2 item(s) found.

Outsourcing: implications in a globalized world

Outsourcing: implications in a globalized world

The Magic Nexus team

In this issue we look at the role of outsourcing in European industry. The question is, what role does outsourcing play in the effectiveness of EU policies to reduce greenhouse gases emissions, promote renewable energies, increase recycling and reduce environmental impact of agriculture?

Industrial and agricultural production are often outsourced to countries with lower production and labour costs, and the impacts of these activities are externalised along with production. Outsourcing may be the direct result of policy decisions, such as when a country exports its toxic waste, or may be a secondary effect of decisions taken at firm level, such as relocation driven by labour costs and tax reliefs. Outsourcing is also referred to as displacement by Dryzek (1987), and externalisation, with reference to the concept of externalities in economics (the consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices).

Due to the difficulty of keeping track of externalized activities, they are difficult to measure and are often kept hidden from public view. For example, efforts to increase recycling may not lead to the desired results, as there is little information on what happens to exported waste. In our first article, we explore the question of waste outsourcing by taking China’s recent ban on plastic waste imports as an example. Waste exports draw attention to the fact that waste disposal is costly, requiring a high level of energy and labour resources.

In the case of energy, the challenge is dependence on energy imports. While energy imports are often analysed in terms of energy security, we argue that from a nexus perspective imports also imply outsourcing the production of inputs which are particularly “costly” in terms of resources or labour requirements.

In the case of water, we use the water footprint approach to show how trade of agricultural commodities also implies trade of “virtual water” used to produce fruits and vegetables. The trade of virtual water flows is of interest within Europe, as water-scarce Mediterranean countries are the main exporters of fruits and vegetables to Northern European countries.

These articles are aimed at initiating a discussion on the importance of outsourcing for the study of the nexus. We welcome any comment and contribution to the discussion. You can either use our discussion forum or write to us.

References:

Dryzek, J.S. 1987: Rational ecology: environment and political economy. Oxford: Basil Blackwell

The role of human activity in the nexus structuring space

The role of human activity in the nexus structuring space

Laura Pérez-Sánchez, Raúl Velasco-Fernández, Michele Manfroni, Sandra Bukkens & Mario Giampietro

Current discussions on sustainability tend to focus principally on the shortage of natural resources and environmental degradation: water and material footprints, peak oil, greenhouse gas emissions, destruction of habitats, etc. Society is mostly pictured as a black box and its environment as a factor limiting its expansion. Constraints operating inside the society are often overlooked. Human activity or time use is one such constraint. A shortage of human time in one or more critical elements of society constrains the trajectory of economic growth, in a way like other biophysical production factors do, such as water, energy, and land. Whereas the limits to primary resource supply and sink capacity are difficult to assess, the human time yearly available both at the national and at the global level has a well-defined limit: population size × hours in a year. MuSIASEM is unique in that it analyzes sustainability from a metabolic perspective including internal societal constraints. Indeed, MuSIASEM expresses resource flows not only per unit of land but also per unit of time use (e.g. electricity per hour of human activity in the transport sector). The adopted metabolic perspective thus allows us to address the entanglement over the diverse factors (demographic, cultural, socio-economic, technical and biophysical) that affect the option space of desirable (compatibility with culture and values), viable (compatible with technology, infrastructure, and institutions) and feasible (compatible with nature’s capacity to contribute to people) profiles of human time allocation. 

Any human society simultaneously generates and requires human time for its reproduction. The demographic structure of society and the prevailing social practices define a forced dynamic equilibrium between supply and demand of time. Natural population growth does not necessarily solve a problem of shortage of time, as it does not only lead to a larger supply of human activity but also an increased requirement of working time (e.g. for child care, education, health care etc.). Post-industrial countries can (temporarily) overcome economic stagnation caused by shortage of working time through the use of technology and energy—boosting labor productivity, through immigration of adult workers—notably seasonal and temporary workers— and through the externalization of the requirement of working time in the form of imported goods and services. Indeed, the contemporary mode of socio-economic development has entailed a massive movement of workers away from the agricultural and industrial sectors to the service and government sector. This was made possible during the industrial revolution, which saw the mechanization of the primary and secondary sectors thus freeing up labor time for the service sector and, importantly, leisure time for the consumption of goods and services [1–4]. The post-industrialization process (globalization) has consolidated this trend through the use of embodied working time in the form of imported goods and services (notably in agriculture, mining, manufacturing, and waste treatment) and (seasonal/temporary) foreign migrant workers (notably for low-skilled occupations in the sectors of agriculture, mining, construction, transport and the private sector—house cleaning). Note that imported working time in the form of imported goods and services often concerns labor with lower salaries and less social protection.

Many of the applications of the Nexus Structuring Space in MAGIC have addressed the externalization of human labor. But probably the most striking ones are the comparison of the metabolic pattern of China with that of the EU and the USA [5] and the assessment of the virtual hours of labor embodied in imports in the EU [6]. These applications concern the use of the macroscope (internal end-use matrix), mesoscope (trade) and the virtual scope (embodied labor in imported goods and services). For instance, the overall amount of work required to produce the goods and services consumed by an average US, EU and Chinese citizen is respectively: 1430, 1230 and 985 hours per capita per year [6]. As for the actual hours of paid work allocated to the economy of these countries, we found that the USA and EU allocate, respectively, 790 and 730 hours per capita per year, whereas China allocates 1300 hours per capita per year (see Figure 1). China is the only country of these three presenting a positive work balance: a part of the available work hours of its internal work force goes into exports. The USA and the EU, on the other hand, almost double the internally available hours of labor to produce the goods and services they consume, thanks to embodied labor in imported goods and services. For instance, in 2011 the EU used 500 hours of embodied work per capita per year in its imports that are equivalent to more than 120 million annual work units (virtual workers; assuming a work load per unit/virtual worker of 1700 hours/year). Similar results were found for the USA. The large import of hours of embodied work in the EU is possible only because of the small size of its population compared to the world population. Given the fixed time budget at the global level, the reproduction of EU (and US) consumption levels that emerging economies such as China and India are striving for is simply implausible, given the limited size of the ‘fund’ of human activity. This raises important ethical issues and questions the EU’s commitment to the Sustainable Development Goals.

 

Figure 1: Time allocation in the EU and China in hours per capita per year.

 

The characterization of human activity patterns currently observed through the macroscope refers only to the allocation of human activity inside the paid work sector. In the future we plan to extend this analysis by characterizing the metabolic pattern associated with social practices outside the formal economy (e.g. residential/household sector). Social practices outside of the paid work sector represent the equivalent of the microscopic view of the technological process of production inside the paid work sector. 

These applications show the relevance of the MuSIASEM framework in informing sustainability discussions with regard to the viability and desirability concerns. A detailed theoretical exposition on the profile of time allocation as an emergent property of the metabolic pattern of society is forthcoming [7].

 

References

[1] G.K. Zipf, National unity and disunity: The Nation as a Bio-social Organism, Principia Press Inc., Bloomington, 1941.

[2] V. Smil, Making the Modern World : Materials and Dematerialization., Wiley, 2013. 

[3] C.M. Cipolla, The Economic History of World Population, Pelican Books, 1962.

[4] M. Giampietro, K. Mayumi, A.H. Sorman, The Metabolic pattern of societies: where economists fall short, Routledge, London, 2012.

[5] R. Velasco-Fernández, L. Pérez-Sánchez, M. Giampietro, A becoming China and the assisted maturity of the EU: assessing the factors determining their energy metabolic patterns, Energy Strateg. Rev. in press (2020).

[6] L. Pérez-Sánchez, R. Velasco-Fernández, M. Giampietro, The international division of labor and embodied working time in trade for the US, the EU and China, Ecol. Econ. (2020).

[7] M. Manfroni, R. Velasco-Fernández, M. Giampietro, The profile of allocation of human time and societal organization: the internal constraint to perpetual economic growth, Unpubl. Manuscr. (2020).