Ecologically Unequal Exchange

Background and Definition
It has long been mistakenly argued that developed nations are ―dematerializing‖ their economies, that is, that citizens of these countries value more and more consumption of services over material products and therefore they use less materials per unit of GDP or even in absolute terms. Moreover, Ecological Modernization Theory developed in northern Europe observed that some capitalist firms appeared to be incorporating environmental considerations into their decision-making. Both these trends led many observers to assert that economic growth was decoupling from resource consumption, indicating a sort of environmental victory. However, the Environmental Kuznets Curve hypothesis was not confirmed for the use of materials, as economic growth did not lead to less use of materials (in relative terms or even in absolute terms).

A related claim made by World Bank and World Trade Organization analysts states that exports from developing nations are being upgraded and are increasing poor nations‘ expectations for higher economic growth and development. These arguments however have recently been questioned by researchers constructing a literature on ecologically unequal exchange. Their empirical findings suggest that trade relations remain strongly unbalanced and unfair because many poorer nations (and regions) export large quantities of under-priced goods whose value does not take into account the environmental and social costs of extraction, processing, or shipping. Moreover, the metropolitan regions or countries require for their metabolism increasing amounts of energy and materials at cheap prices.
Ecologically unequal exchange thus refers to the act of exporting goods from poor countries at prices which do not take into account local externalities or depletion of natural resources generated by these exports, in exchange for the purchase of expensive goods and services from richer regions. It focuses on poverty and the lack of political power of the exporting region to stress the lack of alternative options. This exchange of exports from poor to rich nations against goods or services from rich to poor countries tends to be organized by multinational corporations or partnerships between elites in poor nations and import firms in rich nations. This process is facilitated by the International Monetary Fund and World Bank through their structural adjustment loans which require poor countries to stimulate exports of natural resources by devaluing currency and providing various regulatory concessions (such as environmental law waivers) and financial incentives (tax holidays) to foreign investors in return for their money.

Causes and effects
Alf Hornborg explained the structural roots of ecologically unequal exchange in 1998. The rich metropolitan regions of the world require a net inflow of energy and materials at low prices for their social metabolism. Therefore, exporting regions have trade deficits in physical terms, exporting more tons than they import, and selling their exports at a lower price than they pay for their imports. This is a structural condition of the world system. Large amounts of oil, coal and gas flow from relatively poor regions to rich regions. Moreover, during long periods of time there is a constant decrease prices of exports from poor nations (largely natural resources) relative to the prices of exports from wealthy nations (largely manufactured goods or services). As a consequence of this deterioration in terms of trade, more and more natural resource (e.g., forestry) or other primary product (e.g., agriculture and mining) exports are required to purchase imports from rich nations. This often entails extensive degradation in poor nations (e.g., forest loss, water pollution, and air pollution) as increased export production is required to maintain levels of imports. The obligation to pay external financial debts is another factor forcing exports of raw materials.

For example, the export oriented cattle industry in some regions of Latin America is a main contributor to domestic forest degradation. Local elites and transnational firms own and operate most of the high density livestock operations, and meatpacking plants prepare meat for export to the US and to other growing markets in developed countries. Another example is the case of logging corporations degrading the forest in many countries. European-based firms exploited the proximity of West African forests to the coast for export to European markets. These firms even gained access to forested areas in Ghana, Cameroon (see the CEECEC case study on Foresty in Cameroon), and the Ivory Coast, with the majority of wood exported to high-consuming European countries.

Beyond a clear contribution to various forms of environmental degradation, ecologically unequal exchange leads to other problems in poor nations as well, especially poverty and inequality. It also seems to play a role in the particularly important area of global climate change. Indeed, statistical research suggests that participation in international trade increases CO2 emissions in poorer countries while lowering them in wealthier countries. Therefore, while national CO2 emissions data may suggest a shift towards relatively low-carbon lifestyles and economies in the north, such countries are not necessarily emitting less, but may simply be displacing their emissions (like ―outsourcing‖ the production of their energy-intensive goods to developing countries). These findings have led to the proposition that the richer nations owe some sort of remuneration (an ecological debt) to poorer nations for the environmental damage embodied in their energy (and material) intensive goods. It is said that wealthy nations have been accumulating a huge debt over centuries by exploiting the raw materials and ecosystems of poor countries.

Analysis
The empirical analysis of ecologically unequal exchange theory has become quite popular among ecological economists who analyze material flows. They have developed detailed accounting frameworks aimed at measuring flows of minerals, fossil fuels and biomass. However, this approach tends to focus on single nations. In order to apply the approach cross-nationally, Jorgenson (2006) developed a more comprehensive measure of ―weighted export flows,‖ which enables researchers to test insights of ecologically unequal exchange using data for a large sample of nations. Jorgenson‘s weighted export flow measure quantifies the extent to which the exports of a given nation are sent to wealthier nations. A higher value on this measure means that a nation sends a higher percentage of its total exports to richer nations.