New Internationalist

Barefoot Businessmen

Issue 086

Modern industry simply can’t provide gainful employment for all Third World citizens that want jobs. So the jobless are forced to make their own work - either that or starve. Paul Harrison surveys this so-called ‘informal sector’ and argues that it should be encouraged and nurtured rather than discarded and ignored.

THE bustling market of Bouake, second biggest city in the Ivory Coast, hums with activity. Diviners sit cross legged on collapsed boxes, waiting to tell your fortune. Traditional medicine men sell rams’ horns, snakes’ heads and desiccated chameleons. The tiny glass booth of Watch Doctor Monsieur Emmanuel Ipade is decorated with childish paintings of giant watch faces, while over a boy tailor dreaming at his. treadle sewing machine, a sign proclaims: ‘Pop fashions here, dress yourself at Mr 0 Dao’s’? Round the corner they are doing a brisk trade in used cardboard for packing or making houses with, and you can even buy empty bean cans, shampoo jars and White Horse whisky bottles to keep your savings, cooking oil or plastic flowers in.

This is the spontaneous business of the informal sector, varied, inventive, booming in numbers if in nothing else. According to the International Labour Office’s definition, an enterprise is classified informal if it employs only a handful of workers, on low incomes, using rudimentary equipment, and works outside the framework of laws and regulations. The informal sector covers services - shoeshine boys, cigarette vendors, sweepers, porters, scribes - and manufacturing, anything from palm-leaf roofing panels and twig brushes to religious objects.

Surveys from Bombay, Nairobi, Sao Paulo, Abidjan, Jakarta and cities in Peru put its share of city employment at between 40 and 60 per cent. And, as the rural exodus continues in the Third World, this share is unlikely to decrease. Most migrants start off their working city lives in this sector. After a few years of this kind of work, a migrant may have learned enough of the city’s ways and made enough contacts to land a steady job in the modern sector. Many migrants will find themselves trapped in a life of poverty and insecurity, although in most cases they are still better off than if they had remained in their rural area of origin, at least in monetary terms.

A survey in Lima, Peru, found that three-quarters of street vendors were earning less than the government’s minimum wage, indeed an unlucky 13 per cent of them were actually making a loss. Most had gone into trading for the simple reason that they could find no other work.

Their incomes were low not because they didn’t work hard - more than half of them were putting in forty-five hours a week or more - but because there were too many competitors. Productivity was low as they might have to wait an hour or two between each customer.

Nearly half of Jakarta’s one million workers are in the informal sector. The 70,000 rickshaw drivers buzz around like wasps and earn, on average, less than 125.00 each per year. Unknown to them, the city’s official plan predicts that by 1980 ‘the function of the betjak rickshaw as a means of transportation would become non-existent’. Two-thirds of the city’s 30,000 hawkers were found to have a daily turnover of less than $15.00. A similar proportion were so abysmally poor that virtually 100 per cent of their income was spent on food. Three quarters of them had turned to hawking because there were no other jobs available.

Migrants are much more likely to be poor and under-employed than natives of the cities they have come to: in Sao Paulo 44 per cent of migrants had monthly incomes below 200 cruzeiros in 1970 (about $40 at the time), against only 29 per cent of non-migrants. Migrants - though more educated than the neighbours they left behind - were less educated than life-long city dwellers, so the latter were more likely to pick up steady, well-paid jabs in the modern sector.

Their poverty is due to two factors: first, governments have shamefully neglected the informal sector, with primitive technology, management marketing, and low productivity. Second, there are far too many informal sector workers chasing far too little work. There is not much work because there is not enough spending power among their customers, poor like themselves. And there are too many work-seekers because of the never-ending flow of refugees from rural poverty. Because of this massive growth of people seeking work in the informal sector, and because of lack of investment in it, there is a danger that it will go the way of so much small-holder agriculture, towards what might be called ‘industrial involution’: supporting an ever-increasing population with a steadily declining income per head.

Economy of the Poor

The modern sector is the economy of the privileged. It employs them, houses them and pays them enough to afford its products. The informal sector is the economy of the poor. Through it they house themselves and employ each other and produce goods and services they can afford. There is precious little contact between the two economies.

The greatest advantage of spontaneous business is that it requires an absolute minimum of capital and skills. The barriers to entry are so low that virtually anybody can set up. So the informal sector mobilizes the savings of the poor, spares them the indignity of begging others for work and allows them the liberty of being self-employed. Two out of five Ivory Coast entrepreneurs had capital of less than $50 and only one in five had more then $250.00. Almost all of them got the money together themselves or borrowed it from relatives and friends. The informal sector requires no diplomas, no degrees or school leaving certificates - bits of paper the poor in any case do not possess.

The sector does provide real and necessary services and products, too. When I was in Nigeria, bush garages were a handy institution whenever the car broke down (which, given the state of the roads at that time, was frequently). The premises were an inspection pit dug in the ground under a bamboo shelter to keep the rain off. A ragged, oily crew of teenagers and young men willing to learn would rush out eagerly as you chugged to a halt and after half an hour’s improvisation and experiment with a few bits of wire could usually get you on the road again.

Precepts into practice

While Western consultants and agencies are urging Third World governments to adopt small-scale appropriate technology, the barefoot businessmen are actually putting many precepts into practice. The technology they use is of necessity small-scale and labour-intensive, since they have so little capital. They use local materials because they can’t afford or get licenses for imports. Recycling of waste is a specialty at which they are past masters. In southern Peru I met one old village blacksmith forging bright new kettles, pans and funnels out of polished-up used tin cans. In Calcutta 1 came upon a tiny workshop cutting up old cooking oil containers and working them into neat round tins for rough local beedi cigarettes.

Logically, governments should make the most of informal businesses. They are the ideal place to try out small-scale, intermediate technology. Their machinery can be improved, their owners can be provided with credit and trained in better management, quality control and marketing, their workers’ skills upgraded. They could be tied r ‘n with the modern sector by encouraging big factories to sub-contract work out to them. This whole vast mass of self-improvement could be built on to provide an unprecedented groundswell of manufacturing and services in the city economies of the Third World.

However, from most governments spontaneous business gets the same treatment as spontaneous housing. It is seen as a transitory, deviant sort of activity; a nuisance that contributes little to the kind of economy political leaders want to build up; and, like the shanties it is housed in, a hazard to public health and political stability.

At best it is ignored and neglected. It enjoys none of the access to official credit, cheap foreign exchange and government assistance that big business can count on. The small informal-sector businessman has no collateral apart from his cranky old machines or tumbledown shack. He keeps no books other than those in his head. All in all, he is a decided credit risk. Without credit, the small man finds it much harder to improve his business and is usually doomed to stay small.

He may also suffer a good deal of government discrimination, restriction and even outright harassment. Official standards of quality or safety are set artificially high, with the modern sector in mind. The informal sector cannot hope to comply, and hence is excluded from many markets.

Spontaneous businesses are no better provided with services than are slums: the majority have no roof over their heads or are housed in tents or shacks. Most have no water or electricity - essentials for manufacturing activity.

Spontaneous business is the exact economic parallel to spontaneous settlements. The same forces give rise to both. The urban bias of investment generates higher city incomes, which pull in the marginal rural poor. But that investment, in jobs as in housing, is used up in expensive Western-style packages that can only benefit the few. The many are left to house themselves, and to employ themselves. As long as rural incomes are so far below urban, and as long as the obsession with Western architecture, tastes and technology continues the informal sector will go on growing.

Adapted from Inside the Third World by Paul Harrison, Pelican, 1979. (U.K. £3.95, Australia $7.95, Canada $6.95)

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