PROGRESSIVE NOTIONS OF INFORMALITY AS SELF-EXPRESSION
Jeffrey R. Oliver, Ph.D., MBA
This essay describes the different ways informality has respectively been conceptualized in academic literature as a survival strategy of the desperate and as a mode of empowering self-expression.
Introduction
The term “informality” often conjures up notions about impoverished people working in the shadow economy in developing nations (Portes & Sassen-Koob 1987). Mazumdar (1974) gave a bleak prognostic of informality, essentially arguing that “informality breeds more informality”. Referring to informal housing and employment sectors, La Porta & Shleifer (2014) stated that “far from being reservoirs of entrepreneurial energy, they are swamps of backwardness. They allow their owners and employees to survive, but not much more.” Such scholarship is often rooted in Hart’s (1973) depiction of informality as a “single survival mechanism” (Portes & Schauffler 1993, 39). This faction of scholarship portrays informality as hopeless employment and housing sectors of the desperate.
However, another faction of the scholarship on informality seeks to push it beyond this “single survival mechanism” mentality. This faction proposes that informality is more diverse and more ubiquitous than proposed by the “single survival mechanism” faction (Light & Bonacich 1991, Sassen 1994, Gold 2014). The more progressive faction notes that informality can be seen as many things beyond work and housing sectors of the desperate (although they acknowledge that it can be that too). It can be seen as a form of organization (McFarlane & Waibel 2012), an engaging and enriching way of life (Su-Jan, Limin & Kiang 2012), a type of strategy not only used by the poor, but even by elites and the government (Sassen 1994, Böröcz 2000, Roy 2005), and as expressions of creativity, ingenuity and power (Portes, Castells & Benton 1989; Portes & Schauffler 1993; Perry 2007; Roy 2009; Weinstein 2014).
In short, this progressive faction endeavor to broaden the way informality is conceptualized—allowing it to extend beyond notions of only informal housing/work among the poorest people of developing nations. The progressive faction of the literature acknowledges the way informality is everywhere and impacts almost everyone: The person paying cash for someone to do “odd jobs” around the house, or informal organizations that arise in response to crisis when formal organizations are too slow to do so (McFarlane & Waibel 2012). This faction also describes the government and elites in society engaging in informal practices (Böröcz 2000; Roy 2005, 2009; Mitchell 2012).
While definitions of informality are often confusing or contradictory (Moser 1978, Rakowski 1994, McFarlane & Waibel 2012, Kanbur 2015), Kanbur (2015) has suggested that a possible common thread among definitions is “that which is outside of state purview.” While this definition may be more conducive to identifying and quantifying informality in practice, definitions like this can be overly reductionist, static and stubbornly rooted in antiquated notions of informality. Borrowing a phrase from Gold (2014), they are “inconsistent with contemporary…realities.” There is much to be learned about personal expressions of power, embracing creativity and spontaneity, and preference for life outside of the mainstream when informality is re-conceptualized in the way it is being done in the more progressive faction of scholarship on informality.
For example, Portes & Sassen-Koob (1987) defined it as: “Activities that occur outside of the arena of the normal.” Azari & Smith (2012) described informality as “shared expectations outside the official rules of the game”. These definitions encompass the vast majority of conceptualizations found in the “single survival mechanism” faction of literature, but also allow for it to push beyond that in a way that is diverse and dynamic. If conceptualizations of informality do not push forward to meet these conditions it will be left behind as an academic concept.
As background for discussing these progressive definitions of informality that are appearing in literature, this paper begins by discussing the emergence of “informality” as an academic concept, as well as the emergence of the two different factions (the “single survival mechanism” faction and the “progressive” faction). Following that is a discussion of conceptualizations found in the literature that outlines the respective positions of the two factions. This discussion is divided into four smaller discussions that represent different strategies for conceptualizing informality. These are: the relationship between the informal and the formal; informality as pathological vs. socially beneficial; the relationship between informality and power; and the interplay between informality, the state and capitalism. This paper concludes that the conceptualizations associated with the progressive faction are less conducive to identifying and quantifying informality in practice, but are better suited to describing the complex and dynamic realities of society. Such definitions also give a more complete depiction of informality as an academic concept and allow the concept to grow and adapt with a dynamic and global world.
Emergence of “Informality” as an Academic Concept
While he never used the term “informality”, the emergence of the concept is often linked back to Lloyd George Reynolds’s two sectors: “state” and “trade service”. Trade service was made up of petty traders, shoe shiners, street vendors and personal servants—“the multitude of people whom one sees thronging the city streets” (in Roy & AlSayyad 2004). His description was much like what many picture the informal sector to be (Roy & AlSayyad 2004).
Officially the concept of “informality” was first employed in 1973 by Hart as a way to describe the sporadic employment trends he was observing in Ghana (Kanbur 2009). While Hart did observe that informality encompassed a diverse number of activities, he did not see it as taking in a diverse number of motives (Portes & Schauffler 1993, 39). Therefore, originating with Hart, informality was associated with irregular activities of the poor and desperate in developing nations but little else. This is, in a sense, the embodiment of what this essay calls the “single survival mechanism” notion. For over a decade, informality continued to be portrayed almost exclusively in this way (Portes & Sassen-Koob 1987).
However, nearly as soon as the term emerged in academic literature in 1973, it became enshrouded in confusion (Moser 1978). That confusion continues into more recent times (Rakowski 1994, Kanbur 2015). While it can be detrimental for an academic concept to be enmeshed in ambiguity, it may also be an indication that the term being described represents a highly dynamic and diverse phenomenon, and thus, is difficult to capture in a way that is both concise and comprehensive. Therefore, it may be that some of the confusion related to the different conceptualizations may simply be an indication that informality is an equally diverse and dynamic phenomenon.
There is evidence that this is the case: a growing body of literature that is conceptualizing informality in more progressive ways. For example, Portes & Sassen-Koob (1987) were among the first to attempt to “debunk the myth” of the “single survival mechanism” idea. They observed that informality was present in more scenarios than just among the poor and desperate in developing nations. Thus began a flow of what this essay is calling “progressive” literature on informality—literature that challenged and pushed early assumptions about informality as merely a single survival mechanism associated with the impoverished in “Third World countries” (Portes & Sassen-Koob 1987).
Here it should be noted that informality was largely the domain of economists beginning with its emergence as a term in the 1970s and extending into much of the 1980s (Portes & Sassen-Koob 1987). This disciplinary difference may in large part explain the existence and persistence of the “single survival mechanism” faction. However, as those from other disciplines outside of economics entered the academic conversation, they began to push the definitions and applications of informality into new arenas as an academic concept (Portes & Sassen-Koob 1987).
In practice, the “single survival mechanism” faction prefers definitions that make it easy to identify and quantify informality. For example, in India, the informal sector is defined as “…all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers” (Kanbur 2015). Such definitions make the term easily measurable, but restrict it to only the parameters set up by the definition. In contrast, more progressive definitions often capture more of the essence of the term, but can be hard to quantify. For example, Portes & Sassen-Koob (1987) defined informality as “activities that occur outside of the arena of the normal.” Azari & Smith defined it as “shared expectations outside the official rules of the game.” These definitions, while not as conducive to concrete measurements, take in a broad range of the essence of informality (often even including the essence of the “single survival mechanism” notions).
Kanbur (2015) attempted to synthesize extant definitions of informality and observed that a possible common thread is that informality is that which lies outside of state purview. This brings up a discussion about whether the state can be outside of its own “purview.” While a discussion subtitled “Informality, the state and capitalism” will be taken up later in this essay, the notion of sovereignty and the state is a central concept behind informality that will be discussed briefly at present. If the state is considered to have sovereign immunity, its own actions are automatically law, and therefore it cannot engage in informal practices. This makes any assertion that the state can engage in informal practices invalid. However, Roy (2005, 2009) and Böröcz (2000) have made the point that the state can (and does) engage in informal practices.
Therefore, either Kanbur’s notion is flawed or the notions of Roy and Böröcz. Roy and Böröcz are in the progressive camp and trying to push the definition of informality into new realms. One might be tempted to suggest that Roy and Böröcz have simply pushed the definition of informality beyond its bounds. This all comes down to two possibilities. If the state can commit informal acts, then Roy and Böröcz are justified in saying that the state can engage in informal actions. If it is “immune” from informality, then the implication of Kanbur’s notion is that Roy and Böröcz should not describe the state as engaging in informality because it technically cannot do so (being immune). This essay asserts that the latter notion is unnecessarily limiting for informality scholarship and potentially limits the insights that can be gained from taking a more progressive approach for the following reasons. Roy and Böröcz observe that informality on the part of the state is characterized as flexible, spontaneous, creative, and (in keeping with more progressive definitions) they are outside of the normal rules of the game (Portes & Sassen-Koob 1987, Azari & Smith 2012).
Roy (2009) described the way the state gets creative in its practices when it cannot get things done through “formal” channels. Böröcz observed that in post-socialist nations it is almost impossible to get anything done without “bowing or even succumbing” to informality—even for the state or large firms. Without progressive definitions, scholars like Roy and Böröcz would be limited to describing “Third World poor” street-vendors without business licenses, and would not be able to explore the way informality operates in these other arenas.
The debate between Kanbur’s definition and more progressive definitions cannot be concluded definitively. However, what may be concluded is that the more progressive definitions give more flexibility to the concept of informality. Such flexibility has allowed scholars like Roy and Böröcz to bring out new insights about informality and how it operates. Therefore, this essay argues in favor of such progressive definitions. They may make informality harder to identify or quantify in practice, but they allow researchers to paint a more comprehensive picture about what informality is and how it operates in different contexts.
There have been many competing notions about informality since its inception as an academic term. Many of those remain unresolved. In this way, informality is at a turning point in its tenure as an academic term. This essay now turns to a discussion of the strengths and challenges of the respective factions (“single survival mechanism” and “progressive”). This conversation will inform discussions about how informality should be conceptualized in the literature.
Relationship between the formal and the Informal
One strategy for conceptualizing informality is through its relationship with the formal. The relationship between the formal and the informal is often presented as a question of “dualism” vs. “continuum” (Moser 1978). Throughout its history as an academic term, the “dualism” of the formal and informal has been debated. In 1953 Boeke described the idea that there can be “imported” social systems that clash with an “indigenous” social system (Samal 2008). This has been used as a foundation for describing informality as an imported system that clashes with the “indigenous” (formal) system (Samal 2008). This schema has often been applied to depictions of desperate individuals and groups of people working in the informal economy (Samal 2008).
However, like many perspectives associated with the “single survival mechanism” concept, this can be very limiting. By logical deduction alone, dualism suggests that there is nothing “between” the formal and informal—that they are two different things that never intersect. There is some practical evidence for this. For example, informal jobs do not mesh well with formal payroll systems (Roy 2005). However, the “duality” notion is in conflict with many other observations. For example, Portes, Castells & Benton (1989, 12) noted that the informal and formal employment sectors are linked, and that “individual workers may switch between the two (even) in the same work day.” Markus Keck described the case of food wholesalers in Bangladesh that seem to pick and choose certain aspects of formality and informality. They have very small businesses and most evade taxes in certain ways, yet almost all register their businesses (in McFarlane & Waibel 2012). Such observations show the way the formal and informal are intertwined in practice.
As early as 1978, the debate began about whether informality is a duality with the formal or a continuum. Tokman (1978) described informality as an “autonomously contained sector,” while Moser (1978) attempted to overthrow the formal-informal dualism idea, suggesting that they be seen as a continuum instead. Chatterjee (2004) noted that the formal and informal are “intertwined” and “mutually reinforcing” and Portes & Schauffler (1993, 48) described a dense network of relationships between the two. For example, as Portes & Schauffler (1993, 48) point out the majority of formal businesses rely on goods that were informally produced or distributed, and many upper-class families hire informal laborers as domestic workers. Additionally, many “formal” firms hire informal laborers such as contract workers and informal immigrant workers (Jones, Ram & Edward 2004, Gold 2014). In many studies these phenomena do not show up because they are off the books, but they appear to be nearly ubiquitous (Kanbur 2015). This is a compelling argument in favor of conceptualizations that are more progressive because their definitions allow for dynamic interaction between the formal and informal. However, conceptualizing informality as a dualism with the formal (as many “single survival mechanism” arguments support) restricts the definition to two sectors that do not interact in this dynamic fashion.
As with almost all aspects of informality, the debate between dualism and continuum becomes more complex with deeper analysis. For example, several scholars have taken up a sort of “chicken and egg” debate with informality and formality (Samal 2008, Grzymala-Busse 2010). Is it the informal that gave rise to the formal or the other way around? Does the informal take its cues from the formal or is it the opposite? Many scholars have relied on Boeke’s logic to assert that the formal is the “indigenous” social system and the informal is a sort of conflicting “foreign” system (Samal 2008).
However, several scholars (Böröcz 2000, Chatterjee 2004, Roy 2005, Grsymala-Busse 2010) have engaged in detailed discussions that defy this kind of logic noting that the formal and informal are, in Chatterjee’s (2004) words, “mutually reinforcing”—taking cues from each other. As a result, the formal is not always the template for the informal, but it can be the other way around (Grzymala-Busse 2010). Grzymala-Busse (2010) notes that informality is organized, established and has rules that are enforced—only this is done through unwritten, unspoken methods such as norms and conventions. On the other hand, the formal has some written rules that are “official” but not kept (Grzymala-Busse 2010). Grzymala-Busse’s point is that the informal and formal can each take cues from each other when one finds something that works. For example, perhaps “formal” speed limits would be better enforced through informal means, or informal businesses could be more efficient if they applied established bookkeeping techniques.
Finally, there can be a kind of symbiotic relationship at times between the formal and the informal. Sometimes informal ways are mutually beneficial for the formal system and are often allowed or even encouraged to continue. For example, the informal housing community on the Texas-Mexico border (known as las colonias) ends up bringing in a lot of low-wage laborers that are needed, therefore las colonias are designated as a zone of exception (to borrow Ong’s (2008) notion) and permitted to remain (Larson 2005).
In general, descriptions of informality that portray it as separate from and never interacting with the formal, once again miss a variety of possible additional insights related to informality. For example, the way formal businesses rely on informal processes at some point in their business cycle, or that upper-class families often hire informal domestic workers (Portes & Schauffler 1993). It also overlooks the way some workers switch back and forth between formal and informal jobs within the same work day (Portes, Castells & Benton 1989), that the formal sometimes uses the informal as a template when “formal” ways are not working or are contradictory (Grzymala-Busse 2010, McFarlane & Waibel 2012), or that there is a symbiotic relationship at times between formal and informal institutions (Larson 2005).
Progressive notions about informality allow for these kinds of observations and often see them as dynamic and creative expressions of humanity. However, the “single survival mechanism” approach cannot adequately engage with these types of observations because they are largely limited to portrayals of the desperate living and working in isolation in specific kinds of sectors.
Informality as Socially Pathological vs. Beneficial
Another point of analysis for conceptualizations of informality is whether it is socially pathological or socially beneficial (Portes, Castells & Benton 1989; Gold 2014). Many scholars have advocated for a transition from seeing informality as pathological to seeing the ways it also benefits society (Gold 2014). However, other scholars remain fixed to the idea that it is pathological and incorrigible because of status-reinforcing culture and ineffective habits of those who practice it (Perry 2007, La Porta & Schleiffer 2014).
More progressive notions observe that informality is often the best option in situations that demand greater flexibility (Larson 2005) or are time sensitive (Roy 2005). At times, informal organizations are better at mobilizing than formal organizations (for example, in times of crisis or when there are conflicting “formal” policies) (Roy 2005, Azari & Smith 2012, McFarlane & Waibel 2012); pay higher wages (Light & Bonacich 1990); provide jobs, goods and services that formal firms cannot or will not provide (Tokman 1978; Sassen 1994; Su-Jan, Limin & Kiang 2012); and allow immigrants to a way to preserve their rich cultures (Su-Jan, Limin & Kiang 2012). Bosch, Goni & Maloney (2007) noted that jobs in the informal sector are less sensitive to economic downturns than those in the formal sector. On one survey those who worked in the informal sector reported being as well-off emotionally and financially as those in the formal sector did (Perry 2007). On a macro level, informal activities account for much of the total economic output in many countries. It is estimated to account for up to 40% of total economic activity in developing countries (Staudt 2001), 20% in the United States (La Porta & Schleifer 2014), well above 50% in some parts of the United States (Pisani 2012), and even makes up 70% of all jobs in some countries (Kanbur 2015). In short, informality in its many forms makes a valuable contribution to society in economic and non-economic ways.
Viewing informality as a pathology may cause the researcher to miss these many benefits, because analysis of something with a focus on it being a problem may lead the observer to pass up the benefits of the thing. A good example of this is a study by Su-Jan, Limin & Kiang (2012). These researchers observed informal night-life activities in Singapore and approached them not as pathological, but tried to only see them for what they are. They concluded that “…urban informality is an emblem of what makes a global city more than just cosmopolitan and competitive, but also tolerant, engaging and liveable.” They also found that informality allowed many migrants to continue to embrace their traditional ways. Su-Jan, Limin & Kang (2012) did not limit their approach to informality as only a “single survival mechanism” of the desperate (Portes & Schauffler 1993, 39) and consequently came across many beneficial insights related to informality. For example, the way informality adds some variation to life and allows people to continue to embrace their traditions when they otherwise might not be able to do so. This is in stark contrast with the assertion La Porta & Shleifer (2014) made when observing informal settings—that they are incorrigible “swamps of backwardness” that allow for survival but little else.
However, acknowledging the benefits of informality does not mean that there are not also pathological aspects related to some types of it. For example, Weinstein (2014) described informality in Dharavi, a mega-slum of Mumbai. Dharavi has been a promising means of income for many immigrants that were marginalized because of their ethnicity. Many of them are able to learn business skills in Dharavi that sometimes even lead to starting their own businesses. Dharavi is also a good example of what Appadurai called “globalization from below” (Roy 2009). It is globally interconnected through technology and exports (Weinstein 2014). In other words, it is more than just a “swamp of backwardness” (La Porta & Schleifer 2014). It has provided its residents with income, opportunities and a sense of accomplishment.
However, Weinstein (2014) also observes that the residents of this mega-slum live in precarious conditions amid unsafe physical structures, poor drinking water, disease and refuse. In short, it is useful to concede that acknowledging the benefits of informality should never come at the expense of the recognition that there are certain pathological outcomes associated with informality in some circumstances. Especially for those in the informal economy and informal housing sectors, any benefits they derive are often accompanied with precarious living conditions that should be addressed in academic discourse and policy-making (Weinstein 2014).
Even in light of this acknowledgement, the sometimes-pathological impact of informality should not be conflated with informality itself, which is a much broader concept. Neither should discussions of informality be limited to only depictions of the pathological side of it at the micro or macro level. In short, some manifestations of informality represent dire conditions that should be improved; however, this should not be taken as all there is to learn from informality.
Relationship of Informality and Power
Another aspect by which informality is often conceptualized is its relationship to power. There are two sides to this perspective. The first is that informality is a result of exclusion of the powerless by the powerful (Samal 2008, Wacquant 2008). The other is that informality can also be characterized itself as a manifestation and expression of sovereignty and power (Portes, Castells & Benton 1989, Staudt 2001, Roy 2005).
In the first case, Wacquant (2008) noted that informality is a type of “advanced marginality.” It is a new form of “exclusionary closure translating into expulsion to the margins and crevices of social and physical space” that is almost tangible (Wacquant 2008, 232). In practice, marginalization has many manifestations involving social exclusion at the interpersonal level (Mazumdar 1974), but it can also be a result of broader socioeconomic conditions like strict or inaccessible housing policies, free trade policies that favor the wealthy, cuts in welfare and subsidized housing, and general increases in wealth disparity (Larson 2005, 142). Wacquant (2008) noted that the state often furthers this marginalization through neglect and “punitive constraint”. In short, there are many social forces that sometimes compel people into informal practices and often keep them there.
The discussion of informality and power can be advanced by further engaging Roy’s (2005) notion of sovereignty that has already been discussed in this essay. Specifically, the state and the elites of society have the power to decide what is formal and what is not (Mitchell 2012). In this light, informality seems be less about what is informal and more about who decides what is informal. If the elites and the state are able to influence legislation that validates their own actions (Mitchell 2012), then it is ironic that those who cannot do so would be stigmatized for engaging in informal acts. This is because informality simply ends up meaning not having enough power to get the state to pass legislation that supports one’s actions.
However, for many that are kept outside of this system of power, informality is an “expression of a new form of control characterized by the disenfranchisement of a large sector of the working class” (Portes, Castells & Benton 1989, 27). The informal domain then becomes a new space outside of the mainstream in which one can have some control over one’s destiny. (In Perry’s (2007) words, one can “exit” the mainstream where one has no power). The point is that the “single survival mechanism” faction minimizes power dynamics in society, asserting that those who are in undesirable informal conditions put themselves there and do not get themselves out. However, the more progressive faction regards the broader power dynamics in society, acknowledging that complex issues of power and discrimination can force people into undesirable informal conditions from which they cannot escape.
Informality as “building from scratch”
In describing informality, Chatterjee (2004) mentioned that it often involves doing things “from scratch”. There is a lot to be learned about informality by taking up this assertion because there are a number of reasons that one might choose to exit the established system (Perry 2007) and do something from scratch vs. building on what has already been established in mainstream society. These things include: social isolation (by compulsion or choice), disagreeing with mainstream ways of doing things, desiring to enrich ones abilities (by learning and doing something alone or within an isolated community) or as an expression of personal accomplishment or creativity (e.g. being a part of the “entire process”). Implicitly, “building from scratch” can be the result of a power conflict, but does not have to be. For example, those that are compelled into informal practices may find that “building from scratch” is somewhat satisfying even if they were compelled into doing it that way. However, sometimes there is no underlying power struggle and “building from scratch” is merely an expression of creativity or a matter of preference. For example, some communities may be socially isolated by choice due to cultural or religious reasons.
Admittedly, there are some exceptions in which “building from scratch” may not be considered an informal practice by some. For example, there are many hobbies that are considered to be completely normal (or mainstream) that involve doing something from scratch, such as building a model airplane, building a bike from the bottom up or making a quilt as a hobby instead of buying one. Therefore, the “building from scratch” idea may not work as a standalone conceptualization of informality when juxtaposed with certain definitions like that which is not normal or mainstream (Portes & Sassen-Koob 1987, Azari & Smith 2012). However, Chatterjee (2004) may never have intended it as a standalone definition anyway (as it is not the focal point of the piece). Nevertheless, it is a promising undertaking for future research to allow the “building from scratch” idea to play out as a part of what constitutes informality. Perhaps the definition of informality may even be expanded to encompass “building from scratch” hobbies in some ways.
Interplay between Informality, the State and Capitalism
Finally, depictions of the interplay between informality, the state and capitalism occur frequently in the attempt to conceptualize informality as an academic concept. The interplay between informality, the state and capitalism is really an extension of the broader conceptualization of informality that have been discussed in this essay, as the state and capitalism are respectively prominent components in many definitions of informality. However, informality, the state and capitalism are intertwined in a paradoxical way that merits more in-depth discussion.
For example, capitalism often refers to the free market, which implies minimal state intervention. However, in practice, the state plays an active role in capitalism (Roy & AlSayaad 2004). Therefore, it should be noted that “capitalism” has multiple meanings. For example, in the Marxist sense, capitalism is a hegemonic force controlled by society’s elites and is used to control non-elites. However, capitalism also refers to a political and economic system that encourages the free market and profit maximization (Portes & Schauffler 1993). In the sense of the latter, it is widely regarded that one of the state’s roles is to smooth out the “gaps” in capitalism such as unsafe working conditions and inequality (Roy & AlSayaad 2004).
Ironically, in the purest sense, the informal economy is more of a “free market” economy than “mainstream” capitalism, because so-called “mainstream” capitalism involves a degree of state intervention in the market in an attempt to extend certain social protections. Therefore, the first irony of capitalism and informality is that it is more “capitalist” in some senses than “mainstream” capitalism is. Even if “pure” capitalism does not completely exist in practice, informality may be much closer to it than that which is often called “capitalism”.
Additionally, those forced into the margins in society (Wacquant 2008) often work in informal jobs in a way that some scholars have called an “alternative to capitalism” (Portes & Schauffler 1993, De Soto 2003, Chatterjee 2004, McFarlane & Waibel 2012), but in this new light being discussed, informality as an “alternative” to capitalism is more capitalist than that which is called capitalism. So is informality a type of capitalism, or an alternative to it?
As with many details of informality, the case is that it is both: Informality is both a form of capitalism (Hart 1973, 69; Moser 1978; Portes & Sassen-Koob 1987; Sassen 1994; Samal 2008) and an alternative to it (Portes & Shauffler 1993, 39; De Soto 2003; Chatterjee 2004; McFarlane & Waibel 2012). It is the former because it is business activity that is unrestricted by the state; however, it is the latter in the sense that it is a kind of de facto deregulation (as De Soto (2003) described it). This is because the main purpose of informal business activity is usually not profit maximization, but taking care of friends and family as a sort of stand-in for welfare the state is unable or unwilling to provide (Geyer, Geyer & Du Plessis 2012, McFarlane & Waibel 2012).
Furthermore, informality has not “behaved” as predicted in a “capitalist” (in the Marxist sense) system. Marx predicted that petty-capitalism would be absorbed into mainstream capitalism (Portes & Sassen-Koob 1987). Others incorrectly guessed that informality is a phenomenon of underdeveloped nations that would disappear as soon as a country reaches a “developed” state, but this has not been the case either (Portes & Sassen-Koob 1987). In a sweeping act of irony, informality seems to thrive in all different kinds of socio-economic contexts in a way that defies prediction. This is a reflection of the way informality is an expression of human (not only personal) ingenuity, and of its ability to adapt and be flexible in a variety of socio-economic conditions. As Gold (2014) observed:
“Research demonstrates that informal economic activities are well suited to contemporary economic realities. For example, informal firms are efficient, keep costs down, permit innovation and allow owners to avoid restrictive regulations associated with wage levels, hours, environmental protection, occupational safety, benefits, taxes, zoning and the like.”
In short, its flexibility allows informality to fill in gaps that the mainstream leaves open.
In a way, “mainstream” capitalism and informality run parallel. Both fill free market and social welfare goals—although in different ways. “Mainstream” capitalism is the wealth-and-prosperity seeking arm of the mainstream socio-political system and is backed by state-sponsored safety nets and protections. Informality on the other hand provides the economic benefits the mainstream cannot or will not and the welfare the state cannot or will not. In a sense, it fills the gaps left open by the mainstream capitalism and the state (McFarlane & Waibel 2012).
The position of the “single survival mechanism” faction is once again reflected in a quote from La Porta & Schleifer (2014): “Bad government is not the main competitive problem of informal firms: their main problem is that they add so little value.” La Porta & Schleifer seem to fail to see the value that informality can add where the state fails. Instead, this quote portrays a sector that is waiting for the state’s help, even though that too (they seem to suggest) would be futile. The “single survival mechanism” faction seems to see informality as a only a means of survival for the desperate, rather than as a helpful complement to “mainstream” capitalism and state welfare (Portes & Shauffler 1993, 39; De Soto 2003; Chatterjee 2004; McFarlane & Waibel 2012).
From a policy perspective, “single survival mechanism” advocates may argue that informality should be eliminated because it offers little and is pathological (as described earlier in this essay). However, seeing what it can add to society, more progressive thinkers may argue for a number of other possible solutions that do not involve eradication. These options include: regularization, allowance, flexible policy implementation, and embracing and encouraging informality. Regularization involves giving “gradual and flexible standards of compliance, with the goal of progressive improvement” (Larson 2005). Allowance refers to the creation of certain state-sanctioned “zones of exception” (to borrow a term from Ong (2008)) in which informality is permitted to remain. This is often the case in situations where the state may not find it effective to shut down certain informal operations that are mutually beneficial (Perry 2007). Flexible policy implementation is an approach in which “…policies and the implementation thereof are treated as situational, flexible and able to be bent” (Chatterjee 2004). Finally, there is the option to embrace or even encourage informality, acknowledging it as a valuable planning strategy (Roy 2009) and as a solution to imperfections in the market or state that fills a vital need (De Soto 2003, Gold 2014).
Therefore, there are a number of paradoxes present in the relationship between the state, mainstream capitalism and informality that are reminiscent of Chatterjee’s (2004) “mutually reinforcing tangle” notion. In other words, mainstream capitalism and informality in many ways are complementary and the presence of one does not seem to diminish the other. This observation is also in keeping with the more progressive faction of informality literature that sees informality not as a passing aberration, but as growing with the mainstream and filling a complementary need.
Conclusion: Towards a More Progressive Conceptualization of Informality
This essay has described the way informality can be seen a highly diverse phenomenon. It is both a sector and a series of actions. It is found among the poor and desperate but also among wealthy elites and even the government. Informality is a survival mechanism at times, but can also be the result of wanting to do things a different way or to do something “from scratch” rather than interfacing with mainstream society. It can have certain pathological outcomes, as evidenced by precarious living conditions in slums, but can also at times be the best and most efficient solution in certain circumstances. Informality is open, creative, efficient (though not in a formal bureaucratic way) and flexible in many circumstances in which formality is closed, inhuman and rigid (when urgent action is needed or there are conflicting formal edicts for example).
Informality should be embraced for all that it is and the progressive approach described in this paper represents a faction of research that encourages that. While this may be less conducive to identifying and quantifying informality in practice, it does justice to all that informality is rather than just reducing it to only its pathological aspects. The world today is very dynamic and informality must be seen as an answer to the growing need for flexibility. As informality takes new faces and becomes increasingly dynamic and varied in response to globalism and other social forces, it is vital that the way it is conceptualized go along on that journey instead of remaining tied down to antiquated notions of informality as only a housing or work sector, as only that which is outside of state purview or only a single survival mechanism. Taking a progressive approach to informality research reveals new faces of informality that can be applied in various contexts. Informality can be a way to make life more interesting, a means of self-expression, and a manifestation of ingenuity as well as a sector or activities that are outside of state purview.
Additionally, the “single survival mechanism” faction may be likely to recommend elimination of informality as the policy position of the state. This may be due to the belief that informal activities are pathological, incorrigible and that those participating therein are steeped a culture of informality and poverty (Perry 2007, La Porta & Schleifer 2014). However, those of the progressive faction consider the many benefits of informality and are likely to recommend strategies of progressive improvement, flexibility, allowance or even policies that embrace informality in order to realize those benefits.
Informality may remain a multifaceted and somewhat ambiguous concept for years to come because it is a multifaceted and somewhat ambiguous phenomenon. However, there is much to be learned from studies of informality when progressive conceptualizations are employed. In an increasingly globalized and dynamic world, informality will continue to have new manifestations, and those anchored in the “single survival mechanism” mindset will likely be left behind.
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Jeffrey R. Oliver 