How free market advocates have delivered us big government

We all know the argument; Governments are inherently ineffective at guiding markets and will always screw it up when they try to. Markets, the argument goes, are inherently more efficient at picking technologies and responding to constraints, so should be left to do their thing.

People who want to resist change, for any number of reasons, latch on to this argument as another excuse to avoid action on climate. After all, even if climate is a problem, government will surely get it wrong if they try to fix it. It is this argument, along with climate scepticism and the over-riding priority given to economic growth, which has, in various combinations, been used against climate action since the threat became clear in the late 1980’s.

Yes, we forget how long this problem has been in the mainstream debate. It was back then that the pro-market, conservative British Prime Minister Margaret Thatcher argued: “The danger of global warming is as yet unseen but real enough for us to make changes and sacrifices, so that we do not live at the expense of future generations.”

However, despite their adulation of her in other areas, free market advocates ignored Thatcher’s sensible, business-like approach to climate change and instead latched onto the fear of big government. It is true that views of Tea Party types in the US, who genuinely believe the climate threat is a conspiracy cooked up by people with a secret big government agenda, is not the dominant view of the corporate sector. However the general view – that government can’t be trusted, that markets should be left to do their thing and that imposing limits on behavior is inherently dangerous – is widespread and mainstream among those with their hands on the market levers.

Whatever the merits of this argument – and it is certainly true that the record of western governments in such areas is, at best, mixed and arguably poor – the effect of it being leverage to resist change is now clear: We will now move into an era of big, interventionist government that will last for decades and will impose tight controls on market behavior. The percentage of the economy controlled directly or indirectly by government will increase and the market will inevitably become less efficient in the process – it being true that interventionist government and central planning are generally economically inefficient but socially effective – war being the clearest example.

Why is the arrival of such an era now so clear?

We can see, after the Copenhagen and Cancun climate conferences, that the pace of response to the climate threat is not going to keep up with what the science says is needed. There is no dispute on the science – none of any consequence – that is holding back action. Both conferences saw governments universally agreeing that 20C was the maximum level of warming we can tolerate and the right scientific framing for policy. (Many scientists and an increasing number of countries argue it’s too high, but no one credible argues it’s too low.) So the science is clear but the action is slower than the science demands. We can lament this but that doesn’t change it.

How this will all unfold is not driven by politics but by science. The world is going to get ugly and there will be significant economic cost as a result. We are going to have rising sea levels and extreme weather causing widespread disruption, damage to infrastructure, geopolitical instability and large refugee flows. We’re going to have food crises and resulting social and economic upheavals. We will see ocean acidification and the collapse of fisheries.

While we won’t be able to prevent all that, we will, once it really takes hold, certainly then act to stop it getting worse. Guess what all this means? Big government.

What do you think is going to happen when large areas of expensive coastal real estate are damaged and even larger areas collapse in value as a result? An insurance crisis, a credit crisis and economic costs – all requiring big government intervention. Guess who steps in when there’s a food crisis and asserts new controls over trade and the market? Big government. What’s going to happen when major infrastructure is threatened by rising seas and extreme weather? Do you think the market will be left to run its course when power supplies, airports and freight transport facilities are threatened? No, government will step in and fix it.  It will be messy, ugly and inefficient but it will certainly happen.

By that stage, there will also be a sense of crisis and associated political demand for dramatic emissions reductions. The nature of the lag between emissions reduction and impact means the required cuts will then, by necessity, require draconian measures – as I argued in the paper I co-authored on the One Degree War Plan. That too will require the heavy hand of big government.

Life is full of irony at the moment. WikiLeaks is inspiring right wing conservatives in the US to call for intervention by big government against freedom of speech. The centrally planned Chinese economy looks like seizing the huge market and innovation opportunity now presented by clean energy. It’s recently adopted new “Magic 7” strategic industries that will power China’s economic development have a strong green focus, as you can see in this HSBC analysis. And on climate we will soon see the return of big government with strong restrictions on our behaviour  - because free marketeers ignored the sensible, conservative approach advocated by Margaret Thatcher over two decades ago.

So when this trend becomes clear, remember it was brought to you not by a conspiracy of left wing climate change campaigners, but by free marketeers who so detested big government they have delivered a situation where nothing else will work.

Nice work guys.

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10 Responses to How free market advocates have delivered us big government
  1. Stephen G

    G’day Paul,

    Congratulations on the book hitting the printers…that’s gotta feel pretty good? :-)

    WOW! You could’ve called this article ‘In a Nutshell’! It looks like you’ve had an interesting few weeks and you’re a bit over the ‘idiot factor” (Idiot defined – an entity that cannot or will not think for itself)? I sure know how that feels and I don’t blame you for sending up a flare.

    I reckon you could well have left ‘else’ out of your last sentence… :-P

    To me there’s only one thing scarier than global climate change and it’s consequences….that is Great Big Global Government (GBGG). And if all that climate related upheaval sounds bad, what about the GBGG trying to enforce it’s draconian measures. It seemed pretty clear to me from the Copenhagen fiasco that most were jokeying for position to oversee ‘Global Cooperation’, which effectively means GBGG.

    My argument is the same for this as it was for GMO food: Without ‘Warp Drive’ and ‘Deflector Arrays’ I/We don’t have a choice. We’re stuck here with all the Captains.

    I reckon science has done its job. All the pieces are on the table. The rest of us are horses standing next to a lake. What’s left? Warp Drive and Deflector Arrays. Actually ‘Stargates’ would be a tad more convenient… :-P

    But then who’d want us moving into their neighbourhood?

    All that said, I’m quite heartened at what a lot of good folks are up to at the moment (e.g. Rocky Mountain Institute, Autodesk and the like). They seem to be having an impact.

    All the best mate and have a great Christmas.

    Cheers

    Stephen G

  2. Bruce Smith

    You are possibly correct with forecasts of the collateral damage of Global Warming but, to date, climate sceptics retain access to sufficient data that prevents the Man Made Global Warming theory from being considered as a fait accompli.
    Acidic oceans is also a bit of a stretch of the imagination when you consider the volume of neutralising materials present in the world oceans. Illegal fishing is/will do more harm than acid from what may be termed global warming.

    This subject is becoming akin to Fundamentalist Episcopalians debating religion with hard-line Muslims. There is no common ground because each is absolutely sure of the relevancy and correctness of their own unmitigatedly biased platform – a la Millennium 2000 bug.

    Science is supposed to be a measured debate based upon possible scenarios that may be proven or disproven based upon a persons skill sets.
    I don’t believe that this current “debate” is how the system is intended to work.
    Rubbishing an opponent because he has taken the “Galileo position” is plain wrong.
    In such cases as climate change, science remains in the QED corner.
    The argument that to do nothing is wrong is very correct and very relevant.
    The claimed factual statement that a group of people making up a portion of the worlds scientific community is of the opinion that this phenomena is directly attributable to mankind is fallacious. That we are a contributing factor – possible.

    Scientific debate looses its relevance when factionalism and fanaticism dominate and the immediate results are Cancun type gab-fests over-run by devotees..

  3. Les

    Ya gotta laugh at guys like poor old Bruce Smith. I particulary like the way he drags out the millenium bug as proof of ignorance. His own that is. Having almost gone bust in 1999 because I was not selling Y2K remediation, I can attest that the only reason the whole IT based world didn’t collapse then was because the collective IT world spent billions fixing it before it went “boom”.
    What a pity the same corporates can’t pony up the self interest they managed 11 years ago. I guess this constitutes “someone else’s problem”. And, as you say Paul, won’t we hate it when that someone does finally come up with a fix.
    More than likely, the fix will involve idiocy becoming a capital offence. I can’t see any other way any fix could actually be implemented…
    cheers,
    Les

  4. Jason Collins

    I’m not so pessimistic that it is too late to prevent a big government solution to climate change. People respond to incentives and I consider that a decent price signal in the near future could be influential. A revenue neutral proposition (say, cutting income and corporate taxes with the carbon tax revenue) could largely preserve freedom to operate and innovate within a sustainable framework. As for issues such as compensating those on the coast who have had plenty of warning about climate change, this says more about government’s bailout mentality than anything else.

    What I do worry about the lack of free market thinkers who also believe that climate change needs to be addressed. There will come a time (The Great Disruption) when action on climate change is inevitable and will be implemented quickly. I just hope that more libertarian minded individuals have already established their case for action at that point. Otherwise, big government it is.

  5. Paul Gilding

    Jason – Yes, I think you’re last point is key. The sudden change will occur, the question is will we be ready, because if not, the more authoritarian types will certainly dominate.

  6. salamander

    Government intervention does have a lot to answer for when it comes to the influence on markets. That is what has caused the train wreck of Tasmanian forestry – conservationists just encouraged a resolution by forcing the industry to change instead of collapse completely. In the same way, Rudd was prepared to give more handouts to the big polluters, so they had no incentive to change. So it is not just government intervention that causes so much trouble, it is when it is firmly attached to heavy lobbying from the affected industries. They are the leeches that will drain us, just for today’s profits – forget about tomorrow’s jobs.

  7. [...] How rejecting market-based solutions like and cap & trade might force an increase in big government:... hot-topic.co.nz/the-climate-show-4-peter-gleick-the-agu-and-climate-sensitivity
  8. Ross Smith

    You could similarly argue that environmental activists who promote intervention by governments have allowed for interest rates to be set below market levels thereby driving debt and distorting the market leadiing to unsustainable investment and hence environmental damage. Thanks guys! Both this and Paul’s arguments are specious.
    Paul, I think you need to clarify what a ‘free marketeer’ is (it is not the same as a neoconservative).

  9. Graeme Harris

    I wholeheartedly agree that we are on the brink of massive climate change, however, using the interventionist centrally planned economy of the USSR which was an unmitigated environmental disaster, worse than the free market West, I can see very little hope of any solution except the solution that will be forced upon us by climate change and rising sea levels. Such a change will no doubt result in a considerably diminished number of human beings.

  10. [...] We presented Paul Gilding‘s important book on the Great Disruption yesterday. On his blog, he disc... blog.p2pfoundation.net/does-the-great-disruption-also-mean-big-government/2011/07/24

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