John (a false name) stands at the street corner that I pass by every morning in Oakland, when I walk my dog. An elder black man in his late sixties, John wears the same brown jacket each day, through summer heat and fall chill, and a weathered baseball hat. He shuffles up to cars that line up to caravan over the Bay Bridge into San Francisco and asks, “Do you have fifty cents?” John is also a mobile storefront for “loosies”–or, individually sold cigarettes–hawking them to neighborhood residents for a quarter a piece. On a good day, John pockets $20, a helpful supplement to his monthly Social Security payments, which he says are his only source of income otherwise.
Robert Neuwirth, author of the new book “The Stealth of Nations,” would say that John is a member of System D, an informal economy involving 1.8 billion people (that’s half of the workers in the world) who make their money doing jobs “that fly under the radar, that don’t get registered, incorporated, or licensed, that are not paying taxes (or may be paying less than they should), and are somehow camouflaging their operations.” Neuwirth stresses that his definition “rules out criminal enterprises–those businesses that commit a crime, regarding what they do, and not how they do it.”
Excluding activities like drug smuggling, for example, from the informal economy, it still accounts for $10 trillion in global trade annually.
In this country, Neuwirth told me, the informal economy makes up a deceptively small slice of our gross domestic product, 8 to 9 percent, but that translates into $1 trillion in economic activity. And that number is growing. “[There’s] no question that in hard times, when people are desperate for extra income, moonlighting and other forms of cash-only work become important survival mechanisms,” explained Neuwirth.
This can take the form of a teacher, who lost her job and is now running a childcare center out of her home. Or, my friend Marites (also a false name), an Asian-American woman in her mid-thirties who quit her white-collar job only to find reemployment difficult. She survives on the cash tips she earns when volunteering for an LGBT jitney service. These sorts of off-the-books hustles are keeping many families afloat these days, because not much else is forthcoming from the public or private sector.
President Obama’s $447 billion jobs pitch has fizzled in the Senate, even as Majority Leader Harry Reid tries to revive pieces of it (like a $60 billion measure to strengthen transportation infrastructure), a Sisyphean task. The House, on the other hand, agreed to pass a tax measure, with both parties celebrating this transcendence over party politics. But as Jennifer Steinhauer notes for the New York Times, legislators merely repealed a tax measure that hadn’t even been implemented yet. That’s what passes for job creation these days. And as an employer, the government shed 34,000 workers in September, the bulk due to austerity measures in cities and counties.
Meanwhile, in September, the private sector created about 100,000 new jobs, according to the Bureau of Labor Statistics. That’s a mere 7 percent of jobs needed to meaningfully reduce the 14 million people now unemployed, or 4 percent if you count the 25 million unemployed and underemployed. A recent new National Employment Law Project report, “Filling the Good Jobs Deficit,” estimated that we’re running an 11 million-job deficit, when you count both the jobs we lost in the Great Recession and those needed to keep up with population growth. The report goes on to say that any growth in employment that we have experienced has been in bad jobs, paying lower wages.
What score would the informal economy earn, I wonder? Neuwirth agreed with me that informal economies may offer more opportunities at present for people of color and Native Americans than the formal sector. “[Poor] people and people of color have historically been ignored and redlined by financial institutions. At the same time, governments are also hard-up, so they are raising the costs of licenses and inspections,” he expalined. “This double-bind makes it impossible for people to start businesses through approved channels.”
Opportunities created in the informal sector also stay within the communities where they’re launched, Neuwirth added. “A local vendor who is your neighbor tends to spend money in the neighborhood. This means that the money he or she earns circulates in the community and doesn’t leave the area to feed corporate profits. Street vendors buy in small quantities, so they also tend to buy from other local merchants. So the informal economy is actually an important tool for community economic empowerment and autonomous development.”
Perhaps a better frame for thinking about exchanges outside of state intervention and capitalism is the community economy, also known as solidarity economy, where members of the community collectively own and operate the means of production, so to speak. This is a better catch-all term because it’s not defined by what it’s not–the formal capitalist economy–but by what it’s for–the needs of the community. (Anthropologist Keith Hart, credited with coining the term informal economy in the 1970s, has similar issues with it.) A community economy collectivizes the struggle we all share to sustain ourselves during this endless recession; that’s unlike the informal economy, in which each individual hustles to get by.
Pockets of community economies are flourishing across the nation, as people decide to take their economic resilience into their own hands. Alliance to Develop Power, for instance, in western Massachusetts, is an example I’ve written about previously. They own and operate a community economy worth over $80 million, diversified in tenant housing cooperatives and a worker-owned contracting firm, creating 60 jobs for its members. Similar projects are afoot in New York City, some showcased in a series of film shorts called “Portraits of the Solidarity Economy.” The film will premiere Nov. 12 in New York, details here.