World development under monopoly capitalism

Most of world trade is organized through global value chains (GVCs). The World Bank’s Trading for Development in the Age of Global Value Chains claims that GVCs boost incomes, create better jobs and reduce poverty. It explains the developmental benefits of GVCs from a comparative advantage theory perspective. In this chapter we show how GVCs contradict and invalidate the assumptions upon which comparative advantage theory is constructed. While comparative advantage theory holds that firms interact through arms-length relations, GVCs are characterized by the exercise of significant non-market power by lead firms over their suppliers. We argue that these power relations also explain the deleterious impact of GVCs upon real human development. While the WDR claims that GVCs are developmentally positive, it provides evidence to the contrary - showing how they concentrate wealth, repress incomes, create many bad jobs (low-wage, low-skill, low-security and with poor working conditions), and reproduce new forms of in-work poverty.