In the middle of the path there were monopoly rents

Challenges to the Brazilian economy posed by the “disfigured smile” of global value chains

Abstract

This article aims to present a critical analysis, based on the Marxist approach, of the greater value-adding capacity of intangibles (pre- and post-production services), associated with technological progress, expressed in the smile curve of Global Value Chains (GVCs). Methodologically, it is a bibliographic research of an exploratory, descriptive, and fundamentally theoretical nature. The main contribution of this analysis is to investigate the essence of the phenomenon, identifying the real obstacles to the development of peripheral economies, such as the Brazilian economy. The article argues that technological innovations, instead of enabling these services to create higher added value and increase productivity, have actually transformed them into monopolies that allow for the appropriation of rents rather than competitive segments that generate profits. The high barriers to entry in these segments, combined with the lower short-term profitability of these investments compared to the agricultural sector (which has higher Ricardian allocative efficiency) and the financial sector (which benefits from high interest rates, providing higher returns associated with the generation of fictitious capital) in the Brazilian economy, indicate that the only possible path for growth and development lies in public investment. This path presents its own challenges, especially neoliberalism (which advocates for less state intervention in the economy), political polarization, and lack of popular support. This support could be gained through a national state development plan, focused on adapting the country to climate change (which affects everyone) and generating decent jobs, which would bring greater benefits to the population than focusing on upward mobility in the GVCs.