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Global value chains in a post-
Washington Consensus world
Gary Gereffi
a
a
Department of Sociology, Duke University, Durham,
NC, USA
Published online: 06 Mar 2013.
To cite this article: Gary Gereffi (2014) Global value chains in a post-Washington
Consensus world, Review of International Political Economy, 21:1, 9-37, DOI:
10.1080/09692290.2012.756414
To link to this article: http://dx.doi.org/10.1080/09692290.2012.756414
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Review of International Political Economy, 2014
Vol. 21, No. 1, 9–37, http://dx.doi.org/10.1080/09692290.2012.756414
Global value chains in a post-Washington
Consensus world
Gary Gereffi
Department of Sociology, Duke University, Durham, NC, USA
ABSTRACT
Contemporary globalization has been marked by significant shifts in the
organization and governance of global industries. In the 1970s and 1980s,
one such shift was characterized by the emergence of buyer-driven and
producer-driven commodity chains. In the early 2000s, a more differentiated
typology of governance structures was introduced, which focused on new
types of coordination in global value chains (GVCs). Today the organization
of the global economy is entering another phase, with transformations that
are reshaping the governance structures of both GVCs and global capitalism
at various levels: (1) the end of the Washington Consensus and the rise of
contending centers of economic and political power; (2) a combination of ge-
ographic consolidation and value chain concentration in the global supply
base, which, in some cases, is shifting bargaining power from lead firms in
GVCs to large suppliers in developing economies; (3) new patterns of strate-
gic coordination among value chain actors; (4) a shift in the end markets of
many GVCs accelerated by the economic crisis of 2008–09, which is redefin-
ing regional geographies of investment and trade; and (5) a diffusion of the
GVC approach to major international donor agencies, which is prompting a
reformulation of established development paradigms.
KEYWORDS
Globalization; development; global value chains; global commodity chains;
Latin America; East Asia; import-substituting industrialization (ISI); export-
oriented industrialization (EOI); value-added trade.
I. VIEWING THE GLOBAL ECONOMY THROUGH
A VALUE-CHAIN LENS
Globalization has given rise to a new era of international competition that is
reshaping global production and trade and altering the organization of in-
dustries (Gereffi, 2011). Since the 1960s, international companies have been
C
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REVIEW OF INTERNATIONAL POLITICAL ECONOMY
slicing up t heir supply chains in search of low-cost and capable suppliers
offshore. The literature on ‘the new international division of labor’ traced
the surge of manufactured exports from the Third World to the establish-
ment of labor-intensive export platforms set up by multinational firms
in low-wage areas (Fr
¨
obel et al., 1981). This was typified by the American
production-sharing or ‘twin plant’ program with Mexico and the German
export-processing zones for apparel assembly in Central and Eastern
Europe. The pace of offshore production soon accelerated dramatically and
took new organizational forms (Dicken, 2011). In the 1970s and 1980s, US
retailers and brand-name companies joined manufacturers in the search
for offshore suppliers of most categories of consumer goods, which led
to a fundamental shift from what had been ‘producer-driven’ commodity
chains to ‘buyer-driven’ chains. The geography of these chains expanded
from regional production-sharing arrangements to full-fledged global
supply chains, with a growing emphasis on East Asia (Gereffi, 1994, 1996).
In the 1990s and 2000s, the industries and activities encompassed by
global supply chains grew exponentially, covering not only finished goods,
but also components and subassemblies, and affecting not just manufactur-
ing industries, but also energy, food production and all kinds of services,
from call centers and accounting to medical procedures and research and
development (R&D) activities of the world’s leading transnational corpo-
rations ( Engardio et al., 2003; Engardio and Einhorn, 2005; Wadhwa et al.,
2008). Since the early 2000s, the global value chain (GVC) and global pro-
duction network (GPN) concepts gained popularity as ways to analyze the
international expansion and geographical fragmentation of contemporary
supply chains (Gereffi et al., 2001; Dicken et al., 2001; Henderson et al., 2002;
Gereffi, 2005).
There are numerous reviews of the distinctive features of the global
commodity chain (GCC) and the GVC and GPN approaches to analyzing
global supply chains.
1
In general, they all characterize the global econ-
omy as consisting of complex and dynamic economic networks made
up of inter-firm and intra-firm relationships. However, it is equally true
that there are national and international political underpinnings to the
shifts in global supply chains that have taken place over the past four
decades. In the 1960s and 1970s, the key players in most international
industries were large, vertically integrated transnational corporations
(Vernon, 1971) and their link to the growing markets of developing
countries was primarily via the import-substituting industrialization (ISI)
model of growth that had been well established in Latin America, Eastern
Europe and parts of Asia since the 1950s. The ‘East Asian miracle’ (World
Bank, 1993), based on the rapid economic advance of Japan and the so-
called East Asian tigers (South Korea, Taiwan, Hong Kong and Singapore)
since the 1960s, highlighted a contrasting development model: export-
oriented industrialization (EOI) (Gereffi and Wyman, 1990). Buttressed by
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GEREFFI: GVCs IN A POST-WASHINGTON CONSENSUS WORLD
the neoliberal thrust of the Reagan and Thatcher governments in the US
and the UK, respectively, export-oriented development became the prevail-
ing orthodoxy for developing economies around the world. This model
came to be known as the ‘Washington consensus,’ and EOI was lauded for
giving many small economies in the developing world the opportunity to
benefit from scale economies and to learn from exporting to much larger
trade partners, thereby overcoming the bias of the ISI model toward the
limited number of developing countries with large domestic markets.
The death knell f or ISI, especially in Latin America, came from the oil
shock of the late 1970s and the severe debt crisis that followed it (Urquidi,
1991). The ISI approach had devised no way to generate the foreign ex-
change needed to pay for increasingly costly imports, and escalating debt
service payments led to a net outflow of foreign capital that crippled eco-
nomic growth. When many developing countries, under pressure from the
International Monetary Fund (IMF) and the World Bank, made the tran-
sition from ISI to EOI during the 1980s (Gereffi and Wyman, 1990), there
was an equally profound reorientation in the strategies of transnational
corporations. The rapid expansion of industrial capabilities and export
propensities in a diverse array of newly industrializing economies in Asia
and Latin America allowed transnational corporations to accelerate their
own efforts to outsource relatively standardized activities to lower-cost
production locations worldwide. It is precisely this change in the strate-
gies of transnational companies that enabled the shift from ISI to EOI
in developing economies, and it corresponds to the shift from producer-
driven to buyer-driven commodity chains at the level of global industries
(Gereffi and Korzeniewicz, 1994).
2
However, the development story for East Asia and other newly in-
dustrializing economies cannot be captured solely through a contrast
of the ISI and EOI models, since the shift from ISI to EOI was not
total or uncontested in either East Asia or Latin America. Indeed, el-
ements of both strategies were intertwined since countries tended to
move from relatively easy to more difficult phases of both ISI and EOI
over time (Gereffi and Wyman, 1990). In addition, the growth of GPNs
has been linked to rising levels of income inequality, within and be-
tween countries, which can be explained in large measure by the dy-
namics of rents in GVCs, which are increasingly determined by intan-
gible assets (such as copyrights, brand names and design) as more tan-
gible barriers to entry in manufacturing have tended to fall (Kaplinsky,
2000). In the wake of the 2008–09 global economic crisis, the rapid
growth of productive capabilities in China, India and other large emerging
economies has created a profound shift in global demand for both finished
goods and intermediates from North to South, with both positive and
negative implications for developing country exporters (Kaplinsky and
Farooki, 2011).
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