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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsNeoliberalism is blocking green growth
![](https://i.gyazo.com/d8412def354f56f7b1a49bdbc5d5d76b.png)
Climate change is a global challenge, yet trade rules do not allow developing countries to break with neoliberal orthodoxy.
https://www.socialeurope.eu/neoliberalism-is-blocking-green-growth
![](https://www.socialeurope.eu/wp-content/uploads/2024/07/Claudia-Sheinbaum.jpg)
Elected president of Mexico last month, Claudia Sheinbaum is committed to big investment in renewable energy (Paola Garcia 1 / shutterstock.com)
Recent election victories for leftist parties in France and the United Kingdom may herald a new era of climate policy-making in Europe. Britains new Labour government has ambitious plans to expand renewable-energy capacity and, although tricky coalition-building remains, the climate-sceptic far right has been thwarted in France. One hopes this momentum can be carried into the G20 ministerial meeting today in Rio de Janeiro. There, rich countries are considering Brazils pioneering proposal for a 2 per cent annual minimum wealth tax on the worlds billionaires. Such a tax, along with new climate-financing instruments that are expected to be announced, could support investments in green growth, climate adaptation and measures to address inequality within countries. But new investment vehicles will not suffice. As our experience with Covid-19 showed, purely market-based approaches were not enough to tackle a pandemic, nor can they help counter environmental destruction or the worlds yawning wealth gap. Even the rich world is starting to move away from the neoliberal orthodoxy of privatisation and deregulation. But as long as developing countries remain hamstrung by the old rules, they will struggle to develop their own economic models and shape their own destinies.
Global struggle
Where previously western free-trade advocates decried Chinas use of protectionism and subsidies to favor strategic sectors, now these practices are de rigueur in advanced economies. The United States is pumping tens of billions of dollars into domestic electric-vehicle and battery manufacturing through the Inflation Reduction Act, using the state to stimulate investment and job creation in green sectors. But addressing climate change is a global struggle and international trade rules generally do not allow developing countries to boost their own industries in this way. For example, Indonesiathe global leader in nickel, a critical metal in EV batterieshas been punished at the World Trade Organization for pursuing an industrial strategy. Thus, while neoliberal policy prescriptions fall out of favour in developed economies, they are being repackaged in green boxes for less affluent ones. Policy-makers in high-income countries can rely on costly industrial policy levers such as tax incentives and loan guarantees, whereas developing countries have no such luxury. The latter must work out how to create jobs, reduce inequality and decarbonise their economies with a much more limited set of tools and technological capacity.
Moreover, richer countries are pushing developing countries to leapfrog to renewables at an unrealistic pace. They fail to recognise developing countries need for limited fossil-fuel use in the short term, or that unfair trade rules are limiting poorer countries access to affordable green technology and cheap capital. Such double standards are indicative of the same power imbalances observed in recent years when wealthier countries hoarded vaccines, slashed aid budgets and failed to deliver on past climate-finance promises. This hypocrisy has not gone unnoticed. Authoritarian populists, such as the former Brazilian president, Jair Bolsonaro, the Argentine president, Javier Milei, and the Turkish president, Recep Tayyip Erdoğan, have each promoted the narrative that climate policies undermine economic growth. That may be true in many cases, but only because of the trade-offs imposed by neoliberal policies. If developing countries could shape their own policies, climate investments would drive job creation and inclusive growth. Governments that are being asked to green their economies need flexible financing at concessional rates. They also would benefit from progressive national and international tax schemes that build on recent successes such as the proposal for a United Nations tax convention, an effort led by developing countries to democratise tax rules and claw control away from closed shops such as the Organisation for Economic Co-operation and Development.
New paradigm
The waning of neoliberalism gives developing and emerging economies a chance to co-operate on the design of a new paradigm. By devising state-led models that link green strategies with socioeconomic development, they can shield the climate agenda from attacks by authoritarian opportunists. Just as there are different types of capitalism, there are different paths to green development. Consider Mexico, a manufacturing powerhouse and oil producer which has just elected a climate scientist, Claudia Sheinbaum, to the presidency. Her administration aims to invest $13.6 billion in renewable energy, with a goal of meeting 50 per cent of electricity demand through zero-carbon sources by 2030. If done right, these efforts should promote job creation and reduce inequalities, with state-owned enterprises being leveraged to support the deployment of green technologies. The encouraging announcement of a new ministry overseeing science and innovation could also support advanced manufacturing and high-tech industries. Brazil is also well positioned to pioneer green policies for the developing world. Freed from Bolsonaros destabilising rule, the administration of his successor, Luiz Inácio Lula da Silva, is pushing sustainable development and tax reform. If it can effectively co-ordinate its industrial policy, infrastructure aims and green initiatives such as the Ecological Transformation Plan, it could power ahead with a robust green-growth agenda at home, while expanding its regional and global influence as the host of this months G20 meeting and next years UN climate conference (COP30).
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