CIAO DATE: 12/2008
November 2008
Danish Institute for International Studies
In the early 1970s, the notion of informality emerged in micro- and institutional economics as a descriptor of trade and social relations construed as existing outside formal state regulation. The ‘informal sector' has been regarded a liability for development, but also a reservoir of economic initiative halted by oppressive state bureaucracies. More recently, informal economic activity has been linked to ‘shadow', ‘illicit', ‘combat', and ‘hidden' economies. Historically, residual forms of exchange that await, resist or escape bureaucratic and legal regulation have been conceptualized in different ways with different moral and ideological underpinnings.
This working paper explores the dialectic of formal and informal economy in the context of ‘development' discourse over the last four decades. The dialectics of formal and informal economy can be described as a war waged by the bureaucracy on the people, allowing informal economic practices to be portrayed as a kind of democratic resistance. Yet, as the author argues this would be less fertile. While we might endorse the political value of self-organized economic activities, there are tasks of large-scale co-ordination for which bureaucracy is well suited; and the institution's origins were closely linked to aspirations for political equality, even if historical experience has undermined that expectation. So the task is not only to find practical ways of harnessing the complementary potential of bureaucracy and informality, but also to advance thinking about their dialectical movement. One way of doing this is to explore the dialectics of formal and informal economy in terms of four categories: division, content, negation and residue.
The present working paper emerges from the ‘Markets for Peace? Informal economic networks and political agency' research network sponsored by the Danish Social Science Research Council (FSE) and hosted by DIIS during 2007 and 2008. The aim of the interdisciplinary research network was to gain a better understanding of the role and significance of informal economic networks on political processes. The research network explored the dynamics of such networks; national, regional and international attempts to regulate them; and the ways in which informal economic network activities are or are not converted into political influence.
Resource link: Between Bureaucracy and the People: A Political History of Informality [PDF] - 515K