John Maynard Keynes ends his 1936 The General Theory of Employment, Interest and Money with a warning: the world is governed by the power of entrenched ideas, right or wrong. Today, we are in the grip of one such idea, reflected in the persistent framing of policy around the question of financial affordability and the assumed limitations of public budgets. 

Just days after returning to the Oval Office, Donald Trump boasted that he had “terminated the ridiculous and incredibly wasteful Green New Deal,” deriding it with his preferred moniker, the “Green New Scam.” His hostility toward the framework is not new. During his failed 2020 presidential bid, Trump dismissed it as “socialist”, and a “radical $93 trillion disaster.” The irony, of course, is that there was no Green New Deal for Trump to terminate in 2025. While the Biden administration acknowledged the urgency of climate action, it—along with much of the Democratic Party—largely echoed right-wing anxieties about the supposed cost of any sweeping climate agenda.

What made the Green New Deal so threatening to establishment politics was not just its scale but its explicit challenge to the prevailing economic logic. The Green New Deal rejected the idea that ambitious public policy must defer to financial markets, instead framing climate action as a matter of jobs, justice and democratic investment. In its more ambitious forms, the programme included public employment initiatives, large-scale infrastructure upgrades, and guaranteed access to clean energy—all of which would require robust coordination by the state and a significant boost in public spending. 

Like countless other progressive climate and social policy proposals, the Green New Deal has routinely been dismissed with a familiar retort: how will we pay for it? Popularized by Margaret Thatcher, the idea that there is no such thing as public money, only taxpayer money, now transcends partisan lines—a thought-terminating cliché that serves to shut down ambitious public initiatives, often with a derisive reference to the “magic money tree”. Beneath the rhetoric, though, lies an economic orthodoxy that presents markets and private transactions as the sole engines of growth, cloaking ideology in the guise of mathematical objectivity.

‍Assertion As Truth

Today’s economic orthodoxy is rooted in neoclassical economics. It treats a lack of public finance as a natural constraint, downplaying the state’s role in shaping the economy and obscuring how money is actually created.^[1] In reality, though, the only true constraints lie in the availability of real resources—workers, materials, infrastructure—to meet our collective needs.

The misconception that governments simply do not have the money to solve problems carries especially high stakes in the confrontation with the climate crisis. Former Senator John Kerry, who routinely touts his climate credentials, repeats this assertion as a truth: “No government has enough money or will find enough money to do what we have to do. We have to bring the private sector to the table.” This is echoed across the financial and policy landscape. Larry Fink, CEO of BlackRock, the world’s largest asset manager, describes capital markets as “the most powerful” method, “uniquely suited” to address society’s greatest challenges. Similarly, World Bank President, Ajay Banga, has argued that we need the “ingenuity, speed, and resources” of private actors, framed in direct contrast to the presumed weaknesses of the public sector.  

Because the notion that public budgets are inherently limited is so ubiquitous, climate policy is routinely reduced to questions of financial feasibility, with attention fixed on how the supposed “finance gap” can be filled by private investment. In the process, the debate is artificially narrowed, steered away from real questions about the genuine challenges and politics of resource mobilization and the structural changes needed to decarbonize. Instead of confronting the climate crisis head-on, we remain mired in a discourse that mistakes accounting for reality. 

Crucially, while this narrative is used—whether disingenuously or ideologically—to obstruct action around the world, it also obscures the very real constraints faced by countries outside the wealthy North, not least their limited access to external finance and a global financial architecture that needlessly imposes additional hurdles.

‍Money and Productive Capital

At the heart of mainstream economic thinking lies a deceptively simple idea: that markets, if left to their own devices, will allocate scarce resources in the most efficient way possible. This in turn relies on the assumption that self-interested individuals and firms, through countless transactions, naturally generate the best outcomes for society, including sustained economic growth. The theory’s elegant simplicity, however, rests on several abstractions that soon unravel under scrutiny.

Neoclassical models are built on what are called “micro-foundations”, whereby households and firms are reimagined as rational actors, constantly seeking to maximise utility or profits. Markets are assumed to be competitive, with prices set at the point where supply and demand meet, rather than the reality, in which they are shaped by power dynamics, institutions and gatekeeping. 

The idea that prices are set through competitive markets quickly unravels on contact with reality. The cost of life-saving drugs, for instance, is not determined by supply and demand but by what pharmaceutical companies decide health systems are willing to pay. Concert tickets are routinely marked up with charges by sellers with monopoly power, and gas prices swing based on global speculation and producer cartels. 

This disconnect between how prices are set in the real world and how this process is imagined by neoclassical theory matters. It is at the core of how production and growth are modelled, and by extension, how policy decisions are made. Production, in neoclassical models, is estimated as an output related to just two inputs: labour and capital. Here, capital is not merely the machines and buildings underlying production but an abstract, all-encompassing variable that lumps together everything used to produce goods that is not human labour. This vague concept is further distorted when scaled up to the level of the entire economy. When added together, all production is reduced to simplified formulas where inputs are assigned monetary values and plugged into equations. The result is a model that claims scientific rigor while relying on wildly unrealistic assumptions.

In the world of neoclassical economics, investment is reduced to an accounting identity, in which more savings inevitably lead to more investment and, by further assumption, to more production. The implications are far-reaching: public spending is understood as drawing from the same supposedly finite pool of savings as private investment; as a result, when governments invest, they “crowd out” private actors who would otherwise have used those funds more efficiently. This narrative has shaped decades of policy in both domestic and international arenas, and placed the question of “finding the money” at the centre of nearly every policy debate, artificially treating access to finance as the key bottleneck for progress. Any expansion of public spending, governments are now routinely told, risks overheating the economy, deterring private investment, or triggering inflation.

As early as the 1950s, economist Joan Robinson challenged the shaky foundations of this framework. Robinson criticized what she called the “peculiar nature of capital” in neoclassical theory, highlighting how the notion of capital as a single, aggregate input not only obfuscates the diversity of real-world assets like tools, land, and financial claims, but also how it distorts the way that production is understood more broadly. For instance, when economists try to estimate the cost of decarbonizing, treating capital as a uniform input ignores that different types of investment require very different materials, skills, and technology—the difference between building, say, a solar farm and a public transit system. 

The central error of this framework is to conflate money with resources, treating financial capital as the ultimate constraint when in fact money is created through institutions like central banks and private credit markets. The real constraints lie elsewhere: in the availability of skilled workers, raw materials, technology, and physical capital, as well as the political will to direct them. By misidentifying what is scarce and what is possible, the neoclassical lens tells us only what we supposedly cannot afford, rather than what we must urgently build.

These problems surface most clearly when attempting to estimate the cost of climate action. These estimates rely on production functions and assumptions about capital that carry through all the problems Robinson identified. In doing so, they offer the illusion of precision while quietly embedding deeply questionable assumptions about technology, efficiency, and pricing that lead ultimately to needlessly inflated headline costs. By collapsing everything into a single variable, these models omit vital questions of coordination and resource planning. They also rely on market prices that can be artificially inflated or distorted by monopolies; at the same time, innovation can significantly reduce the costs of certain technologies and inputs, which are difficult to predict and capture. As a result, while the models might propose specific and seemingly authoritative numbers, they are fundamentally disconnected from real-world complexity and from the politics of large-scale economic transformations. In reality, at the heart of any successful structural transformation—climate or otherwise—are shifts in knowledge, coordination, and innovation, factors that resist easy quantification.

‍The Real Finance Constraint

While climate change is a global crisis, responsibility for it is anything but evenly distributed across the world. The Paris Agreement principle of “common but differentiated responsibilities” explicitly acknowledges this, affirming that wealthy countries bear a historical obligation to support those that have contributed least to the problem. Yet even as inequality is acknowledged in international climate negotiations, the dominance of financial framing distorts how this inequality, and responses to it, are conceived. 

Under the UN Framework Convention on Climate Change, discussions about what the North owes to the South have been absorbed into technical debates over finance targets. The New Collective Quantified Goal, for example, whose programme ran from 2022 to 2024, set negotiated targets for the amount historic polluters should collectively pay to support climate action in developing countries. Bodies like this reduce broader questions of justice to a narrow focus on financial transfers, as if a specific dollar figure could address deep structural imbalances. In doing so, any engagement with deeper issues is avoided, and questions about who controls the terms of finance, who sets the rules, and whose priorities are reflected in many global institutions are bypassed. 

This bias is so entrenched that it now spills out well beyond the closed rooms where policy is made. In recent years, activists have linked calls for debt relief with climate justice, opening space to challenge the conditions that currently constrain fiscal capacity in the Global South. While laudable, these efforts nonetheless remain focused on securing fixed financial commitments without confronting how the multilateral system reproduces hierarchies, both economic and political, between North and South. Also overlooked is the question of how countries in the Global South can access this finance. The multilateral system that governs climate finance is shaped by the same power dynamics it claims to correct: institutions like the World Bank and IMF remain dominated by wealthy countries, both in voting power and agenda-setting. As a result, funding flows are often slow, opaque, and tied to policy conditions that reflect donor interests rather than recipient needs. 

The international financial system, structured around the US dollar, provides limited pathways for countries in the Global South to secure “hard currency”,^[2] the form of money that countries need to import essential goods like food, fuel, and medical supplies, as well as to repay debt owed in foreign currencies and stabilize their domestic economies. Most countries in the Global South cannot issue hard currency themselves, so they are forced to earn it. Typically, this requires that they either export commodities, attract foreign investors, or borrow from international lenders. Each carries its own vulnerabilities. 

Export earnings are often volatile, especially for countries dependent on raw materials whose prices fluctuate on global markets. Foreign investment, meanwhile, can be highly selective and short-term, chasing speculative returns rather than long-term development. And borrowing, particularly from institutions like the International Monetary Fund (IMF) or World Bank, is rarely unconditional. Positioned on the margins of this system, many countries find themselves trapped in recurring cycles of debt, austerity, and underdevelopment.

Eventually, faced with these constraints, few can avoid turning to the IMF for assistance. Yet these loans come with strings attached. In exchange for financial support, governments are typically required to adopt economic reforms—commonly referred to as “structural adjustment” policies—that include cuts to public spending, liberalising trade and investment rules, privatising state-owned enterprises, and removing protections for domestic industries. The rationale behind this “adjustment” is that by creating a more “business-friendly” environment, recipient countries will in turn attract foreign capital. 

In practice, these reforms erode social protections, undermine local industries, and restrict the policy space needed for development. Instead of channelling investment into productive sectors like manufacturing, education, or infrastructure, capital flows frequently target speculative opportunities, such as real estate, resource extraction, or financial markets, where returns are faster but whose economic benefits are fleeting. This pattern does little to build resilience or diversify economies. In many cases, it exacerbates inequality and weakens public institutions.

This externally imposed model stands in stark contrast to the paths of countries often cited as development success stories. The “Asian Tigers”—Hong Kong, Singapore, South Korea, and Taiwan—and more recently China, did not passively wait for foreign capital. Instead, they followed state-led strategies: implementing long-term industrial policies, investing in infrastructure and education, protecting key sectors during early stages of development, and actively managing trade and capital flows. Their governments treated development as a national project, not something to be outsourced to international markets. Rather than assuming markets would efficiently allocate resources, they intervened directly to build productive capacity, raise living standards, and achieve strategic goals. Their success was not a product of deregulation but of deliberate planning, public investment, and policy autonomy.

Space For the State 

What emerges from the dominant framing of climate policy as a finance problem is a dangerously narrow approach that sidelines the real economic and political tools needed to drive transformation. Neoclassical economics distorts our understanding of money, investment, and production; international financial institutions reinforce structural inequality; and the private sector is positioned as the only viable actor for delivering change, even as its record remains deeply uneven. Against this backdrop, the conversation around climate action must move beyond mobilising finance and focus instead on mobilising real resources. 

Industrial policy was once central to the rise of today’s wealthiest nations. Yet, after achieving their own development, many downplayed the state’s role, promoting free-market rules abroad. The climate crisis forces a re-evaluation of that legacy. China offers a striking example of what strategic planning can achieve. Long before emerging as a global leader in green technologies, it used industrial policy to build manufacturing capacity, infrastructure and innovation. Through the coordinated efforts of state-owned enterprises, long-term planning, public procurement and technology transfer, China now leads global production of solar panels, wind turbines and electric vehicles. These interventions have helped drive down global costs, making renewables more accessible and helping to accelerate the energy transition worldwide.

This kind of coordination cannot be replicated by merely relying on market inducements like carbon pricing. When climate action is framed primarily as a problem of mobilising finance, the role of the state is reduced to simply enabling private investment rather than leading the transformation. Public institutions are cast not as planners or investors but as guarantors, tasked with making green investments more attractive to private actors. Tools like blended finance and public-private partnerships are promoted as solutions, but their logic reinforces the idea that structural change must be routed through private investors’ incentives. In practice, this limits the scope of public ambition and steers policy toward projects with clear financial returns rather than broader social or ecological value. 

Market mechanisms may help reduce emissions at the margins, and may generate some revenue, but they are not designed to coordinate across sectors, manage trade-offs, or drive large-scale transitions. Treating finance as the central constraint sidelines the essential questions of what gets built, by whom and in whose interest. The belief that markets alone can deliver the necessary scale and direction has not only delayed progress but also distorted priorities—placing finance at the centre while allowing questions of production, capacity, and coordination to fade into the background.

As the United States retreats from managing the international order, returning under Trump to a more transactional and coercive approach to foreign policy—ditching the Paris Agreement, undermining multilateralism, and waging tariff wars under the banner of economic nationalism—it also exposes the fragility of the existing system. The version of globalization built on US financial dominance, free capital flows and market liberalization is beginning to crack under the weight of its own contradictions. 

If this chaos has an upside, it is that it presents an opportunity to build an alternative—and radically more just—financial architecture, and to confront the economic orthodoxies that needlessly constrain what is considered possible.