The idea of the informal economy: a work in progress report

I'm working on a series of studies concerned with the intellectual history of the 'informal economy', and its relevance to current concerns in Papua New Guinea (PNG; the eastern half of the island of New Guinea). I hope, eventually, to 'join up' these studies in an extended monograph.

The first study in the series was the subject of an OAC online forum in April 2012. It dealt with Keith Hart's introduction of the idea of an urban informal economy and considered earlier writers who had described what may be seen (in retrospect) as informal economic activity. I contended they could be seen as precursors of Hart and his ideas. These writers were concerned with mid-Victorian London (Henry Mayhew), late-colonial British West Africa (Peter Bauer) and late-colonial PNG (Richard Salisbury). These precursor works opened the possibility of considering informality in market exchange across a broader compass than that of Hart, one embracing countryside as well as town.

To bring the PNG rural sector into the narrative, the second study dealt with the subject of 'subsistence affluence', a concept introduced by the economist E K Fisk. It found some precedent in the work of Salisbury (who influenced Fisk) and other anthropologists including Mauss and Sahlins. Fisk was seen to stand in a line of economists including W A Lewis, Hla Myint and Peter Bauer (all owing much to Adam Smith), although his own adherence to neoclassical assumptions and method was emphasized.

A study of New Guinea Stone Age Trade by Ian Hughes provided a sense of that propensity to 'truck, barter and exchange' which Smith believed was innate to humanity. A critique by Chris Gregory, from a Maussian perspective, challenged the idea of 'subsistence' economy as a misconception, of subsistence 'affluence' as a chimera and of commercial exchange as a misnomer in traditional society. For orthodox economists, the significance of an affluent subsistence sector lay in an untapped margin of resources hidden within it, whittled away over time by population growth. So long as some degree of 'affluence' remained, this had implications for the willingness of Papua New Guineans to engage in the market economy and to 'hustle' for a living in informal economic activities. The study also recalled the visit of Keith Hart to PNG in 1972 and his introduction of the 'informal sector' concept into policy discussion on the eve of self-government.

The observation that informal economic activity was of relatively limited significance in PNG, at least until fairly recently, provided a starting point for the third study in the series. The paper sought explanations for this by comparing two stylized cultural entities, Monsoon Asia (where the informal economy is dynamic) and Melanesia (where it is limited in scope and contribution to livelihoods). Papua (occupying the western half of the island of New Guinea) was presented as the meeting point of these two stylized entities, and as a zone of transition between the ceremonial exchange of Melanesia and the system of tribute imposed on Papuans by Moluccan sultanates. Limited economic specialization and exchange in Melanesia contrasted with the Asian household economy, enmeshed in complex social hierarchies and systems of occupational differentiation.

Historically, the Malay Archipelago engaged in a world trading system, into which it drew west New Guinea over millennia. As shown by the work of the Dutch historian J C Van Leur, travelling peddlers played a key role in the archipelagic trade system, demonstrating the antiquity of the informal economy tradition in the cultures of Monsoon Asia. The paper sought explanations for the comparative absence of that tradition in Melanesia. Finally, it examined the rapid and dramatic emergence of an informal economy in Papua, dominated by non-Melanesian immigrants, in the wake of the incorporation of (Dutch) west New Guinea into the Republic of Indonesia in 1963. Within the space of ten years, the sleepy 'whitebread' Dutch colonial capital, Hollandia, became a recognizably 'Asian' town, renamed Jayapura.

Work now in progress is considering the extent to which premodern trade in Melanesia constituted any preparation for engagement with the market. It will examine the traditional trading systems of regions which would later become the hinterlands of three modern towns in PNG (Rabaul, Port Moresby and Goroka). In preparation for later discussion of these towns' colonial experience, the paper will survey the traditional trade of the New Guinea interior, the long-distance seaborne trade of the coasts and islands, and the particular case of the Gazelle Peninsula. Malinowski's account of the kula, and its (mis)interpretation by Van Leur, the historian of Asian trade, raises the question whether Melanesia possessed any counterpart of the travelling Asian peddler and what this might mean for the capacity of Melanesian traditional traders to engage with the market. Finally, the paper will consider how Keith Hart's concept of 'informality', derived from Weber's notion of rational/legal bureaucracy, could be seen as applicable to the early colonial setting of New Guinea.

Future work will take the story of the emergence of an informal economy in PNG up to the date of self-government in 1973, while a final section will review the modern informal economy (1973-2010), a period over which population nearly trebled and poverty became an open and observable phenomenon.

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Comment by John Conroy on April 21, 2013 at 8:15am

Glad to hear from you again, John. I see you've been commenting lately about the potential for modelling to systematize our thoughts about social networks. I take it your comment is not so much in relation to my own post, but rather an opportunity to draw to the attention of readers some recent modelling work done on the Kula trade system (to which I had referred). Having access to a modelling package is seductive, indeed fun, when it's applied to a well-described data set. As a 'literary' economist, I've been a lifelong refugee from the tendency in my erstwhile profession to substitute technique for insight (though I intend no comment on the merits of the case in point). My own use of Malinowski (in the paper I'm working on, which I hope to post soon) is for the purpose of rejecting what I regard as a misinterpretation of his account of a particular Melanesian trade system by a Dutch historian of premodern Asian trade. J C Van Leur's account of the trade of the Malay Archipelago is discussed in my paper on Monsoon Asia and Melanesia (see my blog post for the link).

Comment by John McCreery on April 15, 2013 at 6:37am

See Ring Around the Klula [].

P.S. A Google search for "social network analysis Kula Ring" turns up several additional items.


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