Informal economies are not homogenous but ubiquitous, non-linear and transnational markets. Although not formally indexed as such, informal market activities form two thirds of all economic activities. Informal workers outnumber their formal counter-parts, since a percentage of formal workers also engage in informal labor. Informal economies circulate in overlapping gray markets, as not all informal occupations are illegal or belong to non-market labor and organizations. This includes formal employment in informal enterprises and unregistered or temporary employment in formal organizations. In an expansive definition; informality encompasses domestic, reproductive and care labor; unemployment and underemployment; smuggling and black markets. Expanding to national, international and transnational levels, informal economies operate on various scales, hence the use of the plural ‘s’. Informality is more prominent in the developing states/the Global South and predominately effects female/non-cis male workers, the labor of whom has been invisible to the canonical economic viewpoints.
For increasing numbers of urban and rural workers, informal work is the only possible mode of economic participation, either due to their labor not being considered as formal work (per the fictitious tyranny of wage labor and rigid definitions of value) or the unavailability of formalized opportunities. At the bottom of this hierarchy are those who care for the economy and ecology but are left unseen by the productivist value machines.
Added to this, informal workers are exposed to further precarity and are most vulnerable to sociopolitical and economic shocks and turmoil. The absence of support structures, universal social rights and future stability, compels workers to seek informal opportunities and living conditions to tackle collapsing markets and the state’s withdrawal from legal protections. This has been overwhelmingly the case during the Covid-19 pandemic. For instance in Iran which already hosts a high number of informal workers, a recent census showed that 31 percent of Tehran’s population live in informal residences on the margins of the city as housing prices have increased up to 1200-fold. Other research shows that two thirds of the income of Iranians is sourced through non-occupational activities.
The informal economy is generally perceived as underdeveloped and marginal, an anomaly to be overcome by introducing regulations. Underground informal exchanges, undetected and untraceable, are taken as threats to financial markets, causing friction, evading taxation and further extraction. Even though informality and informal employment could eventually cost less for the states and the free market, it has been framed as a burden derailing liberal markets. Yet top-down attempts to formalize these markets, especially in developing countries, have reinforced bureaucratization and privatization of asset ownership. First and foremost affecting women, subalterns, indigenous people, local and rural communities.
The exploitative and extractive structures of neoliberalism, formalization and development are carried out through the technocratic policies laid down by international or supranational institutions. This is most apparent in the reports, suggestions and consultations of World Bank and International Monetary Fund programming ‘inevitable transitions’ for third world economies. These preemptive universal schemes have mounted immediate mass protests, police violence and slaughters in different parts of the world. Since 2016, rising petrol prices and waiving subsidies in Iran, have been met with nation-wide protests. Policies imposed by the IMF has been justified as an a priori requisite for Iran’s global economic integration and transition to a free market economy. This was supposed to bring economic prosperity to the country but did not account for hostile international policies, devastating sanctions and the abandonment of the nuclear deal. Instead, what happened on the ground triggered mass protests, leaving people in an even more precarious state and eventually a target for extreme police violence. Unsurprisingly, the IMF had even foreseen internal unrest as a consequence of this transition, and subsequent state crack-down, implying that this is all natural and an inevitable part of the process.
There are different levels of violence at play here, the exploitative building block of the empire, the regional power plays and the nation-state that also becomes complicit by appropriating the violence of the empire and its appropriation of colonialism in eliminating the right to self-determination of its people. In the long run, economic global integration—as imposed by dominant economic institutions—necessitates further exclusion and the creation of outcasts in the economic sphere and society, by keeping the poor and the middle class in volatile (permanently temporal) conditions and confining them to increased informality.
Informal economies are not anti-modern anomalies
Legacies and failures of applied colonialism, modernization, neo-liberalization, privatization and bureaucratization have forced more people into undertaking informal labor. Thus, informality is not separable from formal economies. Formally regulated markets and sleek financial abstractions are tethered to the material circulation of informal exchanges and their so-called messiness. This tether can be seen as corporations in the Global North outsource industrial production to the Global South. And in the allegory of Adam Smith not recognizing his mother’s sustained labor, which allowed him to theorize modern economics. Dependency theory
lays out the faux dichotomy and opposition between developed and developing economies, showing that the two are not isolated islands, but are deeply interconnected by way of exploitation and asymmetrical participation. A decolonial rereading of the world’s economic order reveals the dependency of formal markets on the existence of informal economies.
Conventionally, informal markets have been taken as inherently anti-modern. Yet informal economies are byproducts of projected modern economics. Informality, labeled and diagnosed as a problem, reveals the failures of universal modernization and the reproduction of dichotomies between the developing and the developed. It demarcates the messy and dirty markets against the formal, modern and observable sectors of the economy, ignoring the diverse regions and circumstances that modern economics was applied to. This is to the extent that apart from the financial aspect of informal businesses, their aesthetics while occupying the city or workplaces is also considered an architectural difficulty to urban designers and city planners. Contrary to how modernization views informal markets, which it aims to formalize or eradicate; these markets are societal constructs that operate in circulation and reciprocity with formal markets. The indelible role of informal/black markets in the supply chain of products and services bears witness to the enmeshment of these markets in the economic sphere. Thus, as informal transactions flow into the formal markets and vice versa, using the same currency and exchange rates, we can discard these persisting dichotomies and think of them as interrelated, morphing and fluid structures.
Still, encouraging the formalization of employment would grant better conditions to informal workers. Attempts by formal enterprises that can still hire informal employment have not always been successful in providing economic and social safety nets to these workers. Gayatri Gosh points out the difference between formalizing employment and formalizing enterprises; recognizing the first as what needs to be fought for, while the second only channels the revenue of informal labor back into the formal market without benefitting the laborers.
An emerging challenge to formalization is similar to that of Universal Basic Income. How do we understand and push for UBI or the formalization of employment in decolonial terms and especially in the Global South? Does this depend on having a functioning state with infrastructures that could equally distribute profit or could this effort surpass the state altogether? Is it even possible to formalize the economy—as we have it today, arranged by years of imperialism and capitalism—in its entirety? If it is, will formalization and subsequently the formal economy look and mean the same as it does today? And if not, how can the informal workers access social safety nets and legal protection? Demands for universal social security need to be untethered from the effort to formalize economies, otherwise, prescribing formalization will in practice enable neoliberal entrepreneurial schemes of ‘paddling your own canoe’ with a broken paddle and canoe. In the long term, this will spoil the leverage that informal workers have to resist unstable and ambiguous working conditions, or thwart the workers’ ability to extract surplus revenue by minimizing their margins of profits through legalized bureaucratic loopholes.
Precisely because of the vastness of informal activities and economies, there is a social power—not a lack of power—in informality. Informality, despite its pervasiveness, has been associated with locality, yet it is hard to imagine how a formal economy would really function without informal markets in place. This is more apparent when thinking about the rising demand for labor of reproduction and care, placing informal economies in a central position that can not be overlooked. Such understanding vouches for the ways informality and diversity can appropriate collective power and agency in determining future economies and realizing the dispersed and potent networks they embody. This implies that informality alters the way economics has been and still is figured, organized and imposed through formal—yet in practice parochial and marginal—channels, and it shows that the local scale governance has always been embedded in our global economies. The unpredictability of informal markets, their reluctance to formalization due to lack of trust in the state, and their increased adaptability to changing conditions in their locale, give them leverage within the totality of economic ecology. Instead of the invisible and the tiny hands of the market, economics rests on the widespread cooperative hands of the multitude making up a major trans-local power, localized in their operations.