Thoughts from the periphery
Víctor Ramiro Fernández and Gabriel Brondino
By the end of the 1970s, the ‘Golden Age’ of capitalism that started in the post-Second World War years came to an end. The institutional arrangements that sustained a strong process of capital accumulation had now become a straitjacket for its continued expansion. There began a process of considerable institutional and productive transformations, which scholars are still trying to explain. One of the most important dimensions of this transformation is related to changes in the global organization of production. A restructuring of supply chains in multiple locations involving multiple firms operating in a highly coordinated way through market exchanges has been evidenced. This stands in sharp contrast to the vertically integrated conglomerates distinctive of the Fordist mode of accumulation.
The question of how these changes emerged and what are their theoretical and practical implications remains a contested field of discussion among scholars. The central variable in most explanations is technological change. For new institutional economics, changes in technology create new rents for potential innovators that demand institutional rearrangements. In this sense, the technological shifts of the 1970s and 1980s opened up attractive rent opportunities that could only be seized by breaking down the vertically integrated corporations (Langlois 2003). A similar position, though in a neo-Schumpeterian vein, is held by Perez (1985).
Although we do not deny the importance of these elements, we believe that they fall short in providing a comprehensive explanation of the complexity of the changes. In this sense, it is legitimate to ask to what extent one can explain these transformations by abstracting them from other transformations that have occurred within the capitalist system in the advent of the 1970s world crisis, in terms of class struggle, the policy priorities of states, and geopolitics. It is also relevant to investigate the particular impact that these changes have had on the periphery of the capitalist system and the way in which this periphery is involved in the ‘spatial solution’ of capitalism in general and in global productive transformations in particular.
We will attempt to provide a theoretical framework to analyze these changes in the context of recent historical transformations of the capitalist system, as well as to evaluate the particular way in which the periphery has been incorporated into these transformations.
Capitalism is the first and only historical system that has become global in scale and scope. Mapping this transformation over time is a particularly challenging task.
Arrighi 2004: 527
Classical political economists considered the conflict and power relations between the owners of means of production (capitalists) and the direct producers (laborers) to be a central feature of capitalism. The main conflict concerned the distribution of the social surplus. For given normal conditions of production, “one class cannot have more without the other class having less” (Garegnani 1984: 301). According to Marx, it was the merit of Ricardo to point out the economic contradiction between this “intrinsic relation” (Marx 1963: 525).
The production of commodities is structured in terms of chains, which are constituted by the exchange relations established between capitalists. Each chain can be seen as a network of inputs (including labor) required for the production of final goods (Hopkins & Wallerstein 1977). The conflictive relation between the labor force and capitalist agencies underlies each node of the chain. That is why, in addition to competing in final product markets, capitalist agencies also attempt to displace the distributional conflict to other nodes of the chain. In this way they aim to get the largest share of the surplus generated in the chain (or other chains).
There is no defined territorial scope for the constitution of commodity chains. As World Systems theorists have shown, because territories are delimited by the inter-state system, inter-capitalist competition is not disconnected from inter-state competition for power and leadership. In this sense, the formation of global commodity chains is not an unintended outcome derived solely from the autonomous decisions of capitalists. Commodity chains also have “occurred under the leadership of particular communities and blocs of governmental and business agencies which were uniquely well placed to turn to their own advantage the unintended consequences of the actions of other agencies” (Arrighi 1994: 10).
A state that accumulates enough power can lead the system in a desired direction and, in doing so, be “perceived as pursuing a general interest” (Arrighi 1994: 30). Under the leadership of the hegemonic power, states are ranked into three broad groups (Fiori 2009): first, states developed under the tutelage of the hegemon, mainly by geopolitical motives; second, states that adopt autonomous development strategies to catch-up with the leader (these projects are not always permitted by the hegemonic power and may be blocked); and third, a group of heterogeneous states, which constitute the periphery of the system. In this ‘center-periphery structure,’ some states can change their position but the structure as a whole is stable over time (Arrighi & Drangel 1986; Babones 2005).
This political structure of center-periphery relations influences the exchange and production relations of commodity chains. Peripheral states usually provide primary and secondary specialized inputs to central states. According to Latin American structuralist authors, exchange between the center and the periphery is unequal since central states commonly provide political protection within their domestic borders both to labor and capital, while peripheral states are more limited in their ability to do so. This differential in protection means a different distributive arrangement in the center than in the periphery, which in the end implies an unequal terms of trade (Prebisch 1962).
To sum up, the emergence of a hegemonic state implies a particular inter-state structure, configuring and articulating a center-periphery hierarchy. This structure is supported by a particular configuration of global commodity chains. In each node of the chain, capitalist agencies attempt to displace the distributive conflict to other nodes or other chains. This displacement is reinforced and mediated by the center-periphery relations. Capitalist agencies located in central states are usually more successful in translating the conflict to nodes located in peripheral states.1
This way, inter-capitalist and inter-state competition ultimately resolves itself in a particular configuration of global capital accumulation. The configuration will depend on the form of these two types of competition (Arrighi & Drangel 1986).2 But this configuration is not definitive and competitive pressures are always latent.
As capital accumulates, it may have difficulties in finding outlets for its production and realizing the expected normal profitability. This may lead to a breakdown in the accumulation process and leave large shares of labor and productive capacity underutilized in some areas of production. When the crisis becomes deep enough, a global restructuring of capital accumulation occurs. As Marxian critical geography authors claim, the crisis is usually resolved by restructuring the production process. This restructuring is accomplished by incorporating new spaces for capital accumulation, that is, a ‘spatial fix’ (Harvey 1981, 2001). Since the fundamental contradictions of the crisis are not solved, this solution is also a temporal fix, that is, it only delays further in time the always latent distributive conflict.
There arises resistance to new spatial-temporal fixes. Some fractions of capital, as well as local institutions and part of the labor force, cannot relocate. This is important in the sense that it is not necessary for a capitalist to actually move but to have a potential place of relocation. The mere possibility of a spatial fix is enough for the mobile fractions of capital to have leverage to negotiate concessions for obtaining higher profits (Bluestone & Harrison 1982). Resistance also comes from inter-state competition, since relocation of productive activities may empower the recipient territory/state and cause geopolitical shifts in the balance of power (Harvey 1981; Arrighi 2004).
If for capitalist agencies only the possibility of a new spatial fix is sufficient, what are the main determinants that make this menace credible? What enables global restructuring of productive chains? Certainly, the institutional and technological advances are fundamental determinants (Perez 1985), but they cannot be understood without considering the general picture of interstate competition and distributive conflict.
By the end of the Second World War, the United States (US) had consolidated its global political power and assumed the leadership of the inter-state system. This hegemony was continuously threatened by a particular group of states centered around the Soviet Union (USSR). Under these circumstances, the US pursued an active foreign policy in those states that had geographical proximity to the territories controlled by the USSR. Specifically, the strategy had two pillars: economic and political reconstruction of Europe, and an impulse for development in East Asia.
As military tension between state blocs began to rise, internal political pressure from the working class in Western central states was increasing, especially in Western Europe. Labor organizations gained strength in wage negotiations and, in the face of the ‘menace’ of communism, concentrated capital adopted a defensive strategy. National states acted as mediators of this transitory agreement between the two factions. Negotiations were highly centralized, since they were developed by big economic groups and trade unions (Brenner 2004). The agreements allowed—in central states—for an extended process of formation of the Keynesian welfare states, which, regardless of their domestic specificities (Esping-Andersen 1990) converged in encouraging a unique growth process through social spending and full employment policies (Marglin & Schor 1990).
The presence of big economic groups and concentrated capital was the result of rapid industrial development at the end of the nineteenth and beginning of the twentieth centuries. The development of transportation and communication systems (railroads and telephone network, among others) within domestic borders enlarged the size of national markets. Since commodity chains were configured mainly inside the national borders, a market expansion allowed for a larger division of labor and higher productivity (Kaldor 1970). The majority of industrial production processes were characterized by a proliferation of production techniques based on the constitution of an assembly line that allowed a technical division of labor within the firm or corporation (Scott 1988). In the context of wage negotiations tied to productivity growth, capitalist agencies had to exploit the maximum scale of operations in order to maintain the rate of profits. The basic form of industrial organization that capital adopted was vertical integration of the supply chain (Langlois 2003). The rigidity of this type of organization required an environment of stable demand, which was guaranteed by the implementation of the full employment policies mentioned above.
This type of productive organization conditioned the industrialization strategies of peripheral states. Since the main supply chains operated at the domestic level, the most relevant option for development was the creation of industrial supply chains and the proper articulation of its nodes. But for this strategy to be viable it was necessary that markets be large enough to benefit from scale economies and from vertical integration. As technology came mostly from the central states, it was also necessary to provide attractive conditions for transnational companies. Even if these two conditions were fulfilled, in order for the industrialization process to be eventually successful in international markets—that is, to alter the traditional export pattern—a source of external demand (mainly from the central states) was also necessary.
However, not all peripheral states were equally able to carry out this strategy, so they adapted in different ways and performed differently. It is beyond the scope of this chapter to offer a comprehensive analysis of the causes of this differential economic performance, specifically between East Asian (EA) and Latin American (LA) regions. Instead, by highlighting the different elements that intervened in this outcome, we aim to show, first, that the periphery is never constituted by a homogeneous group of states, and second, how inter-state and inter-capitalist competition has affected the periphery in different ways, and hence influenced the organization of global production and the international division of labor.
Economic performance was affected by three main aspects: (i) the geopolitical strategy of the central states—the US, in particular; (ii) the capacity of the state to steer industrialization; and (iii) the nature and extent of land reform.
In the LA region, development projects were mostly geopolitically conditioned. Industrialization was permitted, as long as it was not a threat to the political leadership and economic interests of the US. Also, the region was discouraged from engaging in integration processes that could form a potential regional bloc which limited the power of both hegemons. At the same time, there were internal restrictions due fundamentally to the state’s ineffectiveness in solving the distributive struggle and to command the accumulation process (Fiori 1992). The state’s role was confined to that of an authoritative intervention related to the cyclical deactivation of popular sectors (O’Donnell 1973).
These conditions had a clear impact on the configuration of the productive structure of most LA states, which were markedly heterogeneous (Pinto 1970). The nodes of production of higher productivity were dominated by the presence of large foreign corporations. These nodes were poorly articulated with the nodes of lower productivity, which absorbed the surplus labor. As a result, the labor force was segmented into two broad sectors, formal and informal (Chena 2010). This had a clear impact on the capacity of the working class to organize, which was less than that of the central states. Nevertheless, when social conflict began to arise, the final way out of the conflict was ‘truncating’ the industrialization process through authoritative governments (Fajnzylber 1985).
In contrast, industrialization projects in the EA region were authorized and even encouraged by the hegemonic state (Glassman 2011). Within this geopolitical context, the process was directed through nation states of strong authoritative nature, high technical quality, and with a very coherent and centralized strategy (Evans 1995; Woo-Cumings 1999). These elements permitted, on the one hand, both domestic and foreign big capital to be disciplined (Amsden 1992); on the other hand, they allowed for the unionization of the working class to be hindered. Finally, in contrast to the LA region, agrarian reforms in the EA region fragmented the capitalist class and limited its conditioning capacity (Kay 2002).
The process of industrialization under economies of scale with vertical integration managed to advance in the sensitive nodes and, at the same time, to be extended spatially in the EA area through a process of regional integration known as flying geese (Akamatsu 1962).
It is in this stage—and considering these specificities—that attention should be given in order to analyze the subsequent differential in economic development between both regions. During this period, international trade between peripheral and central countries maintained a structure similar to that in force during the period of British hegemony. In general, trade at that time consisted of final goods; central countries exchanged industrial goods, while peripheral countries participated in international trade by exporting primary goods. The possibility of developing integrated industries allowed EA states to join trade networks exporting manufactures of increasing complexity. This differential led to a different integration in global commodity chains.
By the late 1960s and early 1970s, the first signals of exhaustion of the post-Second World War expansion cycle become visible. The reconstruction of Western European states in general, and the German economy in particular (together with Japan), increased both inter-state and inter-capitalist competitive pressures. The emergence of China in global politics and the global economy also contributed to the questioning of American hegemony.3
Distributive tensions in central countries reached critical levels. By the end of the 1960s, demands for higher wages increased rapidly (Cavalieri et al. 2004). This, together with the abrupt increment in the international oil price, increased inflationary pressures. In such a context, during the 1980s, the majority of central states applied disinflationary policies based on higher interest rates combined with demand adjustment policies (Serrano 2003). The resulting rise in unemployment was a key element to discipline the working class and to contain wage demands.
In this scenario, a fraction of the capitalist class sought to relocate part of the nodes of production outside national spaces (Ross & Trachte 1990), and through changes in the capitalist strategy, a new spatial-temporal fix began to emerge. One of the most visible aspects of this new ‘fix’ was the restructuring of global commodity chains. This restructuring was made possible by technological advances that occurred in the transportation and communication systems, and in the sphere of production, on the one hand, and the process of financialization, on the other hand.
The development and refinement of tools and machines governed by electronic control mechanisms allowed greater flexibility in production processes (Alcorta 1994). This flexibility created the possibility to break down the production process into elementary units that unskilled labor could easily perform. This allowed the replacement of skilled high-wage labor of the center with low-wage labor of peripheral regions (Fröbel et al. 1977). As for connective technology, the development of jet aircraft and the introduction of containerization reduced substantially the costs for transporting heavy and bulky freight. In communication systems, technological developments in satellites and optical fibers vastly increased the speed and capacity of communications networks (Dicken 2011: 81–97).
Finally, the production restructuring should not be considered as detached from the growing process of financialization, meaning the “increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies” (Epstein 2005: 3). In this framework, profit making in the pattern of accumulation “occurs increasingly through financial channels rather than through trade and commodity production” (Krippner 2005: 181).
Financialization played a vital role in relocating investments through space and time as well as in developing new forms of organization of capital and its production system. The deregulation wave of capital markets across the world gave greater flexibility of movement to those fractions of capital that became globalized. But as it facilitated the transfer of capital from one location to other, finance capital also began to take a stake in the organization of global commodity chains (Milberg 2009). Moreover, the industrial and financial forms of capital has reached such a level of development that transnational companies can be considered to be the “organizational modality of finance capital” (Serfati 2008: 35).
With these techniques and in the context of high capital mobility, a new form of economies of scale became relevant, and so the industrial organization of most productive sectors began to change. Business enterprises began to externalize a great part of the activities that constituted their supply chain, and most of these activities began to take place in new geographical territories. In this new setting, production is organized through numerous firms dispersedly located, but operating simultaneously in real time. In each node of production, specialization also means generalization. For example, a firm that participates in the stage of assembling products does not assemble for one particular firm, but assembles a variety of products for different firms (Langlois 2003). Hence, supply chains are now disintegrated on a multi-firm, multi-location basis, where in each location there exists a clustering of firms that specialize in a given set of activities.
By connecting the literature on international business and economic geography, it is possible to observe how an increasing process of outsourcing led by transnational corporations co-exists with a multiplicity of heterogeneous and unequal local clusters (Mudambi 2008). In other words, spatial dispersion and agglomerative logics are part of the new economic geography of capitalism. Overall, mediated by the financialization process, technological transformations provided the foundation for the spatial reorganization of production in order to temporarily fix the distributive crisis of the central states. Within this spatial-temporal fix, space is at the same time shrinking and expanding. That is, while more spaces are being incorporated into global production, within this larger space, firms cluster according to the type of activity they perform (Harvey 2003).
These transformations also have had repercussion in the activities of national states and the manner in which they regulate the constitution of these networks. Under the new spatial-temporal arrangement, states no longer seek to insulate local actors from international market pressures, but are compelled to provide competitive support so its ‘national’ capital can develop global competence (Competition state) (Cerny 1997). Far from representing an absent state, it represents one immersed in ‘strategic activism,’ related to the strengthening of its capitalist economic agents in the global competitive process through the securing of commercial, technological, and financial support (Weiss 2005) and subordination of social policies to the structural demands of competitiveness (Jessop 1993). The changes in national strategies and the process of restructuration of global capital affected the peripheral states and, due to the geopolitical articulation configured during the Golden Age, the manner in which they became involved in the new global economy was different.
Traditional commercial articulation between the center and the periphery lost relevance in the total trade flow, in terms of final goods exchange. At the same time, productive disarticulation within national spaces and the novel forms of operation of capitalist agencies altered the role of foreign direct investment. Under current circumstances, even if the market is large enough to allow for production to take place in the periphery, transnational companies do not replicate the same production processes used in the center, but participate in the nodes that are functional to their global strategy of maximizing profits.
Considering the cases of the EA and LA regions, the different forms of involvement meant a subsequent difference in performance between the two regions. Due to its successful industrialization process in previous years, the EA region became involved in the most dynamic nodes (industries with high technological complexity) of supply chains. The LA region, on the other hand, dismantled a great portion of its industrial structure and specialized in some productive nodes using advanced technological capabilities mostly oriented towards the exploitation of natural resources.
The argument developed so far reveals the inextricable connection between changes in the global organization of production and inter-state and inter-capitalist competition that have converged historically in different spatial-temporal fixes, and configured center-periphery relations. As we stated in the introduction, conventional explanations of the organization of global production does not incorporate these elements and how they figure in the analysis. We will critically discuss the Global Value Chain (GVC) approach given that it is the one that gained most popularity among academic scholars and has become relevant for the formulation and assessment of public policies.
The origin of the GVC approach traces back to the term Commodity Chain (CC) discussed earlier, which was coined by Hopkins and Wallerstein (1977). Gary Gereffi first introduced the concept of Global Commodity Chain but later changed it to Global Value Chain to avoid the disproportionate attention given to the notion of commodities in relation to primary products (Bair 2005). While the notion of CC was advanced in a broader theoretical framework aimed at explaining the macro-historical dynamics of capitalism, GVC was introduced as an attempt to construct a novel tool for understanding the current specificities of the globalization process. Notwithstanding their heterodox roots, the transition to GVC had several mutations of important interpretative implications.
The GVC approach aims at analyzing the networks of enterprises that do business at a global level in activities that transcend national and regional boundaries. The focus is on the organizational logic of different global industries and the role of firms that comprise those industries. In order to analyze such networks, the concepts of governance and upgrading have been developed for understanding the top-down and bottom-up dynamics that constitute the global chain, and which organize its functioning.
The top-down approach is developed through the concept of governance, which is used to unravel the way in which large firms obtain governance over the GVC and additionally fix its dynamics based on the control over certain strategic functions (Gereffi et al. 2005). The GVC literature broadly distinguishes between ‘producer-driven’ and ‘buyer-driven’ value chain governance.4 ‘Producer-driven’ chains are usually found in sectors with high technological and capital requirements, where capital and proprietary know-how constitute the main entry barriers (for example, automobiles, aircrafts, and computers). In these chains, producers tend to keep control of capital-intensive operations and sub-contract more labor-intensive functions, often in the form of vertically integrated networks. ‘Buyer-driven’ chains are found generally in more labor-intensive sectors, where the cost of information, product design, advertising, and advanced supply management systems set entry barriers (for example, clothing, footwear, and many agro-food commodities). In these chains, production functions are usually outsourced and key actors concentrate on branding, design and marketing functions.
The bottom-up approach is developed through the concept of upgrading, the purpose of which is to examine the processes and ways in which firms that do not govern the chain (and are therefore subordinated) climb steps in the international ladder of value-added activities, moving from low-value to high-value activities to increase the benefits of participating in GVCs (Bair & Gereffi 2003). To this end, three essential forms of upgrading are distinguished: (i) the upgrading of a product (improving its quality or design); (ii) the upgrading of a process (in scale and speed, and efficiency and productivity); and, (iii) functional upgrading (acquisition of new functions to increase the added value of activities in the chain) (Gereffi 1999).
Based upon these concepts, the main contribution of GVC to the study of the current globalization process has been to understand the way in which space and economic activities interact and evolve along different stages of production of each global economic network, and the way in which value is produced and distributed among those networks, not only focused on manufacturing nodes, but also including marketing and distribution (Giuliani et al. 2005).
The receptiveness of mainstream economics to this approach was slow. In recent years, the use of the GVC approach has spread among economists studying trade and development; mainly among those working in multilateral economic institutions (Ravenhill 2014). This can be seen through the overwhelming presence of its conceptual apparatus in the policy recommendations of international institutions, as well as in the development proposals of national and regional governments.5
Despite its contributions, there are several omissions and critical simplifications in the GVC approach that have significant implications. Many of these omitted issues are related to the elements we have considered in our analysis.
First, by proposing an analysis of the changes in the process of production restricted to a limited period—specifically, that of globalization—in which all that is considered are the novel ways of production organization and coordination of distribution, the forms of governance, and the types of upgrade, the approach loses the historical perspective of capitalism highlighted in the second section of this chapter. The GVC approach is also focused on sectors and specific activities. This method of slicing the chain (Bernstein & Campling 2006) has the corresponding disadvantage of losing sight of the analysis of capitalism as a whole, and of the interaction of the commodity chain with other entities and agencies.
Second, the lack of a holistic and historical perspective of capitalism is accompanied by disregard for the contradictory, hierarchical, and unstable logic of capitalist development. This neglects the cyclical form and recurrent crisis under which global production processes are developed and their relation to the spatial fixes (as discussed in the second section of this chapter). Disregard for these logics is rooted in the conception (more or less explicit) of power underlying this approach (Fernández 2014). The notion of power as domination, that is the capacity to impose one’s will over
others, is displaced and replaced by another—grounded in theories of network relationships—in which power is related to co-production and collective endeavors (Hess 2008).6 This association, in the absence of a historical and holistic perspective, restricts the capacity to consider the way in which conflictive relations are reinstalled and reprocessed at the level of spaces and actors.
With respect to actors, the GVC approach focuses mainly on firms and the relationships between them (Bair 2008). This neglects not only the role of labor (Newsome et al. 2015), but also disregards the conflictual relationship between workers and capitalists, which is central to the analysis of crisis and emergent spatial fixes.
With respect to space, the sectoral perspective and the adopted method of slicing chains together with the poor treatment of power, has restricted the GVC approach’s relevance and the way in which global commodity chains contribute to shape centers and peripheries. The approach has been in general reluctant to take into account the complex set of global geopolitical elements, as well as the specificities of national trajectories (Fernández 2014). In sum, in the GVC approach prevails a global–local conception (Werner et al. 2014) that is imposed without a clear recognition of national spaces and peripheral specificities. In this conception, the leading firms build forms of global governance while local instances appear as strategic spaces for developing clusters of Small and Medium Enterprises (SME) internally organized to enhance upgrading in the GVC (Humphrey & Schmitz 2000).
As we have seen, all these elements are important to understand how central states and their leading firms control the strategic functions of the commodity chain and establish a hierarchical link with peripheral states, where most activities of low complexity and remuneration are performed. However, within this approach, and as a part of the globalization process, the state has been diluted to be like any other public organization acting to complement firms (Sturgeon 2013), and whose performance should be evaluated in terms of the effectiveness of the reversion in the unequal position of local actors in the commodity chain.7 This omission and reduction does not recognize the historically unique specific role of the state in particular and the inter-state system in general in the regulation of accumulation cycles, and, within these, in the development and transformation of global and national processes of production.
The ‘invisibility’ of the state also affects the linking of the role of geopolitics and national trajectories previously mentioned. Under the inter-state system constituted in the new scenario of globalization, it is essential to take into account the strategic role played by the US in the periphery, as we discussed earlier, since the post-Second World War years (Glassman 2011), together with the different historical national trajectories of peripheral states (Kohli 2012). It is from the confluence of both elements, and from the centering of the analysis on the state, that plausible explanations arise for the different developments of the EA and LA regions. The respective regional responses to the constitution of leading firms with governance capacity in global commodity chains (as in the case of Japan, South Korea, and Taiwan) leads to region-specific and upgrading strategies to reach the core nodes of the chains (as in the case of China).
To sum up, the GVC approach excludes the role central and peripheral states have played in the new spatial fix intervening in the constitution of governance and development of upgrading in the global supply chains. As we have seen, competition states act as supporters of leading firms located in the center in developing resources and infrastructure to enhance their international competitiveness (Block 2008). This amplifies the differences in the capacity of firms from central states for constituting and positioning in the global commodity chain.
Finally, there is a remarkable absence of finance and financialization issues in the GVC approach and its conceptual apparatus (Williams 2000). When finance and financialization are introduced, two additional aspects become critical for the analysis of the links between producers from peripheral states and transnational capital. First, relations between leading firms from the center and the peripheral regions are more shaped by speculative motives than by productive purposes (Newman 2009). Second, global firms of the chain have privileged access to financial instruments, in contrast to economic actors from the periphery. In order to improve their functions and positions in the commodity chains through new financial investments, these economic actors depend on the assistance offered by either leading firms or national and international coordinated programs from international institutions through development and financial assistance. In consequence, the financialization process (as well as the financial system) tends to increase asymmetric control of power within the chain, and establishes entry barriers mostly for small actors.
In this chapter, we have provided an analysis of the main aspects involved in the changes in the organization of global production in the context of the recent transformations of the capitalist economic system. We have highlighted the necessity to observe these transformations as a part of the cyclical process of crisis and the subsequent restructuring through new spatial fixes of the capitalist system that do not alter its fundamental contradictions and center-periphery configuration but rather reinforce them.
Based on this conceptual framework, we have presented a critical assessment of the GVC approach, the mainstream analysis of recent transformations in global production. We have examined their analytical tools and demonstrated how the omissions and simplifications of the approach limit its capacity to understand how these transformations condition the way in which different actors and spaces manage to face the process of global productive restructuring and position themselves in the commodity chain.
The most problematic arguments that stand out are related to the adoption of a perspective limited to the globalization period and centered on the analysis of sectors and interfirm relations in which power is associated with co-production and collective endeavors. In our view, such arguments omit the historical and holistic perspective under which the contradictory nature of capitalism can be fully grasped. Such omissions encourage disregard for the role of labor and its conflictual relation with capital, as well as denial of the center-periphery spatial configuration. These omissions are reinforced through a weak treatment of the state (both in its center and periphery characterizations), the nullification of geopolitics and national trajectories, and the exclusion of the process of financialization in the formation and functioning of global chains.
Considering the growing institutionalization of the GVC approach, the effects of the simplifying assumptions and omissions are not restricted to limited interpretations within the academic field. Quite the contrary. The institutional strategies derived from the framework tend to derail a dynamic global insertion of the periphery supported by integral accumulation strategies that overcome the heterogeneous and unequal socio-productive structures.
In this way, an articulation of the omitted elements in the dominant perspective is important: to attain a more adequate explanation of the context and factors that influence the process of global restructuring of production in capitalism and to account for the distinct way this process takes place within the periphery; and to also elaborate the multi-scalar strategies that allow peripheral spaces to participate in the process of global restructuring in a way that is capable of reversing—or at least reducing—its subordination and elevating the position of labor.
1 Peripheral states are not homogeneous. Recall that in the process of global configuration of commodity chains, geopolitical interests of the hegemon may benefit some regions and block initiative of others. The institutional trajectory of each peripheral state also plays an important role in this process.
2 Arrighi (1994: Ch. 1), for instance, identifies in the history of capitalism four partly overlapping ‘systemic cycles of accumulation’ of increasing scale and decreasing duration.
3 Whether the US has lost the inter-state leadership to China is still a matter of discussion among scholars (Fiori et al. 2008). The trouble arises from the fact that the Chinese economy is sometimes seen as complementary to the US hegemony and sometimes as an opponent and potential substitute for its leadership (Medeiros 2006).
4 A recent study suggests a broader classification of types of governance (Ponte & Sturgeon 2013).
5 See Fernández (2014) and Werner et al. (2014), and the official documents of World Bank, UNCTAD, OECD, ILO, and IDB cited there.
6 The poor treatment given to power in the GVC approach co-exists in similar perspectives like that of Global Production Networks (GPN) (Henderson et al. 2002, Coe et al. 2008). GPN presents itself as a complementary perspective to GVC but critical regarding some elements of the latter approach. However, the approach fails to offer a systematic and articulated problematization of these issues, so part of the critics advanced to GVC in this section also apply to GPN.
7 Recent warnings made about the absence of the state in GVC have been mainly concerned with highlighting its new adaptive role in the novel conditions of global production (Lee et al. 2014), disregarding— and even considering anachronistic—the strategic role played by the developmental state in moving up from a peripheral position in the world system. See the special issue on GVC and GNP of the Review of International Political Economy (volume 21, issue 1, 2014).
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