Degrowth is often presented as cultural transformation away from a society obsessed with growth as progress and towards pluriversal alternatives. While this transformation is essential, certain structural impediments prevent its realisation. One of these obstacles is the immense foreign debt that Global South governments owe to private lenders and institutions in the Global North—in currencies that are not their own. I argue that debtor countries must default on these debts collectively for the global economy to transition from growth-oriented capitalism to post-capitalist degrowth.
Global South countries are currently experiencing a debt crisis wherein governments like that of Sri Lanka are unable to service the debts they hold that are denominated in a foreign currency. Such debts began to balloon across the Global South in the aftermath of the oil crises of the 1970s. Following the Volcker Shock—and the accompanying steep rise in interest rates for dollar-denominated debts—countries that held those bonds found themselves in a situation similar to that of today. At that time, Global North governments, acting through the World Bank and International Monetary Fund (IMF), agreed to a series of bailouts conditional on Structural Adjustments Programs (SAPs). SAPs allowed these institutions to intervene directly in the fiscal policy of indebted countries and to implement neoliberal reforms which reduced public spending and opened up economies to transnational corporations.
The explicit goal of SAPs was to kickstart growth, as the only means for indebted countries to pay back their loans and to lift communities out of poverty—the implicit goal being the creation of societies mirroring those of their former colonisers. Yet the last forty years have yielded the opposite result: an explosion of inequality both within and between countries and debts at their highest level this century. To understand this trend, we need to recognise that loans to the Global South were never about achieving prosperity; instead, the intention was to reassert neo-colonial control over the decolonising world. Decolonisation reduced the Global North’s access to the cheap labour, energy and raw materials that colonialism had ensured for centuries. Debt relationships between the former colonisers and colonised recreated the conditions for the plunder of the Global South. It turned poor countries into captive markets for companies based in the Global North and created a race to the bottom in environmental and labour standards meant to attract foreign investors.
Under this arrangement, indebted countries need to grow their economies to service their debts. Growth relies on exports priced at disadvantageous rates that create ecologically unequal exchange between the Global South and Global North. Economies centred on the export of low-value-added commodities prevent the Global South from achieving full decolonisation. Fortunately, scholars of Modern Monetary Theory have shown that it is not necessary to prioritize growth for the sake of growth before investing in what countries actually need. Instead, what matters is a country’s productive capacity determined by social and ecological boundaries, and here the Global South is far richer than the Global North. To invest in necessary programmes like a Job Guarantee and Universal Public Services, however, countries must first free themselves of colonial currencies and end the cycles of debt that trap them in poverty.
Given that stopping ecologically unequal exchange is a cornerstone of degrowth, the need for debt restructuring is clear. The only question is how to achieve this revolutionary reform. The international campaign Debt For Climate calls for unconditional debt cancellation as a first step towards climate reparations in the Global South. This demand is sound yet unrealistic: imperial governments in the Global North will never agree to give up access to cheap resources and captive markets. Such a change would pose an existential challenge to the perpetuation of capitalism, which relies on an exploitable periphery to maintain surplus value extraction in the core. Countries in the Global North, particularly the United States, think of the World Bank and the IMF as organs of their own foreign policy and understand that unequal exchange depends on debt. As Assata Shakur, member of the Black Liberation Army, put it in 1987: “Nobody in the world, nobody in history, has ever gotten their freedom by appealing to the moral sense of the people who were oppressing them.”
Instead, what we need is a New Non-Aligned Movement (NAM) capable of supporting its members through a mass default on their foreign debts. When Thomas Sankara, the first president of Burkina Faso, called for a united front against debt in the same year, the idea proved a powerful one. Less than three months later, Sankara was assassinated in a Western-backed coup. Beyond resurrecting the NAM, and to mitigate the pain of possible sanctions from institutions in the Global North, indebted countries should focus on achieving food and energy sovereignty, as well as high-value-added exports relative to imports. Finally, social movements in the Global North must stand ready to support a mass default in the Global South, similar to the way that, during formal decolonisation, strong labour movements in the colonising countries opposed continued imperialism.
While the period immediately following default is ridden with risk, two points speak to the Global South’s ability to overcome it. The first is that international investors tend to have short memories, so while they may attempt to punish defaulting states for a couple of years, they will soon begin looking for new investment opportunities. The second is that the more countries sign on to a default on their debts, the lower the likelihood of resulting sanctions.
Ending the unequal exchange that traps the Global South in poverty and extractivism and paving the way for a degrowth transition will require an alliance of countries prepared to default on their foreign debts, and strong movements in the Global North ready to defend them when they do.
Marxian political economists often criticise Modern Monetary Theory (MMT) for its lack of class analysis. While these critiques are right to point out that MMT has often been presented as the saviour of capitalism and growth, its insights are also of use to those who wish to see an end to capitalism and growth. While many proponents of MMT are not interested in a world beyond capitalism, the theory itself could offer useful tools in this struggle. Indeed, at its heart, MMT formulates the coherent monetary analysis needed by anyone who believes in using State power as a means of dismantling capitalism.
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