The study--produced by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) and based on in-depth interviews and a survey of 595 business owners across the UK--concludes that government should take a less punitive approach to System D businesses--and should cajol and encourage firms to formalize rather than prosecuting them for being informal. And it asks the heretofore heretical question of whether governments should learn to live with the informal economy.
can we learn to live with the informal economy?
the informal economy can be the perfect protective environment that many small fledgling micro entrepreneurs need as they make the transition from unemployment to the formal sphere. In this way, it is possible to conceive of the informal economy as a fixed quantum, not to be reduced in size but to be controlled in such a way that individuals flow through it as seamlessly as possible....without going some way towards accepting informality as an integral part of the economy, there is a danger of never being able to fully realise the assets of existing and would-be micro entrepreneurs who depend on this shielding environment.