Global value chain analysis has emerged as one of the key approaches to studying the changing character of global production. However, this approach is limited insofar as it adopts a firm-centric focus and neglects the wider structural context within which industrial development takes place
The expansion of global capitalism has given rise to two inter-related processes: the rising integration of trade and the growing fragmentation of production. Large transnational corporations increasingly focus on capturing ‘high value’ activities such as product design, marketing and R&D. Lower value activities, such as assembly line production and raw material extraction, are often outsourced to supplier firms.Global value chains (GVC) analysis has established itself as the leading framework for charting these shifts in the geography of transnational production. It explores, often in exhaustive empirical detail, how intra-firm relations and patterns of ‘supply chain governance’ are evolving across a large variety of industries and sectors. However, the GVC approach has a number of blind spots that undermine its capacity to explain important shifts that are taking place in the present conjuncture.
Since the 2008 global financial crisis, a series of reconfigurations have taken place within global capitalism. Global trade and investment collapsed in the aftermath of the crash. In the monetary and financial spheres, central banks played a key role in sustaining post-crisis capitalism, through adopting unconventional ‘loose’ monetary policy such as sustained low interest rates and Quantitative Easing (QE). Marked shifts in geo-politics have also taken place, as China’s gargantuan $600 billion post-crisis stimulus programme helped to maintain global demand in a context of contraction.
Each of these reconfigurations in post-crisis capitalism has potentially far-reaching implications for GVCs. For example, when the Federal Reserve began to unwind its QE programme in 2012, this led to currency volatility among emerging economies, which in turn generated instability within sectors which are heavily integrated into global value chains. China’s huge expansion of investment underpinned Germany’s export-led return to growth, which in turn fed into its various supply chains in Eastern Europe. GVC analysis is ill-equipped to capture these reconfigurations because it adopts a heavily firm-centric focus and downplays the wider structural context within which GVCs emerge and develop.
There is a certain irony to GVC’s neglect of structural categories. The intellectual lineage of GVC analysis lies in an earlier current of thought that had a heavily structuralist orientation: the ‘World Systems Theory’ of Immanuel Wallerstein, Giovanni Arrighi, Samir Amin and their various collaborators. Like GVC analysis, world systems theory rejects methodological nationalism and aims to empirically capture how inter-connected ‘commodity chains’ link together the global economy. However, as Jennifer Bair has pointed out, world systems theory is concerned with how these ‘commodity chains’ interact with wider structural and cyclical dynamics within the global economy.
In order to better conceptualise the specificities of global capitalism after the 2008 crash, GVC analysis would benefit from recovering the structural orientation of this earlier intellectual tradition. Three structural categories from world systems theory could be usefully drawn upon in this regard.
The first relates to the question of geo-politics and hegemony. For Wallerstein, while the ‘world economy’ must be understood as an integrated social totality, it always exists alongside a parallel organisational logic, that of the inter-state system which distributes power across a complex patchwork of sovereign jurisdictions. The co-existence of these two logics is ‘functional’ for global capitalist expansion in two respects. First, unbridled competition between rival capitalists would result in a race to the bottom between competitors, eventually eroding profit rates and capital accumulation. States prevent this from happening by protecting and extending monopolistic tendencies. Second, the existence of multiple states means that no one state can impose excessively punitive measures on its own domestic capital. The threat of capital flight acts as a check on state sovereignty and as a guarantor of profitability. Giovanni Arrighi built on this conception of the functional relation between the inter-state system and the global economy by uncovering the ways in which global capitalism is maintained through the power of one hegemonic state at the heart of the system.
Recovering this earlier focus on the inter-state system could help to overcome GVC’s firm-centric form of analysis. As Nicola Phillips and Frederick Mayer have argued, the GVC approach often underplays the role which states play in constructing and maintaining GVCs. However, all states do not have equal authorship over these processes. Recovering a focus on the hierarchical character of the international state system opens-up a series of concrete questions surrounding GVCs and the post-crisis conjuncture. To what extent might contemporary shifts in US geo-political strategy impact upon the GVC world? In what ways might the rise of China reconfigure the developmental trajectory of GVCs?
The second category which the GVC approach would do well to recover is the notion of conjunctural analysis. In world systems theory, the ‘structural’ level relates to deeply entrenched configurations of power – for example the stratification of the world economy into ‘core’ and ‘peripheral’ regions – which tend to last over the long durée. In contrast, ‘conjunctures’ endure over shorter timeframes, of around thirty or so years. These ‘conjunctural’ moments emerge as the result of a confluence of underlying tendencies, which tend to generate a relatively stable context within which social actors operate. The post-war regime of managed Keynesian capitalism is one such example; the neoliberal upsurge from the late 1970s to the 2008 crisis another.
Adopting a conjunctural mode of analysis could aid the GVC approach in a number of respects. GVC analysis emerged in the historical context of the 1990s and 2000s. The collapse of the Soviet Union, the integration of China into the global economy and the long Anglo-American financialised upswing of this period created the impression that a new form of ‘globalisation’ had emerged, where the power of the state was increasingly constrained by the expansion of footloose capital. The GVC methodological focus on inter-firm relations and its neglect of state power rests, in part, upon an acceptance of these premises.
But the 2008 crisis shattered many of the illusions of 1990s ‘globalisation theory’. In its place a new ‘post-crisis conjuncture’ has emerged. Its precise contours remain blurry and contested but its basic form is increasingly coming into view. GVC analysis should move away from its narrow firm-centric focus and explore how GVCs interact with this post-crisis conjuncture. One avenue for future research would therefore be to explore how the specificities of post-crisis capitalism – shifting patterns of global trade and investment, loose monetary policy and changing forms of geo-politics – shape the ongoing development of GVCs.
The third category which can be usefully recovered is the notion of core-periphery relations. This concept remains implicit in GVC analysis. However, the approach also focuses on advancing prescriptions which are designed to support national states in their pursuit of ‘industrial upgrading’ by embracing, for example, supply-side institutional reforms. For world systems theory, this kind of recommendation is highly voluntarist and underplays the profound structural constraints which in fact hinder capitalist development. Rather than asking what policies states might adopt to achieve ‘industrial upgrading’, a structural orientation seeks to uncover the wider web of constraints which de-limit development for ‘peripheral’ regions and how these unequal relations are reproduced over time. Organising analysis around these three ‘structural categories’ – the inter-state system, conjunctural analysis and core-periphery relations – does not entail embracing world systems theory in its entirety. However, it does suggest that if GVC wants to capture important changes which are taking place within contemporary capitalism, it will need to break from its narrow commitment to studying inter-firm relations and supply chain governance. Global capitalism has changed in important ways over the past decade and is likely to continue to change into the next one. Global value chains analysis would do well to change with it.