Macroscope | A loaf of bread’s well-serviced journey
Inputs at 30 stages make up the services chain that lands it on the shelves, highlighting the role of a sector that turns the economic wheels
The impressive display of edibles at the Hong Kong Trade and Development Council's Food Expo this week focused attention on elegant presentation and delighting the taste buds.
But behind the sensory gratification is a complex value chain that transforms primary ingredients into the offerings that appear on shop shelves and our tables.
At the Fung Global Institute (FGI) we are analysing value chains for goods and services, including for food and other products. The objective is to gain insights into why value chains are configured in particular ways, how inputs enter production, what those inputs are, and how government policy influences value chain design and outcomes.
Services are multi-functional in production and trade, more than a source of income and jobs
The particular emphasis of FGI's current work in this domain is on services. Services drive production and trade in ways that are poorly understood.
Services account for around 70 per cent of global production, and a similar share of trade when correctly measured. Those shares typically grow as people become richer and enjoy consumption baskets less dependent on physical products. Increased output results in disproportionate demand for services.
All economic activities in modern economies need them, and every expanding sector requires a core bundle of producer services including telecommunications, transport, distribution, financial and business services.
The technology-driven shrinkage of distance and time across the globe has also increased international demand for services. Services are multifunctional in production and trade, more than merely a source of income and jobs. They articulate production processes and provide the glue that holds everything together. Contrary to earlier perceptions, services turn out to be a significant source of productivity growth.
At FGI we recently studied the journey and short life of a loaf of bread, starting with primary ingredients from the mainland and other origins, to manufacture on the mainland and final consumption in Hong Kong.