Guerrilla economics and the wild economy

Crime, Law and Social Change 15: 1-18, 1991. t~) 1991 Kluwer Academic Publishers. Printed in the Netherlands.

Review essay

Guerril la economics and the wild economy

STUART HENRY Eastern Michigan University, Department of Sociology, Ypsilanti, MI 48197, U.S.A.

Abstract. This paper assesses the latest contributions, by Harding and Jenkins and by Portes, Castells and Benton, to the literature on the informal or hidden economy. It places these works in the context of the now significant body of theoretical and empirical research that has developed over the past 17 years. It traces the emergence of the concept from its roots in economic anthropology, developmental studies, criminology, poverty studies, industrial and urban sociology, and Soviet studies, to its current demand for an interdisciplinary economics. It shows how, what was originally a fragmented polemical critique of the classical model of economic man, dismissed by many as peripheral, even trivial, has emerged as a new approach to the analysis of economic life. This guerrilla interdisciplinary irreverence is forcing a new dialectical vision in which economic life is revealed to be anything but the predictable, rational activity of market forces. Instead we see a wild economy, of formal and informal, market and non-market, as interrelated dimensions of the same whole, a whole permeated by social networks and clusters of workers. Failure to take this development seriously is to be blind to the realities of modern economic life and itself constitutive of the myth that is the formal economy.

Philip Harding and Richard Jenkins, The Myth of the Hidden Economy: Toward a New Understanding of Informal Economic Activity. (Milton Keynes: Open University Press, 1989), 202 pages, $14.95.

Alejandro Portes, Manuel Castells and Lauren A. Benton (eds.), The In- formal Economy: Studies in Advanced and less Developed Countries. (Balti- more: The Johns Hopkins University Press, 1989), 327 pages, $16.95.

Until the 1970s it was assumed that economic exchange in industrial market economies comprised the reciprocal transfer of property and services between private individuals and corporations, through the medium of money. It was clear that the situation was different in socialist command economies, where the state owned and managed most property transactions, where bureaucrats made investment and loan decisions in keeping with the Five-Year Plan, and where vast government subsidies sustained full employment in massively inefficient production units. Here administration prevailed over principles of exchange. Excluded from either image were non-monetary exchanges within or between families, friends and communities, and monetary exchanges that were unaccounted for by the state. The former were seen as little more than

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the domestic vestiges of pre-industrial society, at best a communal survival mechanism for the poor, while the latter were nothing less than parasites in the bowls of industrial modernism.

Since 1972 these images have been exposed as seriously flawed. They fail to recognize the integral interrelationship in all economies between informal and formal exchange, between visible and observed transactions, between official- ly sanctioned and approved principles and unofficial ways of doing things. The debunking did not have a grand entrance. Nor did it have a unified front. Rather it was a creeping assault from a diversity of disciplinary cells, whose combatants were unaware that they were contributing to what was later to be known as studies of informal, hidden or underground economies.

One strand of the assault emerged from studies of the Third World under the concept "informal income opportunities"? These comprised "modes of earn- ing a livelihood which lie outside the "formal" wage economy, "incomes earned by individuals, instead of, or additional to, the wages and salaries paid by private firms, public corporations or government departments".2 For some, this "informal sector" provided essential goods and services for survival of the waged work force and was described as a traditional mode of "petty commodity production" existing in conjunction with, but operating independently of, capitalism. It was claimed to have no orientation to accumulation and repre- sented a more egalitarian organization of economic activity? Others, however, claimed that the Third World informal sector is relied upon as a means of labor absorption for the wider capitalist economy, serving to disguise unemployment and to stimulate new employment. 4 It was seen as contributing to economic growth by providing lost cost consumer goods, indigenous capital goods and a more labor intensive form of industrialization. But critical developmental theorists, argue that workers in the informal economy of Third World capitalist countries are no more than disguised wage laborers, since their production is subject to control by industrial capital which sets the volume, type and quality of the goods that are produced, and fixes the prices below that of their true value. 5 The informal economy of the Third World is thus the means whereby multinational capitalist corporations are able to maintain a marginal work force available for employment at the lowest possible cost. 4 It provides a self-help network of support, a safety net for the poor that sustains them, at no extra cost, until formal economy jobs are available. It thereby serves the social reproduction of the surplus labor force. 7

In the developed industrial West, some anthropologists began applying non-industrial society concepts such as "multi-centric economies" to the prevailing free market system. Ever since Adam Smith, the fundamental model in societies having a predominantly market economy has been that the allocation of resources is determined through the market process of atomistic competition to maximize self-interests. The usefulness and reliability of such a model

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depended on the extent to which the bulk of economic transactions were governed by the "calculus of exchange value" rather than by the "etiquette of valued exchange". 8 In 1972 Davis 9 alerted our attention to the possibility that this assumption may not hold, and he highlighted that modern industrial capitalist countries had not one, but many economies, and that each may be governed by different principles of exchange. He claimed that in addition to a "market economy" governed by laws of commercial trading, employment and labor relations, and a "redistributive economy" governed by laws of taxation, welfare and state expenditure, capitalist societies also have a "domestic economy" governed by customs and expectations between family members, which includes all productive activities which are not mediated by the market, such as making clothes and furniture, mending and food processing. In addition there is a "gift economy" which is governed by the rules of reciprocity and includes all those activities and transactions which we call giving a present. He says that rather than talking of one form of exchange, the market economy, predom- inating, we should be examining the relationship between the different sub- economies.

Elsewhere, it was just such an interrelationship that was fascinating sociological students of poverty. The early work of Ferman revealed that informal economic exchange is rooted in the very heart of the capitalist economic system, the logic of which implies that certain of its members are excluded. Ferman and Ferman 1~ argued that capitalism generates its own historically specific types of informal or irregular economies and that the very origins of irregular economies, "lie in structural conditions and processes in the larger society, and cannot be divorced from them".11 They pointed out that modern industrial society encourages such economies by creating structural inequal- ities based on class, ethnic and cultural segregation. In addition economic specialization, protectionist trade unions and professional associations coa- lesce so that some goods and services are not widely available or are too expensive for those with low or non-existent incomes. The direct result is that a market is created outside of the formal regular economy for cheap goods and services. Importantly, this market, and the exchange on which it is based, was found to be as much social as instrumental, which was demonstrated by various ethnographies. 12

Criminologists too, were coming to grips with their age-old conundrum of the hidden crime figures, one dimension of which was the illicit trade in pilfered and stolen goods , 13 while another was the unofficial rewards of work derived from varieties of occupational crime TM and more recently the escalation of the illicit drug trade. ~5 Instead of being isolated and peripheral, these activities were now being seen as part of a hidden economy of illicit trade.

In the early 1980s it became apparent that the original assumptions sustain- ing the hegemony of market exchange principles was being seriously chal-

lenged. Anthropologists, developmental theorists, sociologists, and criminologists were claiming that a proportion of economic activity was exchange based upon different principles, such as positive reciprocity, altruism, social obligation, and commitment to the commons of community. Moreover, econ- omists were also beginning to take account of the phenomenon.

Beyond the early estimates 16 this integral non-market exchange, loosely referred to as the informal, irregular, hidden or underground economy was shown to comprise up to twenty percent of a nations' gross national product.17 An early US survey established that sixty percent of the services households reported using were produced within the household by friends, relatives, neighbors or co-workers without monetary payment, and further, that of all the services used, 25% of those for which payment was made were purchased through the irregular economy of paid, off-the-books, work. TM Following this initial work, a national probability survey of 2100 homes in the United States, "found that about $ 42 billion in informal economic activity took place in 1981 and that four out of every five American families purchased something from an informal vendor". 19 The most recent U.S. national household survey of 3617 adults over 25 years of age conducted in 1986, 2o found that while paid productive work in regular jobs occupies the greatest number of hours of productive time in any one year, significant amounts of time are involved in informal economic activity which includes irregular work for pay, unpaid work at home and help provided to others. The authors found that 15.3% engage in paid irregular economic activity, while 81.3% provide help of various kinds to friends and relatives; 86.9% engage in some household maintenance or im- provement; and 95.5% engage in housework. They demonstrate that by far the greater amount of American's productive time is spent in work outside of employment.

However large the informal economy was claimed to be, there were those who believed that it would and should go higher. Futurist speculation by urban sociologists and observers of technological change suggested contrasting de- velopments. The split was between those who heralded the informal economy as a constructive supplement to the formal or regular economy, that serves to ease its transition to a new stage of economic development, and critics who saw it restoring individual autonomy and social rewards, sign posting a pathway to revolution in an era of economic rationalism. Gershuny and Pahl,21 for example, argued that informal economic activities are an early indication of future development and of the progress of post-industrial society. Gershuny 22 was interested in the way technological change stimulates social innovation. He rejected the arguments that post-industrial society was becoming a service society, and claimed instead, that the trend is away from expenditure on formal services and towards expenditure on goods. 23 He predicted that the growth of labor productivity resulting from a declining manufacturing sector,

and spurred on by the micro-technological revolution, would continue to reduce employment opportunities in the formal manufacturing sector. Fiscal and legitimacy crises would halt the traditional Keynesian public spending solution to unemployment, and would encourage an ideological shift from public provision to privatization. Rather than continuing the expansion of the service sector, argues Gershuny, we are more likely to see an expansion of the "self-service" economy. Unable to afford formal economy services because of higher unemployment and lower income in the formal economy, people will turn to the household, the community and the irregular economy to provide goods for themselves that they would otherwise be unable to afford. More- over, rather than preventing this development, capitalism will encourage it in certain areas, for the same reasons that it is encouraged in the Third World. As Gershuny and Pahl conclude, "our present stage of economic development appears to be one in which jobs are displaced not only by automation within the formal economy, but also by export to an informal economy". 24

Others of both liberal and radical persuasion also proclaimed the functional utility of informal work. Shankland saw the formal and informal economies existing in a symbiotic relationship of mutual support and argued that the benefits derived from encouraging the informal economy were enormous and a particularly useful way of getting new business started on a "trial basis". 2s Although, Heinze and Olk argued against stabilizing strategies for capitalism based on the colonization of people's desire for participatory control, their own preference for a "complementary network" involving a deliberate policy of state encouragement and support for the informal sector, fits precisely into this framework of cooptation. 26 Also ambivalent about the untamed role of informal work, are Illich and Gorz who saw the micro-technological revolution as enabling liberation from socially determined heteronomous work, and facilitative of autonomous informal convivial work, only in circumstances where the state can be captured by a new form of associational party of citizens led by "militants who are willing and able to understand social conflicts in legal and organizational terms". 27

Indeed, recent commentary has cast serious doubts on the earlier views of the revolutionary potential of informal work arguing that if anything, the informal and irregular economies are becoming a new arena of stratification.28 Although, as Gorz says, the high capital new technology undermines traditional class loyalties, it replaces them with new divisions. Pahl, for example, examined the changing nature of work, employment and unemployment in England, particularly as this affected the household and the domestic division of labor. 29 His research challenged the prevailing view of working class solidar- ity finding instead, that irregular jobs are typically done by those already highly active in the formal market economy. This is because much informal work requires particular skills and finances which are possessed by the very

same people who already have occupations in the formal economy. As a result those who are already in formal work are the ones found to be most able to benefit from the informal economy, and who will, if given longer holidays or shorter hours, take extra overtime, double jobs and so on. 3° Moreover, while Pahl reveals that there is a polarization in forms of informal work between men and women and between "work-rich households with multiple earners engag- ing in all forms of work and work-poor households typically headed by elderly people, single parents, or unemployed people," he argues that those with formal jobs and resources are also likely to be most active in the informal economy. 31 This needs some qualification in the light of the more recent substantial findings of Herzog et al., for example. 32

Consistent with Pahl, Herzog et al. found that "hours spent in paid irregular work as well as participation, peak in the younger age groups and trail off in older age," but the finding for the sexual division of labor is more complex. While men are more than twice as likely than women to be doing paid irregular work, "among women who actually engage in irregular paid work the number of hours they spend in such activities are strikingly similar to men's hours" 33

The increasing transformation of market economies into mixed economies involving state intervention and a considerable redistributive economy, has been seen as an added stimulus for the emergence of informal economic exchange. It was argued, for example, that the development of centralized government and state taxation policy has played a significant role in generating informal economic activity. 34 Gutmann, an advocate of laissez faire market economy capitalism, claimed that tax laws, designed to define what activity is liable for government revenue collection, also highlight that which is not liable, creating an arena of significant attraction. He argued that the redistributive economy and the welfare state, growing employment protection legislation and sex and racial equality legislation, are actually creating the grounds for capitalist employers to go outside the system, employ workers off-the- books and thereby facilitate the irregular economy2 5

The view that informal economic exchange is facilitated by centralized state intervention, also emerged from studies of the second or parallel economies of socialist planned economies.36 In the Soviet Union, for example, underground economic activity is crucial in allowing things to get done b3~ short cuts and getting round red tape, and in the functionalist vision informal economies are claimed to serve the spirit of state socialism. Research has shown that this "oiling the wheels" function is manifest by "tolkachi" who are "fixers" or "pushers", employed by Soviet factories to bypass bureaucratic snarl ups and to overcome shortages through an informal network of contacts. 37

It is to this plethora of research and commentary that these two very different works make their contribution. What they both point out, in different ways, is that if we are to adequately comprehend and make policy decisions, it

is crucial to have an analytic model capable of matching economic reality. The Harding and Jenkins book is a critical derivative commentary on the current state of informal economy literature in advanced capitalist countries, princi- pally Britain and the US; the Portes, Castells and Benton book is an edited collection of commissioned works from a linked series of conferences on informal economies in both advanced capitalist and less developed countries.

The fundamental thesis of Harding and Jenkins is that, rather than leading to a clarification of analysis, the informal economy concept has impeded development of an adequate model. They are particularly bothered by the idea that a distinct informal, or hidden economy exists. Just because the informal economy and the market economy have been conceived as being based upon different principles of exchange, should not lead us to the view that these economies are, in fact, separate or discrete, or even that they are economies. Nor should it suggest that each area is exclusive of the principles described of the other. This is what they mean by The Myth of the Hidden Economy; it is neither separate nor uniquely different from the formal economy. Nor, indeed, is a different mode of analysis needed to understand the activities mistakenly divided into different economies, sub-economies or spheres. In- stead, Harding and Jenkins forcefully point out, the formal and informal economies are analytically at different ends of a continuum but are no more than ideal types, caricatures born of the researchers who constructed them. Most social interaction has a degree of both formal and informal, depending upon the context and the legal administrative framework in which each is set. They argue that "even the most formal contexts are comprehensively pene- trated by, and implicated in, informal social relationships" (p. 175). But nor does this perspective deny their degree of separation for:

Each has particular qualities and characteristics, defined within an opposi- tional relationship to the other, but each has also, through a process of historical development, come to signify a distinct and peculiar way of doing things: 'going by the book' as opposed to 'give and t ake ' . . . , the informal is both an absence and a presence within the formal, and vice versa. The relationship between them is a contradictory dialectic of dependence and autonomy (p. 175).

These commentators also question the usefulness of the rigid distinction between the economic and non-economic, suggesting that an overarching concept is necessary:

Economic activity is socially organized; social interaction proceeds within a framework of resource distribution and consumption.., the dichotomiza- tion of social experience into distinct domains of the economic and the

non-economic, is not to be taken for granted . . , the allocation of specific activities varies across time and situation. Nor is the distinction uniformly significant for all actors (pp. 175-76).

The implications of their review on the nature of economic exchange demands that we develop a transcending approach that neither reduces the one to the other, nor gives priority to the one over the other. Rather, it requires an interdisciplinary approach sensitive to the material, cultural, moral and social interactive contexts of exchange, one that recognizes the genuine contribution of each to the structuring of exchange relationships.

Unfortunately, while their central thesis is well taken, although not especially original, 38 the critique whereby they arrive at it is a somewhat mistaken account of the idea's development. The separatist model did not merely emerge from a homology of theoretical approaches and common concerns, as Harding and Jenkins argue, but was deliberately chosen as part of a polemic to draw attention to an unconsidered aspect of socio-economic life, and one that as Portes, Castells and Benton argue, was previously considered "interesting, but exotic, phenomena of no real economic or social significance." (p. 1) That these two books, along with over twenty others on the topic, have been published demonstrates that the strategy proved very effective!

At the outset, the authors get themselves into deep methodological hypocri- sy by criticizing empirical researchers for misunderstanding their subjects and claiming that they, in contrast, will " take seriously actors' perceptions and accounts" (p. 3). The fact that Harding and Jenkins' do not have any actors' perceptions, let alone empirical data, to take seriously, and are relying on us accepting their re-reading of our research, does not seem to temper their methodological arrogance. Nor does the fact that, as former anthropologists, they ought to know better than interpret, or re-interpret, second-hand data out of context. Interesting, too, is the conceptual ambiguity that while they see informal and formal economic activity as ideal types on a continuum requiring a single framework of interpretation, they see capitalist and socialist economies as "qualitatively different systems" that "require qualitatively different frameworks if we are to understand their workings and the relationship between formality and informality in each context" (p. 4). However, previous work of Portes and his colleagues shows that under state socialism the informal economy has different characteristics than its capitalist market economy coun- terpart in that it, "provides an 'escape valve' and a means to circumvent supply bottlenecks in rigidly planned economies" and it "represents a means of personal resistance to the existing political o rder . . , it creates an avenue for civil society to manifest itself as distinct from the state, thus offering a short- term and individualistic, but nevertheless real, alternative to politically con-

trolled planned command economy". 39 Does this mean then that under socialist economies we do have distinct sub-economies, whereas under capitalism it is all part of a continuum? On this reading it seems that whether economic exchange constitutes a distinct type or is part of a continuum depends on the somewhat capricious criterion of what one takes as the totality.

I find the theoretical perspective Harding and Jenkins develop to transcend the separationist position, elegant but weakly founded and unlikely to take us beyond typologizing. Ironically, claiming that their alternative approach is "less dependent upon ad hoc ingenuity, and more reflective of actors' perceptions of the world (and hence less inclined to do violence to research findings by attempting to fit them into pre-existing a priori frameworks)" (p. 3), they proceed to develop just such a framework, based upon doing violence to other people's empirical research, with no first-hand supportive evidence of their own. Their framework is based on two criteria: a horizontal continuum between formality and informality and a vertical continuum between employment and work, which in its extreme extends to leisure. Formality is in- terpreted, in the extreme, as state formal organization as in legal obligations, while at the informal end of the continuum it is seen as unregulated activity, whether this be economic in nature or not. High on the vertical axis is employment, which is defined as working for someone else within the capitalist employment relationship, whereas working for one's self, or self-provision- ing would be low, but not as low as leisure. Their omission of the Third World literature is a problem here since it is clear, as we saw earlier, that self- employed homeworkers, who are not in employment but whose only market for their product is capitalist multi-nationals, are undeniably in a capitalist employment relationship. Similarly, as Weiss has shown, even in advanced Western capitalism, organization by the state, which on Harding and Jenkins criteria ranks on the formal end of their continuum, can penetrate, shape, and even create informal economic activity (a point also made by Portes book). 4~ She demonstrates, particularly in the case of Italy, with its high level of underground economic activity, that the state, by which she means succeeding Italian governments, has deliberately fostered small capital by giving small formal companies privileges and that this has encouraged many small employers to move part of their production underground in order "to retain the privileges and benefits that attach to firms of small size". 41 At the same time, Weiss argues, the state has endorsed the expulsion of married women from the official work force and limited their access to legitimate employment, forcing them into invisible underground economy labor, and has also resisted the regulation of outwork in order to reaffirm women's auxiliary and domestic role. Thus the patriarchal structure of Italian society is reinforced through a combination of state or more precisely, government, policy and its facilitation

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of informal economies. On Harding and Jenkins framework the whole significance of the connection between the state and this 'informal work' would remain 'underground'.

In profound contrast to Harding and Jenkins, the Portes, Castells and Benton collection represents the findings of researchers who set out to provide in-depth observational studies in different settings. They were not interested in the development of abstract models and elegant formalizations but in gaining reliable knowledge about comparable events, worldwide. They have produced a rich, fascinating series of fourteen 'city studies' in ten countries, which combine quantitative estimates of "informal production and employment" with qualitative in-depth observation and interviews designed to "trace the articulation between formal and informal activities in selected sectors of the urban economy" (p. 2). To its greater credit, Portes, Castells and Benton's book "does not culminate in a comprehensive theory of informalization" but in the presentation and analysis of the theoretical and practical implications of their empirical findings. They claim this evidence shows that: the informal economy is universal, irrespective of the level of a country's development, and regardless of the presence or absence of immigrant labor; that its form changes even in the same society, region or city; and that the amount of activity has grown in recent years, even in advanced industrial societies, especially if one takes account of usually discounted very small economic units.

In contrast with some earlier studies the authors argue, that the informal economy is "not a set of survival activities performed by destitute people on the margins of society" but "a specific form of income generating production relationship" that "cuts across the whole social structure", (p. 12) and a "fundamental politico-economic process at the core of many societies" (p. 15). Its importance stems from being "unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated." (p. 12) It is in this sense, that the informal economy is created at the interface of human agency and formal structure for "the more the society institutionalizes its power relationships and the more individual actors try to escape this institutionalized logic, the sharper they divide between the two sectors" (p. 13).

The importance of maintaining the sense of difference between formal and informal activities is to examine their interrelationship in ways that is not possible if they are conflated into an undifferentiated whole. As the paper by Roberts on employment, life cycle and life chances in Guadalaj ara, northwest Mexico shows, the two sectors are systematically linked by the requirement of profitability, but this is mediated by the life cycle. Earlier work of Vinay in Italy, 42 showed how women may begin in formal employment but move into informal work when children are born, returning to formal work when children are older. Roberts, here describes how young men in low income areas,

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complementarily, start out in informal work, move into formal employment and subsequently become self-employed. Thus the household becomes the nexus of formal and informal work strategies in combinations that reflect stages in the life course.

However, in some areas, the interrelationship between formal and informal is such that the informal sector grows, as Sassen-Koob's paper on New York's informal economy demonstrates, at the expense of the formalized employment relationship. Instead of being displaced by advancing industrialization these informal activities have reemerged. Consistent with critical developmental theory, Fortuna and Prates's contribution shows how in Uruguay the informal sector serves as a form of disguised wage labor. The boom period of manufacturing and increasing use of advanced technology led to de-skilling and fragmenting of the formal work force, and its restructuring on the base of age and sex. But as, Castells and Portes point out, the emergence of what appears to be old forms of wage relationship such as sweatshops, in the new historical context of advanced, regulated institutionalized capitalism "causes old forms of production to become new ones" (p. 13). What they are arguing here is that the informal economy as a process, undermines classical liberal and radical views that economic development leads to the incorporation of the work-age population into capitalist labor relations dominated by the wage bond; in short, to proletarianization. A central theme of their book is that instead, traditional class relations are being transformed by the informalization process into a "wild economy"; a diverse decentralized heterogeneous economic organization of networks and clusters of workers, whose members are bound more by their social and communal ties and their social projects than by their objective class positions in the work process. Stepik's paper on the ethnic enclave economy of Miami is particularly instructive here, for he shows that the nature and relationship of the informal economies to the formal economy depends upon the existing patterns of work in an industry, the skills of the potential workers and the discrimination practices against ethnic minorities, in this case Cuban and Haitian immigrants. While both are excluded from the formal economy, for Haitians exclusion results in an isolated survival strategy of casual employment within their own ethnic enclaves; for Cubans informalization, based on garment, construction, and restaurant work, direct- ly competes with the unionized formal economy.

In many instances, then, these networks and clusters are not marginal but central to the formal, regulated economy, as is further illustrated by Beneria's contribution on subcontracting and employment in Mexico City, Benton's study of industrial subcontracting in Madrid's electronic industry, Capecchi's evidence of "flexible specialization" in the Emillia-Romagna region of Italy and Sassen-Koob's chapter on the restructuring of the garment, furniture and electronics industries of New York City.

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The character of the informal economy is inextricably intertwined with the causes of its generation. Workers who participate have the common characteristics of being "down-graded labor", whose social situation is marked by some kind of social stigma, as immigrants, ethnic minorities, women, youth, etc. But their marginalization is systematically produced by the wider political economy as is demonstrated by Ybarra's study of the household workshops of the Valencia region of Spain. But its emergence also structures subsequent relations for as Castells and Portes argue, "The informal economy evolves along the borders of social struggles, incorporating those too weak to defend themselves, rejecting those who become too conflictive and propelling those with stamina and resources into surrogate entrepreneurship" (p. 27).

But this informalization also takes place under the overarching auspices of the state which may tolerate, or even stimulate informal economies in order to resolve potential conflict or promote social patronage that results in situational advantages for otherwise excluded groups, which is a theme of Fernandez- Kelly and Garcia's study of Hispanic women homeworkers in the garment and electronics industries in California and Florida. 43 Similarly, even where it is unintended the state can stimulate the process of informalization as Gross- man's study of corruption and other informal income generation in the Soviet Union shows. However, as Standing's contribution on the British government's reversal of Keynesian economics toward a supply side strategy shows, state action, in this case resulting in unemployment, can also bring with it a new form of control through the disenfranchisement of a large section of the traditional working class.

Thus the dialectic of the informalizing and decentralizing process that is the informal economy is both the outcome of the conjuncture of economic, political and social forces, and a heterogeneous movement that itself has transformative capacity. It is the product of: a response to global recession of the 1970s; a reaction to the power of organized labor and labor aristocracies, a rejection of the state's regulation of the economy; international competition from cheaper Third World Nations that forced many previously successful formal Western corporations underground; and Third World countries' attempts to selectively industrialize in pockets freed from the costly baggage of regulation and enforcement that pervade their wider society. Consequently, the developmental effects of informalization are contradictory: it can lower labor productivity, automation and rationalization, while simultaneously increasing capital productivity by reducing the size, and thereby cost, of large scale bureaucracy and by reducing the cost of labor. It can also undermine the power of organized labor and thereby the protection and related quality of work life of the participants. But it can also destroy the proletariate as a class, blurring its boundaries through networks and variety of work, while constitu-

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ting a web of connectedness between social groups that have different internal ties and bonds than those traditionally associated with working classes.

Importantly both the cause and the effects of the informalizing process, are, because of their interrelationship with the state and political economy, quite different depending upon the historically specific relationships between the macro and micro forces in each country and even in different regions and cities. Because of this the editors of the volume caution about the policy implications of the informalizing process. In particular, they warn against the transferability of apparently successful contributions that some nations or regions have experienced in harnessing the strengths of informal economies to their overall development, and are even more critical of attempts to elevate informalization into an ideology. They also point out that state policies that have proved most beneficial to informal economic growth are those imple- mented at the local level, and those that are facilitative of a general environment for entrepreneurial opportunities for people of modest resources. They conclude that, the findings:

underscore the need for innovative state responses to a novel economic trend, rather than a return to earlier models of either rigid planning or simple deregulation. The process of informalization generates simultaneously pitfalls and opportunities for local labor absorption and economic growth. Effective action to promote the latter requires a shift in the style of government intervention, but not its abandonment (p. 307).

But they are not blind to the negative consequences of the process. Confront- ing the reality of informalization requires that we recognize how participants in class struggle will use it as an instrument to further their interests, how dominant classes will at tempt to strengthen their hegemony at the time that labor organizations are fragmented and weak, and how workers use this development to survive and gain autonomy under the new conditions: "The challenge is how to develop new organizational forms as flexible as the new arrangements and which respond to the emerging needs and interests of participants" (p. 309).

As a test imony to the new comparative political economy, Portes, Castells and Benton 's book represents a major and successful at tempt to link the ground-level descriptions of life and work with the macro-level economic and social processes that constitute the wider structures in which they are set and with which they are mutually interrelated. Their work is a blockbusting reassessment of the global significance of one of the most overlooked phenomenon of our time. When directors of research foundations and traditional theoreticians seek to dismiss the concept as a myth, it takes academic courage,

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and considerable stamina to deliver the research goods. For doing so these authors are to be highly commended.

Having said this, I am somewhat concerned that they might have carried over some of the traditional analytical, and particularly developmentalist assumptions. Two aspects are troubling. First, to frame informal economies as interrelated with formal economies is an accurate but partial assessment. What is missing, and this is central to Harding and Jenkins analysis, is the interrelationship of the informal and formal within specific economies. Formal, regulated work, is constituted not only by the wider political economy and the state, but also by the internal dynamics of its own informality. Formal work, in the sense of employment, contains informal work that is no less central to its ongoing reproduction than is the formal aspects of informal work to its reproduction. To put it another way, informal work does not simply interact with formal employment; some of the relations of informal work are the relations of formal work and vice versa. This is why workplace pilfering and fiddling, production deviance, informal rewards systems, informal institutions, discretion, indulgences and kick-backs in bureaucracies, are so perva- sive yet so often trivialized. Likewise, as anyone who has worked in the underground knows, there are taken for granted rules, normative regulations and sanctions for 'rule' breakers, as forceful as any stemming from the quasi- judicial justice of corporate organizations or state bureaucracies. A comprehensive examination of the phenomena must also recognize this level of interrelationship.

A second critical issue is the priority, given in both these books to the principles of classical economics in governing people's entry into and exit from the formal employment or informal work relationship. It is not just that the basis for social formations has changed from class to group, but also that the work relations have changed their intrinsic meaning. Money, and material reward do not become the sole, or even the primary reason for participation, especially in cases where a base income is available from whatever source. Status, prestige and socially nutritious satisfactions, become significant moti- vators. In one of the most radical re-conceptualizations in this regard, Etzioni has rejected the entrenched assumptions of the "utilitarian, rationalistic- individualistic, neoclassical paradigm" pointing out that market place exchange is permeated and integrated with attempts not only to maximize self-interest but also seeking to do what is morally right. 44 Moreover, he argues that humans' abilities to act rationally on their own as individuals advancing the "self" is deeply affected by how well they are anchored within a sound community and sustained by a firm moral and emotive personal underpinning. Such a base is even more likely in the networks and dusters constituting the wild economy. Acknowledgement that there exists a significant amount of informal economic activity based on different principles of exchange means

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that prevailing utilitarian rationalistic assumptions about market economies must be revised to reflect a broader concept of exchange than that held by classical and neo-classical economics. It requires that we transcend the artifi- cial disciplinary boundaries between the social sciences in order to capture the social, moral and economic relations that shape economic life. It means adopting an interdisciplinary approach designed to synthesize the diversity of economic reality.45 As Roberts, Finnegan and G allie, who were one of the first to recognize this necessity say, one of the chief features of this new approach is to question established disciplinary truths: "Not only are some of the older, taken-for-granted boundaries between disciplines being challenged, but much recent research is now drawing on insights from a number of disciplines, not just from one" .46 Indeed, they argue that the challenge of the informal economies is in its highlighting, "the existence of a whole series of economic activities which do not fall easily within the definitions and analysis of traditional economics or get measured by government. ''47 However, as Davis points out, limited by disciplinary interests, and by the politics of research funding, studies in informal economies have so far been narrowly chan- nelled. 48 He says that despite their critical stance, researchers have bought into "the established categories of the system of analysis they seek to revise," and he sardonically laments, "If they have found a princedom by kissing the toad of falseness, they should now embrace imperfection. But in fact they have at best been tentatively rebellious". 49 These two books make that embrace; Harding and Jenkins see another toad, while Portes, Castells and Benton look beyond to the wild kingdom.

N o ~ s

1. Keith Hart, "Informal Income Opportunities and Urban Employment in Ghana," Journal of Modern African Studies, 1977 (11), 61-89.

2. John Bryant, "An Introductory Bibliography to Work on the Informal Economy in Third World Literature," in Pahl, R. and J. Laite (eds.), Bibliographies and Local Labour Markets and the Informal Economy. (London: Social Science Research Council, 1980), 1.

3. J. Bremen, "A Dualistic Labour System: A Critique of the Informal Sector Concept," Economic and Political Weekly, 1976 (11), 1870-76. R. Davies, "Informal Sector or Sub- ordinate Mode of Production? A Model," in Bromley, R. and C. Gerry (eds.), Casual Work and Poverty in Third World Cities (London: John Wiley and Sons, 1979), 97-104.

4. D. Mazumdar, "The Urban Informal Sector," World Development, 1976(4), 655-79. 5. C. Moser, "Informal Sector or Petty Commodity Production: Dualism or Dependence in

Urban Development?," World Development, 1978(6), 1042-64. Bromley and Gerry, op.cit. 1979.

6. Chris Gerry, "Developing Economies and the Informal Sector in Historical Perspective," in Ferman, L.A., S. Henry and M. Hoyman (eds.), The Informal Economy, The Annals of The

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American Academy of Political and Social Science (Beverly Hills: Sage Publications, 1987), 100-19.

7. Enzo Mingione, "Social Reproduction of the Surplus Labour Force: The Case of Southern Italy," in Redclift, N. and E. Mingione (eds.), Beyond Employment (Oxford: Blackwell, 1985).

8. Harvey A. Faberman and Eugene A. Weinstein, "Personalization in Lower Class Consumer Interaction," Social Problems, 1970(17), 449-57.

9. John Davis, "Gifts and the UK Economy," Man, 1972(7), 408-29. 10. Patricia R. Ferman and Louis A. Ferman, "The Structural Underpinning of the Irregular

Economy," Poverty and Human Resources Abstracts, 1973(8), 3-17. 11. Ibid., p. 5. 12. Carol B. Stack, All Our Kin: Strategies for Survival in a Black Community (New York:

Harper and Row, 1974). Martin Lowenthal, Martin, "The Social Economy in Urban Working Class Communities," in Gappert, G. and H. Ross (eds.), The Social Economy of Cities (Beverly Hills: Sage, 1975), 447-69. Leslie M. Dow, "High Weeds in Detroit," Urban Anthropology, 1977(6), 111-28.

13. Stuart Henry, The Hidden Economy (Oxford: Martin Robertson, (1978). 14. Jason Ditton Part-time Crime: An Ethnography of Fiddling and Pilferage (London: Mac-

millan, 1977). Gerald Mars, Cheats at Work: An Anthropology of Workplace Crime (London: George Allen and Unwin, 1982).

15. Carl P. Simon and Ann D. Witte, Beating the System: The Underground Economy (New York: Auburn Publishing Co., 1982). P. Mattera. Off the Books: The Rise of the Underground Economy. (London: Pluto Press, 1985).

16. Peter M. Gutmann, "The Subterranean Economy," Financial Analysts Journal, 1977 (34): 26-7. Edgar L. Feige, "How Big is the Irregular Economy?", Challenge (November/Decem- ber), 1979, 5-17. Vito Tanzi, (ed.), The Underground Economy in the United States and Abroad (Lexington: Lexington Books, 1980).

17. Carol S. Carson, "The Underground Economy," Survey of Current Business, 1984(6), 21-37. Michael Carter, "Issues in the Hidden Economy - A Survey," Economic Record, 1984 (60) 209-21. Bruno S. Frey and Hannelore Weck-Hanneman, "The Hidden Economy as an 'Unobserved' Variable," European Economic Review, 198 (26), 33-53.

18. Louis A. Ferman, Louise E. Berndt and Elaine Selo, An Analysis of the Irregular Economy: Cash Flow in the Informal Sector (Ann Arbor: University of Michigan/Wayne State Uni- versity, 1978). Louis A. Ferman and Louise E. Berndt, "The Irregular Economy," in Henry, S. (ed.), Informal Institutions (New York: St. Martin's Press, 1981), 26-42.

19. James D. Smith, "Measuring the Informal Economy," in Ferman, Henry and Hoyman, op.cit. 1987, 83.

20. A. Regula Herzog, Robert L. Kahn, James N. Morgan, James S. Jackson and Toni C. Antonucci, "Age Differences in Productive Activities," Journal of Gerontology: Social Sciences, 1989 (44), 129-38.

21. Jay I. Gershuny and Ray E. Pahl, "Britain in the Decade of the Three Economies," New Society, 1980 (51), 7-9. Jay I. Gershuny and Ray E. Pahl, "Work Outside Employment: Some Preliminary Speculations," in Henry, op. cit. 1981, 73-88.

22. Jay I. Gershuny, "Post-industrial Society: The Myth of the Service Economy," Futures, 1977(9), 103-14. Jay I. Gershuny, "The Self-service economy," New Universities Quarterly, 1977 (32), 50-66. Jay I. Gershuny, Aflerlndustrial Society? (London: Macmillan, 1978). Jay I. Gershuny, "The Informal Economy: Its Roles in Post Industrial Society," Futures, 1979(11) 3-15. Jay I. Gershuny, Social Innovation and the Division of Labour (Oxford: Oxford University Press, 1983). Jay I Gershuny, "Technology, Social Innovation and the Informal Economy, in Ferman, Henry and Hoyman, op.cit. 1987), 47-63.

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23. Jay I. Gershuny and Ian D. Miles, The New Service Economy: The Transformation of Employment in Industrial Societies (London: Frances Pinter, 1983).

24. Gershuny and Pahl, op.cit. 1981, 77. 25. Graeme Shankland, Our Secret Economy (London: Anglo-German Foundation, 1980).

Barry Knight and Ruth Hayes, The Self Help Economy: Social and Economic Development in the Inner City (London: London Voluntary Services Council, 1982). Charles Handy, The Future of Work: A Guide to a Changing Society (Oxford: Basil Blackwelt, 1984).

26. R.G. Heinze and T. Olk, "Development of the Informal Economy: A Strategy for Resolving the Crisis in the Welfare State," Futures, 1982 (June), 189--204.

27. Andre Gorz, Paths to Paradise: On the Liberation From Work (London: Pluto Press, 1985), 75. Andre Gorz, Farewell to the Working Class: An Essay on Post-Industrial Socialism (London: Pluto Press, 1982). Ivan IUich, Shadow Work (London: Marian Boyars, 1981).

28. Stuart Henry, "The Working Unemployed: Perspectives on the Informal Economy and Unemployment," Sociological Review, 1982 (30), 460-77. Stuart Henry, "Can The Hidden Economy Be Revolutionary?," Social Justice, 1988(15), 29-60.

29. Ray E. Pahl, Divisions of Labour (Oxford: Basil Blackwell, 1984). 30. Jeremy D. Alden, "Holding Two Jobs: An Examination of Moonlighting," in Henry, op.cit.

1981, 43-59. Herzog et al., op.cit. 1989. 31. Ray E. Pahl, "Does Jobless Mean Workless? Unemployment and Informal Work," in

Ferman, Henry and Hoyman, op.cit. 1987, 36. 32. Herzog et al. op.cit. 1989, 133. 33. Ibid., p. 135. 34. Dan Bawly, The Subterranean Economy (New York: McGraw-Hill, 1982). 35. Peter M. Gutmann, "The Subterranean Economy," Financial Analysts Jounral, 1977 (34),

26-7. Peter M. Gutmann, "Off the Books," Across the Board, 1978 (August 15), 9-14. Peter M. Gutmann, "The Subterranean Economy," Tax and Spending, 1979 (April), 4-11.

36. D.K. Simes, "The Soviet Parallel Market," Survey, 1975 (21), 42-52. Alex Nove, The Soviet Economic System, (London: George Allen and Unwin, 1977). A. Katsenelinboigen, "Col- oured Markets in the Soviet Union," Soviet Studies, 1977 (29), 62-85. Sergio Alessandrini and Bruno Dallago (eds.), The Unofficial Economy: Consequences and Perspectives in Different Economic Systems (Aldershot: Gower, 1987).

37. Gerald Mars and Yochanan Altman, "How a Soviet Economy Really Works: Cases and Implications," in Clarke, M. (ed.), Corruption: Causes, Consequences and Control (London: Frances Pinter, 1983). Gerald Mars and Yochanan Altman, "The Cultural Bases of Soviet Georgia's Second Economy," Soviet Studies, 1983 (35), 546-60.

38. Bryan Roberts, Ruth Finnegan, and Duncan Gallie (eds.), New Approaches to Economic Life (Manchester: Manchester University Press, 1985). Stuart Henry, "The Political Econo- my of Informal Economies," in Ferman, Henry and Hoyman, op.cit. 1987, 137-53. Amitai Etzioni, The Moral Dimension: Toward a New Economics (New York: The Free Press, 1988).

39. Alejandro Portes and Jozsef Borocz, "The Informal Sector under Capitalism and State Socialism: A Preliminary Comparison," Social Justice, 1988 (15), 26.

40. Linda Weiss, "Explaining the Underground Economy: State and Social Structure," The British Journal of Sociology, 1987 (38), 216-34.

41. Ibid., p. 224. 42. Paola Vinay, "Family Life Cycle and The Informal Economy in Central Italy," International

Journal of Urban and Regional Research, 1985 (9), 82-98. 43. Although as we saw earlier, Weiss, op.cit. 1987, shows how the state can also deliberately

foster such activity in order to maintain existing gender power relations in society. 44. Etzioni, op.cit. 1988. 45. Ibid.

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46. Roberts, Finnegan and Gallie, op.cit., 1985, 14. 47. Ibid., p. 14. 48. John Davis, "Rules not Laws: Outline of an Ethnographic Approach to Economics." in

Roberts, Finnegan and Gallie, op.cit., pp. 502-11. 49. Ibid., p. 503.

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