op_fofack1_RAUL ARBOLEDAAFP via Getty Images_deforestation Raul Arboleda/AFP via Getty Images
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Climate Injustice and the Curse of Illusory Growth

Advanced economies have long relied principally on developing countries for primary commodities and natural resources to fuel their industries and economic expansion. But this has entailed high social and environmental costs for lower-income economies and, increasingly, the world as a whole.

CAIRO – Overcoming the risk of “immiserizing” growth – an increase in aggregate national output that results in a net decline in national welfare – has been a perennial challenge as countries pursue economic development. It is also proving to be a major roadblock to achieving greater global income convergence.

Developing countries’ GDP growth has exceeded the global average over the past several years, and their economies are projected to expand by 3.6% on average in 2022, compared to world growth of 3.2%, according to the International Monetary Fund. But the income and welfare gaps between them and the advanced economies have widened, especially where GDP has consistently expanded at the expense of total wealth and future prosperity.

This counterintuitive development reflects a combination of factors. The GDP estimates used in cross-country comparisons do not account for large-scale outflows of payments to the foreign-owned entities that dominate many developing economies’ extractive industries. Headline growth numbers also exclude negative externalities, such as the depletion of natural capital.

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