Ecological macroeconomics in the open economy: Sustainability, unequal exchange and policy coordination in a center-periphery model

Abstract

This article introduces a novel (environmental) interpretation of a “Keynesian coordination game” and develops four potential scenarios to remaining within a global carbon emissions constraint. With inspiration from research on “ecologically unequal exchange” (EUE), we demonstrate the drawbacks of present “green growth” strategies by considering how pollution- and resource-intensive industries are distributed unevenly in the world economy, with large and increasing negative impacts on the periphery. The situation may only be exacerbated if the reduction of emissions in the center is based on shifting heavy industries and extractive enterprises to low-cost producers in the periphery. In this way, existing research likely overemphasizes the capacity of “green” investment policy to achieve sustainable outcomes. Our scenarios show that achieving global sustainability and improving global equity will require an impressive level of coordination between the center and periphery, as well as a significant reduction in the rate of growth (“degrowth”) in the center.