The informal economy

99% of working people in Tanzania are employed in the 'informal economy'. You might think that an economy which engages 99% of a country's workers should simply be called 'the economy', but the term 'informal' is used by development artists to distinguish the type of economy you find in Tanzania from the type of economy you find in, say, the UK. Undeveloped economies are 'informal' because they operate outside any formal legal framework, whereas in an advanced economy like the UK you can't really do anything, can you, without first consulting your expensive lawyers and having them brief you on a whole bunch of government rules and regulations.

​If you assume that rules and regulations set up by the institutions of the state - parliaments, courts, police, prisons - are the hallmark of a well-functioning economy, then it would seem self-evident that this is the type of 'rule of law' that is needed in the developing world, to rescue all those poor people from their informal economy and bring them into more sophisticated and formalized production systems. A more formal economy offers safety and security for citizens, with a welfare state on the side to support those who opt out of work altogether.

If on the other hand you consider this type of 'rule of law' to be a blight on the spontaneous order of free market exchange, then the growth of the 'informal' economy would be welcomed as a thing of beauty to be nurtured and encouraged and celebrated.

But the informal economy is feared because it offers no formal social security of any kind - it is each man for himself and devil take the hindmost. This means that everyone (well, 99% in Tanzania) is forced to take charge of their own affairs because the government has no money to organize their life on their behalf and provide a welfare state to distribute free money so that nobody has to work unless they want to. In poor countries, everyone is forced to be an entrepreneur and pull themselves up by their own bootstraps whether they fancy it or not. Root, hog, or die.

This is why people in rich countries feel sorry for people in poor countries. Imagine living in a country that is so poor, that you have to wake up every day and go out into a chaotic market to hassle for another dollar, propelled by nothing except the sweat of your own brow, and without any safety net. It's almost like being a raw unreconstructed human being, like you see in Ayn Rand novels (except without the grey eyes and chiselled features).

​How unsophisticated is that? Nobody would choose to live that way, would they, if they went behind the Rawlsian veil of ignorance and contemplated these matters correctly. Everyone would prefer to live in a rich country where the nice employer will give them a secure job and look after them with all their employment rights so that life can be easy and risk-free. 

Most poor people would greatly prefer a stable job, where the risks of ups and downs in prices, politics and markets are borne by a large, diversified employer instead of by them and their families. These people are not 'entrepreneurs'. They are people trapped in an economy where they have to do whatever they can - kukiya-kiya* - in order to scrape together the few dollars a day on which they subsist.

Gillian Hadfield, Rules for a Flat World, p. 288.

*Ed: kukiya-kiya is an African word meaning: wake up every morning, get out of bed, go out into the market place, work hard all day, and try to earn your own living, as human beings have been doing since the dawn of time: hustling for your next dollar.

Apparently these poor poor people are at the mercy of market forces pummelling them from every side with no legal system to protect them from reality.​ They live in an economy where they are forced to 'do whatever you have to do to get by'. Aw, diddums. 

They are the last link in the value chain, with no bargaining power and no choice but to take what they can get for their efforts - any price, any risk, any humiliation. If they don't do it, there are millions of others, some half a world away, who will.

Rules for a flat world, 289.
​

That's a harsh life. Markets are a hard taskmaster, especially if you had expected life to be more like heaven, with free milk and honey for you as long as you're good. Life, is hard, for sure, and the successful conduct of the human experience does take a bit of effort. Luckily, history has shown that this kind of effort is always rewarded in the long run. Free markets always tend towards affluence over time. Sure, you may be the last link in the value chain today, and that sucks, but over time you improve your material conditions if you are willing to stay the course and not listen to poisonous words from Oxfam about how Somebody needs to Help You by sending you free money.

The truth is, that anyone can be an entrepreneur, whether rich or poor, sophisticated or unsophisticated. Being an entrepreneur simply means that you are willing to make your best attempt to improve your own life conditions and believe in a better day tomorrow, instead of believing that the nice government or the nice employer will fix everything for you. You don't have to be Bill Gates to live a happy and successful life.

Also, don't listen to people who feel sorry for you because of how poor you are. Being poor is nothing to be ashamed of: on the contrary, if you are poor you are blessed among all people because at least you can rest easy in your hovel at night, free from the scourge of liberal guilt that torments development artists. They lie awake at night, tossing and turning, worrying about all the money that billionaires have stashed away in their tax havens, and wondering how they can get their hands on it for distribution to 'the poor'. This way, they hope to feel less guilty about their own relative wealth. You, however, can take pride in knowing that you hassled for your own dollar that day. You may be poor, but at least you're not a parasite, shamelessly trying to shake down other people.