Friday, April 24, 2009

the informal is normal

The Times of London has more on the Organisation for Economic Cooperation and Development (OECD) report on the informal economy that I mentioned in an earlier post.

Two important new details:

1. While he questions the OECD statistics, Friedrich Schneider, Professor of Economics at the Johannes Kepler University in Linz, Austria, also told The Times that the informal economy is not incompatible with growth. "It is not straightforward to say that reducing the informal sector will reduce poverty. One should also ask: 'How large would poverty be if we had no shadow economy?'."

2. Maeve McGoldrick, of NGO Need Not Greed, told the paper: "People have been forced to work cash-in-hand in the UK because of poverty and the welfare state. What the authorities see as a problem could, in fact, be a solution if they could harness the informal economy by providing support rather than criminalising people."

In fact, the OECD report is not all that negative towards the informal sector. It notes the highly important emerging reality that "informal employement is emerging ...within formal establishments and global commodity chains." And some of its statistics can be read as proving that the growth of the informal has been responsible for the bulk of job growth in the developing world in recent years.

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