Sustainable development literature and government
policy documents are dominated by neo-classical economic concepts and generally
promote the ‘free’ market as the best way of allocating environmental
resources. This is no accident but is a consequence of the persistent advocacy
of free market solutions by influential corporate-funded think tanks.
The environmental crisis of
the late 1980s drew attention to the inadequacies of existing political, economic
and regulatory structures. There were increasing demands from environmental
and citizens groups for tightened environmental standards and increased government
control of private firms and corporations.
This heightening of public
anxiety in response to scientific confirmation of environmental deterioration
induced a wave of corporate political activity. Corporations were able to take
advantage of PR techniques and information technologies available for raising
money, building coalitions, manipulating public opinion and lobbying politicians.
The Chief Executive Officer
for Phillips Petroleum Company, C.J. Silas, wrote in Public Affairs Journal at the beginning of 1990, having observed the rise in environmental consciousness
and the defensiveness of US industry: "There’s no reason we can’t
make the environmental issue our issue. If we wait to be told what to
do–if we offer no initiatives of our own and react defensively–we’re
playing not to lose, and that’s not good enough" (his emphasis).[1]
Exxon spent over a million
dollars in the early 1990s on US congressional candidates in its efforts to
prevent the Clean Air Act being strengthened. Dow Chemical and its affiliates
also gave over a million dollars and opposed the strengthening of the Clean
Air Act as well as pushing for cost-benefit analysis to be incorporated into
the Clean Water Act. Chevron, Exxon and Dow Chemical all gave financial support
to a range of front groups, including Alliance to Keep Americans Working, American
Council on Science and Health and the National Wetlands Coalition.[2]
It was at this time that conservative
think tanks, having been instrumental in bringing Ronald Reagan to power in
the US and Margaret Thatcher to power in the UK, turned their attention to environmental
issues and the defeat of environmental regulations. With an eye to the interests
of their corporate supporters they sought to cast doubt on the very features
of the environmental crisis that had heightened public concerns at the end of
the 1980s including ozone depletion, greenhouse warming and industrial pollution.[3]
Many think tanks that are funded
by corporations are also ideologically committed to promoting free enterprise
and small government so they were particularly concerned that environmental
problems might be interpreted as resulting from a failure of the market system
and lead to increased government intervention through legislation to prevent
environmental problems. In the face of this threat, they promoted market solutions
to environmental problems that had long been advocated by neoclassical economists.
Market solutions included tradeable property and pollution rights as well as
pricing mechanisms and tax incentives.
The promotion of market-based
instruments was viewed by many advocates as a way of resurrecting the role of
the market in the face of environmental failure. The Washington-based Cato Institute,
for example, states that one of its main focuses in the area of natural resources
is "dismantling the morass of centralized command-and-control environmental
regulation and substituting in its place market-oriented regulatory structures..."[4]
According to Heritage Foundation’s
policy analyst, John Shanahan, the free market is a conservation mechanism.
In 1993 Shanahan wrote to President-elect Clinton urging him to use markets
and property rights "where possible to distribute environmental ‘goods’
efficiently and equitably" rather than legislation. He argued that "the
longer the list of environmental regulations, the longer the unemployment lines."[5]
In Australia, the infiltration
and domination of the Canberra bureaucracy by economic rationalists pushing
neoclassical economic solutions was particularly influential in the framing
of sustainable development policy.[6] But think tanks, such as the Tasman Institute,[7]
have also played a major role in influencing the Canberra bureaucracy, as have
key economists from US-based think tanks.
Anderson and Leal from the
San Francisco-based think tank, the Pacific Research Institute for Public Policy,
argue in their book Free Market Environmentalism, that even if legislation
improves environmental quality it is at the expense of "individual freedom
and liberty".[8] Anderson and Leal juxtapose the market with the political
process as a means of allocating environmental resources and argue that the
political process is inefficient, that is it doesn’t reach the optimal
level of pollution where costs are minimised:
If markets produce "too
little" clean water because dischargers do not have to pay for its
use, then political solutions are equally likely to produce "too much" clean water because those who enjoy the benefits do not pay the cost...
Just as pollution externalities can generate too much dirty air, political
externalities can generate too much water storage, clear-cutting, wilderness,
or water quality.
Free market environmentalism
emphasises the importance of market processes in determining optimal amounts
of resource use.[9]
Anderson and Leal are perhaps
more blunt about it than other economists, but the ideas they express are representative
of the rationale behind economic instruments. Economic instruments, such as
taxes and charges, are supposed to make external costs (externalities) part
of the polluter’s decision. Laws can also force the polluter to take notice
of these external costs by prescribing limits to what can be discharged or emitted.
Advocates of economic instruments argue that the market is better able to find
the optimal level of damage, the one that is most economically efficient.
The optimal level of pollution,
for example, is supposed to be the level at which the extra costs to the company
of cleaning up the pollution further equal the cost of environmental damage
caused by that pollution. If the polluter spends any more than this the costs
(to the firm) of extra controls will outweigh the benefits (to those suffering
the adverse affects of the pollution) and so beyond this level of optimum pollution
it is argued to be more cost effective for the company to pay a pollution charge.
The charge, which goes into government coffers, is supposed to compensate the
community for the pollution.
The assumption is that environmental
damage can be paid for and that this is as good as, or even preferable, to avoiding
the damage in the first place. However, the money collected from pollution charges
is seldom used to correct environmental damage. Economists argue that if the
money is spent on something equally worthwhile then the community is still no
worse off; a view that those who suffer from the pollution might find hard to
accept. This also assumes that the benefits that arise from the environment
can be substituted for by other benefits that can be bought on the market. However,
environmental quality is not something that can be swapped for other goods without
a loss of welfare.[10]
Given the workings of the market
in reality, and the well-elaborated imperfections and problems associated with
it, what is surprising is that neoclassical economics has not only dominated
environmental economics but has also increasingly dominated the whole public
discussion of sustainable development.
Nor is the push for free-market
environmentalism confined to the Liberal Party in Australia or the Republican
party in the US. Democrat Bill Clinton, in 1992 prior to becoming President,
said he believed that it was "time for a new era in environmental protection
which used the market to help us get our environment on track - to recognize
that Adam Smith’s invisible hand can have a green thumb...." [11]
In 1991 the OECD issued guidelines
for applying economic instruments[12] and an Economic Incentives Task force
was established by the US EPA "to identify new areas in which to apply
market-based approaches".[13] Similar units have been established in regulatory
agencies in other countries including Australia. At the Earth Summit in Rio
in 1992 business groups pushed for the wider use of economic instruments in
conjunction with self-regulation.[14]
Such thinking has spread throughout
the world and some environmental groups have embraced the free market environmental
rhetoric. Others, such as the Australian Conservation Foundation (ACF), have
hired economists to enable them to talk the language of neoclassical economics
in their negotiations with government over sustainable development policies.
Few question the conservative ideology and corporate interests behind the promotion
of economic instruments but accept them as neutral tools in the arsenal against
environmental destruction.
The assumptions and language
of neoclassical economists is found clearly in Agenda 21, the Action Plan for
Sustainable Development, signed by over 100 nations at the Earth Summit. In
its chapter on integrating environment and development in decision-making it
posits three fundamental objectives:
(a) To incorporate environmental
costs in the decisions of producers and consumers, to reverse the tendency
to treat the environment as a "free good" and to pass these
costs on to other parts of society, other countries, or to future generations;
(b) To move more
fully towards integration of social and environmental costs into economic
activities, so that prices will appropriately reflect the relative scarcity
and total value of resources and contribute towards the prevention of
environmental degradation;
(c) To include, wherever
appropriate, the use of market principles in the framing of economic instruments
and policies to pursue sustainable development.(Section 8.2)
Corporations prefer economic
instruments to legislation because a market system gives power to those most
able to pay. Corporations and firms rather than citizens or environmentalists
have the choice about whether to pollute (and pay the charges) or clean up.
Very polluting or dirty industries can stay in business if they can afford the
pollution charges or the tradeable pollution rights. In this way, companies
can choose whether or not to change production processes or introduce innovations
to reduce their emissions.
Market solutions such as economic
instruments and pricing of the environment make a virtue out of the profit motive
and the pursuit of self-interest. Free market environmentalism perpetuates the
central problems that caused environmental degradation in the first place. They
ensure priority is still given to economic goals and they enable individuals
and firms to make decisions that affect others on the basis of their own economic
interests. The primacy of ‘free’ markets in environmental decision-making
ensures that power remains in the hands of those who direct and control financial
resources; the wealthy, the corporations and the economists they employ. This
will ensure that business can go on as usual and the environment will continue
to deteriorate.
The imperative that environmental
deterioration might once have had for social and political change has been dissipated
by this clever hijacking of the notion of sustainable development.[15] Whilst
the public is led to believe that neoclassical economic solutions can achieve
environmental protection, opportunities to discuss possible alternative futures
are minimised. Why look for something else if you think the existing system
can be adapted to solve the problem? It is the lack of discussion about possible
futures that reinforces the idea that the present system is the only feasible
option in the minds of many people. It means that few people are willing or
able to envisage alternative futures.
An alternative vision of the
future cannot be developed without wide discussion and that discussion will
not happen until there is a general acceptance that the prevailing paradigm
represents an undesirable future. This means facing up to the reality that sustainable
development has been taken over by business groups, and their think tanks and
economists, so that its purpose has become the perpetuation of an outdated paradigm.
Sustainable development policies today rest on the assumption that the quest
for profit is socially beneficial, that those who are best able to make money
should be the ones who decide what technology is used and what is produced and
that corporate efforts to satisfy their self-interest in the market place can
be utilised to protect the environment.
Footnotes
- C. J. Silas, 'The Environment: Playing to Win', Public Relations Journal
(January 1990) , p. 34.
- Mark Megalli and Andy Friedman, Masks of Deception: Corporate Front Groups
in America, Essential Information, 1991) , p. 184.
- Sharon Beder, Global Spin: The Corporate Assault on Environmentalism
(Devon, UK: Green Books, 1997) , chapters 5 and 6.
- Cato Institute, 'Natural Resource Studies: Energy and the Environment',
(Cato Institute, 1995) http://www.cato.org.
- John Shanahan, 'How to help the environment without destroying jobs, Memo
to President-elect Clinton #14', (Washington: The Heritage Foundation, 1993)
- Michael Pusey, Economic Rationalism in Canberra (Cambridge: Cambridge
University Press, 1991) ; Clive Hamilton, 'Ecologically Sustainable Development:
Implications for Governance' Paper presented at the Sustainable Development
-- Implications for the Policy Process, Canberra, 10-12 December 1991.
- Alan Moran, Andrew Chisholm and Michael Porter, eds. Markets, Resources
and the Environment (North Sydney: Allen & Unwin and the Tasman Institute,
1991) .
- T. Anderson and D. Leal, Free Market Environmentalism (San Francisco: Pacific
Research Institute for Public Policy, 1991) , p. 171.
- Ibid., p. 23.
- Sharon Beder, 'Charging the earth: The promotion of price-based measures
for pollution control', Ecological Economics, Vol. 16 (1996).
- John Shanahan, 'How to help the environment without destroying jobs, Memo
to President-elect Clinton #14', (Washington: The Heritage Foundation, 1993).
- OECD, Environmental Policy: How to Apply Economic Instruments (Paris:
OECD Publications, 1991)
- R. Stavins and B. Whitehead, 'Dealing with pollution: Market-based incentives
for environmental protection', Environment, Vol. 34, No. 7 (1992) ,
p. 29.
- S Schmidheiny and The Business Council for Sustainable Development, Changing
Course: A Global Business Perspective on Development and the Environment
(Cambridge, Mass: MIT Press, 1992) , chapter 2.
- Sharon Beder, The Nature of Sustainable Development, 2nd ed (Newham,
Australia: Scribe Publications, 1996).