Widening productive chains while integrating popular sectors

By widening promissory productive chains while integrating popular sectors, we add the critical aspects of social inclusion and income distribution to the economic development.
There are those who dissociate production from income distribution, growth that leads to wealth concentration from its consequences. Either in an open or covert way we return to the old trickle-down theory that reality does not validate. However, the process of value generation and how it is socially distributed starts from the production of goods and services; which is then shaped by public policies and the mechanisms of value extraction that have been imposed by those who detent the power to impose.
In another article we have highlighted the critical need of transforming the productive matrix of a country or region to grow organically and to avoid recurrent bottlenecks in the external sector as well as in the processing and commercialization of products. In the following lines we address an important dimension of the transformation process of a productive matrix: how to integrate in the core of its transformations the objectives of deconcentrating value accumulation, boosting social inclusion, and achieving a better and sustainable wealth and income distribution.

While transforming, widening the productive chains

A productive matrix is made up of diverse productive chains that are ensembles of enterprises that complement each other to produce goods or services. These ensembles are not homogeneous, quite the contrary; large companies that lead productive chains coexist with medium and small enterprises almost always subordinated to the larger ones. This subordination expresses itself in the strategic direction that chain leaders impose to the rest, as well as in the mechanisms of value extraction or appropriation imposed by the most powerful. So the economic power imposes its understanding of the direction that has to be followed and, if it hits or misses the target with its strategic decisions, it directly impacts on all the actors that participate in the productive chain. In addition, it has the capacity to determine how the generated value is internally distributed.
The heterogeneity that characterizes the enterprises that form a productive chain projects itself over the workers employed by those companies; there will be workers that are registered and thus access to what is stipulated by current labor laws (collective wage bargaining, working conditions, social security, family allowances, job security, among others) and unregistered workers that do not enjoy those rights. This labor informality responds to diverse circumstances that must be addressed whether productive chains are widened or not.
The State plays a critical role in guiding and regulating the economic process. If the State were controlled by the economic power it would establish policies and assign resources in its benefit. If instead it were led by social forces that looked to transform the prevailing order, it might use its political, financial, and regulatory capacity to change the course and strategic aspects of the way of functioning. It is in this context that the objective of transforming the productive matrix can include the need to widening productive chains to include popular sectors. Of course, that integration will not take place spontaneously; rather it will require an explicit intervention by the public sector.

Measures to integrate popular sectors in promissory productive chains

A transforming State has in hand a battery of measures to promote the integration of popular sectors in promissory productive chains (not in the residual chains they tend to be doomed). Among other modalities, it can: (i) establish promotional regimes regarding taxes, credits, technology, tariffs and territorial matters to guide investments, initiatives, commercial agreements, technical assistance; (ii) directly invest in strategic sectors for development; (iii) promote the formation of inclusive venture developers specialized in identifying opportunities, structuring, launching, and on-going assisting this type of productive units.

The power that the State has, allows it to intervene in areas previously not considered of the productive chains it decides to promote. A crucial area is eliminating the mechanisms of value appropriation so that the productive chain could benefit from a balanced growth. This means avoiding that certain economic groups (large companies and intermediaries) appropriate a good part of the value generated by the rest of participants in the productive chain. The purpose is that each actor could keep the full value he produces for his own capitalization and development. To advance in this direction, it would be needed to set up in each productive chain specific spaces to negotiate prices, buying and selling conditions, as well as technical, financial and organizational collaboration. As long as these spaces get formalized and maybe even institutionalized, the power to impose that large companies and intermediaries detent might be compensated by a new emergent power coming from the whole ensemble of participants in the productive chain. Already the fact of shedding light on prices, risks, returns and other aspects of the process of generation and distribution of value will help in finding ways to aligning interests. The State can act in the same way as it does when it mediates or brings parties together in collective wage bargaining, as the ultimate objective is not to weaken but to strengthen the whole productive chain just that, from that point forward, securing the development of the entire ensemble intervening actors.

Simultaneously with the efforts to establish spaces of agreement and alignment of interests within each productive chain, the State can directly foster other type of interventions; those will differ case by case. We offer examples in two productive chains were it is quite feasible to integrate popular sectors: food and tourism chains.

(i) Food chain
In the food chain, if what producers receive for their effort is just a minimal fraction of what the final consumers pay for their products (common situation in almost every emergent economy), there will be burdensome mechanisms of extraction of value that belongs to producers and consumers. In these cases, State intervention might cover diverse instances of the processing and commercialization chain.
If producers of fresh foods are subject to extorting practices as their productions needs to be sold in short terms and the middlemen can threaten to stop buying driving the prices down as the lifespan of the product shortens, thus there is where intervention is needed: to promote another brokerage system more aligned with producers’ interests; in some cases, even with the participation of producers in its ownership.
Likewise, it would be needed to tackle eventual extorting actions by carriers and agro industries, regulating what can be regulated or, if this were impossible or ineffective, promoting the establishment of other type of actors in those sectors; such is the case, for example, of communal transport services or locomotive agro industries where producers and well-selected strategic partners converge.
Frequently, those who end up leading the food chain are big supermarkets which with their purchase power and oligopolistic position impose prices to those who produce, commercialize or process foods, as well as to their clients that stock up on products from their display racks. This way they try to widen as much as possible their return margins. To confront these practices, there have been regulatory experiences (such as the program Precios Cuidados, “cared prices” in Argentina) but also the establishment of alternative sale channels (communal supermarkets, neighborhood trade fairs, among others).
(ii) Tourism chain
Tourism is an important sector in most of our countries. Its development stands on the enhancement of natural and cultural resources securing an effective commercialization and customer service management together with the provision of transport, lodging, and communication infrastructure.
The tourism chain includes foreign and national travel agencies, diverse accommodation services (hotels, hostels, lodges), entertainment, transport, art crafts, food supply, consumption products, among others. These activities generate opportunities for integrating popular sectors in promissory spaces and not just in those marginal niches of the tourism chain that they tend to occupy nowadays. To take advantage of those opportunities an appropriate combination of public, private, and communal initiatives is required.
An example is to promote the establishment of ensembles of rural family or community run and owned inns that do not act in isolation. They are instead organized in medium-size associative ventures that allow access to a larger and more effective scale. This larger scale enables a common identity and management to market their offer, negotiate in better terms with travel agencies, suppliers, carriers, having a unified booking system, receive training and on-going technical assistance, access to financing to build, update, or expand their facilities. Each participating family or community participates in the general returns of the associative venture.
The integration of popular sectors happens first at the level of the inns and the associative venture. But it is well-known that visitors require all types of services, from meals whose fresh products can be provided by local farmers, up to tour guides for sightseeing walks, horseback ridings, cultural activities (folklore, bonfire guitar shows, local storytellers, popular theatre, festivals), kid’s entertainment, recreational sports, adventure tourism, among others. These activities can be developed by micro and small popular-based ventures articulated with the inns and receiving technical assistance on management and financing by each inn associative venture.
The way of structuring these inn chains could vary depending on the conditions and circumstances of each country and region: people franchises, cooperatives, associated around center services, or others. In Community tourism of excellence a specific example of this type of initiative is presented.

New socioeconomic actors
Up to here we have focused on considering economic and managerial aspects of efforts orientated towards integrating popular sectors to promissory productive chains. It was necessary to do so to support that it is viable and desirable to widen existent chains to generate sound productive opportunities to population segments that have always been forgotten or neglected. However, we cannot finish these lines without stating that it is also possible to promote that these new socioeconomic actors be carriers of values of environmental protection and active collaboration with their communities. What counts is not to promote more actors that are just interested in maximizing returns at any cost, but instead to form collectives that practice a responsible way of functioning and relating with their social and environmental context.

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