How the informal economy took over the World – Part 2 by Keith Hart

The dialectics of form.

“General Forms have their vitality in Particulars, and every Particular is a Man” (William Blake).

Most readers of this book live substantially inside what we may call the formal economy. This is a world of salaries or fees paid on time, regular mortgage payments, clean credit ratings, fear of the tax authorities, regular meals, moderate use of stimulants, good health cover, pension contributions, school fees, driving the car to the commuter station, summer holidays by the sea. Of course middle class households suffer economic crises from time to time and some people feel permanently vulnerable, not least many students. But what makes this lifestyle ‘formal’ is the regularity of its order, a predictable rhythm and sense of control that we often take for granted. I only discovered how much of this had become natural to me when I went to live in a West African city slum almost 50 years ago.

I would ask people questions that just didn’t make sense to them, like, how much do you spend on food a week? Most households were in any case unbounded and transient. Assuming that someone had a regular wage (which many didn’t), it was pitifully small; the wage-earner might live it up for a day or two and then was broke, relying on credit, help from family and friends or not eating at all. A married man might use his wage to buy a sack of rice and pay the rent, knowing that he would have to hustle until the next pay check. In the street people moved everything from marijuana to refrigerators in deals marked more by flux than stable incomes. After completing my doctorate, I went to work in a development studies institute. There I saw my main task as trying to get this ethnographic experience across to development economists. My use of the conceptual pair formal/informal came out of those conversations. The formal and informal aspects of society are already linked, since the idea of an ‘informal economy’ is entailed in the institutional effort to organize society along formal lines. ‘Form’ is the rule, an idea of what ought to be universal in social life; and for most of the twentieth century the dominant forms have been those of bureaucracy, particularly of national bureaucracy, since society was identified to a large extent with nation-states. This identity is now ending as a result of neoliberal policies, the digital revolution in communications and the global economic crisis.

Formal and informal appear to be separate entities because of the use of the term ‘sector’. This gives the impression that the two exist in different places, like agriculture and manufacturing, whereas both the bureaucracy and its antithesis contain the dialectic within themselves, as well as between them. There is a widespread perception that together they constitute a class war between the bureaucracy and the people. It was not supposed to be like this. Modern bureaucracy was invented by the Italian city-states of the quattrocento as part of a democratic political project to give citizens equal access to what was theirs as a right. It still has the ability to co-ordinate public services on a scale that is beyond the reach of individuals and most groups. So it is disheartening that bureaucracy (‘the power of public office’) should normally be seen now as the negation of democracy (‘the power of the people’) rather than as its natural ally.

Forms are necessarily abstract and a lot of social life is left out as a result. The gap may be reduced by naming a variety of practices as an ‘informal sector’. They appear to be informal because their forms are largely invisible to the bureaucratic gaze. Mobilizing the informal economy will require a pluralistic approach based on at least acknowledgement of those forms. Equally, the formal sphere of society is not just abstract, but consists of the people who staff bureaucracies and their informal practices. Somehow the human potential of both has to be unlocked together.

‘Form’ is an idea whose origin lies in the mind. Form is the rule, the invariant in the variable. It is predictable and easily recognized. Idealist philosophers from Plato onwards thought the general idea of something was more real than the thing itself. Words are forms, of course. In his Science of Logic, Hegel shows the error of taking the idea for reality. We all know the word ‘house’ and might think there is nothing more to owning one than saying ‘my house’. But before long the roof leaks, the paint peels and we are forced to acknowledge that the house is a material thing, a process that requires attention. The ‘formal sector’ is likewise an idea, a collection of people, things and activities; but we should not mistake the category for the reality it identifies.

What makes something ‘formal’ is its conformity with such an idea or rule. Thus formal dress often means that the men are supposed to look the same, so they adopt a ‘uniform’ that cancels out their individuality. Formality endows a class of people with universal qualities, with being the same and equal. What makes dress ‘informal’ is the absence of such a shared code. But anyone can see that clothing styles in an informally dressed crowd are not random. We might ask what these informal forms are and how to account for them. The dialectic is infinitely recursive. No wonder that most economists find the conceptual dichotomy confusing and impossible to measure.

There is a hierarchy of forms and this hierarchy is not fixed for ever. The twentieth century saw a general experiment in impersonal society whose forms were anchored in national bureaucracy, in centralized states and laws carrying the threat of punishment. The dominant economic forms were also bureaucratic and closely linked to the state as the source of universal law. Conventionally these were divided according to principles of ownership into ‘public’ and ‘private’ sectors. This uneasy alliance of governments and corporations is now sometimes classified as ‘the formal sector’. On the surface they share being subject to regulation, conformity to the rule of law. How then might unregulated economic activities, ‘the informal economy’, relate to this formal order? They may be related in any of four ways: as division, content, negation and residue. The moral economy of capitalist societies is based on an attempt to keep separate impersonal and personal spheres of social life. The establishment of a formal public sphere entailed another based on domestic privacy. The pair was meant to constitute complementary halves of a single whole. Most people, once men more than women, divide themselves every day between production and consumption, paid and unpaid work, submission to impersonal rules in the office and the free play of personality at home. Money is the means whereby the two sides are brought together, so that their interaction is an endless process of separation and integration or division. The division of the populations into males and females is the master metaphor for this dialectic of complementary unity. When the lines between the paired categories become blurred, we enter a phase of ‘negative dialectic’, from which a new idea may eventually emerge. Identifying the informal practices that constitute a bureaucracy implies such a blurring of the ideal.

For any rule to be translated into human action, something else must be brought into play, such as personal judgment. So informality is built into bureaucratic forms as unspecified content. This is no trivial matter. Workable solutions to problems of administration invariably contain processes that are invisible to the formal order. For example, workers sometimes ‘work to rule’. They follow their job descriptions to the letter without any of the informal practices that allow these abstractions to function. Everything grinds to a halt. Or take a commodity chain from production by a transnational corporation to final consumption in an African city. At various points invisible actors fill the gaps that the bureaucracy cannot handle directly, from the factories to the docks to the supermarkets and street traders. Informal processes are indispensable to commerce, as variable content to the form.

Of course, some of these activities break the law, through a breach of safety regulations, tax evasion, smuggling, the use of child labour, selling without a licence etc. The third way that informal activities relate to formal organization is thus as its negation. Rule-breaking takes place both within bureaucracy and outside it; and so the informal is often illegal. It is hard to draw a line between colourful women selling oranges on the street and the gangsters who exact tribute from them. When the rule of law is weak, the forms that emerge in its place are often criminal in character. Modern civilization protects the public image of bureaucratic processes from a hybrid reality that mixes formal order with corruption and criminality. We enjoy watching movies about cops and gangsters, but we insulate these fictions from belief in the rule of law that helps us to sleep at night.

The fourth category is not so obviously related to the formal order. Some ‘informal’ activities exist in parallel, as residue. They are just separate from the bureaucracy. It would be stretching the logic of the formal/informal pair to include peasant economy, traditional institutions and domestic life as somehow ‘informal’. Yet the social forms characteristic of these domains often shape informal economic practices and vice versa. Is society just one thing – one state with its rule of law – or can it tolerate institutional pluralism, leaving some spheres to their own devices? Communities depend on members understanding each other for practical purposes; and so they operate through culture. They use implicit rules (customs) rather than state-made laws and regulate their members informally, through the sanction of exclusion rather than punishment. European empires, faced with a shortage of administrative resources, turned to ‘indirect rule’ as a way of governing semi-autonomous subject peoples. Anthropologists played their part in making this work. Any serious attempt to combine the formal and the informal anew requires similar openness to plurality of form. (…to be continued)