stealth of nations

backward acting and forward-thinking

2012-02-17T16:22:00.000-08:00

India may be a country on the move, but not for street vendors, as this editorial in The Hindu shows:

The recent national consultation on urban street vending has made it clear, despite four decades of struggle, that hawkers and mobile vendors still find Indian cities reluctant to include them. While cities are willing to accommodate on-street car parking, they view handcarts used for vending and providing services on roads as a hindrance.

The paper complains that "cities such as Mumbai and Ahmedabad pursuing irrational cut-off lines which bar a large number of vendors from getting a licence" and, in what might be a first for a major publication, urges the central government to work with the country's more than 10 million street vendors. Let's hope the politicians listen.

we are the 94 percent

2012-02-16T11:32:00.000-08:00

Here's an astounding fact, from an article in livemint: "According to government estimates, the informal sector constitutes almost 94% of India’s workforce and accounts for around 60% of India’s gross domestic product (GDP)."

Why do governments continue to insist that these workers are illegal and their economic actions illegitimate? Should the Indian government be outlawing 94% of India's working population?

Taxi zum Klo

2012-02-16T03:53:00.000-08:00

The Economist discovers the power of System D--through an examination of the unlicensed taxis that are the backbone of public transportation in Tehran. From the article:

In the absence of formal structures, a sophisticated eco-system of cab options has emerged. Commuters can call a taxi to the door or flag one down on the street to go dar baste (literally, “closed door”), hiring the whole cab for themselves. Or they can walk to the nearest main road and, at any point on the street, jump into one of the passing shared taxis that ply fixed routes up and down that particular street or between major city squares. These shared taxis form a city-wide hub-and-spoke network. Unlicensed cabs look like normal cars, but move slowly as they look for fares, flash their lights at waiting commuters and tend to have the window open just a crack so people can shout their destination at them.

Two commenters provide different takes on the quality of System D taxi systems in other cities:

1. I live in Lima, Peru where there exists a de facto total liberalized and unregulated taxis market (I say de facto because in theory, you would need to be registred to work as a taxi driver). I can tell you one thing about Lima: traffic is a mess, and that's mainly because of the huge supply of taxis that overcrowd the streets. So you have to take in conunt this externality that spreads well beyond this market and, at the end, impacts the city productivy of the country as a whole also in the analysis.

2. I regularly do business in Tanzania. The taxi system there is very like to is in Tehran - if I try and walk I am regularly 'peeped' at by hopeful taxi drivers who want to take me wherever. I will take a taxi, and, if he and I get on, often I will hire him for the time I am in country. He teaches me Swahili and waits for me between meetings. We agree a fair price. I have never had a bad experience. As everyone has mobile phones, if he doesn't know how to get to where I want to go, he phones my client and gets instructions. I love it. I learn a language, make a new friend, and get my work done at a reasonable price. Do I need anything more?

[A hat tip--and a taxi ride--to Zach for sending this my way]

Fresh, Direct and Subsidized

2012-02-15T13:55:00.000-08:00

I never understood why, when large, profitable companies threaten to move out of New York, they immediately get offered millions in subsidies.

Consider FreshDirect, the online grocery store and food delivery service. The firm floats the idea of a $100 million subsidy offer from New Jersey and gets almost 30 percent more from Mayor Bloomberg--$127.8 million, including $20 million in cash.

The careful language of this New York Times article makes the deal suspect: "The company now plans to build a $112 million complex in the Bronx and over the next 10 years add almost 1,000 jobs to its work force of 1,963," the paper writes, but all Seth Lipsky, the head of Bloomberg's Economic Development Corporation, would confirm is that FreshDirect will invest "tens of millions of dollars" in a new facility. This divergence implies that the highly-touted $112 million investment might not ever happen--and that those 1,000 new jobs might never materialize. Furthermore, does anyone at City Hall think FreshDirect ever thought seriously about the logistics of doing just-in-time deliveries to its overwhelmingly NYC-based customers by running trucks over the always-crowded George Washington Bridge and through the routinely tied-up Lincoln and Holland Tunnels?

This deal reminds me of the 80s, when NBC extorted more than a hundred million from the city for its supposed decision to stay in 30 Rock instead of jumping across the Hudson. Think about the possibilities: Brian Williams broadcasting nightly from NBC's world news headquarters in Secaucus and Tina Fey starring in a sitcom called 1782 Paterson Plank Road.

Ah, it could have been!

an amazing fact about the street economy!

2012-02-13T10:15:00.000-08:00

Informal merchants often pay more to the government than legal merchants do.

I learned this when I met Maina Mwangi, a shoe vendor at Muthurwa Market in Nairobi, and one of the leaders of KENASVIT, the Kenya National Alliance of Street Vendors and Informal Traders.

He offers a particularly acute and specific take on the common complaint that street market vendors don't pay their fair share in government fees and taxes. Maina reports that a typical merchant who rents a storefront in downtown Nairobi pays 7200 Kenyan shillings ($87) per year for a license to do business in the Central Business District. By contrast, for his right to sell from his kiosk, Maina pays Ksh 50 a day to the City Council. That's about 60 cents, which sounds pretty good until you do the math: it's Ksh 1,500 a month or Ksh 18,000 ($217) a year.

The real deal: Maina pays two and a half times more than legal merchants pay for the right to operate downtown. So much for the supposedly unfair advantage street market merchants have over their legal brethren.

{Praise be to Zach for putting me in touch with Maina}

the odds-on winner

2012-02-07T06:35:00.000-08:00

The Giants won the game, but the informal economy won the betting pool. As this Bloomberg article notes, an estimated $10 billion was wagered on Sunday night's Super Bowl -- and less than one percent of that amount involved bets placed legally. The informal economy really is an American institution.

oh, mexico!

2012-02-02T10:19:00.000-08:00

The Council on Foreign Relations reports on a new study of the cash generated by the informal economy--and states that it amounts to $50 billion a year.

But here's the catch: the study only looks at what it calls "illegal capital flight or illicit financial flows" out of Mexico. It covers "all unrecorded private capital outflows that drive the accumulation of foreign assets by residents in contravention of applicable laws and the country’s regulatory framework." As the article notes, "the report finds that the vast majority (80 percent) of the money leaving Mexico does so through a method called “trade mispricing.” This is when a company either undervalues exports or overvalues imports, and agrees with its trading partner (for many this is the same entity or owner) to transfer the balance to a bank account abroad. Just as when a restaurant doing cash business fakes the number of customers it receives to avoid paying taxes, companies doctor their trade records to allow money to flow out of a country untaxed."

So this study only tracks the extent to which elite Mexicans evade the law and sneak their income out of the country.

But the street level economy is far larger than this. Mexico's GDP last year was more than $1 trillion, and the best estimate (from professor Friedrich Schneider) is that the country's shadow economy is equal to approximately 1/3 of that. So Mexico's System D is worth approximately $345 billion. That's some street trade!

[praise be John Conroy -- @informaleconomy -- for linking me to the article]

paid in beer

2012-02-01T17:24:00.000-08:00

another NYC informalist: Rent-a-Gent. His price? A six-pack of Sierra Nevada Pale Ale per hour (the brand of beer is non-negotiable.) Gothamist has the fizz.

In the subways, the law is a ass

2012-02-01T17:01:00.000-08:00

Call it recycled money, courtesy of System D. John Jones roams the subways collecting discarded Metrocards. The truth about these cards? Not all of them are maxed out. Indeed, many of them have some small amount left on them. Jones estimates that he's salvaged $20,000 in unused fares over the past couple of years. He sells restored $5 fare cards for $4. And that's nothing: unused lost and expired cards amount to as much as $52 million in a year--meaning that lots of competitors could join Jones's business--if they had the desire and fortitude. (The Metropolitan Transportation Authority contributes to that massive amount because many turnstiles only declare "insufficient fare" when you don't have enough money on your card--without telling you that there's actually still some money on your card.

But, instead of saluting a savvy businessman who's come up with a cool discount, the MTA is unhappy with Jones. Indeed, transit cops have arrested him for "unlawful solicitation and illegal access to transit services," the New York Post reports. His crime: not that he's recovering the unused fares, but that he's combining them on new metrocards and reselling them.

The publicity has garnered Jones some unlikely supporters. The Atlantic Magazine's cities blog compared him to Steve Jobs. Benjamin Kabak, of the blog 2nd ave. sagas, who held back from endorsing Jones's resale discount, declared, "I know plenty of people who are aggressive in their pursuits of discarded fare cards." And then there's the brilliant charity called metrochange--which suggests that we all should emulate Jones, and that there should be kiosks in every subway station where people can donate the amounts that remain on their otherwise dead metrocards. And leave it to The Wall Street Journal to offer something that could help Jones better target his scavenging business: a map that shows where the most people buy 'pay per fare' cards--which will often have leftover balances on them--versus where people buy weekly or monthly cards--which are generally not discarded until they are fully used up.

[I owe several free swipes to Zach, who pointed me in the direction of this story]

home improvement, system D-style

2012-01-31T10:32:00.000-08:00

This New York Times article offers a peep at an interesting and progressive program in New York. Rather than reporting unlicensed construction firms to the authorities, the Queens Economic Development Corporation is trying to help them out, teaching them the skills required to pass the licensing test for home improvement contractors given by the city's Department of Consumer Affairs. Interestingly, despite the size of the Chinese community in NYC and their involvement in real estate in many neighborhoods, the city only offers the 30-question multiple choice test in English, Spanish, Korean and Bengali.

This program is a great idea--giving previously illegal contractors a route to legality. But it also raises some issues about the licensing test. For instance, how important is it for contractors to know that, for jobs that cost less than $200, they don't need a license. Or that they must keep their contracts on file for 6 years. Or that they can't start work on a job until 3 days after they sign the contract. Should the test really be administrative--or should it check whether these contractors really know the city's building code? And, speaking of the code, why, for small residential jobs, is bamboo scaffolding, which Chinese contractors have used successfully for years, illegal in New York?

System D & the Super Bowl

2012-01-30T11:16:00.000-08:00

Football is big business--but only one of the teams in this year's Super Bowl has its roots firmly in System D.

The New England Patriots and New York Giants are both massive enterprises. Indeed, Forbes Magazine's valuations for the Patriots and Giants show that they're the 3rd and 4th most valuable franchises in the league, worth $1.4 billion and $1.3 billion respectively. Forbes estimates that the Pats' 2010 EBITDA (earnings before interest, taxes, depreciation and amortization) was $42.9 million while Big Blue pulled in a cool $40.6 million.

But only the Giants still trace their roots directly to System D. Timothy James Mara, the grandfather of current president and CEO John K. Mara, bought the franchise when the National League of Professional Football Clubs expanded into New York in 1925. He paid $2,500.

Tim Mara knew a good deal when he saw one. How did he have such business acumen? Because he was a bookie. Mara placed his first bet when he was 12, and, when he left school a year later, started his illegal gambling operation. Four years before he bought the Giants, he expanded his bookmaking efforts to Belmont Park. There, on an average weekday, he handled bets amounting to between $10,000 and $15,000. On weekends and holidays, his book was worth as much as $30,000.

He took the cash from his System D activities and diversified into other businesses, including the Giants and a coal company. At the same time, however, he was found to be legally destitute. On paper, the Giants were owned by his two sons, while the coal firm was in the name of his wife and brother. As for his bookmaking concern? Mara swore that he was just the manager and had no actual financial interest in it. But, as A.J. Liebling wrote in an appreciative profile of the wily entrepreneur, "Tim's destitution does not interfere with his enjoyment of life. Daily he visits the various business enterprises in which he has no financial interest." And he lived in a pauper's palace--an eight-room apartment at 975 Park Ave.

Today, the Giants and the Patriots are both wildly profitable formal operations. But you know which team I'm rooting for.

(for more background on the founder of the New York Giants, read "Turf and Gridiron," by A.J. Liebling, which ran in The New Yorker on Sept. 18, 1937 and also appears in The Telephone Booth Indian, Liebling's classic compendium about all things System D in NYC.)

**And here's another reason to root for the Giants: one of Tim Mara's great granddaughters, the actress Rooney Mara (she stars in 'The Girl With the Dragon Tattoo') heads the board of the Uweza Foundation, which supports empowerment programs for children and families in Kibera, the largest mud hut community in Nairobi, Kenya.**

talk about an unequal world

2012-01-29T08:05:00.000-08:00

Here's a jarring juxtaposition. The heads of state gathered at the Masters of the Universe conference in Davos Switzerland (aka the World Economic Forum) are talking of allocating 22 billion euros to combat youth unemployment in Europe. By contrast, in a report late last year, Al Jazeera asked if Senegal -- the West African nation whose total GDP is less than half the amount the Europeans are discussing and where an economic analyst reports that "less than three per cent of the population" receives a formal salary every month while the rest rely on "informal revenue" -- was experiencing "an African renaissance."

Annie Diouf makes her money informally. She works in Sendaga, Dakar's largest market, selling fabrics. "I got started in this business, because earlier I worked for a company and with inflation and the global crisis companies started shutting down in Senegal and because I didn't think I would find a job, I decided to work in the informal sector of the economy," she says. The work is hard and involves spending long hours in the sun and rain, often with little to show for it. With little faith in the government to improve their lot, Diouf and a few of her colleagues have taken matters into their own hands."We got organised, we put together a women's association so we can stand by each other. We pool our profits together and give the money to one of the women on one day and she buys the material for her stall, the next day another woman goes out and does the same," Diouf explains.

This is not to minimize the pressure on Europe's young people. But self-starters will fare better in this chastened and debt-ridden world. Europe has some things it can learn from Senegal. Informal collectives can spark an economic renaissance.

Bookies of America, Beware!

2012-01-25T10:55:00.000-08:00

Betting on the Super Bowl!? I'm shocked, I'm shocked.

The New York Times offers a peek into the scads of money at stake in the football game pitting the New York Giants vs. the New England Patriots. And a few tidbits on the World Series and the NCAA tourney.

But, hey, is all this gambling part of the informal economy or the formal? Are the big winners paying tax on those earnings?

how to ensure equitable development

2012-01-24T11:10:00.000-08:00

The headline offers the answer: Informal Economy Ensures Equitable Development. This article, about Papua New Guinea, comes from InterPress Service. Here's an inspiring detail:

Bire Nikil moved to Port Moresby from Chimbu Province in the highlands to start a food garden several years ago. At Gordons Market, he is surrounded by five of his relatives who assist him with growing and selling kaukau (sweet potato), bananas, aibika (Pacific cabbage), pineapples, peanuts, watermelon, mangoes and coconuts, all transported in by public minibus. Nikil’s weekly income of K300 (142 dollars) supports 20-25 people, including relatives in Chimbu province.

I love Papua New Guinea's policy statement that the informal economy constitutes "the grassroots expression" of the private sector.

the most potent symbol of the year gone by

2012-01-22T08:20:00.000-08:00

In Athens, the Greek web mag OUGH says, the supermarket cart was the iconic image of 2011. Not because people are out shopping, but because they're out recycling. An enterprising recycler can earn 20 to 30 Euros a day -- $25 to $38 -- and, as a colleague in Greece suggests, many folks with good jobs struggle to pull in much. It's hard work:

The hunt for scrap and the miles that these people walk every day to get it, is not shown in any economical transaction, no invoices are kept, no receipts are issued, just warm, black money is flowing not only to the lower levels of the system but also at the later stages of the reselling process. For the smallest junkyard to the biggest, again no records are being kept, the paperwork is barely typical, while at the same time, there is a million-euro turnover that reaches up to the steel industry. We are talking about huge sums of money, the material prices skyrocket from the time the collectors turn them over to the moment they reach the industrial melting pot to be further used again in constructions. The story is not simple at all, and it bears no relation to what comes out as an image.

But it's also how people survive and thrive in hard times.

The Yippie Way of Ownership

2012-01-20T14:30:00.000-08:00

The whole whoopee cushion of words over the Stop Online Piracy Act and the Protect Intellectual Property Act got me thinking about Abbie Hoffman and Jerry Rubin.

Those two were the most pop-culture-savvy leaders of the group of agitprop rebels who promoted ‘free’ as a lifestyle a generation ago—the Yippies. But, even for them, it was not easy to say exactly what free meant.

Abbie’s first publication, a 1967 pamphlet called Fuck the System, proudly proclaimed the principle of free and open access: “Nothing in this manual is copyrighted. Anyone may reprint this information without permission. If you paid money for this manual you got screwed. It’s absolutely free because it’s yours. Think about it.” (Abbie later disclosed that, through a middleman, the government of New York City had actually paid the printing costs—proving that, then as now, ‘free’ sometimes requires that somebody else pick up the tab.)

In 1968, a year after Fuck the System came out, Abbie published Revolution for the Hell of it. He dedicated the book to “FREE.” He published the book under the pseudonym ‘Free.’ But the book wasn’t free: the hardcover price was $4.95 and the copyright was held by The Dial Press.

When Abbie published his 1971 primer on the art of getting stuff for free, he called it Steal This Book—but he didn’t really want readers to steal it. How do I know? Because he copyrighted Steal This Book in the name of Pirate Editions. Why copyright a book that tells you how to get things for free? Because Abbie was accused of piracy himself. His collaborator and all-around researcher, Izak Haber, called him out for stealing the work without compensation. (Though Haber is acknowledged in the book as a co-conspirator, he didn't feel that was enough, and you can read his account, “An American Dream: A True Yippie’s Sentimental Education or How Abbie Hoffman Won my Heart & Stole ‘Steal This Book,'” in Rolling Stone magazine of September 30, 1971.) Copyrighting the book in the name of Pirate Editions hid the fact that Hoffman had been forced to give Haber a cut of the profits.

Jerry, meanwhile, offered his own spin on ‘free.’ “Money is Shit,” he opined in his 1970 tome Do It! “Money is a drug, Amerika is a drug culture, a nation of crazy addicts….Burning money (and credit cards and banks and property) is an act of love, an act on behalf of humanity,” In Yippieland, he preached, “there will be no such crime as “stealing” because everything will be free.” Rubin acknowledged his collaborators on the title page, noting the book was “Yipped by Jim Retherford” and “Zapped by Nancy Kurshan.” Do It! was copyrighted, though, in the name of the Social Education Foundation—a non-profit. Who could possibly be against Social Education? The Internal Revenue Service, that’s who. One year after the book came out, the feds revoked the tax-free designation, asserting the only charitable work the foundation did was to funnel money to a single truly needy fellow named Jerry Rubin.

So how do Abbie and Jerry shed light on SOPA and PIPA? This way: Abbie and Jerry were right that free is a great and desirable and valuable thing. But they were also chameleons. They advocated ‘free’ when free suited them. And they advocated pay when pay was to their benefit.

This is one of the points that Jaron Lanier made in a New York Times Op-Ed on Thursday. Lanier suggested that we’ve become linear in thinking about these issues rather than acknowledging that copyright and copyleft are both a mixed bag. Addiction to copyright puts big bucks in the hands of big corporations like the ones that make and distribute movies. But copyleft—which offers free usage—puts the big bucks in the hands of big companies that assemble private data and aggregate eyeballs to sell advertising. It’s the bad guys fighting the bad guys. “We in Silicon Valley undermined copyright to make commerce more about services than content—more about our code than their files,” Lanier wrote. “The inevitable endgame was always that we would lose control of our own personal content, our own files.” Translation: we're all fucked.

But, as the money being spent on this battle shows, there are some who aren't fucked. A lot of people say the web is like a commons. Maybe. But it’s a commons where a select cadre of companies are making tons of money.

SOPA and PIPA are apparently no longer being fast-tracked, but the brouhaha is still simmering. The New York Times reports that the Motion Picture Association of America—one of the most ardent supporters of the bills—now wants to sit down with the tech companies, perhaps at the White House. At the same time, the government has upped the stakes by taking down Megaupload, one of the ‘locker services’ that allows users to upload unrestricted content (interestingly, Megaupload recently settled a copyright infringement lawsuit brought against it by the porn studio Perfect 10—though the terms of the settlement were not revealed.) The feds claimed that Megaupload was profiting massively from its position as a drop box for piracy and asserted in the indictment that the firm and its owners and subsidiaries had more than $175 million in cash stashed in 64 accounts in banks around the world. (BTW: can anyone tell me how the government has the standing to bring a case of copyright infringement? And how the government can shutter megaupload without having proved that the company’s done something wrong?)

I confess. Stealth of Nations has a small c in a circle with my name next to it on the back side of the title page. This may seem odd in a book that extols certain kinds of piracy. Indeed, I once owned a well-thumbed copy of Steal this Book—until a friend borrowed it for good. And when Yipster Times, the Yippie paper, published the calling card numbers of various federal agencies and massive corporations, I sometimes used them to make cross-country calls. Charging it to The Man. At the time, nothing felt freer.

Still, I’m glad that that little symbol is in my book. Not because it prevents piracy. Rather, I see it as a printed reminder of a labor of love that consumed years of my life. I trust that people will honor that--that other publishers won’t use my words without my permission and will include my name when they cite stuff I reported. Yes, I want people to buy my book. But the truth is that I can only wish that Stealth of Nations gets pirated and winds up on a site like Megaupload. That would mean it was a success, that it had reached a truly wide audience--and, since nothing will get pirated if there isn't demand for it, that I had made enough money on it that I didn’t need to worry about the lost revenue.

SOPA and PIPA are ugly blunt instruments that will limit free speech and have impacts far beyond the realm of copyright. But we can’t trust Google or Wikipedia to fight this battle either. Indeed, just thinking about Chris Dodd and Sergey Brin sitting down in a room with Obama’s Chief of Staff Jacob Lew and banging out a deal is bone-chilling.

Is there a lesson in all this? Perhaps it’s this: Don’t trust anyone under 40. Don’t trust anyone over 40. And don’t mess with Mr. In-between. Or, as Frank Mankiewicz told Hunter S. Thompson in Fear and Loathing on the Campaign Trail '72: “Keep your own counsel. Don’t draw any conclusions from anything you see or hear.”

Yippie!

identity economics

2012-01-19T11:34:00.000-08:00

Kate Meagher, in her 2010 book Identity Economics chronicles the recent history of the informal garment and shoe manufacturing clusters in Nigeria's Igboland. It's a fairly pessimistic look at the possibilities for these merchants.

She writes, "If the travails of Igbo informal producers have revealed anything, it is that even the most dynamic and well established informal enterprise networks lack the ability to assert their productive interests against the distruptive agendas of local officials, let alone to defy national or global economic and political interests." Meagher calls for strengthening the capacity of informal operators while leaning on the government to find ways to work with informal merchants -- thus allowing them an opening to turn the identity economics of tribal social networks into something that can develop across regions and transcend traditional divisions.

But, in a short epilogue, she adds a bleak new prognostication: locally funded criminal networks and state neglect/persecution are conspiring to drain the life from this hope. "Despite claims to promote informal enterprise, the devil's deal of state neglect and clientalism continues to triumph over any genuine commitment to productive support and political voice within the informal economy. This reckless policy neglect is rapidly squandering the valuable informal institutional resources that could offer a path out of the unemployment, disaffection and criminality engulfing the Nigerian south-east."

When mere survival is a revolutionary act

2012-01-19T10:08:00.000-08:00

Zimbabwean street vendors reflects on the battle to survive in this article from the UN's Inter Press Service. Though perhaps 90 percent of working-age Zimbabweans are unemployed, the article notes that "police and council officials move around the city in trucks arresting vendors who sell goods without a licence and confiscating their merchandise. The raids are often violent as the vendors have now organised themselves and are fighting back. On Jan. 11 the Harare city centre came to a standstill as the police and vendors fought, with vendors throwing stones at the police."

As Tafadzwa Nyamupfachitu, a 27-year-old mother of six-year-old triplets who earns a living for her family by selling fruit, cigarettes and cell phone airtime, told IPS, "We fight the police because they are the ones who started attacking us. They took our goods to eat or sell at their houses when we also looking to survive. We are angered by this because we also want to survive. We must enjoy ourselves in our country of birth freely. If we don’t survive that way there is no life for us because we cannot become criminals or turn to prostitution for a living."

It's not just the Mugabe reign-of-terror. All over the Africa--from Zimbabwe to South Africa to Liberia to Nigeria to Tunisia to Egypt--and almost all the countries in between, street vendors are being harassed and threatened. Why is daring to make a living such a revolutionary act?

show me the money

2012-01-15T12:28:00.000-08:00

Oddly, the most sensible declaration has come from an academic: "A really determined effort to stamp out corruption would itself be massively destabilising," Stephen Ellis, a historian at the Africa Studies Center at Leiden University in the Netherlands, told Reuters about the general strike that has paralyzed Nigeria in the week since the oil subsidy was ended. "It can only be done gradually."

The free market absolutists at The Economist magazine may have been in favor of lifting the subsidy immediately. But this showed absolute ignorance of the mechanics of the subsidy. As Alexandra Gillies, of the Revenue Watch Institute, writing in the Huffington Post, noted, the oil subsidy was itself a form of official corruption:

In 2011, the subsidy on gasoline cost the government over $9 billion, more than the entire federal government capital budget and about double the subsidy's cost in 2010. Global fuel prices did not, of course, double during this time period. Nigeria's tab skyrocketed thanks to the costly, corrupt system by which the country produces and imports gasoline, as well as rising interest charges and insurance premiums as government failed to pay fuel importers on time. By the end of 2011, Nigeria owed importers over $4 billion. Relying on the Nigerian National Petroleum Corporation (NNPC), the national oil company, the government devised complex, opaque methods for covering import costs, including swap deals where crude oil was awarded to commodity traders in exchange for gasoline and other refined products.

Nigeria's Socio-Economic Rights and Accountability Project (SERAP), has asserted that the fuel subsidy was hidden from the budget: "While 250 billion naira was allocated for fuel ‘subsidy in 2011, by the end of October 2011, over 1.3 trillion naira has been spent. We have information to the effect that the subsidy claim rose to 1.5 trillion naira by December 2011... Having found that no supplementary appropriation was submitted to the National Assembly by President Goodluck Jonathan, we would be grateful for information on who authorised the release of the sum 1.26 trillion naira, which was paid by the Central Bank of Nigeria.”

Gillies wants the subsidy to end, but pointed out a conundrum: "High oil prices and increased production should have made 2010-2011 the most profitable years yet for the Nigeria. However, the country's economic health worsened. Budget deficit estimates exceeded $8 billion in 2011 and, over the last three years, foreign reserves dropped by 40 percent and public debt doubled." She said this "paradox of robust revenue potential and declining fortunes" could only be solved through comprehensive reforms.

But, in simple political terms, you can't ask the people to suffer in order to pay the big corporations (Well, I guess you can -- we did it in the U.S. in order to bail out the "too big to fail" banks -- but it hasn't made people's lives any better.) The Nigerian government contends that gradual lifting of the oil subsidy won't work because "investors will be discouraged" and "smuggling and rent-seeking behavior will continue." But the profiteering's going on anyway and the so-called investors are the companies who've been profiting from this clandestine system for years. A friend in Enugu tells me that some petrol there is going for 300 naira per litre -- double what the supposedly free market price is.

If there is to be a comprehensive solution--as Gillies wants--everything has to be transparent. How are all the deals currently working? Who's making the most money? How much has corruption siphoned off from the federal treasury (Nigeria's former government anti-corruption crusader Nuhu Ribadu has estimated that boodling cost the country $7.6 billion a year for the past 50 years and a recent report in Nigeria's Vanguard Newspaper asserted that the country's congressmen and senators are being paid more than $1.5 million a year--an amazingly high amount.)

Until all the dirty financial linen is aired out in public, it's no wonder the people are skeptical. The strike shouldn't stop till the cronies come clean.

invest in life

2012-01-13T10:50:00.000-08:00

You, too, can invest in something infinitely more valuable than profits. It's a strange new commodity called life.

As The New York Times reports, Copenhagen's Christiania squatters, famed for their anti-free market ways, are selling shares in their community so they can buy it from the government. What do you get for your investment: "a symbolic sense of ownership in Christiania and the promise of an invitation to a planned annual shareholder party." As one squatter calls it, "ownership in an abstract form."

According to the Copenhagen Post, after striking a deal with the state this summer, Christiania residents now need to raise 76.2 million kroner (almost $13 million) to buy the majority of the area’s properties and an additional six million kroner to rent adjoining green spaces. The first 43 million kroner (or approximately $8 million) is due on 15 April 2012. Several prominent people have purchased Christiania Shares, including Margrethe Vestager, minister of the economy and interior, and Mogens Lykketoft, president of parliament. The shares are available for purchase online at www.christianiafolkeaktie.dk.

no line gets a $50 fine

2012-01-13T10:28:00.000-08:00

That's the policy towards food trucks in the nation's capital, as described by Forbes magazine. "Over the past week, District officials have been visiting food trucks and telling them that beginning on Jan 13, 2012, they will be ticketing food trucks that don’t have a line formed in front of them." And this in a city where the profusion of wide avenues, monumental federal buildings, and vast landscaped malls conspire to ensure that there's no commercial frontage on many blocks--so the mobile vendors are often the only place to get your lunch.

Ah, but DC is just following in the footsteps of the municipalities that were ticketing kids with lemonade stands.

going green -- but no green to show for it

2012-01-11T13:58:00.000-08:00

City Limits details the travails of the 'green cart' program in NYC. Many of the vendors the magazine spoke with are looking to get out of the street trade. Among the magazine's findings:

since the inception of the program, over 4,200 applications have been submitted, yet only 640 permits were issued.
interviews with 35 vendors in four boroughs show that the average vendor takes home an annual net income of approximately $7,500 dollars (or an average of $62 a day — less than minimum wage), putting them in the bottom 7 percent of income in the United States.
60 percent of Green Cart vendors who started in 2008 did not renew their permits.
from the first year to second year of the program, the number of tickets (and thus, fines that will be levied) per number of vendors increased by 150 percent.
parking the cart can cost $250 a month, plus two months security deposit.
buying fruits and vegetables can be prohibitively costly, because the main wholesale market is in Hunt's Point--a long jaunt from most other neighborhoods.
One vendor the magazine interviewed reported that he worked 12-hour shifts seven days a week yet was losing between $100 and $150 each day.

Possible fixes include fund vendors' cooperatives, simplifying licensing requirements, creating joint buying clubs.

mob rule

2012-01-11T13:03:00.000-08:00

The headlines will go to the sound bite: "the Mafia is Italy's No. 1 bank." But read the fine print: the mob works hand-in-glove with the 1 percent. Reuters has the details.

"The classic neighborhood or street loan shark is on the way out, giving way to organised loan-sharking that is well connected with professional circles and operates with the connivance of high-level professionals," a report by the anti-crime group SOS Impresa said. Old style gangsters handing out cash in bars and pool halls have been replaced by respectable bankers, lawyers or notaries. SOS Impresa calls this "Extortion with a clean face" whose victims typically are "are usually people in traditional retail sectors like food, greengrocers, clothes or shoe shops, florists or furniture shops."

This is one kind of informal economy we don't need--but it's also an indictment of the formal system. If merchant-led credit and investment cooperatives could aid small businesses, they wouldn't have to resort to loan sharks for cash. If it was easier for street markets to operate, they wouldn't have to pay protection money to crime syndicates. The Mafia used to be somewhat communitarian. Now it simply finds ways to exploit needs that the formal system doesn't meet.

from the U.S. to Mexico

2012-01-11T11:25:00.000-08:00

It's the great cast-off migration. Items that don't sell at swap meets and salvation armies in the Southwest make their way to Nogales and Sonora and then south of the border. One merchant tells Inside Tucson Business that he puts his goods in storage for a day or two in Arizona and then takes it across the border bit by bit. With a little subterfuge, clothes and small items can be carried over in suitcases.

Merchants at swap meets in American towns along the border report that their typical customers are Mexicans who work in the maquiladora factories that are owned by U.S. companies but operated in Mexico. "If you buy a washer here for 1,000 pesos, the same one goes for 2,000 or 3,000 in Santa Ana and beyond," one dealer told the business paper. The price gets higher the further south you go.

for street vendors, LA is the city of the devils

2012-01-11T11:03:00.000-08:00

Whether they're selling trinkets or tamales, the city of Los Angeles wants to do away with street vendors. The New York Times reports that the a new city ordinance that will prevent people selling things of "utilitarian value" from selling them on the street without a license will take effect next week. In the Westlake neighborhood, new signs warn that “street and sidewalk sales of goods are prohibited” and threaten violators with a $1,000 fine or time in jail, the paper reports. But getting a permit for one of the stalls in a new city-sponsored market that will only open on weekends costs $500. So vendors say they'd rather risk selling on the street.

“They can chase me wherever they want, I’ll go and hide someplace for a few minutes and then I will come back again,” Marta Cortez, 43, who has sold fruit and homemade hot chocolate on the street almost since the day she arrived here from El Salvador nearly two decades ago, told The Times. “This is how I make money for my family. If I go to a new market where I can only sell on the weekends, how can I have enough to give my children food to eat?”

--praise be to Zach for sending me the link--

the candy man can

2012-01-09T09:47:00.000-08:00

My post on the profits possible from the informal economy in NYC, at harvard business review.

cracks in the economic monoculture

2012-01-02T07:26:00.000-08:00

Two decades ago, the mischievous philosopher Paul Feyerabend predicted the difficulties now plaguing the Euro Zone:

The members of the European Community, those standard bearers of Civilization and the Free World, want to bring "backward" regions like Portugal, Greece, and the south of Italy up to their own high level of existence. How do they determine backwardness? By notions such as “gross national product,” “life expectancy,” “literacy rate,” and so on. This is their “reality.” “Raising the level of existence” means raising the gross national product and the other indicators. Action follows...: monocultures replace local production (for example: eucalyptus trees in Portugal), dams are built where people lived before (Greece), and so on. Entire communities are displaced, their ways of life destroyed just as they were in Ceausescu’s Romania, they are unhappy, they protest, even revolt—but this does not count. It is not as “real” as are the facts projected by an “objective” economic science. Is it not wise to be afraid of such a civilization?

(from 'Ethics as a Measure of Scientific Truth,' reprinted in Conquest of Abundance, 1999)

The force of Feyerabend's critique is still with us. The New York Times today quoted Greek Prime Minister Lucas Papademos asking for resolve in seeing reforms [aka cost cutting and belt tightening and increased suffering] through, "so that the sacrifices we have made up to now won’t be in vain." What better illustration can there be of the idea that economic ideals being treated as more important than the facts of everyday life. One economist quoted in the Times even called the austerity policy "sheer madness."

Which brings up possible System D responses to the crisis. This interesting essay, published in the aptly named Journal of Innovation Economics, starts the process of assessing if underground exchange networks, parallel currencies, and free bazaars or swap meets can impact economic life and recovery in Greece. Part of the point of these outside-the-system networks is that they reintroduce the concepts of community and social life into the economic arena. From the essay:

"Those economies comprise more than the transaction itself: it is cultivation, experimentation, creation of new household production and nutritional customs, education of adults and children, etc."
"They seek the realization of values that do not exist in the conventional economy, or they create a living example, even for just a day, of how it would be when many people can survive together without conventional economic constraints."
"They create several types of markets along or outside or in contradiction with the main market type."

Why are we so afraid of these parallel or separate or underground markets? As Feyerabend pointed out, we should be far more afraid of our own system.

if Detroit were a developing world country

2011-12-24T07:44:00.000-08:00

An article in The New York Times about Detroit's fiscal problems got me thinking: what would we urge for the troubled city if it were its own country.

1. Debt relief: why can damaged developing countries restructure their debts, but a city like Detroit must always repay creditors? Detroit's problem is like Greece's. Tied to the single currency of the dollar, the city is being forced to cut back at a time that it should be investing.
2. There are 30,000 acres of vacant land in the city (according to a recent editorial in the Detroit News.) If we can believe that number, it's 2/3 of the land mass of the city. Astounding. And a resource too. What should be done. Instead of seeking large-scale plans, the city could become an urban laboratory. Open the land up to markets, to the informal economy. Sponsor a challenge: build a code-worthy home in a day and you'll own it. As the editorial suggests, urban farming can play a role, too. Tilling 5,000 acres could apparently provide 70 percent of the food the city needs and employ 28,000 people (this would cut the city's unemployment rate almost in half.)
3. At the same time, the city plans only to provide services to stable neighborhoods, while continuing its policy of destroying and demolishing dangerous ones (see this article from Crain's Detroit Business, which notes, "In steady neighborhoods, demolition of dangerous structures won't be a priority but will be a top priority in transitional and distressed neighborhoods.") But look at this map produced by the Mayor's office. The majority of the city--the blue and gold areas--are vulnerable. The city plan would essentially give up on 2/3 of the city. Giving up is not a plan.
4. Detroit has an opportunity to investigate how to develop a city based on anarchist/libertarian principles of squatting (see columnist Mitch Albom's sensible proposal that the working poor should re-occupy the city's vacant land and buildings), the creation of informal businesses (why not allow people to run unlicensed businesses out of their homes), and fostering cooperative actions, such as community currencies designed to maximize the amount of money spent locally. Let unplanned, unlicensed, unregistered creativity sow the seeds for the future of the Motor City.
More ideas, please!

holy recolonization, Batman!

2011-12-21T10:18:00.000-08:00

Record numbers of Europeans are heading to the global south in search of opportunity. Greeks and Irish are girding for the journey to Australia. Portuguese are popping up in Rio de Janeiro -- and even angling towards the former Portuguese colony of Angola, on the west coast of Africa. Indeed the Portugal's Prime Minister recently visited Luanda, the capital city, to beg for investment. Angolan President José Eduardo dos Santos was sympathetic: "We're aware of the difficulties the Portuguese people have faced recently," he said. "Angola is open and available to help Portugal face this crisis."

The Guardian has the details of this new global migration.

Why are the former colonies faring better in the current economy? First, with Germany dictating tough financial rules and high interest rates, prospects aren't great for people in the weaker European countries. And then there's this: places like Brazil and Angola have more resilience in global downturns because they've got robust informal economies. Indeed, off-the-books economic activity represents 45 percent of Angola's Gross Domestic Product and 42.3 percent of Brazil's. That makes entrepreneurship possible, even in a global crisis.

license to die

2011-12-19T06:48:00.000-08:00

It's a bit unseemly for Hernando de Soto, writing in Foreign Policy, to use the self-immolation of an unlicensed merchant to make an economic argument. After all, vendors have been skirmishing with officialdom ever since governments began.

The desperation that Tunisian street vendor Mohamed Bouazizi felt after his fruit and scale were confiscated was not exclusively economic, and his response to his travails--to light himself on fire--was extreme, particularly if, as de Soto reports, he doused himself with paint thinner and lit the match only one hour after a local cop confiscated his goods. That's hardly enough time to engage in an official appeal.

Still de Soto is not wrong when he writes that "governments have been toppled, but the underlying economies still remain." He adds: "we found hundreds of small enterprises like Bouazizi's, run by Tunisians with no legal identity, no legal address, and no legal right to their shack or market stall. Without legal documents, their ability to make the most of their assets is limited, and they live in constant fear of being evicted or harassed by local officials. According to our research, around half of the entire Tunisian workforce is employed by extralegal businesses of this kind. Around the region, the number is far larger -- over 100 million."

Indeed. System D--or the informal economy--has the combined economic might of a superpower. If the millions of merchants cited by de Soto--each of them tiny entrepreneurs like Mohamed Bouazizi--would join with others in cooperative action, they would be a force to be reckoned with. Together with squatters and others who are disenfranchised by the free market, they will change their countries and the world.

[***Thanks to Emeka for forwarding the link.***]

motherhood and apple pie and System D

2011-12-16T10:15:00.000-08:00

Sub rosa schools, right here at home, in the most developed city in the developed world.

The New York Times reports on illegal cooperative preschools--formed by middle class parents who can't afford private schools and whose kids don't get included in the city-operated ones, because enrollment in pre-K classes is tightly limited. Soni Sangha writes:

In a co-op pre-K, parents work together to create a school that matches their educational philosophy and worldview. They also run it, finance it, staff it, clean it and administer it — whatever is necessary to keep costs as low as possible. Often, schools operate from members’ homes. Some are taught by parents; others by professional teachers. The downside to such an arrangement? It’s a lot of work. We had found that out last school year, when my son had been priced out of private options and we had banded together to form a co-op with some parents from the neighborhood.

Beyond the effort was the challenge of getting different families to work together. When matters as personal as education, values and children are at stake, intense emotions are sure to follow, whether the issue is snacks (organic or not?), paint (machine washable?) or what religious holidays, if any, to acknowledge. Oh, and in many cases, forming a co-op school is illegal, because getting the required permits and passing background checks can be so prohibitively expensive and time-consuming that most co-ops simply don’t.

....

In New York City, child care outside the home is overseen by the Department of Health and Mental Hygiene. The city requires a permit for any child-care setting where there are at least three children who are not each accompanied by a parent and who meet for more than five hours a week. Inside the home, the state’s Office of Children and Family Services oversees regulation for any group that meets for more than three hours a day. Getting a permit means red tape. Lots of it. There are background checks, required teaching certifications, written safety plans and site inspections.

I wouldn't label these families as crooks. I'd call what they're doing ingenious and enterprising self-help education.

temporary occupation, NYC, Dec. 17

2011-12-16T06:05:00.000-08:00

Monrovia criminalizes 2/3 of the population

2011-12-15T14:58:00.000-08:00

Monrovia, the capital of Liberia, is the latest city to ban street hawking, the German Press Agency reports.

According to the UN's International Labour Organisation (ILO), about 68 per cent of employed Liberians work in the informal sector, including street sales. Indeed, when employment in the informal sector is taken into consideration, Liberia's unemployment rate is as low as 3.7 per cent.

So that raises the question: why would officials move to criminalize the majority of the working population? Why criminalize the one part of the economy that actually keeps people working and surviving?

the canard

2011-12-14T18:34:00.000-08:00

One of most common, and most misguided, arguments against System D, the informal economy, is that it evades laws and thus is a threat to public safety.

If anyone thinks criminality is confined to the global underground, read this Guardian piece about PIP, the fully formal and, until 2010, well-respected French company that made breast implants. Money quote:

The company Poly Implant Prosthesis (PIP), based in the south of France, was one of the world's leaders in silicone implant production until last year when it was found to have been cutting corners and saving an estimated €1bn (£840m) a year by using industrial silicone instead of medical-grade fillers in their breast implants. The casing around the filling was also faulty and prone to rupture or leakage. The company has closed and more than 2,000 women have filed legal complaints. A judicial investigation has begun for involuntary homicide over a woman who died from cancer.

Let's put it in bold in case it hasn't sunk in: a formal corporation is under investigation for committing homicide.

The lesson: criminality exists. Nike's contractors hired child labor until advocacy groups revealed the practice. Siemens paid $1 million in bribes every business day in pursuit of contracts across the developing world. Fully formal firms commit crimes--crimes that harm and, in the extreme, kill.

I don't argue that underground economy is blameless. But let's not pretend formal businesses are clean.

death in florence

2011-12-14T08:34:00.000-08:00

A 50-year-old Italian right-winger turned his .357 Magnum on the African vendors in the Piazza Dalmazia street market in Florence, killing two and wounding three others before shooting himself, the Corriere della Sera reports. In response, 300 mostly Senegalese peddlers massed in Piazza Duomo. One marcher told the Guardian, "Don't tell us he was a madman, because if he was he would have killed whites as well as blacks." The Italian far-right, anti-immigration organisation Casapound said on Tuesday that the shooter was a "sympathiser" who had frequented one of its centers in Tuscany, the Guardian added.

no beggar's banquet in Paris

2011-12-13T10:39:00.000-08:00

French President Nicholas Sarkozy has decided to push beggars out of many fancy parts of Paris, the Guardian reports.

Sarkozy's interior minister and long-time right-hand man, Claude Guéant, has issued a series of decrees banning begging around Paris's most popular Christmas shopping and tourist spots. So now the Champs Elysées, and the areas around the Galeries Lafayette and Printemps department stores, and the Louvre and Tuileries Gardens, are off-limits to panhandlers.

Many of the 300 beggars who have been cited in court are Romanian, and, the Guardian notes, Guéant has hired 33 Romanian police officers to help the Paris force muscle the mendicants off the Champs Elyssés.

Begging may not be entrepreneurial behavior, but beggars do deserve to be treated with dignity. With this Marie Antoinette-style move, Sarkozy seems to be saying that it's a crime to be poor, desperate, and foreign-born.

Sao Paulo street vendors attacked

2011-12-09T04:28:00.000-08:00

The Military Police moved in on 7,000 street vendors in the Bras neighborhood of Sao Paulo, destroying a market that has drawn as many as 30,000 people a day for the past eight years, Street Net reports. Bras is where many vendors from the downtown market on Rua 25 de Marco had fled after a similar police putsch there.

Leonardo Dunas, the Secretary General of the Union of Independent Street Vendors, noted that the breakup of the market was illegal under customary law, since the vendors have been operating with the tacit agreement of shot owners and the local government. In addition, Sao Paulo by-laws actually allow street vending.

“It seems there may be political interests at play. There are plans to develop the area and build a hotel and commercial complex. Certainly, some investors might have the 2014 World Cup in mind, we don’t know”, Dunas said. “We are here to denounce policy brutality, to defend the right to work, and the rights of thousands of families who want to make an honest living.”

The eviction of the market in Bras occurred in late October. If anyone knows the situation on the ground now, please post updated details in the comments.

NOT ON THE STREET

2011-11-29T12:59:00.000-08:00

The Lagos State Government has decided to ban all street selling, effective immediately, The Vanguard reports.

"This administration is set to make the trade unprofitable, as both both the street traders and buyers will be prosecuted under this renewed policy," Commissioner for Environment Tunji Bello, told the paper.

It's a strange thing: the Lagos State Government seems to believe that street selling in the root of all evil." At the same time, the article notes, Commissioner Bello and others in power admit that people must trade to survive and make a living in Lagos.

The government seems to want to punish the people for being in need. This is very Victorian stuff and will help destroy the urban fabric of Lagos.

fake steve jobs bio

2011-11-29T11:49:00.000-08:00

The pirated version of Walter Isaacson's Steve Jobs bio is a big hit in China, Eastday reports. Unfortunately, according to the article, some of these pirate editions may be fiction instead of fact: "Some pirated books' content is totally different from original book, despite an identical cover."

how to fight street crime

2011-11-28T11:17:00.000-08:00

The lede from the Nairobi Star (via All Africa) says it all: "The informal sector is the best tool to fight crime and offer employment to the youth."

The other facet of the story that's interesting is that the Kenyan government is apparently offering low interest loans to informal firms through something called the Youth Fund -- at interest rates that are way better than the banks or microfinance groups. But "the funds are lying idle" --most likely because people are worried that the government will use the knowledge of their business to go after their assets.

Until May 2011, only youth groups could take advantage of the program. But now individual entrepreneurs can apply as well.

a great idea or more hot air?

2011-11-17T12:04:00.000-08:00

India is mulling how to provide social security benefits to its 430 million workers in System D, LiveMint reports. The government estimates that 94 percent of India's workforce is in the informal sector, and that they account for around 60% of India’s gross domestic product.

These ingenious entrepreneurs and street merchants are crucial to the nation's survival. But, as one economist notes in the article, India does not have a great track record in service delivery--and so the whole discussion might simply be an academic exercise or a ploy for the ruling Congress Party to win public support. “This is ambitious simply because we do not know how to implement it,” said S.L. Rao, Bangalore-based sociologist and former director general of the National Council for Applied Economic Research. “When we look at social security, we look at delivering services and money for taking care of health, education and insurance. To be honest, so far we have been incompetent in delivery of both services and money.”

PopTech!

2011-11-17T11:54:00.000-08:00

The talk I gave at PopTech last month is now online.

the mountains are high and the emperor is far away

2011-11-16T11:35:00.000-08:00

Reason Magazine takes you to a Chinese System D boomtown: Wenzhou, where businesses have joined together to fund the city's infrastructure.

Wenzhou is a commercial powerhouse. Unlike Beijing and Shanghai, though, it's the informal entrepreneurs who have made Wenzhou flourish. Here's how the article sets the scene:

Private citizens were the first to connect Wenzhou to neighboring regions by building roads, bridges, and highways, as well as the city’s airports and substantial portions of the dock. Even today the city is scattered with infrastructure investment firms through which groups of businessmen pool money to build the transport routes they all need to get their goods from factory to the point of sale. The result is not pretty. Aside from the confusion faced even by residents driving into the city, it is not uncommon to see sidewalks torn up to insert piping, with seemingly no intention of replacing the concrete. Nevertheless, the system is crudely efficient, merchants can all easily access factories, and the factories in this geographically isolated city now have sales networks that span the globe. ... The streets around the railway station are covered in stalls selling $3 blue jeans and $5 boots. There’s a city block dedicated to baby clothes next to a street that sells plastic signs for bathroom doors. In one run-down alleyway you’ll see people repairing televisions, making blankets, and selling fruits, vegetables, and poultry (live or dead). Further outside the center, you can find small shops dedicated to aluminum rods, sheet metal, tire rims, and tires. ... Pool halls are set up wherever there’s open space that you can set a tarp over. Gambling dens are openly advertised. Taxi drivers often drive off the meter. The karaoke parlors are numerous, and almost all of them double as brothels. The poorest residents take part in one of the largest citizen recycling programs anywhere in the world. In an alley one family collects scraps of fabric to sell to the local textile mills, another hoards scraps of paper and cardboard to send to the paper mills, and in front of a lot that looks like it is being used for a garbage dump, a man has set up a secondhand goods shop.

Hat tip to Zach for flinging this my way.

you be the judge

2011-11-16T10:11:00.000-08:00

Every time I get interviewed about Stealth of Nations and the global growth of System D, I get asked a variation of this question: "Aren't workers in the informal economy being exploited?

For all those who think the formal economy is so great for workers, check out this cringe-inducing article from The Guardian. The British paper discovered that the government is sending young unemployed people in the UK to work for major businesses, in what the government calls a work experience program. The catch: they have to work for free. If the unemployed people refuse to work for no pay, they risk losing their $80 per week unemployment stipends.

James Rayburn, a 21-year-old job-seeker, told the Guardian that, with his unpaid job at the supermarket chain Tesco, which earned a $6 billion profit last year, "it [was] as if I walked into the store and said, 'Look I'll help.'" Even if you want to consider his unemployment benefit a salary, if Rayburn worked 30 hours a week, his effective wage was $2.66 an hour.

So you be the judge. Which is more exploitative: System D--which actually pays its employees--or this scheme cooked up by the government and some supremely profitable businesses--which doesn't?

Indian ingenuity

2011-11-14T06:24:00.000-08:00

If the Times of India is to be believed, India is about to do something excellent and revolutionary: protect the livelihood and security of the nation's 10 million street vendors.

Housing and urban poverty alleviation minister Kumari Selja told the paper that the government "is working on an effective and practical central legislation to protect livelihood and social security of legitimate street vendors," The proposal is aimed at enabling vendors and hawkers an honest living and intends to prevent harassment of street vendors by police and civic authorities.

The law would be administered locally by committees made up of vendors, government employees, traffic police, land-owning agencies and officials from local banks.

The devil, of course, will be in the fine-print and implementation. So I hope that any Indian readers of this blog, or others who follow these kinds of proposals closely, will keep us posted as the proposal moves forward.

Rwanda town criminalizes street selling

2011-11-07T13:03:00.000-08:00

Huye Town, aka Butare, the second-largest city in Rwanda (population 77,000), has declared that it will evict all hawkers from the city's streets.

Pascal Sahundwa, the Executive Secretary of Ngoma Sector, told The New Times newspaper that the move was meant to restore order and neatness and to help local businesses. "We are determined to stop this because the business is causing losses to traders operating in stalls and shops as well as the state," he said.

The authorities make no claim that the hawkers are engaged in criminal activity. Indeed, the newspaper reported, most of the hawkers simply sell clothes, shoes and fruits. The administration wants the hawkers to take stalls in the town market. But, as one hawker told the paper, "We will only stop operating on the streets the day authorities give us affordable places. We cannot afford the high charges in the market, it is beyond our ability."

A small town in England gets it right

2011-11-04T15:34:00.000-07:00

Merchants in Ilfracombe (population: 10,800), in the Shire of Devon, in the South West of the UK, have decided that, during the celebration of the lighting of the city's Christmas lights on Nov. 30th, they're going to confront System D streetsellers. But they're not going to kick out or attempt to criminalize the unlicensed hawkers of glow sticks, balloons and toys. Rather, they're going to ask the street vendors to pony up -- to offer to help to defray the costs of the event, which is funded and staffed through volunteer contributions.

"We are going to ask these sellers for a donation towards the event," said Mark Goodenough of the High Street Traders' group. "If they refuse we will tell them to move on and we may even sell our own products at half the price to discourage them."

This is great: rather than criminalize the informal hawkers, the merchants of this town have decided to embrace them and give them a chance to contribute to the event that brings the town together.The North Devon Journal has details.

the potential of mobile money

2011-11-01T12:32:00.000-07:00

The growth and acceptance of secure mobile payment technologies will benefit street markets as well as financial institutions, a Nigerian banker says. Citing the obviously "huge funds in the informal sector," Obinnia Abajue, head of personal and business banking division (PBB) for Stanbic IBTC Bank, suggested that mobile money will bolster economic development by helping to "identify economically active people, who were previously in the shadows, where it concerns the huge informal cash economy, enabling them to have access to credit facilities."

Business Day has the details.

Informal Egypt

2011-11-01T12:23:00.000-07:00

In the ten months since the January street demonstrations that led to the overthrow of the Mubarak regime in Egypt, System D--a.k.a. the informal economy--has grown by 20 percent, Daily News Egypt reports. Acccording to researchers at the American University in Cairo, 3/4 of the young people in Egypt are now working in System D. Amina Shafik, a consultant for workers’ organizations and columnist for Al-Ahram newspaper, said that workers in the informal sector are being treated just like the freedom demonstrators were: "They are treated like criminals," she told the newspaper. "They are always chased by the police."

Indeed, the right to make your living on the street should be a fundamental freedom in the region. As Ibrahim Awad, director of AUC’s Center for Migration and Refugee Studies, put it, "After all, what triggered the first revolution in Tunisia was an attack on a street vendor.”

more from inside 'Stealth'

2011-10-31T17:56:00.001-07:00

Foreign Policy magazine offers an excerpt from Stealth of Nations.

so you want faster growth?

2011-10-31T17:53:00.000-07:00

The lede in this Express Tribune article says it all:

The informal sector in Pakistan has grown more rapidly than the formal economy over the last three decades and while estimates vary a great deal, the size of the informal sector is not less than one-third of the country’s gross domestic product (GDP).

an upside-down world

2011-10-29T14:10:00.000-07:00

Here's an odd counter-narrative. The hawkers who sell grilled meat at Marina Glen Park, in the South African coastal city of East London, are pleading with the municipality for increased regulation. Why? Well, as The Dispatch reports, "opportunists"--who the article identifies as teachers, government employees and others--have been poaching on the hawkers' turf, setting up their own stalls to do braaing (as grilling is called in local patois.) The increased competition is apparently steeply curtailing the profits of longer-term hawkers.

“These people have jobs, they are being paid salaries, but they come here to make even more money while putting us out of business,” Mambamba Mnwana, chair of the Ebuhlanti Hawkers Association, told The Dispatch.

So the unlicensed hawkers have petitioned City Hall to monitor their business and protect their incomes. A spokesman for Buffalo City Municipality, as the East London political apparatus is known, said some of the issues the hawkers raised were compelling.

Ticketing the ticket-sellers

2011-10-28T13:45:00.000-07:00

In my home town, New York City, it is now illegal to sell tickets on the street without a license. But here's the true Catch 22: there is no license available for selling tickets on the street.

The dispute involves the guys who stand near 34th Street and 5th Avenue and hawk tickets to an Empire State Building virtual reality ride. They wear uniforms of the company that runs the ride, and they have been an almost constant presence on the block for years. But only recently has their presence drawn police action.

While there may be legitimate concerns that the vendors prey on tourists who think they're buying entry to the Empire State Building tower and then discover they've only purchased the access to the video version of the view, the problems caused by the vendors sound pretty paltry:

Many in the community say they’ve had to avoid Fifth Avenue between 33rd and 34th streets whenever possible to steer clear of the vendors. Local residents, building managers and office workers had repeatedly complained of harassment by vendors, whom they accused of blocking sidewalks, accosting tourists and driving neighbors nuts with their constant ‘Going up?’ pitch.

This is ridiculous. I'm on that block often, and the vendors are hardly the threat the residents make them out to be.

It's also worth pointing out that giving desk appearance tickets that will be argued in court waste police, corrections, and court time. The police have to show up in court for the violations to stick--which pulls them off the street. And vendors beware: if you don't go to court to deal with your ticket, a warrant will be issued. And if you get caught again before settling the warrant, you will spend the night in central booking. That's right: in today's overly-securitized city, two non-criminal citations can buy you a night in the slammer.

DNAinfo has more details of this wild NYC ride.

FRESH AIR picks up on System D/the informal economy

2011-10-26T10:00:00.000-07:00

I will try to avoid posting too many plugs for my book on this blog. But I can't resist popping this one up: You can listen to me today in an interview with the National Public Radio show Fresh Air.

the book on the blog

2011-10-17T12:31:00.000-07:00

Well, it's finally time:

Stealth of Nations, the book, hits the stores tomorrow. On Saturday, the The Wall Street Journal reviewed it. And you can get a taste of what's inside the covers on Bloomberg View.

how's an informal business to grow without government/banking support?

2011-08-26T14:27:00.000-07:00

That's the question implicit in a new study by the Malawi Congress of Trade Unions. Far from protesting the informal economy, the union group suggests that it needs good governance to succeed, The Nation newspaper reports. "Though merchants are required to regularly pay market fees, markets do not have amenities such as free public toilets (in usable state), adequate water supply, drainage, and regular solid waste collection," Paliani Chinguwo, the union's director of research told the paper. If the merchants pay their fees to the government, why is the government not providing services?

The union added that bank loans are near to impossible for street businesses to use, because they often require collateral of 50 to 100 percent of the value of the loan. Again, without access to credit, how are small businesses supposed to grow?

against productivity

2011-08-24T14:00:00.000-07:00

In my new book, Stealth of Nations, I have a chapter I call 'Against Efficiency,' in which I argue that we have deified market efficiency at the expense of employment and opportunity. In a similar vein, here's Brazilian social thinker Ladislau Dowbor, with a brisk jeremiad against productivity. Money quotes:

In Brazil the combination of perverse mechanisms of the market – the more you throw the indirect costs to society, the more competitive you are – and the mechanisms of corporate control over political decisions, cause the destruction of forests, pollution of water sources, the accumulation of unemployed people in urban peripheries, and the deepening of social imbalances through the appropriation of the results of production by few national and international groups....

What we need, to put the numbers straight, is for each municipality to work out the complete picture of the activities in its territory, with a battery of indicators of quality of life, allowing the community to answer basic questions: Are we living better? Is the path we have taken sustainable? Are the diverse factors of production – including the work-force – used in a balanced way?

where the other half shops

2011-07-24T09:56:00.000-07:00

It's a class war. That's the unmistakeable conclusion from reading SPOILED, a new report by the Street Vendor Project in New York City, detailing the city's unequal treatment of the vendors in the Forsyth Street Market in Chinatown and the Union Square Greenmarket, uptown near 14th Street. The report shows that the city issues an astonishing 500 Environmental Control Board violations a year to the Forsyth Street vendors (that's more than 1 a day). And most of those violations were for spurious supposed problems like stacking crates on the ground or having ones vending cart in the wrong location, or hoisting a tarp overhead to block the hot sun. In the crackdown on Forsyth Street, officials have destroyed produce, confiscated pushcarts, and issued criminal citations to the vendors. In upscale Union Square, by contrast, merchants are largely immune from this kind of enforcement, and are not even required to have licenses to sell on the street.

Here's how the Street Vendor Project categorizes the selective enforcement: "There are two worlds in New York City, and the difference between them is the difference between the Union Square Greenmarket, where foodies peruse organic heirloom tomatoes at $4 per pound, and the Forsyth Street Market in Chinatown, under the Manhattan Bridge, where $4 will get you three pounds of onions, a pound of peppers, three pounds of bok choy, and a couple mangoes. With a dragon fruit thrown if you speak Chinese. While the City rightly supports markets like at Union Square, it gave nearly 2,000 tickets to vendors at Forsyth Street Market the past two years, in addition to arrests, confiscation of produce, seizures of carts and equipment, and illegal parking restrictions. Why the unequal treatment? Unlike at Union Square, the immigrants who work and shop at Forsyth Street – 94% of them Asian-American — have no voice."

what would fake steve jobs say?

2011-07-21T08:21:00.000-07:00

Taking the idea of piracy to a whole new level, the blog birdabroad documents the existence of three cloned Apple Stores in the Chinese city of Kunming. It's not clear from the post if the counterfeit stores are selling knock-off products, or if these fake Apple Stores sell real Apple gizmos.

crime and punishment

2011-07-20T14:25:00.000-07:00

The sentence? 90 days in jail. The crime? Selling yams and onions on the street. PeaceFM has the details of this perverse non-justice in Accra, Ghana.

the network of rice wine merchants

2011-07-20T12:40:00.000-07:00

The New York Times offers a fascinating glimpse into the Fujianese trade in home-brewed rice wine in New York's Chinatown. It's illegal, according to New York law, but it's a tradition back in Fujian. Perhaps because the producers fear a New York clampdown, the reporters were able to order the sub-rosa rice wine in restaurants, but were not able to meet any of the people who made the brew, which apparently varies in quality from fine sherry to lousy vinegar.

Tanzania depends on informal economy

2011-07-20T12:35:00.000-07:00

Some sensible talk from East Africa. A columnist in The Citizen, a paper from Dar es Salaam, Tanzania, notes how much the country depends on machingas--the local patois for informal traders and street hawkers.

Money Quote: It’s an undisputed fact that both Machingas and peasant farmers play a considerable role within the economy, from the personal and household to the national and international levels. Whatever is said to the contrary by detractors and others with vested interests of one kind or another, Machinga activity brings sustenance to untold millions of otherwise ‘jobless’ youths and their dependents countrywide. They form an important component of the informal economy, accounting for around a third of the greater Economy – whose total real GDP is $22bn, and employs 22 per cent of the workforce. In the event, it’s most distressing to see municipal ‘law enforcement officers’ harassing petty traders and destroying or carting away their merchandise to ‘destinations unknown, fate indeterminable!’

The Shadow Economy in California and New York

2011-07-06T10:41:00.000-07:00

The New York Times had two recent articles highlighting the creativity of the informal economy. The first, which appeared in the July 5 edition, pointed out the existence of thriving 'pop-up' used car lots in Southern California. OK: so they're not exactly lots. But the idea is that entrepreneurs are parking cars on streets where parking is allowed on the weekends and putting price tags in the windows. Merchants complain that the unofficial sales outlets are stealing parking spaces their customers should be able to use. Los Angeles County officials apparently agree, and have proposed an ordinance making it illegal to put a for-sale notice on any parked car on certain streets. "This attempt to use the street as a place of business creates a hazard for businesses and residents," LA supervisor Gloria Molina told the paper.

The second Times article, which ran in the dining section on July 6th, was a profile of Cooking Channel host Ben Sargent. The paper reported that Sargent, now the star of 'Hook, Line, and Dinner' on the cable outlet, recently "hawked samizdat lobster rolls out of his apartment," using the alter-ego "Dr. Claw, a Beantown-accented seafood gangsta." Sargent operated an unofficial lobster restaurant and home delivery service from his Brooklyn apartment, but ended his stint as Dr. Claw after being challenged by the fire department and receiving a cease-and-desist letter from the NYC health department.

So, let's try to get this straight: you can sell a car if you put a sign in your driveway but if you're an apartment dweller without an off-street slot, you can't pop a sign in your car window. Similarly, you can make and serve lobster rolls to 100 friends without a license but can't sell the same lobster rolls to 100 customers.

sense and nonsense

2011-06-10T14:23:00.000-07:00

Here's the sensible thing: E. T. Mensah, Ghana's Minister for Employment and Social Welfare and a newly installed member of the governing board of the International Labour Organization, has suggested that the UN group "recognise the potential of the huge informal economy in Africa and formulate strategies that would halt its marginalization." This is good news. The ILO is a crucially important organization for the world's workers, but it has participated in the demonization of the informal economy, and that has to stop.

Now here's the nonsense, also from Ghana: writing on the web site Ghanaweb, a commenter laments that "A white person arriving in Ghana for the first time will experience culture shock because what he will see is diametrically opposed to what he is used to in his country." Among the shocks he cites when people first arrive in Accra: "Existing pavements are often occupied by hawkers. People are, however, understanding that hawkers' need to earn a living but it becomes a culture shock for many foreign visitors. Soon visitors will no longer see hawkers trading in traffic and near pavements because the metropolitan councils, in their eagerness to beautify the city, no longer allow hawkers to trade in the streets." This raises an important series of questions: what is so ugly about street hawkers? Why does development and beautification have to be designed or dedicated to pleasing or mimicking outsiders? Why can't Africa develop its own market institutions that serve Africans? Why not a little culture shock among friends?

smells like shanzhai spirit

2011-06-10T11:34:00.000-07:00

Essential reading for anyone who thinks the economic underground can't be innovative:

Jan Chipchase, writing in The Atlantic, extols the impact of shanzhai products (shanzhai is the modern Chinese street slang for cloned or pirated knockoffs of big-name brands).

As Chipchase reports, Chinese firms sell 1.6 billion phones a year--and shanzhai producers "are starting to outpace the markets that they originally aspired to." He adds, "They're not satisfied with just copying. Shanzhai manufacturers are actually driving experimentation in the marketplace." One example: a phone that can take two SIM cards--a boon in places where service is spotty and you need two lines. He also suggests that these firms in the economic underground get their products from R&D to retail stores amazingly quickly.

The shanzhai 'hiPhone' may not be as good as the genuine iPhone, but it's far cheaper--making it a reasonable choice for people who can't afford the real thing but want some reflection of its looks and functionality. Far from being a drag on development, the existence of the informal economy is helping to bridge the digital divide.

streets vs. markets

2011-04-13T08:27:00.000-07:00

Is it better to sell on the sidewalks or in officially created outdoor markets? In Yerevan, Armenia, where Mayor Karen Karapetian has started enforcing a ban on street hawking, vendors now face the unappetizing prospect of moving to one of the city's proposed markets or being fined 10,000-20,000 Drams (or up to $53) if they are caught selling on the street. Vendors are concerned because people have to go out of their way to get to the markets, while business is easier on the street. Arka News Agency has a brief account.

the problem with cheap pizza

2011-04-10T12:58:00.000-07:00

A trade organization in Finland has claimed that you can judge whether you're supporting the underground economy by the price of your pizza. Any take-out pizzas that cost less than 6 euros (or almost $9), the Finnish Hospitality Association claims, must be supporting underpaid labor in the underground economy. But the country's pie guys disagree, asserting that they're willing to put in long hours and work for low wages. As pizza merchant Ahmed Seikh noted, though "he only takes home around EUR 1,000 every month ... he’d rather have low-paid work than none at all." Ice News, which offers 'News from the Nordics', slices up this Scandinavian pizza disconnection.

a new definition of transparency

2011-04-08T09:03:00.000-07:00

OK: the new ballot boxes for the Nigerian elections are transparent. Now, how about the elections themselves? The balloting, delayed a week after some administrative snafus, is scheduled to go on for the rest of the month, with Parliamentary elections held tomorrow, the Presidential election set for April 16th, and the contests for state offices and governorships on the calendar for April 26th.

(my transparency: thanks to Andrea for the tip about the transparent ballot bags)

arrest them all!

2011-04-07T14:37:00.000-07:00

A reporter covering the brutal eviction of hawkers from a bridge in Accra, Ghana, was himself arrested and manhandled by government officers. Daniel Nonor, from The Chronicle newspaper, was hauled off after he chanced on the violent eviction and took a picture of the fracas. A worker with the city's Sanitation Department told the newspaper that the reporter should have been beaten and thrown in the gutter, rather than simply arrested. The street vendors, most of them women, were taken to court--though it is not clear what charges were filed against them. The Chronicle (via Modern Ghana) has the story.

A $32 million offering to informal entrepreneurs

2011-03-07T17:26:00.000-08:00

The Dangote Foundation--a charitable group created by one of Nigeria's most successful entrepreneurs--has joined with Nigeria's Bank of Industry to create a 5 billion naira ($32 million) fund to invest in the informal economy, Worldstage magazine reports. The money would be used to bolster working capital so entrepreneurial outfits can grow and would be loaned out to informal businesses at 5 percent interest.

Aliko Dangote, whose various businesses include cement, food, beverages, and real estate, said the fund would grow to 20 billion naira--or better than $100 million US--and could spur the creation of as many as a million jobs.

Nigeria has more than 150 million people and it would be easy to dismiss $32 million as a minuscule investment. But it is also an important first step. In establishing the fund, the government and the private sector are implicitly acknowledging the strength of the sub-rosa economic sphere and its importance for Nigeria's future.

the creative spirit

2011-03-07T10:22:00.000-08:00

Anil Gupta, a professor at the Indian Institute of Management, is calling on students to study the creativity of informal businesses.His idea is that, in a work-study intiative called the shodhyatra, students should spend their time with small-scale fabricators, weavers, leather workers, chemical formulators or garment manufacturers--visiting and learning from these businesses that most business schools don't recognize as legitimate.

If hundreds of thousands of students every summer go out into the hinterland, industrial clusters and villages, there is no way the mindset which promotes inertia, mediocrity and inefficiency can survive in India. The time to connect has come. Creativity, collaboration and compassion will follow.

Absolutely.

higer wages for System D

2011-03-01T18:15:00.000-08:00

A super-brief item in the Buenos Aires Herald notes that, in January, wages in Argentina's informal economy rose at a much steeper rate than wages in the formal sector--a 4.1 percent boost vs. a 1.6 percent increase. But what does this mean? Are System D wages incredibly skimpy? Or is the informal economy so robust that it has no problem supporting such a strong rise in salaries?

Anyone who knows Argentina care to comment?

'you cannot postpone hunger'

2011-03-01T14:01:00.000-08:00

Street hawkers who sell food and other goods at a taxi rank in Rustenburg, South Africa are protesting the demolition of their stalls by the local ANC government, iolnews reports. Local officials told the merchants they could demonstrate at a major ANC meeting in the city stadium, but the memo apparently didn't reach police, who blocked the hawkers when they tried to congregate.

The street traders vented their frustration in placards they mounted on their hastily rebuilt stalls. "We are totally angry," read one placard. Said another, "We are tired."

As one merchant told the news service, they are simply trying to put food on their tables. "You cannot postpone hunger... We are trying to make a living."

damn the torpedos!

2011-02-28T09:42:00.000-08:00

The manuscript is done and the book should be out this fall. I took a break from posting to finish writing it and to deal with the black hole that sucked me in once I was done.

I spent my time repairing manual typewriters. Very cathartic.

Now it's time to end the hiatus.

System D. Full speed ahead!

what happens when you destroy a thriving street market

2010-10-13T15:50:00.000-07:00

The headline on the Agence France Presse story tells half the story: Angola shantytown struggles after market bulldozed.

The other half: The market is struggling, too, after being moved 20 kilometers (about 12 miles) out of town.

Roque Santeiro, which some had called Africa's biggest market, was a chaotic sprawl on the shores of Luanda Bay in the Angolan capital. The market was torn down on September 5th as part of a supposed urban renewal plan.

The result: the surrounding neighborhood has been plagued by unemployment and crime. The new market is failing, in part because it costs an astounding 1,000 kwanzas, or $11, to go there and back from downtown. As a result, the country's biggest microcredit lending outfit is no longer giving loans to the merchants.

And for the final piece of the tragedy, the city has yet to announce any plans for the old downtown site.

the dream that failed

2010-09-14T10:21:00.000-07:00

There's been violence between hawkers and Nairobi authorities after a nighttime demolition at Muthurwa Market in downtown Nairobi, Capital FM reports.

The hawkers lit bonfires and barricaded sections of the roads to protest eviction from the market by city council police.

The tragedy of this is that Muthurwa was built four years ago as a new and promising innovation for street hawkers. The creation of a planned market was supposed to be better for the hawkers and for people downtown. Instead, as The Standard reported last year, the dream failed. "The plan included a 24-hour market with basic facilities like water, restrooms, lighting, a hospital, a police station, multi-storied stalls, a banking hall, and an administrative office," at a price of 700 million shillings ($8.6 million), The Standard noted. But. "Sixteen months down the line, Murhurwa has become the epitome of chaos. The 12-hectare complex has degenerated into a den of muggers where hawkers and matatu [shared van] operators jostle for space."The newspaper enumerated some of the problems: "Burst sewers, dusty if not muddy roads, congestion, pickpockets, and lack of water."

The sad fact: the hawkers and the cops are fighting over a total failure of public policy.

pope-on-a-rope

2010-09-14T09:36:00.000-07:00

Hundreds of unlicensed vendors will be competing to sell Papal merchandise as the Pope visits Edinburgh and Glasgow this week, the Daily Record reports.

The newspaper reports that only seven traders applied for a street sales permit in Glasgow, and only one received a permit. Yet more than 100,000 people are expected to turn out to see Pope Benedict XVI on Thursday.

The Pontiff-related stuff expected to be for sale includes "Pope-on-a-rope soaps, action figures, coasters, clocks, fridge magnets, keyrings and car air fresheners." The Catholic Church is trying to seize some of the street vendors' business by selling Pope-themed products online.

The Pope is often viewed as a voice for social justice, but that doesn't mean that local officials will be lenient with unlicensed vendors. As a Glasgow City Council spokesman told the paper: "Trading standards officers will be targeting unlicensed street traders on the day and will, if necessary, seize goods."

African markets in Spain

2010-08-30T06:46:00.000-07:00

African manteros (literally blanket people, but with the connotation of curbside hawkers) dominate many of the vibrant street markets in Spain, the Deutsche Presse-Agentur reports.

Some municipalities have tried to liberalize hawking laws, but apparently backed down due to opposition from retailers and tourist agencies.

'We do not steal or sell drugs,' a mantero named Abdou told the news agency. 'Whom do we harm?'

Police are due to start raids again in September.

hawking on Moscow's trains

2010-08-30T06:38:00.000-07:00

Hawkers offer a bewildering variety of goods on the trains from Moscow's Yaroslavsky Station to the monastery at Sergiev Posad. The business, an analyst tells The Canadian Press, is worth millions of dollars a year.

making do

2010-08-30T05:50:00.000-07:00

Making Do, a new book by Steve Daniels, highlights the power of the Jua Kali (hot sun) industries in Kenya. Here's an excerpt, from The Atlantic.

The book debuted at Maker Faire Africa 2010 in Nairobi, a festival of informal know-how curated by my esteemed friend and colleague and all-around good guy Emeka Okafor.

Arresting teenagers for hawking

2010-08-19T07:40:00.000-07:00

Authorities in Calabar, the capital of Nigeria's Cross River State, recently arrested 100 young street hawkers for selling legal goods in unauthorized places, Next newspaper reports.

The products they were selling: food items such as eggs, plantain chips, peanuts, potatoes, sachets of water, vegetables, garri (toasted, ground cassava), beverages, plus desirable consumer goods like mobile phone recharge cards and clothing.

Authorities contended, without offering any evidence, that some of those arrested were violent criminals.

But a parent of one of the kids arrested insisted that they were just trying to help their families make some money in a traditionally acceptable way. "How can a government stop street hawking when our tradition encourages it?"

the cost of electricity during Ramadan

2010-08-19T07:29:00.000-07:00

Street hawkers in Dhaka, the capital of Bangladesh, are apparently making under-the-table deals for illegal connections to public electrical lines, bdnews24 reports. The hawkers are apparently using the juice so they can run small light bulbs in order to sell their wares at night.

Authorities told bdnews24 that the number of street hawkers rises during Ramadan, the Muslim month of fasting. The amount of power pilfered by the city's estimated 100,000 hawkers could amount to 10MW per day--in a city that is stressed for adequate power.

One hawker confirmed that he paid an unauthorized 'lineman' 1,000 taka ($14 US) for the hookup and 50 per day (or about 75 cents) for the power. Another said he paid twice as much.

According to the Dhaka Electric Supply Company, legal electricity for commercial use can be had for a flat rate of 5.58 taka (about 8 cents) per unit of use. So the hawkers are likely being ripped off, perhaps by as much as 800 percent.

The obvious solution: instead of hunting down the law-breaking hawkers, crack down on the fake utility workers and provide the hawkers with safe, legal hookups where they will pay the official rate.

up with street vendors

2010-08-11T12:49:00.000-07:00

An essayist in The Hindu, perhaps India's most prestigious English-language paper, blasts the disingenuous arguments used to demonize hawkers and roadside merchants.

Money quote: "If lakhs [tens of thousands] of jobless people decide to be masters and mistresses of their own fate, should we call them a nuisance or salute their spirit of enterprise? The answer, I think, is evident."

the street is better

2010-05-28T15:56:00.000-07:00

Hawkers in Singapore say the street was better for business than the temporary mall in which they operate now. Channel News Asia offers a bare bones story.

the key to growth

2010-05-22T14:11:00.000-07:00

The bulk of Kenya's job growth last year was due to the informal economy, The Standard newspaper reports.

According to the Economic Survey released by the Planning Ministry, the country’s employment rate improved in private and public sector from 1.9 per cent in 2008 to 3.1 per cent and 2.4 per cent last year. Total employment excluding those in the rural small-scale agriculture and pastoralist activities went up by 4.5 per cent to 10.4 million last year. However, the informal sector, continued to lead the way by creating 390,400 jobs.

Though that is an impressive figure, the number of jobs produced by the informal sector actually declined from 2008, when informal employers accounted for 440,000 jobs.

Even as the informal economy still seems robust, it would be interesting to know why that decline in growth occurred.

smashing the stalls

2010-04-26T13:48:00.000-07:00

Hundreds of vendors in the central Sri Lankan city of Kandy lost their stalls and livelihoods after an eviction enforced by the army. The Daily Mirror has a brief account of what was called an effort "to clean up the Kandy city."

someone in Nairobi gets it

2010-04-23T12:25:00.000-07:00

A great blog post courtesy of Ratio Magazine, shows how informal businesses lose out to supposed innovations in city planning.

Money quotes:
1. In this city, in my neighbourhood, a man associated with one of Kenya’s largest scams, is free to run for MP whilst small kiosks are being torn down in the name of ‘beautification’ and ‘security’.

2. in a fantastic example of customer service matched by few formal businesses in this town, one of the local newspaper men [displaced by the government demolition drive] not only delivers the papers to my house, but has also granted me account facilities for both newspapers and airtime, and all I have to do is text him for a top up.

3. we can probably save a lot of cash spent on programmes, workshops and related four-wheel drives for ‘small enterprise promotion’ and actually let small enterprises grow if the city infrastructure were made more functional.

the right to do business on the pavement

2010-04-23T07:37:00.000-07:00

The progressive city government in Calcutta is now initiating a program to legalize street hawkers. The Telegraph newspaper has the details. In a further analysis, the paper quotes a municipal official on the pragmatic reasons for working with street sellers: "The ground realities in the city are such that hawkers can neither be easily evicted nor restricted to specific zones. Try forcing a vendor doing roaring business on a Gariahat pavement for years to shift to another location and you will know what I mean.”

Though the Telegraph harumphs that "you, the pedestrian, will ultimately forfeit the right to your pavement," the reality is that there are 325,000 street hawkers in the city. If they weren't important and desirable, people wouldn't be buying from them and building and store-owners wouldn't allow them to operate right outside their doors.

The government promises to keep some areas of town free from street sellers, while limiting hawking in other areas and allowing it full-force in other sections of town. This is a sensible, pragmatic proposal.

Bahrain goes after street vendors

2010-04-06T17:22:00.000-07:00

In the first three months of this year 460 street traders have been prosecuted in Manama, the capital of Bahrain, the Gulf Daily News reports. The government also arrested 204 undocumented foreign workers -- the newspaper calls them 'runaway expatriate labourers' -- in the same time period.

Given that the capital, according to Wikipedia, has an estimated population of 155,000, almost half of one percent of the city's population has been caught up in these prosecutions.

900 years of market culture

2010-04-06T08:02:00.000-07:00

Bananas on the Breadboard is a new documentary that chronicles the 900-year history of Dublin's vibrant street markets. The Irish Times previews the film.

1,000 pounds

2010-04-05T12:01:00.000-07:00

That's how much the Liverpool City Council wants to charge for permits to sell food at night in the center of town. It's a 300 percent increase over the current license fee. The Liverpool Echo has the details.

Project Hawk Eye

2010-03-29T09:24:00.000-07:00

Police in Vadodara, a city in the Indian state of Gujarat, have started a community policing project in partnership with local street vendors, the Times of India reports.

"Hawkers are good source of information and they can also help us in detecting crime and preventing it too. In fact, just few days back a hawker nabbed a vehicle thief and handed him over to the police," police commissioner Rakesh Asthaana told the paper.

Officials in the city of 3 million have dubbed the plan 'Hawk Eye.' It has the potential to create a much more productive civic relationship between government and street merchants. Vendors are, after all, eyes and ears on the street. They are not criminals. They are a legitimate part of society.

Computer Village attacked

2010-03-23T16:11:00.001-07:00

The Lagos State Government has attacked the street traders at Computer Village, Next reports.

There's no allegation that the street sellers at the market are unscrupulous or criminal. Only the Governor's uncompromising devotion to wiping out street selling.

This puts merchants in a serious bind. They have lost their investment -- often given to them on credit by more-established businesses in the market -- but are so desperate for work that they will probably return to the street despite the risk. "The things they took away were given to me to start market, and they have seized everything," one vendor told the paper. "And government did not create employment for us, so people will start looking for job again." As a mobile phone salesman put it, "We cannot steal so we’ve been trying to earn a honest living, but it’s been made difficult by the government."

Lagos Governor Babatunde Fashola is doing nothing about the real corruption, which involves the area boys -- a cadre of strong-arming thugs who are in league with the officials of the local government (a community political structure) -- who are extorting money from the street traders. But he has turned the hopeful street entrepreneurs at Computer Village into criminals.

What is the sense of that?

After the earthquake, the stealth economy

2010-03-22T13:41:00.000-07:00

The New York Times offers a view of the post-earthquake encampment set up in the Pétionville Club, the 9-hole golf course in Port-au-Prince.

What's significant: With 44,000 residents living under tarps, this new neighborhood has "a quasi-mayor, a ragtag security force, a marketplace, two movie theaters, three nightly prayer services, rival barber shops and even a plastic-sheeted salon offering manicures and pedicures." The article goes on to highlight the commercial success of these refugees in their own city.

"Everything is for sale, like hair extensions in baggies and padlocks for the wooden doors that many have installed in their tarp-covered shelters. Inside a United States Agency for International Development tent outfitted with freshly made benches and a flat-screen television, one entrepreneur charges about 12 cents for screenings of a “Terminator” movie and the Malaysian kung fu film “Kinta.” Another young businessman rents out his Playstation in one of the designated 'child safe' areas, a green netting atop four poles. A woman runs a bar atop a crate."

But the article concludes that international agencies want to move these self-sufficient and entrepreneurial people out of the city: "Moving families from encampments like the Pétionville Club entails finding and preparing some 1,500 acres of land — one relocation site recently opened and another is being prepared — and then persuading people to move outside the metropolitan area, international groups say."

This neighborhood is functioning and, compared to many other encampments, relatively healthy. Why break it up? Why send it out of the city? These are the very people who ought to be at the center of the renaissance of the Haitian capital.

2010-03-22T06:43:00.000-07:00

Swindon, a city of perhaps 200,000 people west of London, is pushing to redevelop its town center by getting rid of street traders, many of whom have been working there for better than 25 years. The Swindon Advertiser reports.

Why do political authorities always see those who sell flowers and donuts from carts on the street to be blight? The truth is that street sellers make the urban experience more vital and charming and boost business for everyone. That's why pushcarts have re-appeared, in a highly planned form, in malls and shopping centers. That's, in part, why street fairs and farmers markets are popular.

death of a teenage hawker

2010-01-26T15:37:00.000-08:00

The Guardian offers a moving account of the death of Fabienne Cherisma, who was shot by Haitian police.

Nice lede: "Fabienne Cherisma spent her life assessing margins."

In addition to highlighting the personal tragedy of a bright 15-year-old's life cut short, it brings up the question: what is looting?

No one suggests that looting for profit is a great thing. And on a mass scale, looting can turn into rioting. But, after the earthquake that killed more than 100,000, people in Port-au-Prince are simply trying to survive. In the context of the massive devastation, and the unconscionably high rates now being charged by air cargo companies to bring supplies into Haiti (a much worse form of looting), why is taking two folding chairs and three paintings a capital crime?

after the earthquake

2010-01-21T13:50:00.000-08:00

As the Haitian people recover from the tragedy of last week, System D--the informal economy--is playing its part.

Government officials and businessmen tell Reuters that street markets and street hawkers are back in operation in Port-au-Prince. That's hugely good news. As usual, the informal economy is back up and running before the banks and the rest of the formal economy.

happy informal new year

2009-12-30T14:28:00.000-08:00

It's that time again. All across the planet, thousands of men and women are standing on streetcorners selling noisemakers and ugly sunglasses shaped to say 2010. For the coming day or two, hawkers and other unlicensed street vendors will be out in force in almost every country of the world.

The trumpet sellers of Java are reporting very slow sales, according to this article in Vivanews. One sidewalk vendor said he had expected to move more than 1,000 trumpets, but so far has rung up just 200 sales. Bad weather may have something to do with it. And people everywhere are facing tough times.

But that's no reason not to have fun.

A big Shadow Economy is a good thing

2009-12-28T09:16:00.000-08:00

Researchers at Deutsche Bank--the German multinational--have reached a staggering conclusion about the informal economy: it's a good thing. The Financial Times has details.

From the article: "Countries with a high prevalence of moonlighting builders, unrecorded cash transactions, missing invoices, tax evasion or illegal activities such as drug dealing, have seen smaller contractions during Europe’s worst downturn since the 1930s than more honest neighbours." For instance, "Greece’s economy has shrunk only about 1 per cent this year – compared with about 4 per cent for the European Union as a whole."

Moroccan rhythms

2009-12-13T16:49:00.000-08:00

The Moroccan government reports a boom in the informal economy, according to a report in the Middle East North Africa Financial Network.

The statistics are impressive: 40,000 new businesses (and only one in five new businesses is registered with the government.) In 2007, according to the government survey, informal businesses in Morocco created more than 2 million jobs and had a turnover of 279.9 billion Moroccan Dirhams, or about $36 billion US.

In Morocco, the informal sector is growing way faster than the formal.