On Law and Value

On Law and Value

NB: This post is part of a symposium on law and global value chains co-convened with the Institute for Global Law and Policy’s Law and Global Production Working Group.

Amy Cohen–

We are witnessing a new moment in economic development: what Richard Baldwin calls the global value chain (GVC) revolution. As our symposium suggests, critical legal realist scholars are organizing in response. Some have argued that by mapping the relations between law and value chains we may find strategies for resistance, solidarity, and distributive interventions. Others have ventured that “law cannot but function” to serve the interests of a global capitalist elite. This post does not aim to resolve this generative realist tension. Rather it shifts focus to propose that under GVC capitalism, status quo maintenance and resistance also happen through discourses of value—an observation that may offer insights into how actors themselves view the salience of law in specific local struggles.

To comprehend what I mean by “value,” think business school not neoclassical economics. Business strategists distinguish “supply chains” from “value chains.” In supply chains, firms compete on price and pursue low-cost imitations. Managing a supply chain is thus all about “taking out cost and making process efficient.” In value chains, by contrast, firms are supposed to transform undifferentiated commodities into distinctive products through creativity and innovation: “Value chain management is about how to create value; how to coordinate the continuous innovations of creative contributors and how to make that process efficient for the consumer and the contributor.” For firms to compete on value they therefore need consumers who desire products for reasons other than a low price, and they also need the means to capture this consumer surplus such as brand reputation and proprietary process technology.

In our lead post, Bair and Danielsen argue that mainstream GVC scholars mistakenly describe law as simply promoting efficient exchange and value additions as themselves determining the distribution of rents. But I wonder if law’s role in enabling capital accumulation is in fact today more easily demystified. As firms chase value, they purposefully create legal-institutional barriers to entry to capture value against competitors (such as IP). As our legal realist tools therefore perhaps become less revelatory, we may consider how actors directly invoke value to both defend and transgress a development common sense.

As the GVC has transformed from business strategy into development strategy, value is regularly invoked in two ways and in two ways at the same time—as an adjective to modify a product that can be measured in price and captured based on one’s position in a chain and as a social and moral hierarchy. For example, in work on urban Indian value chains, Lily Irani recently observed how people who add value to the nation “are those to cultivate and include. Those who [fail] to add value [are] understood instead as sinks, as mouths to feed, as jobless masses, and as failed potential.”

I have examined value chain development in Indian agriculture. Here too value simultaneously represents price and a social-moral ontology—a way of reconfiguring self and social relationships reproduced in consumer advertisements, policy statements, management discourse, business ethics, social impact investment statements, farmer training workshops, the mandates of NGOs not seeking profit, and how, say, a millennial with a MBA degree might evaluate a job prospect (is this firm likely to create value for farmers?). In a forthcoming article, I illustrate how lead firms aim to transform farmers into new kinds of value adders—people who want to collaborate in new ways to create high-end standardized products. I also trace the refusals that follow when farmers—asked to adopt the calculative rationalities of their more powerful negotiation partners—sometimes jettison the value chain for existing commodity markets that they decide better serve their distributive interests. But as value creation now becomes a social and moral promise—a hope for a nation’s future—value language, I am venturing, competes with legal language to envision desirable economic arrangements.

We of course see this dynamic in corporate social responsibility campaigns. For example, Michael Porter, who is often credited with coining the term value chain, today encourages lead firms to create shared value by, for example, considering what small suppliers need to viably participate in a chain. “Shared value creation” is a morally privileged discourse even when joint gains across dramatic bargaining inequalities fail to materialize. Legal realists thus aptly refuse to theorize value creation apart from how law differentially structures relations of production and exchange. But let me nonetheless propose that radical value chain strategists too turn to voluntarism and mutual aid. These activists aim to recover “value” from its dominant economic and social meanings and not necessarily or primarily to recover law.

My research in India is illustrative. The visionaries I encountered advanced complex arguments and subject positions. Many referred to themselves as entrepreneurs and talked of value additions and late capitalist practices like flexible, just-in-time production and distribution. But some also channeled these practices into hopes for radical social and economic change.

Consider Buffalo Back, a small distribution and retail network in Bangalore, founded by an accountant turned natural farmer named Vishala. Its business model is premised on value additions: selling high-end commodities for a higher price, here primarily vegetables, fruits, and grains produced without pesticides or chemical fertilizers. Agriculture is often understood as the form of surplus creation (where outputs exceed inputs) from which all other creative and distributive acts follow. But Vishala likened agriculture to mining. “It’s extraction,” she insisted. Farmers, via whatever chemical or organic methods, take from the earth more minerals, nutrients, “value” than they can replenish.

Profiting from extraction means, she argued, that “you have to be responsible [or] you won’t add value.” Responsibility, in turn, requires distributing ownership, control, and risk. For example, no stakeholder—distributor, retailer, or farmer—owns equity in the chain but rather all must work off their own margins—a decision that confounds prospective investors who want to see plans for a proprietary brand. Likewise, the chain rejects organic certifications (as well as any other kind of label). Vishala sees certifications as enabling rents, that is, opportunities to capture profit by making product differentiation scarcer and more expensive when she would rather that chemical-free production become more cheap and common. The chain rarely imposes standard shapes or sizes in order to harmonize how producers and consumers coproduce commodity value. Indeed, retailers encourage their customers to desire commodities in ways that communicate solidarity with farmers—for example, by forgoing milk and eggs entirely on weeks when producers suggest their animals must rest.

Perhaps most significantly, pre-harvest risk is distributed through collective planning. Many small Indian farmers monocrop because it simplifies skill and labor. Buffalo Back, however, requires farmers to plant multiple varieties according to a negotiated plan. Planning is supposed to generate shared value creation. Distributors receive sufficiently diverse commodities to stock retail shelves while minimizing the costs of logistics. In return for added labor, farmers receive security against risk because the chain promises to buy everything farmers harvest. But surplus only sometimes expands under this collaborative model: everyone is better off when supply matches demand. Often, however, surplus shrinks and flows from the chain to the farmers. Demand is difficult to predict: “there are holiday seasons, festivals, so many things.” Harvests are hard to predict as well: “Lower yield is always okay for us, we say sorry to the customers. Higher yield is when we start looking for options” like dehydrating and simple forms of processing. In these cases, collective planning morphs from shared value creation into purposeful practices of distribution.

Bair and Danielsen express deep skepticism about our emerging global consensus: “that the most promising (and perhaps only) path to development today is via participating in, and ideally moving up in the value chain.” To be sure, Buffalo Back’s transgressions from within a value chain model are far too marginal to disrupt, or even to register within, this consensus. Except that they allow us to glimpse an actually existing counter-hegemonic vision. And they push us to ask how and why radical entrepreneurs think and act today through value and perhaps only secondarily or incidentally through law.

Amy Cohen is John C. Elam/Vorys Sater Professor of Law at Ohio State University Moritz College of Law.