How We Got Here: Economic Ideology and Climate Inaction

New York, NY—Since President Ronald Reagan entered the White House with big promises to smash the regulatory state and free the market, decades of research about the climate crisis and the threat it poses have gone largely ignored. Recently, however, youth activists and environmental justice groups have begun to point to the role of neoliberalism in the creation of the climate crisis and to help explain our government’s inaction.[1]

Roosevelt Institute Fellow Mark Paul and Anders Fremstad of Colorado State University released a new report that presents a coherent account of how neoliberalism has contributed to climate inaction in the US. Transcending Neoliberalism: How the Free-Market Myth Has Prevented Climate Action analyzes the impact that the three tenets of the neoliberal order—decentralized democracy, defunded public investment, and a deregulated economy—have had on constraining collective action on climate change or rewriting the rules governing energy and the economy. Specifically, it has:

1. Decentralized Democracy: A feature of the neoliberal order in the US has been the systematic decentralization of government. Neoliberals have promoted federalism to address “government failure” and subjected the state to market forces, exacerbating the race to the bottom in climate policy.
2. Defunded public investment: Neoliberals dismantled the Keynesian consensus that the state has a major role to play in providing public goods, stabilizing the macroeconomy, and solving coordination problems. In the neoliberal order, government investments are rejected as expensive and wasteful, crowding out productive private investments. By undermining public investment, neoliberal ideology has severely limited the set of tools available to policymakers to set the economy on a path to decarbonization
3. Deregulated the economy: Neoliberalism has launched a concentrated attack on the government’s ability to regulate the economy. Ignoring the ability of regulations to positively shape markets, neoliberals dismiss government intervention as “red tape” that merely increases the cost of doing business.

“The combined effect of each of the three tenants hinders our collective ability to address the climate crisis,” said Paul. “For our policymakers to truly fix this growing crisis, they will need to shed this neoliberal straitjacket and use the federal government to pursue large public investments and binding climate regulations.”

“As the excitement builds around a Green New Deal, it is clear that confronting climate change will require us to confront the ideological system that helped create it. Viewing the climate crisis through neoliberal glasses has brought us to the brink of catastrophe, but we can reverse this,” said Fremstad. “We need the federal government to address climate change head on, rather than exacerbate the race to the bottom by leaving key decisions to state and local governments, which are poorly equipped to handle the task.”

The report builds on the Roosevelt Institute’s paper Decarbonizing the US Economy: Pathways Toward a Green New Deal, which outlined an economic policy framework to address climate change. The climate crisis is a far-reaching problem that requires a fundamental reorganizing of the economy, which is a top research priority for the Roosevelt Institute in the coming months.

A Roosevelt Why This Matters explains why the “free market” won’t free us from global warming, nor will it allow us to achieve freedom, equality, and economic security for all.

[1] Neoliberalism is an ideology that seeks to put “freedom” at the center of a new social contract. Specifically, it elevates markets as the ideal structure for social allocation and decision-making, and it aims to shrink the role of the state and other democratic institutions in an effort to take as much of the economy out of the public sphere as possible.

About the Roosevelt Institute

The Roosevelt Institute, a New York-based think tank, promotes bold policy reforms that would redefine the American economy and our democracy. With a focus on curbing corporate power and reclaiming public power, Roosevelt is helping people understand that the economy is shaped by choices—via institutions and the rules that structure markets—while also exploring the economics of race and gender and the changing 21st-century economy. Roosevelt is armed with a transformative vision for the future, working to move the country toward a new economic and political system: one built by many for the good of all.

To keep up to date with the Roosevelt Institute, please visit us on Twitter or follow our work at #RewriteTheRules.

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