Falling Down

System D: A makeshift market in Lagos, Nigeria.
System D: A makeshift market in Lagos, Nigeria.

Every year, it seems, the guardians of consensus wheel out a new scapegoat to blame for the lengthening economic crisis. The most recent candidate is the tax-dodging population of southern Europe. Not the banking and corporate elites, of course, whose shady income accounting seems to be beyond reproach, let alone prosecution. No, in this case, we are soberly instructed that the actual culprits are the less fortunate strivers who operate in the vast shadow economies in the region known as PIGS (Portugal, Italy, Greece, and Spain). Since these Eurozone governments are unable to collect revenue from all this off-the-books economic activity, the reasoning goes, they have been forced to spend well beyond their means to stay afloat. Our banker-overlords, in other words, are seeking to exact even greater sacrifice and self-discipline from working populations that are scraping simply to survive. In their fanciful jeremiads, this makeshift economy—which counts an estimated 28.5 percent of the Greeks, 27 percent of the Italians, and 22.5 percent of the Spanish—bulks up into a vast criminal syndicate. The rhetoric is all but interchangeable with the anti-immigration hysteria convulsing the equally battered US economy. Denizens of this underground sector, it is alleged, are surely cheating on their law-abiding peers as they go about their undisclosed and unregulated business.

To date, the level of insult has come nowhere close to Marx’s colorful scorn (in The Eighteenth Brumaire of Louis Bonaparte) for the lumpen proletariat: “vagabonds, discharged soldiers, discharged jailbirds, escaped galley slaves, swindlers, mountebanks, lazzaroni, pickpockets, tricksters, gamblers, maquereaux, brothel keepers, porters, literati, organ-grinders, ragpickers, knife-grinders, tinkers, beggars”—in short, “the scum, offal, refuse of all classes” who feed parasitically off “the laboring nation.”

Indeed, in some activist quarters, Marx’s lumpen have acquired a newfound nobility from their inclusion in the “precariat,” an umbrella term that embraces a wide spectrum of participants—from highly educated New Economy freelancers, rudely expelled from the secure haven of standard employment, to recently arrived migrants plugging the gaps in menial services. “Power to the Precarious” is not yet a persuasive rallying cry, but the fitful world of self-employment—where independent workers patch together an income from intermittent gigs—is almost certainly where more and more of us are headed. Indeed, the precariat is where most of the world’s population has always earned a living. Today, fully half of the global workforce subsists in the wageless condition that academics and government officials have come to call, with some disaffection, the “informal economy.”

Though he uses that term in the subtitle of Stealth of Nations, investigative journalist Robert Neuwirth prefers to refer to “System D,” the slang derivation from l’economie de la débrouillardise (the makeshift economy) of Francophone Africa and the Caribbean. This more neutral-sounding phrase suggests a high degree of self-organization; System D operates outside the rules and regulations of the formal sector, via an alternate code of efficiency and trust, with its own resilient logic. For the disenfranchised and the disempowered of most countries, it is the only real option, and Neuwirth believes that its clandestine distribution networks make perfect sense as a response to their needs. Indeed, in his strenuous efforts to rescue this contraband economy from its reputation as the grisly realm of brigands, smugglers, counterfeiters, and charlatans, he goes so far as to suggest that it is not a problem for modern economic life, but rather its solution.

To grasp the true scope of such a claim, we must first reckon with the enormous global reach of System D. Its current scapegoat status aside, most political leaders and economic thinkers routinely ignore the significance of this makeshift economy, even though it accounts, in some nations, for up to 70 percent of GDP. In India, for example, just 7 percent of the workforce enjoys regular wages and salaries, and that number is declining. According to one estimate, System D makes up $10 trillion worth of activity in the global economy (if it were an economic superpower, it would be second only to the $14 trillion US economy), and two-thirds of the world’s workers will be employed in it by 2020. Nor are the core operations of System D alien to the more shipshape countries of the global North. The underground economy is relatively small in the recessionary United States (where it’s estimated to make up between 8 and 9 percent of GDP), but that still works out to a whopping $1 trillion nationwide, and its activity is disproportionately flourishing in immigrant gateway cities. Banks don’t make loans in this sector, so it has been relatively immune to the debt contagion of recent years.

In his first book, Shadow Cities: A Billion Squatters, a New Urban World, Neuwirth proved himself to be an accomplished field reporter from off-the-grid zones. Stealth of Nations finds him in a variety of similar locations. He presents on-the-ground dispatches from the sprawling Rua 25 de Março street market in São Paolo, which draws up to a million visitors on some days; the Paraguayan smugglers’ paradise of Ciudad del Este; the Sanyuanli district of Guangzhou, which plays host to as many as three hundred thousand African small traders; and several sites all over Lagos, including a jumbo garbage dump that hosts a church, a mosque, and pop-up restaurants to service the two thousand scavengers who work over its refuse heaps.

In the course of his reporting, Neuwirth builds out personal profiles that are clearly intended to bolster his case for the self-organizing features of System D that he finds praiseworthy. The sprawling market for knockoff consumer goods, he notes, can provide crucial civic benefits to consumers otherwise unable to afford the legal versions. Likewise, he contends that unlicensed scavenging and bartering constitute an ad hoc recycling system that is ecologically sustainable, and that cross-border, or back-channel, bootleg routes help stanch official corruption in the global South, since they permit producers to evade the rapacious tariffs that government officials try to exact. He also reports that less regulated modes of trade often provide services—transport, roads, utilities, medical care—that governments are not able to maintain. Finally, the informal economy is nothing if not a form of development, generating jobs at a time when the official statistics are not showing a lot of growth.

Neuwirth can sometimes come close to cheerleading for System D, but he is no free-market libertarian urging on the collapse of the public sector. In fact, he is arguing for “an alternate vision of globalization,” based not on the neoliberal dictates of the free market but rather on the “principles of the flea market.” Along the way, he mounts some spirited defenses against criticism of the illegitimate market. The economists who see such arrangements as inefficient and incapable of “scaling up” have little understanding of the value that System D creates, especially for the underserviced poor. In responses to the charges of tax-dodging and labor exploitation we have lately seen surface in the Eurozone crisis, Neuwirth fingers the obvious, and far more powerful, culprits: the leading lights of the formal economy. Corporate America, after all, practices tax evasion on an epic scale, and is gutting the rights of labor by the hour. Citing the principle of no taxation without representation, he asks: Why should people pay taxes when most politicians are hired only to do the bidding of the rich?

While System D is no place for collective bargaining in the traditional sense, Neuwirth mentions some notable examples of mutual aid and cooperative organizations that have evolved to protect workers’ interests. Among these looser models of organizing are India’s Self Employed Women’s Association; Brazil’s association for scavengers, or catadores, that bargains with the cartels that buy the recyclable materials; Nigeria’s National Union of Road Transport Workers, which grew out of the local organizing of motorcycle taxi drivers; and the Domestic Workers United of New York City, which won a historic bill of rights through the state legislature last year. Most large street markets have a tribunal, like the UK’s piepowder courts, set up to adjudicate conflicts among merchants. Indeed, Neuwirth believes that informal markets inherently have “cooperative tendencies,” and that these organizations, which help institutionalize an ethos of greater collaboration and self-help, might one day coalesce into a powerful voice on System D’s behalf, “worthy of its size and importance” in “the global arena.” On a less utopian note, he observes that some governments have begun to explore formal measures—by floating pension schemes and labor protections or forcing banks to extend loans—in return for the right to capture some revenue, mainly via licensing fees, from the traders and merchants who choose not to legalize their operations.

In his zeal to redeem System D’s deviant status, Neuwirth sometimes overreaches—as when he ventures to suggest that, “one deal at a time,” its black marketeers are actually “building a better world.” At the same time, however, he does not gloss over the hardships of operating in the shadows, nor the uneven treatment meted out to economic players there. In comparing the respective fortunes of two informal vendors—an Anglo art school graduate who cooks olive-oil cake in her home and sells it to local coffee shops, and a Mexican immigrant who sells tamales from her pushcart—he provides a memorable example of rough justice. The cake maker, who works in private, gets lionized in foodie magazines and attracts zero attention from city inspectors for her unlicensed activities. But the tamale maker, who works in public, gets evicted from her street beat, and lives in constant fear of being busted. Both workers are part of the informal economy, but this common status is less significant than the way that authorities and social peers interpret who they are and how they make their living. In the eyes of the enforcers of polite society, they don’t really belong in the same category at all. Even in System D, there is one version of the law for those already on the social ladder and another for those without a foothold.

Andrew Ross is the author of several books, including Nice Work If You Can Get It (NYU Press, 2010) and, more recently, Bird on Fire (Oxford University Press, 2011).