Geography Reference
In-Depth Information
productive potential of what some describe as the
'true capitalist entrepreneurs' of developing
countries has been 'stunted by excessive and
inappropriate interventions on the part of the state
via redundant regulation and thwarting red tape'
(Tokman 1989: p. 1068). In addition to lack of
government support and the prohibitive costs
involved in becoming legal, informal
entrepreneurs have not uncommonly faced
harrassment or victimisation (Thomas 1996: pp.
56-7; see also Box 38.2).
Although the case study presented in Box 38.2
may suggest otherwise, a number of commentators
have observed that in the last ten to fifteen years,
government authorities, along with planners and
social scientists, have come round to the notion
that the informal sector is more of a seedbed of
economic potential than a 'poverty trap' (Cubitt
1995: p. 175). With reference to Sri Lanka, for
example, Sanderatne (1991: p. 96) declares:
POLICY APPROACHES TO THE INFORMAL
SECTOR: FROM PROBLEM TO PANACEA?
Until relatively recently, there was no explicit
policy towards the informal sector in regions such
as Latin America. This was partly due to
anticipation that labour surpluses would
eventually be absorbed by formal industry and
services (Tokman 1989: p. 1072). In some respects,
this was borne out empirically by the fact that
between 1950 and 1980, the informal sector
declined in a range of countries, including
Argentina, Chile, Colombia, Peru, Mexico and
Venezuela (Gilbert 1998: p. 71). Another
important reason for policy neglect is that many
economists and civil servants construed informal
activities as 'parasitic', 'unproductive' and
tantamount to 'disguised unemployment'. As such,
there was little will to promote growth in the
sector (Bromley 1997: p. 124). In effect, the
informal sector was (and in many circles still
is
)
viewed as an employer of 'last resort' or a fragile
means of basic subsistence in situations where
social welfare provision for those outside the
formal labour force is minimal or non-existent
(Cubitt 1995: p. 163; Gilbert 1998: p. 67).
Condemned to a precarious existence on the
margins of the urban labour market, it is no
surprise that informal sector entrepreneurs have
faced serious barriers to survival and growth. The
fact that most governments in developing
countries have adopted policies to subsidise the
large-scale capital-intensive sector (for example via
credit transfers, direct and indirect market
protection such as tariffs, quotas and so on), has
effectively discriminated against the informal
sector (Chickering and Salahdine 1991c: p. 186;
Grabowski and Shields 1996: p. 172). On top of
this, while the process of 'becoming legal' varies
across countries and occupations, it is often
extremely time-consuming and costly (Tokman
1991: p. 147).With reference to street occupations
in Cali, Colombia, for example, Bromley (1997: p.
133), stresses that 'regulations are excessively
complex, little known, and ineffectively
administered, resulting in widespread evasion,
confusion and corruption'. In this light, the
Informal economic enterprises, with the
exception of illegal and illicit activities, are
accepted as essential components of the Sri
Lankan economy. Some of these informal
activities have deep social roots and are essential
to the life of the community; many are
vertically or horizontally linked to, and have a
symbiotic relationship with, the formal sector.
What is more, informal activity, though
continuously changing in character, has grown
rather than diminished with the country's
increasing development and has become an
essential means of meeting the community's
economic and social needs.
These more positive constructions hark back to
the 'popular entrepreneurship' concept originally
emphasised in Hart's work. They are also endorsed
by numerous empirical studies showing that some
informal workers earn more than salaried workers,
that self-employment can be a source of pride or
prestige, that informality permits flexibility and
ready adaptation to changing demand and family
circumstances, and that people often acquire skills
in the formal sector that can subsequently be used
to advantage in their own businesses (see, for
example, Alonzo 1991; Salahdine, 1991). By the
