The sustainable development agenda is increasingly being set by economists and business groups and has become the major vehicle for "free market environmentalism". The sustainable development literature today is dominated by neo-classical economic concepts and generally promotes the 'free' market as the best way of allocating environmental resources.

Many government sustainable development policies aim to incorporate environmental assets into the economic system to ensure the sustainability of the economic system. They incorporate the idea that wealth creation can substitute for the loss of environmental amenity; that putting a price on the environment will help us protect it unless degrading it is more profitable; that businesses should base their decisions about polluting behaviour on economic considerations and the quest for profit; that economic growth is necessary for environmental protection and therefore should take priority over it.

The environmental crisis of the 1980s brought with it calls for a new environmental ethic and changes in moral values that governed the human-nature relationship. The heightened awareness of global and local environmental problems in many countries 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. Green political groups challenged traditional political parties in elections with varying degrees of success.

It appeared as if the free market economic system (like the socialist system) was unable to provide economic growth and environmental protection. At risk was the possibility that the environmental benevolence of the profit-motive itself could be questioned and the corporations responsible for much pollution labelled as villains. Schultz (quoted in Kelman 1983, p. 297) identified this possibility early on when he said that what was needed for social welfare was "the identification, not of villains and heroes but of the defects in the incentive system that drive ordinary decent citizens into doing things contrary to the common good."

Promoting Market Solutions

Under threat, business groups and neoclassical economists looked for market solutions to environmental problems. They were heavily influenced by the resurgence of economic fundamentalism during the 1980s and the trend towards increasing deregulation and privatisation in Western capitalist economies. The preference for market solutions tends to be an ideologically based one:

Its first pillar comes squarely out of a philosophical tradition that grew from Adam Smith's notion that individual pursuit of self-interest would, in a regime of competitive markets, maximise the social good. That tradition is so firmly embedded in economics by now that most economists probably do not realize, unless they venture out into the world of noneconomists, that it is a proposition of moral philosophy...(Kelman 1983, 297)

The promotion of market-based instruments is viewed by many of its advocates as a way of resurrecting the role of the market in the face of environmental failure. 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.

This influence has manifest in different ways in different countries. In Australia, the infiltration and domination of the Canberra bureaucracy by economic rationalists pushing neoclassical economic solutions influenced the framing of sustainable development policy (Pusey 1991; Hamilton, 1991). In the Britain, economists such as David Pearce were particularly influential in the sustainable development debate. In the United States, and to a lesser extent Britain and Australia, think tanks have been influential.

Conservative think tanks in various nations have consistently opposed government regulation and promoted the virtues of a "free" market unconstrained by a burden of red tape. As a result they push for deregulation and privatisation of government provided services and publicly owned resources. 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..."(Cato Institute, 1995)

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 arguing that "the longer the list of environmental regulations, the longer the unemployment lines."(Shanahan 1993)

Anderson and Leal (1991) from the San Francisco-based think tank, the Pacific Research Institute for Public Policy, say that "free market environmentalism emphasizes the importance of human institutions that facilitate rather than discourage the evolution of individual rights." They argue that even if legislation improves environmental quality it is at the expense of "individual freedom and liberty"(p. 171). 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.(p. 23)

Nor is the push for free-market environmentalism confined to the US Republican party. 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...."(Shanahan 1993) Such thinking has spread throughout the world.

In 1991 the OECD issued guidelines for applying economic instruments (OECD 1991) and an Economic Incentives Task force was established by the US EPA "to identify new areas in which to apply market-based approaches" (Stavins and Whitehead 1992, 29). 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 (Schmidheiny 1992b, chapter 2).

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:

1. 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;
2. 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;
3. To include, wherever appropriate, the use of market principles in the framing of economic instruments and policies to pursue sustainable development.(Section 8.2)

Agenda 21 goes on, in the following paragraph, to the need to integrate environmental and economic accounting in national accounting procedures.

A first step towards the integration of sustainability into economic management is the establishment of better measurements of the crucial role of environment as a source of natural capital and as a sink for by-products generated during the production of man-made capital and other human activities.(Section 8.41)

So long as the environment is seen to be a set of resources and assets that feed the economic system, then it makes sense to believe that substitutes can be found when some of these resources and assets run out or are damaged. Vandana Shiva, an Indian activist, points to the fallacy of "the non-destructibility of capital and the substitutability of capital and nature":

since industrial raw materials and market commodities have substitutes, sustainability is translated into substitutability of materials, which is further translated into convertibility into profits and cash.(Shiva 1991b, p.9)

Ethics, Equity and the Market

There is a clear inconsistency between the central ethic of sustainable development, equity, and the means proposed in free market environmentalism to achieve sustainable development. Market-based measures grant the highest decision-making power over environmental quality to those who currently make production decisions now. A market system gives power to those most able to pay. Corporations and firms rather than citizens or environmentalists will 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.

In a myriad of ways the approaches to sustainable development advocated by environmental economists, and taken up by governments in many countries, either reinforce or exacerbate inequities in those countries. This suggests that equity is either a minor part of the rhetoric of sustainable development and is not really a central concern of those governments, or those governments have not understood the equity consequences of policies being promoted by interest groups who have other agendas and priorities.

The real problem is not that the environment is not privately owned and does not have a market value but rather that economic considerations take priority in most countries around the world. The tragedy of the commons is not that there are commons but rather the freedom of the commons. The lack of legal sanctions combined with a value system that promotes the raising of individual economic interest to a primary decision-making principle is what destroys the commons.

Seen in this light, economic instruments, privatisation and environmental 'valuation' are all mechanisms for perpetuating 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.

Shiva points out that sustainability should require that markets and the production process be reshaped to fit nature's logic rather than "the logic of profits and capital accumulation, and returns on investment" determining nature's fate. She says sustainable development as it is currently promoted "protects the primacy of capital. It is still assumed that capital is the basis of all activity"(1991b, p. 9).

The imperative that environmental deterioration might once have had for social and political change has been dissipated by the way sustainable development has been construed. Whilst the public is led to believe that this type of sustainable development 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 prevailing paradigms are unlikely to solve major environmental problems. Can the pursuit of self-interest within a framework of ever increasing production and consumption really be harnessed to protect the environment?

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