident. In addition, a water-spray system had been installed in such a way that it could not reach and contain the escaping gas. Few workers in the plant knew that methyl isocyanate could be lethal, and virtually no one in the surrounding community had been told what to do in case of a gas leak. Local management had been complacent. “We’d felt very comfortable,” Vijay P. Gokhale, the managing director of Union Carbide India, told me when we spoke in the autumn of 1985. “We had some of the best safety records in India.”

Conditions at Union Carbide’s Bhopal plant may not have been representative of the way American multinationals operate in the Third World, but they did illustrate some of the problems created by industrialization in a Third World society. “It is obvious that some manufacturing processes are more dangerous in a developing country than in a developed one,” Peter Thacher, a former deputy executive director of the United Nations Environment Program, says. “You have to assume that in a developing country people will not be as careful in terms of inspection, quality control, and maintenance. And you must assume that if a problem occurs, it will be more difficult to cope with.” Researchers from the International Labor Organization found, for instance, that workers in a Volkswagen plant in Mexico tended to think of accidents as “fate,” and relied for security as much on prayers to statues of the Virgin Mary set up throughout the plant as on safety training. Until recently, moreover, environmentalism was often viewed in the Third World as a Western plot to retard the growth of poorer countries. In 1972 Brazil’s Planning Minister welcomed polluting technologies, saying, perhaps flippantly, “Why not? We have a lot left to pollute. They don’t.”

Shortsightedness of that sort is rare these days, but most developing countries still have no toxic-chemical-control laws, and if they had them, would lack both the technical and the institutional capacity to implement them. Shortly before the Bhopal disaster an Indian government study found that only sixteen of the fifty pesticide-manufacturing plants in the country had significant pollution-control systems. The Madhya Pradesh state government had never cited Carbide’s Bhopal plant for significant safety violations or, for that matter, even specified minimum standards for plant safety. Nor had the government ever sought to dissuade tens of thousands of squatters from settling in nearby slums.

When I arrived in Bhopal, I wanted to learn how much hostility the disaster had bred toward the United States and what consequences it might hold for other Western multinationals, in India and elsewhere in the Third World where the risks from industrial development were comparable. I also wanted to find out if the disaster had spurred Third World governments, including India’s, to act against environmental danger, and, indeed, whether it had thrown the whole process of modernization into question. How inevitable, I wondered, were future Bhopals?

THE PEOPLE OF Jai Prakash Nagar, a slum on the outskirts of Bhopal, refer to what happened early on that December morning simply as “the gas.” While many of Union Carbide’s workers fled in panic, a white cloud of methyl isocyanate, escaping from a storage tank during a runaway chemical reaction (probably caused by water contamination when a pipe was improperly washed), drifted over the shanties of the poor. Families were wiped out. Entire streets and blocks were laid waste.

When I walked through Jai Prakash Nagar a year after “the gas,” the physical evidence of disaster had largely disappeared. The Indian government, embarrassed by the attention of the international press, had performed cosmetic surgery on what was once one of the city’s most dismal slums. Drains had been laid, saplings planted, the worst huts pulled down. Fifteen hundred free housing units had been built for indigent survivors. Public and volunteer clinics were providing many victims with their first experience of modern medicine, including the first psychiatrist ever seen in Bhopal. Job programs, supported in part by Union Carbide, were beginning to retrain some of the disabled in leatherwork and tailoring. Contrary to early fears, no significant increase in the incidence of blindness seems to have occurred. Apparent increases in kidney and liver damage and in birth defects have been reported, however. The human suffering was of numbing dimensions. Of the more than 200,000 people injured, according to Indian physicians I spoke with in Bhopal, perhaps 10,000 will endure some form of lasting damage, mostly to their lungs. About 2,500 will remain at least partially crippled for life.

From Jai Prakash Nagar, I took a taxi past the lakes that were once the nawab’s private preserve, and up the low hills to the east, where the offices of the Madhya Pradesh state government are lodged in a modern concrete tower. My appointment was with V. N. Kaul, the state’s secretary of industry and commerce. He told me that the disaster had, at least modestly, heightened concern about environmental safety. I learned later that the state of Maharashtra had sued the Ministry of Defense for pollution caused by an explosives plant. Kerala had sued a chemical concern for contamination of the Periyar River. Villagers in Gujarat, who for years had passively consumed chemically polluted water, had demanded and gotten a freshwater source from the state government. In Madhya Pradesh, Kaul told me, an omnibus pollution-control law was under consideration, and an Indian-owned petrochemical plant had been ordered to relocate to a less populous site. However, he added, “the Bhopal disaster has had no effect on the pace or process of industrial growth. No technology has been turned away or turned down as a result of what happened. Why should we condemn all multinationals because of bad decisions taken by Union Carbide?”

Later, in Bombay, Kaul’s words were echoed by Gokhale of Union Carbide. “Bhopal has had absolutely no effect on multinationals in India,” Gokhale said. “In fact, since then the Indian government has gone even further in seeking tie-ups with foreign companies, and firms from the United States head the list.” And a senior diplomat at the Indian Embassy in Washington informed me that as far as the Indian government was concerned, the tragedy was “a human problem that resulted from one company’s bad planning.” In the streets of Bhopal marchers occasionally chanted, “America made the poison and dumped it in Bhopal!” But these protests seemed almost beside the point. No government officials, no major political parties, took up the cry. No one called for expropriation of Union Carbide’s holdings or urged a general crackdown on foreign capital, though in late November, 1986, the Indian government announced in a Bhopal courtroom that it would seek $3 billion from the Union Carbide Corporation as compensation for the accident and its longand short-term effects.

IN THE 1970s assessments of multinationals’ role in the Third World more often resembled a demonology than a reasoned evaluation of corporations’ complex effects on economic development. Richard J. Barnet and Ronald E. Müller observed, in their influential 1974 book Global Reach, that critics commonly viewed the corporations’ activities as “a recipe for a new stage in authoritarian politics, an international class war of huge proportions, and, ultimately, ecological suicide.” Multinationals were then predominantly American: in 1971, 280 of the 500 largest corporations had their headquarters in the United States. In many places they were hated for their ability to interfere in local politics, their control of essential resources, the ease with which they could shift profits abroad, and what was alleged to be eagerness to dump backward technology and hazardous wastes on countries too unsophisticated to recognize them. Ignorance of the way that multinationals actually functioned sometimes merged with radical ideology in an economic war against real or imagined exploitation. From 1970 to 1975, Third World countries nationalized 336 foreign-owned companies, whereas the figure for the previous decade was 136, Many companies left Third World markets, some feeling squeezed out by punitive regulation, tariff barriers, and a trend toward centralized economic planning, frequently financed by enormous loans from Western banks willing to lend to governments of any political makeup.

Multinationals that weathered the ideological firestorms of the 1970s proved to be far more adaptable than their critics had foreseen. When developing countries sought to supplant the multinationals with state monopolies, the displaced corporations learned to make money by licensing their technology, contracting out management, and bartering their products for local goods instead of cash. When countries demanded that multinationals export more finished goods to bring in foreign currencies, corporations expanded their marketing networks. When governments insisted on a voice in multinationals’ activities, joint ventures proliferated. In China, for instance, R. J. Reynolds is building a cigarette plant in partnership with a state tobacco company, American Motors Corporation has teamed up with a Chinese auto maker to manufacture jeeps, and the Foxboro Corporation is building industrial-process-control systems with the cooperation of a Shanghai firm. Diffusion of ownership has weakened nationalist hostility to multinationals by blurring the once bitter issue of direct foreign control.

A pronounced change has also taken place in the attitude of many developing nations toward multinationals. A Latin American diplomat who specializes in the activities of multinationals told me not long ago, “The ghost of ideology is fading: Third World countries are learning to deal with transnationals as real entities in the real world.” What conflict remains has ceased to focus on allegations of imperialism and now tends to take the form of pragmatic negotiations over such issues as import substitution, the location of corporate research-anddevelopment facilities, and the composition of joint ventures. The reasons for this change of heart are manifold: the drying up of easy development loans from Western banks and the burgeoning of foreign debt; a growing recognition that foreign private investment can promote industrialization and generate jobs, foreign exchange, and tax revenues; a perception that continuing modernization may hinge on the absorption of advanced technologies that can be obtained only from developed capitalist countries; and a widening disillusionment with socialist economics.

For many countries the turnabout has been dramatic. Turkey has reversed its long-standing protectionism, junked most of its export controls, and proposed the establishment of free-trade zones on its Mediterranean coast. Algeria has adopted a new investment code that guarantees foreign investors the right to repatriate profits. Mexico in 1985 authorized the largest number of fully foreignowned investments in its recent history. Ecuador recently raised the permissible proportion of foreign ownership of export-oriented companies from 30 percent to 100 percent. Guinea and Mozambique have shed many orthodox Marxist policies that left their economies in ruins, and are courting Western investment. As Babacar N’Diaye, the president of the African Development Bank, has put it, “Africa in the eighties is not taking account, as far as economics is concerned, of ideology. We are pragmatists.”The sharpest policy reversal of all has occurred in China, which has undertaken a far-reaching experiment in free-market policies throughout its economy and claims some $4.6 billion in foreign investment since 1979. “Twenty years ago there were great certitudes on both sides of the ideological divide,” says Richard J. Barnet, who is now a senior fellow at the Institute for Policy Studies, in Washington, D.C. “Those certainties don’t exist today. When China welcomes multinationals and sets up export zones for companies that it used to decry as the epitome of exploitation and imperialism, then it is clear that the ideological issues surrounding multinationals have changed.”

The India of Rajiv Gandhi embodies many of the new attitudes that are sweeping the Third World. “You no longer find anyone of influence arguing that the future of the economy or the country lies in greater state intervention, in more nationalization or government control,” a director of the State Bank of India remarked to me one evening at a cocktail party in the home of an American diplomat. Since his accession to power after his mother’s assassination, in 1984, Rajiv Gandhi has replaced the Fabian socialists who had guided India since independence with a generation of young technocrats who are more interested in building industries that can compete with Hong Kong and Japan than they are in ideology. In the past two years the government has cut taxes, removed production quotas and import restrictions, established export incentives, deregulated the electronic and engineering sectors, and vigorously promoted commercial competition, telling companies at one point that they would “have to fight for survival” among themselves. At Gandhi’s instruction, the central government has adopted the first five-year plan in Indian history to rely on the private sector more than on the public sector to create jobs.

Since last year Indian firms have scrambled to conclude new technicalcollaboration agreements with foreign investors. While India has successfully sought licenses to import more than $1 billion in advanced American technology, including state-of-the-art computers, record numbers of American trade delegations have been traveling to India in search of investment opportunities. In this atmosphere the Bhopal accident was perceived less as a political or moral event than as a fact of industrial life.

IRONICALLY, MANY countries have grown reluctant to set rigorous environmental and industrial safety standards at a time when multinationals have become, probably, more responsive than they have ever been to environmental concerns. Moreover, high environmental standards seem not to be a deterrent to investment. According to a 1985 study by the United Nations Centre on Transnational Corporations, multinational investment in hazardous industries has gravitated chiefly toward countries with advanced industrial economies and stiff pollution controls. Among developing countries Singapore, one of the most environmentally conscious nations in the world, has a virtually unsurpassed record of winning foreign investment. In the future, low or unenforced environmental standards, suggestive as they are of a backward, ignorant population and work force, are more likely to deter Western investment than to attract it.

In the absence of adequate local standards for environmental safety, multinationals will in the coming years demand fuller control over the staffing, design, and equipment of their foreign plants, and when they build new facilities they will probably insist that local governments share legal liability in the event of accidents. “You can’t be beholden to a foreign government as to how to run vour company, and then be liable to lawsuits in American courts,” says Alvin M. Natkin, the president of the Continental Environment Company and a former manager for environmental affairs of the Exxon Corporation. “If a corporation has to take in local partners, and especially a foreign government, it’s going to be a lot more careful about liability and safety responsibilities than it would have been before Bhopal. If a corporation goes into a country on its own, it’s going to run its business just as it would in the United States.”

The fears, common in the 1970s, that multinationals would increasingly devastate the Third Worlds’s environment now seem exaggerated. “Pollution havens,” free of environmental regulation, failed to proliferate as many critics had expected, and where they existed they failed to attract the interest of major Western companies. On the contrary, multinationals now appear to be the primary source of up-to-date safety and environmental technology for the Third World. A 1984 study by the International Labor Organization determined that multinationals generally maintain health and safety standards well above those required by the developing countries in which they operate, and that they frequently install the latest safety features in new plants they build in the Third World. In two new chemical plants that it is building in Argentina, for instance, the Monsanto Company is including a state-of-the-art computerized processcontrol system that is not yet in place in some of the company’s United States facilities, and in planning a Brazilian herbicide plant the company has used the most modern available computer model to gauge the probable dispersion of gas in the event of a ruptured ammonia storage tank. Since the Bhopal disaster virtually every American chemical company has undertaken an exhaustive audit of its safety standards and its handling of hazardous substances.

No real constituency yet exists in most developing countries, however, for serious efforts to protect the environment. Although more than a hundred developing countries today have agencies that are at least nominally responsible for environmental safety, up from just a handful a decade ago, most are understaffed, underfunded, and overruled in policy debates by economic planners who still see development and safety as mutually exclusive goals. Nigeria, for instance, until recently one of the most rapidly industrializing nations in Africa, had in 1984 just nineteen safety inspectors to monitor thousands of factories and workshops. Where governments are indifferent to environmental improvement, well-intentioned foreign firms are unlikely to have much effect. “It’s hard to tell a government what to do, and especially to suggest that it doesn’t know how to take care of its own citizens,” Alvin Natkin, of Continental Environment, says. Local firms in the Third World are also unlikely to be imbued with the sort of environmental ethics that have become common in the West in recent years. When 100,000 residents of the Indian city of Virabhapatnam were exposed to a cloud of noxious gas just months after Bhopal, none of the half-dozen plants nearby was willing to take responsibility.

BEFORE HIS LUNGS were damaged in the Bhopal disaster, Tunda Lal had earned about $1.50 a day as a mason, when work was available. When I met him in Jai Prakash Nagar, he rarely had the energy to stay on his feet more than a few hours a day. As a registered victim of the gas leak, he will receive compensation when the suit against Union Carbide is settled. But that may be many years away. In the meantime, he hopes to find a place in a job-training program, and sometimes begs in the street. I asked him what he would do if the Carbide plant reopened, handling the same gas in the same way it had before and posing the same hazards to his community. “If it opened again tomorrow,” Lal replied, “I’d be happy to take any job they offered me. I wouldn’t hesitate for a minute. I want to work in a factory, any factory. Before ‘the gas’ the Union Carbide plant was the best place in all Bhopal to work.”

“I’d go too, do or die,” added a neighbor named Tulsi Ram, brandishing a wad of medical prescriptions and leaning on a cane.

Lai and Ram, and others like them in Bhopal, understand the nature of economic change better than many Western critics of multinationals. The security of a good wage and the dignity of a modern job are not things they take for granted but distant, even profound aspirations that can be achieved only through ambition and risk. No one today contemplates a reversal of the process of modernization and industrialization. It must take place, most Third World governments, and apparently increasing numbers of their citizens, believe, at least in part on the basis of Western capital.

—Fergus M. Bordewich