A shock to the ecosystem: Neoliberalism and the environment

In the past 25 years, neoliberalism has become economic orthodoxy. In that time, as James McCarthy and Scott Prudham have written, neoliberalism’s “political and ideological projects have successfully masqueraded as a set of objective, natural, and technocratic truisms” (p.276).

Indeed, so pervasively institutionalised have the values of neoliberalism become that it almost seems a throwback to the 1990s even to write about it critically, at least in the New Zealand context that is most familiar to me. Here, as elsewhere, both the dominant political parties – Labour (nominally social democratic) and National (conservative) – support a neoliberal agenda, and all that it entails, in what amounts to a tacit ‘grand coalition’ in a number of policy areas.

In this article I look at the impact of neoliberalism on the environment through both the roll-back of the state and the roll-out of neoliberal policies, taking some examples from recent New Zealand experience.


The roll-back of the state 


McCarthy and Prudham describe the motivation for the ‘roll-back’ of the state as an “antagonism toward state ‘interference’ (ie regulation)”. This antagonism is seen in “deep cuts to state fiscal and administrative resources and functions” that were previously “aimed at curbing socially and environmentally destructive effects of capitalist production” (p.276). The most familiar examples in terms of social policy are the cuts to welfare provision and benefits instigated around the western world in the 1980s and 1990s.

‘Roll-back’ is also seen in a deliberate fragmentation of regulatory systems: a shift to “neocorporatist regulatory frameworks involving non-binding standards and rules” (p.276) controlled by unelected interested parties such as industry associations and leading ultimately to the essentially neoliberal idea of ‘corporate social responsibility’. McCarthy and Prudham also explain how this fragmentation is further created through the “devolution of regulatory responsibilities to local levels of government without proportional transfers of power or capacity” along with the shift of other regulatory responsibilities ‘upwards’ to “international institutions with little to no transparency or accountability” (p.276).

This particular mode of neoliberalism has a very strong resonance in New Zealand. One aspect of fragmentation by devolution can be seen in environmental regulation, which is largely put into effect by 17 regional and district councils. Some regional councils, for example, the Auckland Regional Council (ARC), have a large population (1.3 million people in the ARC’s case) and the sizeable income that goes with it. As a consequence, the ARC is able to support a significant team of people working in environmental monitoring, regulation and control. The district councils are minute in comparison, typified by the Marlborough District Council which serves 40,000 people and therefore has a fraction of the resources and capacity to handle the same environmental responsibilities as the ARC.

The tiny size of such councils is completely out of proportion to the scale of the problems they are supposed to manage (see this story from the Marlborough Express for an example). One might say that the small, relatively poorly-resourced councils are set up to fail on environmental issues – and some of them certainly are failing badly. Green co-leader Russel Norman has catalogued the dreadful state of New Zealand’s lowland rivers and reported on the unfenced streams and rivers being freely polluted by cattle.

Alongside this devolution of responsibility, we see power and control being shifted upwards and entirely out of local hands. One good example of this is Food Standards Australia New Zealand, a unified agency operating the food regulatory system in both countries. In this agency, New Zealand is accorded the same status and voting rights as an Australian state. The ministerial council of FSANZ is chaired by the Australian Federal Minister, which means New Zealand’s interests are represented by just one vote out of nine.

Loss of local control is also manifest in the great sovereignty sell-off known as the ‘free trade agreement’ (FTA). New Zealand has been a big fan of these deals for some time and, in April 2008, signed an FTA with China. New Zealand Trade Minister Phil Goff described the agreement as “historic” and “hugely important strategically.” While there was some political criticism, the media followed the government’s lead, with the New Zealand Listener hardly able to restrain itself as it gushed about the business opportunities now available in China as a “once in a generation road to riches” for Kiwis.

The environmental sting in these FTAs is found in the protection from ‘expropriation’ afforded to transnational corporations. Under the FTA, any environmental regulations or resource use consent requirements which affect such a corporation must be ‘reasonable’ – but not as determined by the people of New Zealand or their elected representatives. The reasonableness (or otherwise) is decided by a panel of three arbitrators, one of whom is appointed by the corporation concerned. Any regulations or requirements deemed ‘unreasonable’ would be an ‘expropriation’ under the FTA rules (in other words, what is seen from a neoliberal standpoint as an illegal imposition on private property rights known as ‘regulatory taking’). Compensation is payable for any such ‘expropriation’.

This is not just a fear of what might happen. James McCarthy has described how Metalclad Corporation was refused municipal permits for the expansion of a waste disposal facility it had purchased in Guadalcazar, Mexico. The company sought arbitration under the investment protection rules of the North American FTA (NAFTA) and was awarded US$16.7 million on the basis of the arbitration tribunal’s own interpretations of domestic Mexican law.

It’s interesting to note that the investment protection provisions of the China-New Zealand FTA (Chapter 11 – Investment) look very much like those in the notorious and ill-fated MAI (IV – Investment Protection). While the MAI attracted huge opposition from anti-globalisation activists, unions, indigenous peoples and greens around the world in the late 1990s, now the bilateral FTAs accumulate around the world with hardly a street protest, and the piecemeal MAI arrives by stealth.

The roll-out of neoliberalism

The ‘roll-back’ of the state that I’ve described so far is accompanied by the ‘roll-out’ of neoliberalism – the familiar “near worship of … the ‘self regulating market’ … as the mechanism for allocating all goods and services.” This dogma leads to “privatization via putatively market-based schemes” along with a “deeply contradictory endorsement of excludable, private property rights and commodification created and defended by the state” (p.276). Neoliberal ideas about environmental policy are found, for example, in ‘ecosystem markets’ and also in the carbon market, which I focus on here.

In current debates on the ways to address global warming, it seems to be assumed that a market system is the only possible mechanism available to regulate CO2 and other greenhouse gas emissions. To appreciate the fallacy in this thinking, it is worth noting how the idea of tradeable permits came to be the conventional wisdom of emissions reduction. In Carbon trading: A critical conversation (at p. 51), Larry Lohmann describes how, during the Kyoto meetings in 1997, the Brasilian delegation proposed a system whereby fines imposed on countries exceeding their emission cap would be used to fund ‘clean energy’ developments in the South. This proposal was accepted in principle by the ‘G-77 plus China’ group of developing nations. However, after a few days of intensive negotiations, ‘fines’ had become ‘prices’ and a ‘judicial system’ had become a ‘market’, in line with what the US wanted. The dominance of US power, the desire of other nations to keep the US on board, and the pressure applied by corporations drove the agenda in this direction throughout.

As most readers will realise, all this is deeply ironic because the US has never ratified the Kyoto Protocol, having formally withdrawn from it in 2001. Nevertheless, the attachment to the idea of an emission permit/trading system remains, promoted (by governments, political parties, policy wonks, international agencies and even many NGOs too) as the best way to tackle climate change – regardless of the accumulating evidence to the contrary.

Conclusion: challenge the conventional wisdom of neoliberalism

Naomi Klein has written with terrifying clarity about the Shock Doctrine origins of neoliberalism. It may well be true that we still live with the shock waves generated by the neoliberal blitzkrieg of the past two decades. It is certainly true that neoliberal thinking has become the conventional political wisdom in that short time, its pervasive assumptions internalised and now unquestioned even in some supposedly radical circles. But we can and must recover from this shock, and challenge the neoliberal worldview that dominates governments and institutions.

Let us reject the commodification of nature and the fetishisation of competitive markets. These are not the solutions to the ecological crisis that we face.


James McCarthy (2004) Privatizing conditions of production: trade agreements as neoliberal environmental governance. Geoforum, 35, 327-341.

James McCarthy & Scott Prudham (2004) Neoliberal nature and the nature of neoliberalism. Geoforum, 35, 275-283.



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