Global Value Chains—A Panacea for Development?

Abstract

In the last decades in particular, national governments as well as development agencies and international organizations have increasingly turned to participation in global value chains (GVCs) as a development strategy. However, whether the positive development effects of integration are large enough to warrant trade liberalization cannot be answered in a straightforward manner. In this article, we show how development recommendations by international institutions and Western governments have changed since World War II and now ultimately recommend integration into GVCs.Deregulation and liberalization of international trade and capital flows have fueled two opposing trends, which also affect GVCs: on the one hand, there is increasing concentration at the corporate level. On the other hand, globalization has resulted in more countries participating in international trade including via industrial production. Both developments have led to multinationals being able to expand their rent-seeking opportunities while also reducing production costs, especially for simple manufactured goods. Today, it is no longer sufficient for a country to industrialize in order to catch up with the rest of the world, as the prices for industrial goods and quality of productions have fallen tremendously in some cases, at least in comparison to developed countries. Integration into GVCs seems to provide only minimal macroeconomic benefits beyond the positive effects for individual companies and sectors. Industrial policy therefore seems indispensable for catch-up development.

The implications of governance factors for economic and social upgrading in Ghana’s cocoa value chain

“…Process upgrading aims to increase the productivity of cocoa beans. Studies by Barrientos et al (2011), Dünhaupt and Herr (2022), and Karatepe and Scherrer (2022) suggest that productivity increase in GAVCs is associated more with process upgrading. According to the majority of the interviewees, actors such as lead firms, COCOBOD and LBCs, who hold an interest in higher profits and supply chain stability, enable higher yields to drive process upgrading in GCVC through various incentives.…”

Transformation of Global Value Chains in the Context of Modern Macroeconomic Shocks

“…The transformations occurring over time in business organization have led to the evolutionary transition of individual segments of production from vertical integration to horizontal cooperation. As a result, complex and multi-level production relations (value chains) have developed both in the system of holdings and the external environment: GVCs and network structures that began to permeate and connect vertically and horizontally the production processes carried out not only within countries but also at the international level (Dünhaupt & Herr, 2022).…”