Thinning and thickening: productive sector policies in the era of global value chains

Publication Type: Paper
Year: 2014
Author: Raphael Kaplinsky and Mike Morris

Abstract:

Effective insertion into global export markets offers the potential for sustainable income growth. However, inappropriate positioning in global markets may well lead to immiserising growth. The key to achieving the beneficial outcome lies in the capacity to identify, appropriate and protect rents, and in the context of intense global competition, to develop the capacity to master dynamic capabilities in order to generate rents on a sustainable basis. This rent policy agenda is necessarily contextual. We argue that the current temporal context is one in which an increasing share of global trade occurs within Global Value Chains, and that this is widely recognised. Less widely recognised (and we believe that this is the value added in this paper) is the key sectoral distinction between vertically specialised GVCs and additive GVCs. These two families of GVCs require different corporate strategies and different forms of policy support. We refer to thee two strategic agendas as “thinning” (in the case of vertically specialised GVCs) and “thickening” (in the case of additive GVCs). The additive GVCs tend to be relatively more important in low and middle income economies, particularly in Africa and Latin America and parts of South and east Asia. Critically, since effective policy support applies to the agricultural, resource, manufacturing and services sectors (and to the interconnections between them), we argue that “industrial policy” is a misnomer, and instead that we conceive of the policy agenda as one which addresses the “productive sector”.

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