Spreading the Gains from Globalization : What Can Be Learned from Value-Chain Analysis?

In recent years, globalization has been associated with increasing inequality within and between countries, and with a stubbornly large share of the world's population living in poverty. If the "losers" had been confined to those who did not participate in the global economy, then the policy implications would be clear--join the rush. But, when (as is the case) the "losers" include those who have participated in global processes, then the policy challenge is much more daunting. It is not so much a matter of whether to participate in global processes, but how to do so in a way that provides sustainable income growth for poor people and for poor countries. In these circumstances, policy needs to address processes of production and product development, including both intrafirm organization and the relationship between firms. It also needs to address the ways in which poor producers and poor countries connect with producers and consumers in the global economy. Value-chain analysis--which includes the whole cycle of the organization, production, and delivery of products from inception to use and recycling-- provides a tool for mapping these crucial domains of private and public policy. But, more than that, by focusing on the dynamic shifting of producer rents through the chain, on the processes whereby key actors provide governance to production that occurs on a global basis, value-chain analysis provides important insights into the policy challenges confronting both private and public actors. This article reviews the unequal character of recent processes of globalization, summarizes the key theoretical concepts that characterize the concept of value chains, and illustrates the contribution of value-chain analysis through summaries of four chain case studies (fresh fruit and vegetables, canned deciduous fruit, footwear, and automobile components). It concludes with a discussion of practical ways of how value-chain analysis can inform policy.