New OAC Online Seminar: John Conroy Intimations of the 'informal economy', 16th April to 28th April

The seminar opens on Monday 16th April and will be closed Saturday 28th April.

You can read the new Working Paper here (warning it's long, but very interesting and you can be selective).

This paper considers the idea of informality in market exchange, as introduced into the economic development literature by Keith Hart in the 1970s. In addition, it discusses three writers who may be considered forerunners. Each, to a greater or lesser degree, anticipated the idea of informal economic activity and described it in a particular historical period and place. They are the mid-Victorian journalist Henry Mayhew (London, c.1850) (cf. Swift 2011), the libertarian economist P. T. Bauer (British West Africa, c.1948) and the economic anthropologist R. F. Salisbury (colonial New Guinea, c.1952-1963).

John Conroy is an economist, not entirely unreconstructed although he still calls himself a ‘development economist’. He spent the 1970s in Papua New Guinea, finishing as Director of the PNG Institute of Applied Social and Economic Research. After six years in Indonesia, during the 1980s, he ran the Foundation for Development Cooperation through the 1990s, specialising in microfinance and ‘financial inclusion’. He abandoned that field in disgust after its invasion by private equity, and is now a visiting fellow at the Crawford School of Economics and Government at the Australian National University.

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Welcome to John Conroy who has very kindly offered to continue our experiment in trans-disciplinary discussion, this time between anthropology and development studies.

The material included in this working paper constitutes a plentiful source for discussion as it focuses on the concept of the informal economy as articulated by Keith Hart and three of his precursors (Henry Mayhew, P. T. Bauer, and R. F. Salisbury) in a diverse range of places, from Victorian England and British West Africa to colonial New Guinea.

This paper forms the introductory part of a monograph in which Papua New Guinea (PNG) is the main case study. As someone with research interests in PNG, I have several questions I would like to ask, specifically in relation to the "wantok system" and the penetration of the state institutions by clientelistic networks -- concerns that should resonate elsewhere.

I'm also very much interested in hearing more about what you have to say about the contemporary PNG informal economy, specifically your diagnosis of it as still ill-developed and marked more by violence than creativity. I am especially interested in recommendations you might have to remedy this.

To start with, however, I wonder if you could tell us more about the circumstances surrounding the Faber Mission to PNG (where you initially met Keith Hart) and why it made the recommendations in relation to the informal sector that it did. This might provide some initial context to discuss the contemporary relevance of the concept of the informal economy, and not just for the disciplines of anthropology and development studies, but also policy and practice, in PNG and elsewhere.

These questions are meant merely as sparks to initiate debate. Anyone who would like to add their own question, please do so! Remember, we have a casual atmosphere where authors reply when and how they can, and other participants have an opportunity to read and reflect.

John, thanks again for giving your time to the OAC!

A fascinating paper and a welcome reminder of how anthropology participates in larger conversations that preceded and will likely survive its moment in history as a distinct discipline. I wonder as I read it about how you see the relationship between "informal economy" and "informal organization." Both, it seems to me, point to human activity that lies outside conventional institutional boundaries, but the literature on the latter suggests why the former might not be the conventional free market war of all against all between rational, radically independent agents acting only in their own interests. Insofar as informal organizational ties both within and across organizational boundaries depend on exchanges of favors, gifts that create relations, instead of arms-length translations, they cannot be rational in any short-term profit-taking sense. They require, however cynical, an involvement in a gift economy....

This is, of course, only speculation. How does it stand up to an expert's gaze.

Welcome, John. You have plenty of questions to go on with, so I will start by adding some background to our conversation which began 40 years ago and has flourished by email of late.

The first point concerns development studies. In the 70s there were plenty of economists who looked to anthropology, history and politics for help in answering questions about how societies improve themselves economically. One of them, Chris Gregory, made the switch to anthropology after asking how gifts and commodities are combined effortlessly in PNG exchange practices. But since the 80s a new breed of neoliberal economists claimed that development was just about getting the prices right for the markets to work efficiently and interdisciplinary interests were abandoned (as indeed was the development of poor countries). I have written and continue to to write with socially minded economists like John Bryden (who has a claim to being co-author of my first informal economy paper) and Vishnu Padayachee. But young anthropologists today tell me that economics seems to be hermetically sealed to them with no possibility of exchange across disciplines. Your enterprise is a brilliant illustration of the possibilities, being open to all relevant sources, yet still guided by a mission to make a better world economy. Is ours a country for old men that has long gone or is there hope for development studies to take off again in today's world?

My second point concerns how ethnographic fieldwork became a concept in development studies. After finishing my PhD I went to work with development economists at East Anglia. There was a perceived crisis around 1970 about unemployment in Third World cities. It didn't seem right to me, but I didn't know why. It took me some time to figure it out and I realised that the people I lived with were working, but in a highly irregular fashion. This came from excavation of my experience in the Accra slums in ways that I have begun to explore in another thread on anthropology, society and the unconscious mind. I was keen to translate my ethnography into terms that development economists could use. I hit on the formal/informal pair by reading American sociology on the law, crime and the penal system, S.M. Lipset, I think. (This ties in directly with John McCreery's comment above). My paper had two parts: 1. vivid description (I have been there and you haven't) 2. A sort of neo-Keynesian analysis. I had no ambition to coin a concept. This was done by the conference organizers who published the ILO Kenya report while I was waiting for my paper to be published by them and coined the expression informal sector without acknowledging me! In any case, I went to PNG and, when presenting a paper on this at Manchester, Ian Steedman, a neo-Ricardian Marxist economist, asked me if I had read Marx or even Adam Smith, since this rubbish I was chattering about had no hope of informing constructive development policies. I was so ashamed that I went away, read Marx and had a conversion to Marxism (which was all the rage then). By the time my informal Ghana paper came out, I shared the Marxists' contempt for the concept. I only began to take an interest in it in the late 80s when I discovered that the idea was still alive and kicking and I wondered why.

The third point concerns the interest of an area focus. Richard Fardon has a collection called Localizing Strategies which argues that advances in anthropology have often occurred through a shared focus on a particular region. PNG or, as some people prefer, Melanesia has long been one such region and I think your regional focus gives you the chance to range as widely as you do, that and your continuing interest in the causes of economic development. You also place the authors you study in their regions and time periods. When I joined the Faber development strategies mission, there were a macro-economist, agricultural economist and industrial economist, while my portfolio was the rest, but my official label for the World Bank's benefit was labour economist! We went out for three months in 1972 and what struck me was how different PNG was from West Africa, but also how much I already knew about PNG from the anthropological literature. It was the eve of independence and I hit on an analogy with East Africa where colonialism had been more brutal and the indigenous economies more repressed, specifically Nyerere's Tanzania, and I came up with a version of rural socialism as development strategy which accorded very well with Somare's Pangu Party when they won the 1973 elections. What our report had to say about the informal sector was mainly me and I will come back to it, if you like. But for now let me step back and hear what others have to say.

I'm interested to hear what both of you make of the mileage that Libertarians, and allied viewpoints, continue to get out of the informal economy. I hear something like a fetishization of the informal as living proof that the market will always find a way, like grass through the pavement. Even inside development circles (at least over dinner) some people talk about Mogadishu like it's a rugged Libertarian wonderland where, somehow, "everything just happens" despite -- or because of -- the absence of the state. Or here in the US, Rush Limbaugh was recently celebrating the informal economy in junk food that undermined government-imposed healthy school lunches in California (see the caller at the end of the transcript).

Are Libertarians and their think tanks drawing on these ideas straight from Bauer, or have they continued to be involved in the articulation of the informal economy as the concept has developed? I wonder, Keith, if you were surprised to find the concept still alive in the 80s despite Marxist disdain, whether it was Libertarians and other free-market fundamentalists who might have been looking after it?

Paul, the informal sector owed its birth to a Keynesian concern with employment creation: underemployment was better than no employment. As you imply, it took off largely after 1980 as a surrogate for the free market. When structural adjustment policies (SAPs) set about dismantling public economies for the sake of freeing up international capital flows, people wondered what Africans would do without education, health provision, transport, housing etc and the answer of course was the informal economy, do-it-yourself markets unencumbered by state laws. They didn't need Bauer for that, but he was ennobled in retrospect as a libertarian pioneer. The same World Bank that pushed this stuff in the 80s came back after the millennium with a private sector development program (PSD) that saw "informality" as a threat to the regular operations of corporations now established in places where they could move money in and out easily. For example, McKinsey did a report on Turkey purporting to show that only 2/3 of Value-Added Tax (at 17%) was collected because of the size of the informal economy. If collection could go up to 90%, the rate could be reduced to 13% and firms that paid taxes would have lower costs while their informal competitors raised theirs. So the history of the concept is not uni-directional.

I am happy to join in when addressed, but this is John's show, not a double act, with Justin as moderator. Owing to huge time differences between the US, Europe and Australia, it is going to take some skill to get a suitable conversation going. As it happens, I am leaving for South Africa tomorrow, so I will be out of it for a couple of days. I look forward to encountering a thriving discussion when I return, with John's paper as it's main focus.

I wonder if part of the issue re Libertarians, et al, doesn't arise from the fact that the informal economy is defined by what it is not, not part of the formal, a.k.a., already institutional, regulated economy. The term thus covers an infinite multitude of activities, crime as well as compassion, unregulated trade as well as the primitive communism of mutual help to which David Graeber has pointed in an earlier seminar. A concept that encompasses both armed conflict among drug dealers and the strategies for survival described by Carol Stack in All Our Kin, both insider trading on Wall Street and middle-class parents putting up down payments for their children to purchase houses, in effect extending unlimited term loans at below market rates, may be in some need of refinement before anyone draws sweeping conclusions, of either a libertarian or a communitarian bent. Shouldn't this be precisely where the local particularities revealed by ethnography become highly relevant?

Good morning Justin, John, Keith and Paul from the antipodes, where in addition to the usual time-zone difficulties I have the extra impediment that (in an act of exquisitely bad timing) I'm away from my home base for a couple of days.

I hope to be able to respond with some substance this evening (my time) ie in about 10 hours, but in the meantime I'd like to remark that the conversation so far shows just how fertile and pertinent to current concerns the idea of the informal economy has proved to be. The more contemporary phenomena (grand corruption, gansterism et al) are there to be observed in Papua New Guinea, where my larger study will focus over time, and the informality framework has much to say about them, of course. 

But I'd like to point out that in my paper I imposed a limit on its scope. It is, after all, intended as a contribution to the history of ideas about development, and specifically with that phenomenon within the development process (hitherto unnoticed until Keith drew attention to it) called the informal 'sector', or later, informal 'economy'. I'm interested in Keith's ideas and in his intellectual predecessors. This I think is what Keith is hinting at when he suggests (above) a return to the content of the  paper itself before we range too far and wide. The subject matter offers a genuine and unforced opportunity for exchange between anthropologists and economists and I hope I've uncovered some perhaps surprising contributions to the debate from both sides of that fence.  

OK, I’m back again and hope to respond to some of the queries:

First, Justin, I’ll defer responding to some of your queries for a bit as they are in relation to quite contemporary matters. However, in regard to my attitude to current policy issues, you might be interested to have a look at my paper in the Pacific Economic Policy bulletin, at http://peb.anu.edu.au/pdf/PEB25_1_Conroy.pdf

John asks about the relationship between ‘informal economy’ and ‘informal organization’. I agree that both lie outside conventional institutional boundaries. Indeed the informal economy’s location outside bureaucratic boundaries and categories often disadvantages those active within the sector, as they are vulnerable to various forms of official discrimination and harassment, while they usually lack ‘voice’ to defend their interests. In relation to competition between agents operating within the informal economy, while they are subject to competitive pressures, they are also (in a developing country context) involved in traditional relationships and support systems which prove rather durable in the urban setting. These forms of support tend to ameliorate the impacts of misfortune, as described by Keith Hart in his study of the Ghanaian settlement of Nima. These involve reciprocity and are able to be analysed usefully in a gift economy framework. I have seen one or two nightmarish accounts of the lives of migrant Indian workers by Jan Breman, but these seem to involve institutional arrangements which put them well outside any ‘free market’ metaphor and I don’t know enough about the situation to say whether the ‘gift’ metaphor has any utility in such circumstances, either. Chris Gregory (also mentioned by Keith in his response) has worked in both Melanesia and India and might have something to say in relation to your point.

Hullo Keith, I’m glad you’re able to weigh in. Your point about contemporary economists as a group hermetically sealed off from ‘social’ scientists is too close for comfort. I recall debates in the 1970s concerning whether modern neoclassical economics was, or could be, a social science and I must confess that in the interim most of the profession seems to have been engaged in proving the point. There is an arrogance associated with the rise of financial markets as a share of GDP in advanced economies and the corresponding rise in the salaries of financial market economists which has encouraged hubris and a disinterest in broader issues among many. There has also been (and this point has been noted ruefully in the last few years) a loss of interest in and awareness of economic history. Thank you also for the insight you provide into your intellectual journey towards the informality concept.

Paul Cox asks about the relationship between the libertarians and the informal economy. The Economist has run a few articles about Mogadishu noting how private for-profit schools have emerged in the absence of a state, and how mobile service providers have proliferated and are (were?) even trying to deal with the issue of interoperability. I don’t see that as wonderland stuff, or romanticism, but simply as evidence that the market dynamic is a powerful force that will attempt to exert itself under even dire circumstances. Nobody’s saying (I hope) that it’s a good place to migrate, but it does make some points that a libertarian (or an anarchist) might find encouraging. That radio Shock Jocks might seize on such vignettes to make their specious cases is an unavoidable aspect of our political systems.  It’s interesting that Peter Bauer, who in old age was happy to accept the suggestion that he might even have invented the idea of the informal economy, is a pin-up boy for the libertarians. I have extracted a certain sly pleasure from efforts to describe various points of correspondence between the thinking of Bauer and Keith Hart, but it’s nonsense to imagine that the informal economy is Bauer’s construct. Keith is quite right, by the way, to point to the complete reversal involved in the World Bank’s perception and use of the construct over the years since it first appeared.  So also is John McCreery right to point out that the conception of informality as ‘not-formal’ endows the concept with a catholicity which hinders acuity in analysis.



John Conroy said:

Good morning Justin, John, Keith and Paul from the antipodes, where in addition to the usual time-zone difficulties I have the extra impediment that (in an act of exquisitely bad timing) I'm away from my home base for a couple of days.

I hope to be able to respond with some substance this evening (my time) ie in about 10 hours, but in the meantime I'd like to remark that the conversation so far shows just how fertile and pertinent to current concerns the idea of the informal economy has proved to be. The more contemporary phenomena (grand corruption, gansterism et al) are there to be observed in Papua New Guinea, where my larger study will focus over time, and the informality framework has much to say about them, of course. 

But I'd like to point out that in my paper I imposed a limit on its scope. It is, after all, intended as a contribution to the history of ideas about development, and specifically with that phenomenon within the development process (hitherto unnoticed until Keith drew attention to it) called the informal 'sector', or later, informal 'economy'. I'm interested in Keith's ideas and in his intellectual predecessors. This I think is what Keith is hinting at when he suggests (above) a return to the content of the  paper itself before we range too far and wide. The subject matter offers a genuine and unforced opportunity for exchange between anthropologists and economists and I hope I've uncovered some perhaps surprising contributions to the debate from both sides of that fence.  

My last remark was addressed to the "informal" in "informal economy." Now I'd like to ask about the "economy"? Does "economy" require the presence of market driven transactions? There are times, even when allocating scarce resources, that exchange is not involved. Consider, for example, lifeboats, a sinking ship, and "Women and children first." Or a wounded soldier handing his last ammunition to a comrade and urging him to flee while fleeing is still possible. These questions are, by the way, stimulated by David Graeber's discussion of debt and his argument that debt, conceived as a temporary imbalance in exchanges between equals, is not the same as "from each according to his ability, to each according to his need," the usual principle in play when people are working collectively on some project, or allocations based on ascriptions of distinct qualities in settled hierarchies, e.g., tribute paid to a king. Graeber argues persuasively that the latter is not the payment of a debt, since there is no way that the debt can be settled, returning the commoner to equality with the king.

John, these are interesting points, but answering some of them is beyond my competence (I was about to say ‘above my pay grade’ but I don’t want to sound too economistic).I’m not, to my embarrassment, familiar with David Graeber’s work, for a start. But as to the issue of whether all ‘economic’ transactions require a market mechanism, then the answer is clearly No. A Mayan (or was it Incan?) command economy allocates resources to production and rewards participants on criteria other than those of the market, for example. And when we get to battlefield situations, or sinking ships, I believe we are in a domain of values other than the economic. It’s true that Milton Friedman did a lot to ensure that the USA moved from a ‘command’ (ie, conscript) military to a smaller and higher-paid, better-qualified ‘volunteer’ military – that is by applying market principles to recruitment – but such principles surely break down in a scenario such as you have posited. Whatever about the methods of recruitment, the US military still draws on many families with a tradition of military service and perceptions of ‘honour’ which are not amenable to economic analysis and which might influence behaviour in extremis. I don’t doubt, though, that Friedman's Chicago School colleague Gary Becker (Economics of Marriage, Economics of Divorce, etc) might try to posit a calculus of reward to explain such behaviour – though problems of contract enforcement after the death of the hero might require special arrangements! But this is all taking us rather a long way from the operation of mutual support among informal sector participants in an urban environment (unless I’m missing the point)



John McCreery said:

My last remark was addressed to the "informal" in "informal economy." Now I'd like to ask about the "economy"? Does "economy" require the presence of market driven transactions? There are times, even when allocating scarce resources, that exchange is not involved. Consider, for example, lifeboats, a sinking ship, and "Women and children first." Or a wounded soldier handing his last ammunition to a comrade and urging him to flee while fleeing is still possible. These questions are, by the way, stimulated by David Graeber's discussion of debt and his argument that debt, conceived as a temporary imbalance in exchanges between equals, is not the same as "from each according to his ability, to each according to his need," the usual principle in play when people are working collectively on some project, or allocations based on ascriptions of distinct qualities in settled hierarchies, e.g., tribute paid to a king. Graeber argues persuasively that the latter is not the payment of a debt, since there is no way that the debt can be settled, returning the commoner to equality with the king.

John, returning to the paper itself, I am struck in the introduction by what you call "the limited precedents for any fine-grained division of labour in a PNG informal sector" and the relationship between the lack of such precedents and the multiple-job, multiple-source of income lives that Hart described. I find myself thinking about how poorly the catch-as-catch-can quality of lives dependent on informal economies fits with the rational actor model of people who can make calculated choices from a variety of options.

I think rational actor models could be applied -- catch-as-catch-can is a sort of maximising behaviour -- but I wonder how much explanatory power they have when choice is so constrained. I also suspect, as Mayhew illustrated well, that choice is quite unevenly distributed in many informal economies. Which is certainly at odds with an image of the freest of free markets.

On another point raised in the paper, I find it interesting how Mayhew really did do his best, modern sampling methods or no, to enumerate the informal trades he wrote about. (Not to mention his successor Charles Booth; I can't remember how much he got into the details of occupations, but I love his maps.) Did Bauer, Salisbury and Hart see this type of work as useful, futile, missing the point, or perhaps even actively dangerous to informal economies? If the informal sector powers development, and what defines the sector is a lack of precise state recognition, then enumeration could be the first step towards undermining it. Does Mayhew's political arithmetick have development value, or is it a little too political?

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