Agriculture Reference
In-Depth Information
Civic Economy, Economic Embeddedness, and the Informal Economy
The term “informal economy” was coined in the early 1970s to refer to the earning and
spending patterns of the urban subproletariat in the Third World. 23 It is not surprising that
informal and semiformal economic arrangements became most apparent in developing coun-
tries, since it is in the Third World that the “seams” of the neoclassical viewpoint are most
evident. During the 1950s and 1960s, the most widely accepted path to economic moderniz-
ation for less-developed countries was to adopt the Western model of industrialization. This
model posited that the best engines of economic growth for less-developed countries were
open/free markets fed by large-scale, capital-intensive, mass-production enterprises run by
multinational corporations. Agricultural economies could be transformed into modern, in-
dustrial economies by rationalizing the agricultural sector, moving people off of the land and
into cities, and establishing and nurturing an urban-centered manufacturing export base. 24
The spread of the Western model of market development and industrialization throughout
most of the Third World during the 1950s through the 1970s was quite remarkable. However,
it is important to note that the process of “modernization” was essentially a “top-down” en-
deavor. That is, the Western model of development was imposed on countries throughout
the Third World with little regard to existing institutions and social structures. Multinational
factories were simply set down in less-developed countries around the world, while large-
scale, mass-market retail establishments filled with consumer goods became fixtures in Third
World cities around the globe. And while a small handful of countries have benefited from
this economic development strategy and have made dramatic strides toward mirroring “mod-
ern,” Western-like economies (e.g., Korea, Taiwan, Singapore), many others have not seen
the hoped-for results. 25
The embedded economy is most evident in those countries that have not succeeded in de-
veloping full-blown industrial economies. In these nations, only a relatively small fraction of
the laborers work for wages and provide for most of their needs through commercial market
transactions. Larger segments of the population survive in a world of local capitalism that in-
cludes not only the exchange of goods, services, and labor for money but also barter, inform-
al work arrangements, and labor exchanges. For these people, the neoclassical conception
of the economy as being separate from the household or community has little meaning. The
flow of money through formal market channels and the constructed categories (occupations,
industries, etc.) used by economists to chart growth and change in the developing world hide
a social and economic reality that is far more complex and multifaceted than the picture that
is often presented in official statistics and reports.
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