if Detroit were a developing world country

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!

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

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

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

Monrovia criminalizes 2/3 of the population

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

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

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

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

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

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

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

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?

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!

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

the mountains are high and the emperor is far away

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

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

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

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

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

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

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'

Foreign Policy magazine offers an excerpt from Stealth of Nations.

so you want faster growth?

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

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

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

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

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?

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

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

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?

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

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

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

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

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

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

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

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

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

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!

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

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

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

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'

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!

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!