Tuesday, January 03, 2012

why black market entrepreneurs matter to the global economy

Wired | Not many people think of shantytowns, illegal street vendors, and unlicensed roadside hawkers as major economic players. But according to journalist Robert Neuwirth, that’s exactly what they’ve become. In his new book, Stealth of Nations: The Global Rise of the Informal Economy, Neuwirth points out that small, illegal, off-the-books businesses collectively account for trillions of dollars in commerce and employ fully half the world’s workers. Further, he says, these enterprises are critical sources of entrepreneurialism, innovation, and self-reliance. And the globe’s gray and black markets have grown during the international recession, adding jobs, increasing sales, and improving the lives of hundreds of millions. It’s time, Neuwirth says, for the developed world to wake up to what those who are working in the shadows of globalization have to offer. We asked him how these tiny enterprises got to be such big business.

Wired: You refer to the untaxed, unlicensed, and unregulated economies of the world as System D. What does that mean?

Robert Neuwirth:There’s a French word for someone who’s self-reliant or ingenious: débrouillard. This got sort of mutated in the postcolonial areas of Africa and the Caribbean to refer to the street economy, which is called l’économie de la débrouillardise—the self-reliance economy, or the DIY economy, if you will. I decided to use this term myself—shortening it to System D—because it’s a less pejorative way of referring to what has traditionally been called the informal economy or black market or even underground economy. I’m basically using the term to refer to all the economic activity that flies under the radar of government. So, unregistered, unregulated, untaxed, but not outright criminal—I don’t include gun-running, drugs, human trafficking, or things like that.
“There are the guys who sneak stuff out of the port. The guys who get it across the border. The truck loaders and unloaders. All working under the table.”

Wired: Certainly the people who make their living from illegal street stalls don’t see themselves as criminals.

Neuwirth: Not at all. They see themselves as supporting their family, hiring people, and putting their relatives through school—all without any help from the government or aid networks.

Wired: The sheer scale of System D is mind-blowing.

Neuwirth: Yeah. If you think of System D as having a collective GDP, it would be on the order of $10 trillion a year. That’s a very rough calculation, which is almost certainly on the low side. If System D were a country, it would have the second-largest economy on earth, after the United States.

Wired: And it’s growing?

Neuwirth: Absolutely. In most developing countries, it’s the only part of the economy that is growing. It has been growing every year for the past two decades while the legal economy has kind of stagnated.

Wired: Why?

Neuwirth: Because it’s based purely on unfettered entrepreneurialism. Law-abiding companies in the developing world often have to work through all sorts of red tape and corruption. The System D enterprises avoid all that. It’s also an economy based on providing things that the mass of people can afford—not on high prices and large profit margins. It grows simply because people have to keep consuming—they have to keep eating, they have to keep clothing themselves. And that’s unaffected by global downturns and upturns.

Wired: Why should we care?

Neuwirth: Half the workers of the world are part of System D. By 2020, that will be up to two-thirds. So, we’re talking about the majority of the people on the planet. In simple pragmatic terms, we’ve got to care about that. Fist tap Dale.


nanakwame said...

This analysis offers key

into what is a shifting
security environment and considers

how the United States can
best respond to it. Dr.

Phil Williams argues that we
have passed the zenith

of the Westphalian state,
which is now in long-term

decline, and are already in
what several observers

have termed the New Middle
Ages, characterized by

disorder but not chaos. Dr.
Williams suggests that both

the relative and absolute
decline in state power will

not only continue but will
accelerate, taking us into a

New Dark Age where the forces
of chaos could prove

overwhelming. He argues that
failed states are not an

aberration but an indication
of intensifying disorder,

and suggests that the
intersection of problems such

as transnational organized
crime, terrorism, and

pandemics could intersect and
easily create a tipping

point from disorder into


As was done before in the
Afro-Americans communities during Jim Crow: “but not outright criminal—I don’t
include gun-running, drugs, human trafficking, or things like that” Neuwirth - it will
provide cash for the legal business…Great article w/o the morality B.S.