The announcement by China earlier this year that they would no longer purchase Australia’s contaminated waste plunged the local recycling industry into a crisis from which it has yet to recover.

But the consequences for public trust might be even more severe.

“Australians love recycling,” notes consultant Helen Millicer. “It is always rated our No 1 sustainability activity. Every fortnight we wheel out our bins believing we are doing our bit.”

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Except that we now know that we’re not – at least, not in the way that we’d been told.

A huge proportion of the waste that ordinary people assiduously separated for recycling actually ended up in towns like Qingdao in north-eastern China, accumulating in mountains of toxic garbage.

As Dr Karl Williams from the University of Central Lancashire told Fairfax Media: “If you collect rubbish and ship it to China that’s not recycling, that’s just collecting.”

Well, unbeknown to most us, that’s what we’ve been doing.

McDonalds and Coca-Cola together produced almost one in five rubbish items dumped in Victoria in 2013.

In other words, Australians tried to do the right thing – and then discovered they’d been played for mugs.

How will that affect attitudes to environmental activism, particularly given the already profound cynicism about politicians and the political class as a whole?

To understand quite how we got into this mess, it’s worth looking back.

Contemporary ideas about recycling can be traced back to the embrace of single-use packaging by companies in America during the early years of the post-war economic boom. As Matt Wilkins explains in Scientific American: “Manufacturers were excited about the much higher profit margins associated with selling containers along with their products, rather than having to be in charge of recycling or cleaning and reusing them.”

This was not an innovation driven by the public. On the contrary, many ordinary Americans were aghast at the destructiveness of the new corporate practices. In Vermont in 1953, for instance, dairy farmers, angry at the rubbish suddenly appearing in their fields, agitated for laws banning disposable bottles.

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To defeat the new environmental legislation, companies associated with the disposables industry (including Coca-Cola, the American Can Company and the Owens-Illinois Glass Company) launched a well-resourced non-profit group called Keep America Beautiful, devoted to shifting the blame for pollution on to individual consumers rather than disposable packaging and the companies that produced it.

“Packages don’t litter,” explained an American Can executive. “People do.”

KAB’s huge media campaign successfully popularised the term “litterbug” to describe those who threw away their garbage.

As Bradford Plumer argues in Mother Jones: “In essence, Keep America Beautiful managed to shift the entire debate about America’s garbage problem. No longer was the focus on regulating production – for instance, requiring can and bottle makers to use refillable containers, which are vastly less profitable. Instead, the ‘litterbug’ became the real villain, and KAB supported fines and jail time for people who carelessly tossed out their trash, despite the fact that, clearly, ‘littering’ is a relatively tiny part of the garbage problem in this country.”

Wilkins points to KAB’s involvement in the more recent “I want to be recycled” campaign as an example of a similar calculation.

Recycling plastic is to saving the Earth what hammering a nail is to halting a falling skyscraper. Matt Wilkins

“[The] greatest success of Keep American Beautiful,” he insists, “has been to shift the onus of environmental responsibility on to the public while simultaneously becoming a trusted name in the environmental movement.”

In Australia, too, the corporate fox proved keen to fund the Henkeepers Association.

McDonald’s, for instance, boasts of sponsoring Clean Up Australia since 1989 while Coca-Cola has maintained a longtime partnership with Keep Australia Beautiful.

Yet, according to research from Keep Australia Beautiful itself, McDonald’s and Coca-Cola together produced almost one in five rubbish items dumped in Victoria in 2013.

The attribution of responsibility to consumers – who possess almost no social power whatsoever – for the actions of corporations have become so ingrained we barely notice its absurdity.

“Help us save millions of cups from landfill,” reads the sign promoting 7-Eleven’s current recycling partnership with Simply Cups.

Think about what that represents: a massive company urging its customers to force it to reduce its rubbish, in a plea akin to the serial killer demanding, “Stop me before I kill again!”

If, as a society, we want to stop businesses from, say, employing child labour, we don’t rely on a consumer boycotts. We simply force corporations to comply.

Yet, in the face of almost existential environmental crisis, our leaders remain committed to the market to provide a solution to the problems it creates.

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Even before China’s refusal to import Australian waste threw the system into chaos, private recycling businesses had been caught out putting their own bottom line before the environment.

In September last year, Four Corners revealed that huge quantities of the glass that John and Joan Citizen had dutifully put out for recycling was simply being either being stockpiled or dumped; in February 2018, Fairfax documented the thousands of tonnes of recyclables from New South Wales going straight into landfill.

On both occasions, the explanation was the same: there was more money in pollution than environmentalism.

In any rational system, China’s decision to launch its National Sword program to combat toxic waste should have been fantastic environmental news.

In our system, it wasn’t.

Surely that, in and of itself, signals the necessity for a fundamental rethink.

“Recycling plastic,” says Wilkins, “is to saving the Earth what hammering a nail is to halting a falling skyscraper. You struggle to find a place to do it and feel pleased when you succeed. But your effort is wholly inadequate and distracts from the real problem of why the building is collapsing in the first place.”

Most of us grasp intuitively the relationship between an economic system dependent on constant, unplanned growth year after year after year and, say, the proliferation of microplastics in the planet’s deepest chasms and on its highest mountain peaks.

So rather than corralling well-meaning people into consumer-driven, market-based schemes that palpably don’t work, the environment movement needs to agitate for fundamental economic change to end the production of pollutants.

If it doesn’t, a growing public cynicism will end in complete despair.

• Jeff Sparrow is a Guardian Australia columnist