The informal economy and development’s lie of employment for all
Millions subject to global capitalism are told to wait patiently for the fulfilment of development’s promise that things will get better and full employment will appear. Except it doesn’t…
One of the strange suppositions underlying development and its ongoing quest to improve Global South economies is its promise to create employment opportunities for all.
It is thought, that in doing so, people will have flourishing lives.
Sounds reasonable right? Except the global economy doesn’t work like that. It needs an underclass of economic insecurity and precarity to use as cheap labour.
And large parts of the Global South provide exactly that.
We have a system that needs this precarity.
People in the Global South have been faced with endemic labour precarity since colonisation and it isn’t letting up. What is referred to by labour analysts as the informal sector includes billions of workers without social protection in informal enterprises, farms and households. If the informal sector includes agriculture, the share of informal employment against total employment can be as high as 90% in parts of South Asia and sub-Saharan Africa[i]. The insecurity of labour is the reality for most of the world’s population.
Indeed, the informal economy is the formal economy.
Anthropologist James Ferguson has observed the failed promise of full employment through the mass unemployment and underemployment of populations in South Africa, and argues this is not going to disappear anytime soon[ii]. Tania Li also points to the scale of structural labour insecurity, describing through her research in Asia how the process of accumulation by dispossession from global companies aided by the government generates large numbers of people with no access to land or a living wage. She argues their existence is beyond being relative surplus to the labour market, but now they are surplus to the whole capitalist system of production[iii]. Charles Meth bluntly states that “There is little hope that economic growth can rescue the poor – except among propagandists, there seems no doubt that the economy simply cannot grow fast enough[iv].”
The informal economy is a central part of a broader system that doesn’t let everyone win.
The informal economy is gendered too. Women are disproportionately concentrated in informal economic activities[v]. Agriculture and services remain the most significant areas of informal labour for women in the Global South[vi].
Adding to this is the gendered division of labour where, because of gendered norms, women effectively end up working two jobs - one that pays, and one that doesn’t but includes the essential work of child rearing, domestic duties and other care work[vii]. For example, one woman may not only produce crops to sell in the market, but also is the main carer of the children within her family. These two jobs are further compounded when the rains fail, or when her crops don’t grow which means she needs to find additional work to continue to provide.
Her unpaid work provides enormous value. The formal economy profits from women’s unpaid care work – conservative estimates calculate that women’s unpaid work contributes globally US $10 trillion per year or 13% of the global GDP[viii].
Informal work undertaken by women can be also highly sexualised and intimate, including the surrogacy trade, the sex trade and household labour, which all put women and their bodies in difficult and often dangerous situations[ix].
The toll informal work can take on people’s bodies and health are astounding. Development Studies researcher Alessandra Mezzadri, through examining the Indian sweatshops that feed the global garment industry, has outlined the extent of the damage this work does to the women’s bodies. The damage is not just through major incidents like the collapse of Rana Plaza that killed 1,132 people, but also through the subtle wearing down of bodies over a period of time[x]. This wearing down comes from ongoing bodily strain, exposure to substandard conditions, long working hours and the emotional stress of workers, often women, being away from their families[xi].
These women then have no safety net for when their bodies break down; they are then subject to a slow death, doing what they can to keep themselves and their families alive alone.
It is a common misconception of development policy to see the informal sector as being in a process of transition to the formal economy[xii]. This aspect of modernisation has been a norm adopted by the international development industry, governments, the World Bank and the IMF. They attempt to promote the transformation of informal labour into formal labour through championing entrepreneurial acumen and skill development. For example, Sustainable Development Goal 8.2 aims to:
“Promote development oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services[xiii].”
Yet it is a mistake to think development can somehow turn all these people into their own viable business. It fundamentally misconceives of why people are enterprising in the first place – as it’s a function of the immense economic insecurity and precarity people face. Any ‘micro-enterprising’ is really about people trying to make a subsistence living from limited resources and often in oppressive conditions.
There is nothing romantic or whimsical about it.
It is dangerous to think otherwise.
The bias towards full employment as the bedrock of social and economic membership by policy makers in the Global North has severely under-conceptualised the enduring connection between labour insecurity and global capitalism. Not only does the informal economy provide relative surplus labour to drive down formal labour costs; it also delivers sources of cheap labour, resources and commodities[xiv].
The precarity of global labour cannot be disconnected from colonial dispossession, ecological destruction, military occupation and the raft of development policies prescribed by the IMF and the World Bank including Structural Adjustment Policies, which have contributed significantly to the industrialisation and development of the West[xv]. For example, in the 1980s, Australia – alongside the US and the World Bank – argued for global agricultural trade liberalisation and refused support to national food security programs aimed at strengthening domestic agriculture. Specifically, Australia refused to support the development of a rice industry in Papua New Guinea, a country which not only was recovering from being colonised by Australia, but was also paying Australia around AU$100 million per year for rice imports[xvi]. This move destabilised the local PNG economy, the local farmers and their livelihoods.
The assumptions regarding the disconnect between the formal and informal economy and the misguided belief that development will create full and stable employment for all have resulted in economic planning and policies that privilege formal workers and firms, leaving informal workers – who form the majority of the workforce in many countries – without economic security[xvii].
All the while, these millions subject to global capitalism are told to wait patiently for the fulfilment of development’s promise that things will get better and full employment will appear.
Except it doesn’t, and it won’t.
And still the rich economies like Australia tighten the borders so informal workers cannot seek a better life.
Originally written 2019-2020 (some updates included)
[i] H Huitfeld, "Informality and Informal Employment," (OECD Development Centre, 2009); Joann Vanek et al., "Statistics on the Informal Economy:
Definitions, Regional Estimates & Challenges," (Women in Informal Employment Globalizing and Organizing, 2014), 1-48.
[ii] Ferguson, Give a Man a Fish: Reflections on the New Politics of Distribution.
[iii] Tania Muray Li, "To Make Live or Let Die? Rural Dispossession and the Protection of Surplus Populations," Antipode 41 (2010): 66-93.
[iv] Ferguson, Give a Man a Fish: Reflections on the New Politics of Distribution, 234; Charles Meth, "Ideology and Social Policy:'Handouts' and the Spectre Of'dependency'," Transformation: Critical Perspectives on Southern Africa 56, no. 1 (2004).
[v] Martha Alter Chen, "The Informal Economy: Definitions, Theories and Policies," (WIEGO, 2012).
[vi] For example “In Southern Asia and sub-Saharan Africa, over 60 per cent of all working women remain in agriculture, often concentrated in time and labour-intensive activities, which are unpaid or poorly remunerated” (pg. xiii). ILO, "Women at Work Trends 2016," (International Labour Organization, 2016).
[vii] Susan Himmelweit, "The Prospects for Caring: Economic Theory and Policy Analysis," Cambridge Journal of Economics 31, no. 4 (2007); Nancy Folbre, "Valuing Care," in For Love or Money: Care Provision in the United States, ed. Nancy Folbre (New York City: Russell Sage Foundation, 2012); Marilyn Waring, Counting for Nothing: What Men Value and What Women Are Worth (Toronto: Toronto University Press, 1999); Rosalind Eyben, "The Hegemony Cracked: The Power Guide to Getting Care onto the Development Agenda," (Institute of Development Studies, 2012), 1-29.
[viii] Jonathan Woetzel et al., "How Advancing Women’s Equality Can Add $12 Trillion to Global Growth," (McKinsey Global Institute, 2015).
[ix] Silvia Fedirici, "Reproduction and Feminist Struggle in the New International Deivision of Labour," in Women, Development, and Labor of Reproduction : Struggles and Movements, ed. Mariarosa Dalla Costa and Giovanna Dalla Costa (Trenton: Africa World Press, 1999).
[x] A Mezzadri, The Sweatshop Regime: Labouring Bodies, Exploitation and Garments Made in India (Cambridge: Cambridge University Press, 2017).
[xi] Reecia Orzeck, "What Does Not Kill You: Historical Materialism and the Body," Environmental and Planning D: Society and Space 25, no. 3 (2007): 503.
[xii] Guy Standing, A Precariat Charter : From Denizens to Citizens (A&C Black, 2014).
[xiii] United Nations, "The 2030 Agenda for Sustainable Development," (United Nations, 2015).
[xiv] For example, in his analysis of capitalism in India and China, Anthony D’Costa illustrates how the dispossession and displacement of rural communities from their land by national and international capital is integral to economic production for the national and global economy. However, this also forces these people into informal labour, living at the whim of the cost-cutting impetus of companies concerned with their bottom line. Whilst some formal employment has been created through this process, it is nowhere near at a high enough rate to absorb the people being dispossessed (Anthony D'Costa, "Compressed Capitalism and Development: Primitive Accumulation, Petty Commodity Production, and Capitalist Maturity in India and China," Critical Asian Studies 46, no. 2 (2014): 317-44). Barbara Harriss-White further shows the links between economic precarity and capitalism in India, not just through continued accumulation by dispossession and the pauperising of people, but also through climate change and insecurity, producing disaster events arising from the need for more energy and production of more waste to drive productivity in the formal economy Barbara Harriss-White, "Poverty and Capitalism," Economic and Political Weekly (2006).
[xv] Sabelo J. Ndlovu-Gatsheni, "Genealogies of Coloniality and Implications for Africa's Development," Africa Development 40, no. 3 (2015); Walter Mignolo, The Darker Side of Western Modernity: Global Futures, Decolonial Options (North Carolina: Duke University Press, 2011).
[xvi] Tim Anderson, "The Howard Government, Australian Aid and the Consequences," (Australian Review of Public Affairs, 2006).
[xvii] David Mosse, “A relational approach to durable poverty, inequality and power,” The Journal of Development Studies 46,no.7 (2010), 1156-1178; Naila Kabeer, “Globalization, labor standards, and women’s rights: dilemmas of collective (in)action in an interdependent world,” Feminist Economics 10, no.1 (2004), 3-35; Naila Kabeer, Women’s economic empowerment and inclusive growth: labour markets and enterprise development,” International Development Research Centre 44, no.10 (2012), 1-70; Stephen Klasen and Francesca Lamanna, “ Feminist Economics 15,no.3 (2009), 91-132.