The Power of the Informal Economy

Robert Neuwirth, an author, and a journalist recognizes informal economy as an unlicensed economic network comprising of the pushcart hawkers and market vendors in the streets all across the world. Neuwirth argues that the informal market promotes entrepreneurship which subsequently creates around 1.8 billion jobs worldwide (Neuwirth, 2012). The author seeks to distinguish between informal market and the black market. He argues that in an informal market, there is nothing secret or underground in the business operations as opposed to the black market which operates in secrecy. Part of the informal economy is supported by the copyright infringement practices which the companies whose rights are being violated also find useful (Neuwirth, 2012). The author gives an example of a shoe manufacturing company which uses piracy as a research in which the company knows that they have not done something right in case their shoes are not pirated. The informal economy largely affects the formal economy and the marketplace. When people talk about the global economy, they often refer to the formal economy. According to Portes & Haller (2010), the formal economy is worth 1.5 trillion dollars annually. This is a huge amount of money which does not include the 1.8 billion people all around the world. The people in the informal market work tirelessly and produce in a market which is not regulated. According to Neuwirth, if these people were to be united into a single unit, called The United Street Sellers Republic (USSR), their economy would be worth ten trillion dollars on an annual basis. This according to him would account for the world's second-largest economy after the United States (Neuwirth, 2012). Many entrepreneurs and business owners tend to go for opportunities within the formal economy. However, they miss out on a huge market. With the rapid growth in the informal market, the informal market space is becoming stronger and wider with an increasing buying power of its people. It is important that the entrepreneurs examine the patterns in the society for them to find the emerging markets. Cities such as Istanbul and Lagos are synonymous with the street vendors, hawkers and neighborhood bazaars. People living in such cities are used to hearing hawkers from all corners of the cities. They buy almost everything from the streets including clothes, food, DVDs and many others. The informal economy does not stop on the streets, it stretches on informal housing. For example, the contemporary Istanbul comprises many squatters from the Anatolian cities (Neuwirth, 2012). Even the prestigious suburbs neighboring Istanbul such as Bebek have squatters within a radius of five kilometers. While most people see squatters as a threat to the urban development, the reality is that they are part of the urban economy. Lastly, the major players in the informal economy include the hawkers and street vendors majorly from poor communities. The urban transformation has enabled these communities to be empowered by providing job opportunities and enhancing their living conditions (Portes & Haller, 2010). The author gives a notable example of the Turkish squatters coming from humble communities and who get transformed into self-sufficient people because of the informal businesses. There are legislations which make the squatters to be established easily. For example, when more than two thousand people come together as a community, they have the right to be recognized by the government as a sub-community. They can, therefore, represent themselves in the government as well as collect taxes. The author notes that the lives of the squatters in Turkey cannot be compared to the slums in either Brazil or India. As squatters continue to increase, so does the informal habitation. There is an expansion of upper stories and terraces.

References

Neuwirth, R. (2012). The power of the informal economy. In Conferences, T. ed. TEDGlobal. Portes, A., & Haller, W. (2010). 18 The Informal Economy. The handbook of economic sociology, 403.