The Informal Economy: How / What / Why / Should We Learn From It

The inform-what economy?

If we consider the “informal economy to be the activity which goes unregulated in an otherwise regulated system, then informal economies are as old as their formal counterparts”, affirms Wikipedia. It seems humans have always adjusted their activity within economic systems in attempt to evade regulations, by not paying taxes, not being monitored by any government and therefore not being included in the gross national product (GNP). The global informal economy accounts for:

  • $10 trillion = second biggest GDP in the world,

  • in emerging markets, it employs up to 80% of the workforce,

  • and is the fasted growing economy in developed and emerging markets.

In the early 1970’s, money promptly became ungovernable due to neoliberalism and the privatization of public interest, resulting in the creation of multinationals corporations that introduced complexity in the system. As anthropologic economist Keith Hart supports, informality is a product between bureaucracy and people. Political policies and global money face an evermore worldwide labyrinthine challenge, probably why experienced Keith Hart advocates, “regulation is a joke now!”.

Learning from complex adaptive systems, dialectics of forms between de-localized and re-localized contexts, ecosystemic models based on incentives and organization, living in extremely fast environments generally outpacing humans, is not a smooth task. Experts claim it is crucial to converge efforts in recognizing social forms or patterns inside the organized chaos. To some extent a Gestaltist approach, allowing the breakup of elements from the whole situation into what it really is, finding the variables in the invariable.

The informal economy often takes place inside a flexible trusted network in which flexibility comes from negotiating the limits of mutual trust. Other primary variables are time and money, as Niti Bhan eloquently adds, “the only certainty is uncertainty”. Thus, unlike industrialized contexts of long-term planning, emerging informal markets often rely on short-term risky investments for survival. However sustainability, simplicity and collaboration are key assets of informality while complex systems have no space specific rooted local norms.

On another note, we should benefit from the world’s “meta-instability” to renew ourselves. According to Scott Smith, demographics are the main drivers to go “from growth, to functional innovation towards resilience”. Maybe corporations can face disruptions by setting the stage, creating minimum infrastructure and letting society participate and build upon. Besides, there is great importance in the “making”, according to Richard Tyson, “it is not about solving complex problems but negotiating with present environments”. Indeed organizations made possible prosperity, we shouldn’t turn our backs on them, instead we should look for the right environments in which shifting from an informal economy to a human economy is achievable. Quoting John Thackara, “from control to stewardship”.

Studies show that many of the bottom of the pyramid (BoP) are on top when it comes to happiness index despite consuming 20 times less resources than industrialized countries. Knowing the emerging countries represent 80% of the globe’s population, who has to learn from who in order to change?

Thank you for reading!


Can you elaborate?

Hey Tiago, thanks for a pretty serious introduction!

I’m confused about how uncertainty and sustainability walk hand in hand in this informal ecnonomic system? I might have misread and in fact it’s the outlook on sustainability that characterizes informal econ activities, rather than being sustainable themselves? The first example that comes to my mind is the barter economy as a response to the need for increased resilience. Do you have others?

And what are your personal thoughts and opinion? Can’t tell how much of this Tiago endorses personally :slight_smile:

That is exactly the point!

How can we learn from the informal patterns and apply them in our (in)formal context?

I don’t have an answer as to how uncertainty and sustainability can go hand in hand. Even if it stands against many sustainable discourses and strategies…

But the fact of the matter is the BoP are much happier than rich countries, have 20 times less resource consumption and work around simple trusted systems.

So my take on this is that you can either have short-term or long-term objectives, it don’t really matter as long as everyone wins in the transaction.

Also this underlines the need to have a strong community before actually enrolling any kind of business activity. It is said the informal dynamics go as follows: social networks > informal entrepreneurs > business organization > financial services. Yet, in formal context it would be the other way around. 

In my opinion what really sums up this point is how informal economy needs to shift towards a human economy and how resilience plays a major role between these two poles.


I am not sure if I


I am not sure if I understand your message in full. Let me try to summarize what I got:

  1. Many educated people spent a lot of time devising a system that is failing now spectacularly, leaving millions of victims ruined, unhappy, sometimes dead or injured. One of reasons was, that the economical system was intended to supercede, replace and imitate the social one. (Similar to the U.S. case, where the legal system emulates the social one)

  2. Many more uneducated people formed hundreds of local (while globally similar) social systems, that include economical relationships, mainly focused on keeping sustainability in uncertain living conditions.

  3. We are now in a postion to learn from those who succeeded (or at least did not fail THAT completely) and to use our knowledge to transfer their solutions into the disaster area.

Am I correct?

Brilliant wording

Wow, that’s a great formulation! I like especially item 3. Thanks for this.

More on the Informal Economy

The informal economy is indeed the place to look for new models and inspiration on how to navigate a future of increasing complexity.  This was a top theme at The Informal Economy Symposium hosted by my company, Claro Partners, in Barcelona last month.  Tiago, who attended the symposium, shares quotes from the panelists in his discussion above.  You can learn much more about what they had to say and why the informal economy matters today by watching excerpts and full-talk videos from the conference on our vimeo channel.

At; @informalecon; and Claro Partners, we are deeply invested in better understanding the nature of informal enterprises-- why they are rapidly increasing in number, what are the various ways in which they successfully navigate today’s business chaos, and how we might learn from, engage, and enable them in the future. Please visit our website or talk with us to join in the conversation.

Hi Abby

Welcome to Edgeryders.

We think of this space as a kind of home, and so please feel free to post a your personal experiences, insights thoughts or questions to other Edgeryders around the informal economy. If you think Tiago missed something his post above please feel free to share it with us here.

Otherwise imho your post above amounts to advertising for your company which is not really what Edgeryders is for :wink:

Hi Nadia

To clarify, my post is not intended to advertise my company, but to give context to Tiago’s post.  Furthermore, many commenters asked for more information, so the links to the videos will provide readers with opportunity to listen to full talks from which the quotes cited in the post were extracted.

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