Global value chains

Image: Tom Fisk
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By THOMAS ROTTA*

The theory of unequal exchange is incompatible with the assumption that all economic activities produce value

The global economy underwent significant restructuring between 2000 and 2014, driven primarily by China’s rapid industrial rise and its accession to the World Trade Organization in 2001. This period marked a critical shift in global value chains, with manufacturing relocating from developed countries to Asia. The economic consequences were profound, transforming wages, employment, and the distribution of income across nations.

My recent empirical study, published in January 2025 in the journal Environment and Planning A: Economy and Space, estimates the production, realization, and capture of economic value in global value chains across 56 sectors and 43 countries between 2000 and 2014. Based on Marxist value theory, the paper highlights how value is produced by labor and then transferred or captured across industries and countries. It also analyzes the causes behind value capture, shedding light on global economic disparities.

Conceptual framework

The analysis is based on Marx's theory of value, which allows a detailed examination of the creation and distribution of economic value. In particular, the study generalizes to a global scale the approach of the New Interpretation (New Interpretation) of Marxist value theory, developing a new empirical methodology that allows the estimation of the production, realization and capture of value in the global economy.

Key concepts include: (i) Value production: The total labor (direct and indirect) embodied in goods, including labor used to produce inputs such as machinery and raw materials. (ii) Value realization: The allocation of overall value through market transactions, which are carried out at current prices. (iii) Value capture: The difference between realized and produced value, representing the transfer of value between sectors in different countries.

In this regard, it is important to emphasize that Marxian theory distinguishes productive activities from unproductive activities. Productive activities generate new commodities, while unproductive activities do not create new value, but rather recirculate and consume the value produced in other sectors. Examples of unproductive activities include finance, real estate (excluding the construction sector), retail and wholesale trade, public administration, and national defense and public security services. This distinction between productive and unproductive activities challenges the conventional assumption that all economic activities are productive.

Global value transfers

The empirical analysis of my study reveals that value flows predominantly from labor-intensive to capital-intensive sectors, and from productive to unproductive activities.

Labor-intensive sectors such as health care, education, construction, agriculture, and services were the largest value donors. These sectors transfer large amounts of value to capital-intensive industries such as manufacturing, mining, and oil extraction. This pattern of value transfer highlights the economic costs borne by labor-intensive activities, especially in developing economies.

In this context, between 2000 and 2014, China emerged as the largest value donor in the global economy, while the United States was the largest value capturer. This pattern in value flows reflects the substantial relocation of manufacturing to China and the predominance of unproductive activities in the United States, including finance, trade, real estate and the military.

Unproductive activities thus play a central role in value capture. Despite not generating new value, sectors such as finance, trade, real estate and the military extract a substantial share of global value. For example, financial institutions profit from interest and fees, while real estate agents capture value through rents and management fees. These activities amplify the unequal exchange of value between countries and sectors, disproportionately benefiting developed economies with more advanced financial and trade infrastructure.

In this sense, the predominance of the US dollar and American banks in credit creation stands out in particular, which allows them to capture a significant part of global value flows. In another study, published in 2024 in the journal Structural Change and Economic Dynamics, I estimated that the United States is by far the country that captures the most value in the world through the financial market.

The data indicate that productive activities have shifted rapidly from the US and Europe to Asia. This shift in productive activities has led rich countries to focus on unproductive activities and developing countries to focus on productive activities, with particular emphasis on the substantial growth of manufacturing in China.

The dimensions of exploitation in the global economy

Using the definition of exploitation as unequal exchange of labor, my recent 2025 Study highlights two dimensions of exploitation at the global level: (a) Class exploitation: Within firms, capitalists extract more labor from employees than the labor that these same capitalists contribute to production, resulting in unpaid labor on the part of firm employees. (b) Exploitation in trade: At the global level, industries and countries with greater capital intensity, or even with a greater concentration of unproductive activities, tend to capture the value generated by industries and countries that are more intensive in human labor.

The empirical results show that these two dimensions of exploitation are interconnected at the global level. Labor-intensive activities, which exhibit higher rates of exploitation, are also the largest value donors. On the other hand, capital-intensive industries capture value and enjoy lower rates of exploitation. Thus, such dynamics can explain global disparities in income and industrial development.

Because realized value differs from produced value, there are in fact two rates of exploitation in each economic activity, in each country and in each sector. The “produced rate of exploitation” refers to unpaid labor based on the value produced by each activity, sector or country. The “realized rate of exploitation”, on the other hand, refers to unpaid labor based on realized value, which may be higher or lower than the value actually produced.

The data show that the tendency is for capital-intensive activities to have lower rates of “produced” exploitation but higher rates of “realized” exploitation. Labor-intensive activities, on the other hand, have higher rates of “produced” exploitation but lower rates of “realized” exploitation. This is because the tendency within the economic system is for value to be transferred from labor-intensive activities to unproductive activities and capital-intensive activities. There is, therefore, a leakage of exploitation from labor-intensive productive activities, corresponding to the leakage of value from these same activities.

On this last point, my analysis identifies three main mechanisms that drive this value capture at the global level: (1) Unproductive activities: A significant portion of the value produced in productive sectors is consumed by unproductive activities, which do not create new value but are essential for the realization of value. Without credit from the financial system, for example, there would be no productive growth. (2) Capital intensity: Capital-intensive industries tend to capture more value than labor-intensive activities under competitive conditions. (3) Market power and concentration: Larger firms and more developed economies use their market power to capture value from smaller firms and from developing countries. This mechanism is facilitated by the centralization of capital and the hierarchy of international credit systems.

The hierarchy of nations

China's rise as a global manufacturing hub has made it the largest value donor, while the US remains the largest value capturer, largely due to its dominance in unproductive sectors.

Labor-intensive activities such as agriculture, education, health care, and construction are the largest donors of human labor. Labor-intensive services such as health care and education transfer value because of their low capital intensity. After all, in competitive markets, profits tend to be proportional to the value of capital invested, which benefits activities that use more capital than labor.

The data reveal not only a hierarchy between rich and poor economies, but also a hierarchy among the rich economies themselves. On the one hand, we observe value transfers from poor (labor-intensive) countries to rich (capital-intensive) countries. On the other hand, we can also observe that rich countries such as Germany, Japan and France (capital-intensive) transfer value to the US (capital-intensive but where unproductive activities predominate), reflecting the global dominance of American companies in finance, trade and real estate.

Implications for economic development

The results highlight the critical role of industrialization and capital intensity in economic development. Developing nations that rely on labor-intensive activities face structural disadvantages as they transfer value to capital-intensive industries in developed countries. This emphasizes the need for policies that promote industrial modernization and technological innovation in emerging economies.

Furthermore, the predominance of unproductive activities in developed nations raises concerns about the sustainability of value capture mechanisms. While these activities are essential for facilitating trade and investment, their disproportionate share of value produced could potentially harm the long-term economic growth of rich countries themselves.

Rethinking the theory of unequal exchange

At the theoretical level, the aim of my study is to develop the Marxian theory of value for the global economy, offering new perspectives on the production, realization and capture of value.

At the empirical level, the results emphasize the structural inequalities inherent in global value chains, where labor-intensive activities and developing countries tend to transfer value to capital-intensive industries and developed nations.

However, the estimates that emerge from my empirical study challenge conventional approaches to unequal exchange, since conventional approaches assume that all activities are productive. By incorporating the classification of activities into productive and unproductive, my study provides a more accurate representation of global value transfers. My approach reveals, for example, that the United States captures value not only from developing nations but also from other developed economies, mainly through unproductive activities.

China’s rapid industrialization and its demand for agricultural and mineral products from developing countries have also reshaped global value chains. Countries such as Brazil, India and Indonesia have emerged as value capturers due to their exports to China, demonstrating the complexity of value transfers in the contemporary economy.

More fundamentally, my estimates demonstrate that the theory of unequal exchange is incompatible with the assumption that all economic activities produce value. The results show that the theory of unequal exchange can indeed explain the dynamics of the world economy, but only under the Marxian classification of productive and unproductive activities.

The theory of unequal exchange states that rich countries exploit poor countries, based on the definition of exploitation as the unequal exchange of labor directly and indirectly embodied in goods and services. Under the assumption that all activities are productive, the data in my study show that China exploits the United States. Under the assumption that unproductive activities do not generate value, the data show, on the contrary, that the United States exploits not only China and other poor countries, but also other rich countries.

This important qualification arises directly from the rapid shift of productive activities to Asia, the rapid growth of unproductive activities within rich countries such as the United States and the economies of Europe, and the hegemony of the dollar in the international financial market.

Contrary to what many claim, Marx's theory of value is not outdated or useless. This theory can explain an important part of the world economy, especially in relation to the production and capture of value on a global scale.

The evolution of the distribution investigated in the study is summarized in the two figures in sequence. For further details, consult the original article.

*Tomas Rotta is Professor of Economics at Goldsmiths College, University of London.

Translation: Eleutério FS Prado.


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