The cycle of making and upgrading products through global value chains (GVCs) is pitched as a positive thing for development. But what if it isn’t? Drawing on a new book, Capitalist Value Chains: Labour Exploitation, Nature Destruction, Geopolitics, its co-author Benjamin Selwyn challenges mainstream narratives of trade-led progress and reveals how GVCs drive labour exploitation, uneven development, environmental degradation, and geopolitical tensions.
“All countries stand to benefit from the increased trade and commerce spurred by the growth of GVCs.” – World Development Report 2020
Everyone knows about upgrading. Upgrade your phone, your computer, your software – there are newer, better models or ways of doing things that you simply must have! If you’re not into consumerism, you may not care about upgrading. But if you’re interested in international development, you should.
Global Value Chains (GVCs) are the arteries of global capitalism, through which around 70 per cent of international trade occurs.
Global Value Chains (GVCs) are the arteries of global capitalism, through which around 70 per cent of international trade occurs. GVCs are networks of production occurring in different countries where supplier firms provide lead firms (often Transnational Corporations, TNCs) with products and services. Think of your laptop or smartphone – quintessential products of GVCs.
Upgrading in GVCs represents a key development strategy, promoted by international institutions and many academics. It refers to innovations by supplier firms, as they deliver goods and services to lead firms, to improve production, produce new products, take on new activities within a given GVC, and enter larger and more lucrative export markets. Lead firms determine production in GVCs (in the academic lexicon, they ‘govern’ their chains) – deciding upon what is produced, how, with what materials, under what conditions and even what prices suppliers receive.
There are myriad cases of successful upgrading. Does that mean that we should adopt it as a universal development strategy? Absolutely not. Upgrading by supplier firms is possible, but it is not generalisable. The notion that upgrading is a generalisable development strategy is a classic case of the fallacy of composition. This is the assumption that what is possible, and developmentally positive, for one firm or sector can be replicated by other firms and sectors.
How workers are exploited through GVCs
In Capitalist Value Chains: Labour Exploitation, Nature Destruction, Geopolitics, co-authored with Christin Bernhold, we detail and explain the deleterious developmental, environmental, and international relational impacts of GVCs. First, to upgrade, supplier firms collaborate with lead firms. They employ workers to produce goods profitably, for themselves and for lead firms. The proliferation of GVCs has been based upon the establishment of the biggest labouring class the world has ever seen. It has also been based on the proliferation of highly exploitative work.
In GVCs, workers are effectively exploited by two firms – producing surplus value for their direct employers and for the lead firms who capture shares of that value.
Workers are exploited because they receive in wages less than the value of what they produce. That additional value is captured by their employers. This, Marx shows, is the secret of surplus value creation and capture under capitalism. Across numerous chains workers are subject to immiserating exploitation, where they receive below living wages. In GVCs, workers are effectively exploited by two firms – producing surplus value for their direct employers and for the lead firms who capture shares of that value.
Upgrading in one place means downgrading in another
Second, upgrading by some firms or sectors generates intense uneven development – the downgrading of other firms and sectors. In the 1990s Vietnamese coffee producers upgraded by entering the global coffee market. Their vast exports depressed coffee prices globally. According to the International Coffee Organisation, in Cameroon, Central African Republic, Côte d’Ivoire, El Salvador, Ethiopia, and Nicaragua, consequences included reduced farmer incomes, abandonment of farms, and widespread job losses.
China’s hyper industrialisation is often touted as a successful and replicable case of upgrading. However, the flip-side of China’s industrialisation, has been the de-industrialisation and reprimarisation of countries like Brazil and Argentina. These countries increasingly depend on a narrow range of primary exports. For example, in Brazil land devoted to soy has displaced land from traditional domestic food crops such as rice and beans, and has pushed up prices. One consequence was that in 2022, 33 million Brazilians faced hunger.
Disastrous environmental impacts of Global Value Chains
Thirdly, upgrading into and the proliferation of GVCs has contributed directly to our planet’s environmental disaster. The geographic dispersal of production through GVCs entails more infrastructure (air and seaports, rail and road transportation, digital tech and data servers) and an enlarged world market.
The global material footprint – the total amount of raw materials extracted to meet final consumption demands – increased by 113 per cent between 1990 and 2017.
The rising quantity of world production and trade requires more material use. The global material footprint – the total amount of raw materials extracted to meet final consumption demands – increased by 113 per cent between 1990 and 2017, from 43 to 92 billion metric tonnes. It is projected to grow to 190 billion metric tons by 2060.
Technological development, trade and geopolitics
Fourthly, upgrading in, and the proliferation of, GVCs are quintessentially geopolitical. In the late 1950s the US established state-funded agencies which invested and coordinated research into what would become radar, computers, integrated circuits, semiconductors and most famously, the internet. These technologies were then deployed from the 1970s onwards by US firms, and then other nationally rooted firms, to relocate production – while tightly governing these chains – to countries with cheap, highly exploitable, labour forces.
The prime destination for this investment was China. But the Chinese state, with its unique central coordination mechanisms, used its integration into value chains to become a workshop of the world, before evolving into a challenger to US technological primacy. The response from the US – from Obama, Trump 1.0, Biden and now Trump 2.0 – has been, through tariffs and export controls, to “actively strangling large segments of the Chinese technology industry – strangling with an intent to kill”.
Dismantling capitalist value chains
To reiterate, upgrading in GVCs happens a lot. But it is not a universalizable development strategy. Rather, it is based upon labour exploitation, and generates intense uneven development, environmental destruction and geopolitical conflict.
Rather than cheering on the expansion of GVCs, those of us concerned about international development and inequality need to think beyond such structures.
So, what, really, are GVCs? GVCs are capitalist value chains: mechanisms whereby capitalist classes extend their capacity to exploit labour and appropriate nature beyond national borders. They underpin the huge concentration of wealth, for example in Silicon Valley – based on below-living wage work in China and elsewhere. They are supported geopolitically, as mechanisms of control and surplus value extraction, and transfer across borders.
Rather than cheering on the expansion of GVCs, those of us concerned about international development and inequality need to think beyond such structures. Supporting economic democracy and production for human need and the environment, rather than for profit, are ways we can challenge the myopic, exploitative and destructive GVCs-for-Development ideology.
Note: This post gives the views of the author and not the position of the LSE Review of Books blog, nor of the London School of Economics and Political Science.
Main image: humphery on Shutterstock.
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The post The big lie about the benefits of global value chains first appeared on LSE Review of Books.
