Global Value Chains as Inequality Chains

What is it about?

Global Value Chains (GVCs) are complex production networks in which goods are manufactured in multiple steps across various countries. Everyday products—such as food, clothing, electronics, and vehicles—are commonly produced this way. GVCs are largely coordinated by powerful transnational corporations headquartered in the Global North, which control production, labor processes, and prices. This chapter argues that GVCs not only shape trade and consumption but also reinforce global inequalities. While lead firms, shareholders, and consumers in wealthy countries capture the greatest share of economic benefits, workers and suppliers in the Global South often face low wages, poor working conditions, and intense competition. At the same time, environmental harms—arising from resource extraction, industrial production, and waste disposal—are outsourced to poorer regions, placing a disproportionate burden on local workers, communities and ecosystems. Drawing on extensive empirical evidence and case studies, the chapter demonstrates that GVCs often operate as global inequality chains, concentrating profits in the Global North while displacing economic and ecological costs to the Global South. Rethinking GVCs is therefore essential for building a more just and sustainable global economy.

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Why is it important?

The chapter introduces two novel analytical frameworks for examining economic, social, and environmental inequalities along GVCs. The PPR framework (Path Dependency, Power, Rents) explains how historical exploitation and corporate dominance limit development opportunities in the Global South and reinforce structural inequality. The Environmental Smile Curve illustrates the inverse relationship between economic value capture and environmental burden along GVCs. It shows how lead firms externalize ecological costs by shifting polluting activities and waste to less-regulated regions. Furthermore, so-called sustainability strategies often result in a supplier squeeze, imposing compliance costs on producers in the South without adequate compensation.