Can Degrowth Right-Size the Global Economy?

Image Courtesy of NextBillion

. In their article for NextBillion, Steve and Matt argue that degrowth can help the Global North move within planetary boundaries, while allowing the Global South to grow.

Steve and Matt were invited by NextBillion to write an article for their online publication. 

NextBillion is an open forum for the development through enterprise sector. They provide a platform for the discussion of business models and innovations that address development challenges in low- and middle-income countries (LMICs). NextBillion is based at the William Davidson Institute at the University of Michigan. Their mission is to disseminate knowledge about both the opportunities and challenges of doing business in developing markets, while supporting the enterprises and initiatives working on the ground.

To read the entire article, you can find it here: To Change the World, Change Your Economics: How Degrowth Can Shrink Overconsumption in the Global North While Allowing the Global South to Grow.

Here’s an excerpt:

“If (or when) the Global North enters its degrowth phase, there will be excess liquidity in the Northern investment sector. This will occur as Northern capital-intensive industries such as fossil fuels, mining and industrial agriculture are slowly downsized in a post-growth world. This lack of demand for capital will lead to a shrinking of the financial sector itself, while also freeing up vast amounts of capital in the system which will need to be invested.

The adoption of degrowth policies by the Global North will provide the Global South with an opportunity which may not be obvious at first. With the North completely reorienting and decarbonizing its economy, the Global South will need to reorient its own economy away for exporting resources, whose markets will be much smaller, and instead build the industries needed to meet the needs of its citizens. This shift to local development and consumption and away from export resources could be supported by capital in the North, which under a degrowth agenda will be sitting idle with future institutional investors.

These future investors will need to totally reimagine the entire investment process, from credit agencies, due diligence processes, risk models and accounting systems to the final terms, conditions and pricing of the credit. These institutions may even need to move to more innovative structures such as recoverable grants, blended finance and zero interest loans, because there will be many fewer places to invest.”