#31 Informal is normal
Listen, they're playing our song
Hey friend,
Here’s your fortnightly dose of Makeshift Mobility, your first newsletter focused on innovations in informal transportation.
I’ve got two major publications to share with you today. I’m still digesting both but thought I’d give you some quick takes.
Sorry that I’m a bit off the usual schedule this week. We took some time yesterday to stop and listen to the mountains.
I hope you caught this week’s Pop Transport from the Global Partnership for Informal Transportation. They featured a webinar from INTALInC that had 10 short presentations on current research that focused on or touched on informal transportation from around the world.
“It’s so big, where are you going to put it?”1
Hot off the press, the World Bank just released a report that shines a light on the size of the informal sector in what the international financial institutions endearingly refer to as the EMDEs—emerging market and developing economies.
The Long Shadow of Informality: Challenges and Policies edited by Franziska Ohnsorge and Shu Yu (2021) claims to be “the first comprehensive analysis of the extent of informality and its implications for a durable economic recovery and for long-term development.”
Surprise, surprise. It’s big.
…the informal sector accounts for more than 70 percent of total employment—and nearly one-third of GDP—in EMDEs.
Of course, this really isn’t news. The International Labor Organization released a report in 2018 that said:
“Two billion workers — representing 61.2 per cent of the world’s employed population — are in informal employment.” (from Women and Men in the Informal Economy: A Statistical Picture)
“Listen to the chorus!”
You can catch a recording of the WB online panel that launched the report. (One hour viewing time.)
The panel, moderated by Mari Pangestu, WB’s Managing Director, Development Policy and Partnerships, featured:
Ceyla Pazarbasioglu, Dir. of the Strategy, Policy, and Review Department, IMF
Brahima Coulibaly, VP Global Economy & Development, Brookings Institution
Ferid Belhaj, VP Middle East and North Africa, World Bank Group
“Hey, they’re playing my song!”
There are some notes from the panelists that really resonated with me. Can you guess why?
Ferid Belhaj starts his portion by thanking the authors of the report for the “largest dataset on informality we’ve ever seen.” He says that if there is “one thing” hampering their work, it is the lack of data.
Belhaj also frames his remarks by talking about Mohamed Bouazizi, the Tunisian informal vendor who’s self-immolation sparked the Arab Spring.
Ceyla Pazarbasioglu, referring to what governments need to do, says this all “sounds like a broken record.” They know what they need to do. The problem is getting it done.
She does take a hopeful note saying that there’s an important opportunity with advances in digital technology but she also warns of the pitfalls of technology.
Brahima Coulibaly calls for a change in the narrative about the informal sector which is often “portrayed intentionally or unintentionally” as a nuisance, as a “less useful” part of the economy. But, he says, for many developing countries, “the informal economy IS the economy.” (Drop the mic!)
“Who turned on the light?” or
“Does this data make my economy look fat?”
This report IS important but I do wonder about the perspective.
If you didn’t catch the word play in the title, the “long shadow” is a nod to how the informal economy is also referred to as the “shadow economy.”
Un-ironically, the length of shadows depend on the source of the light and the perspective of the viewer.
The report plays on this idea of sight and control with the press release bannering: “Study Finds One-Third of Economic Activity Occurs Outside Governments' Line of Sight.” It goes on to say that the scale of the informal sector…
…diminishes these countries’ ability to mobilize the fiscal resources needed to bolster the economy in a crisis, to conduct effective macroeconomic policies, and to build human capital for long-term development.
Later:
The study provides five general recommendations for policymakers in EMDEs: first, take a comprehensive approach—because informality reflects broad-based underdevelopment and cannot be tackled in isolation; second, tailor measures to country circumstances because the causes of informality vary widely; third, improve access to education, markets, and finance so that informal workers and firms can become sufficiently productive to move to the formal sector; fourth; improve governance and business climates so the formal sector can flourish; and fifth, streamline tax regulation to lower the cost of operating formally and increase the cost of operating informally.
So, the perspective is centered on government control and the direction is towards “formalization.”
“Live performance is so much better.”
If you want a really good discussion on the history and debates on the informal economy, head over to WIEGO’s website.
You’ll learn that “British anthropologist Keith Hart coined the term ‘informal sector’ during his 1971 study of economic activities among rural migrants in Accra, Ghana.”
You’ll also learn about the various schools of thought:
The dualist school sees the informal economy as comprised of marginal activities that are distinct from and not related to the formal sector and that provide income for the poor and a safety net in times of crisis.
The structuralist school sees the informal economy as subordinated economic units (informal enterprises) and workers that serve to reduce input and labour costs of large capitalist firms and, thereby, increase their competitiveness.
The legalist school sees the informal economy as comprised of plucky entrepreneurs who choose to operate informally in order to avoid the unnecessary and burdensome costs, time and effort of formal registration and who need legal rights to convert their assets into formal property.
The voluntarist school sees the informal economy as comprised of entrepreneurs who choose to operate informally in order to avoid taxation, commercial regulations, electricity and rental fees, and other costs of operating formally.
Another approach, often focused on transitional and developed countries, views the informal economy as activity that is illegal, or hidden/underground. The System of National Accounts (SNA) defines illegal production as production activities which are forbidden by law or which become illegal when carried out by unauthorized producers. Underground production is legal when performed in compliance with regulations, but is ofen deliberately concealed from authorities. However, most informal activities are not underground or illegal, but instead reflect a survival strategy.
(Emphasis added.)
“Is that the same tune?”
Meanwhile, in another part of the Bank (and back in the world of makeshift mobility)…
Ajay Kumar, Sam Zimmerman, and Fatima Arroyo-Arroyo just released this excellent report: Myths and Realities of "Informal" Public Transport in Developing Countries: Approaches for Improving the Sector.
Antiphonal: Did I say the report was excellent? Because it is excellent.
I’ve skimmed through it and will re-read for better digestion.
They organized the report around 17 “myths” about informal transportation that they bring to the light.
Some of the myths they declare false out right. Some, they discuss deeper to adjust your vision to reality.
Here are the 17:
Myth 1
The strategic transport plans of developing cities typically articulate a comprehensive approach to addressing the mobility and access needs of all sectors of society.
Myth 2
Investment in road infrastructure and procurement of new public transport facilities and rolling stock are the main “necessary” actions to address worsening urban mobility problems.
Myth 3
The rise of minibus taxis and other forms of paratransit is the result of a conscious decision to deregulate public transport.
Myth 4
Exponential growth in informal public transport is simply a result of the collapse of the formal government-owned and operated bus systems of the 1970s-1990s.
Myth 5
Informal public transport’s safety, security, environmental and performance issues far outweigh its benefits; it should be eliminated entirely.
Myth 6
Public sector ownership and direct operation of fixed schedule, route-and-stop “formal” bus services—a public transport model essentially universal and exclusive in developed cities as late as the 1990s—is ideal and should be recreated where it has disappeared in developing cities.
Myth 7
The quality, quantity, and usage of public transport is declining in most developing cities. The only way to address the resulting chronic and escalating traffic congestion is to reform public transport by investing in mass rapid transit, bus, or rail, and make all other transit subsidiary to it.
Myth 8
Bus Rapid Transit Systems (BRTS) are always a desirable solution to rapidly escalating traffic congestion and the low quality of public transport in developing cities.
Myth 9
The poor performance of the private sector suggests that cities must maintain existing publicly owned and operated bus companies or establish a new one.
Myth 10
To protect the interests of the poor, it is important to regulate bus fares while also allowing competition in the market.
Myth 11
The major advantages of BRT and rail-based rapid transit systems are their dedicated running-ways and high-capacity, modern vehicles. Their introduction should be accompanied by the complete elimination of informal services in their respective corridors.
Myth 12
The informal sector’s issues are primarily regulatory. Informal operators purposefully evade taxes, consequently withholding revenue from the city and unfairly competing with formal, tax-paying businesses. This behavior can be “regulated away.”
Myth 13
In developing countries, people using public transport do so for lack of any options.
Myth 14
Informal public transport is more than just transport; it represents a cultural phenomenon with considerable political clout.
Myth 15
One large bus can replace many of the smaller vehicles (e.g., sedans, vans, etc.) utilized by the informal sector; thus, their procurement should be encouraged if not financially supported by government to reduce congestion.
Myth 16
The entire labor force of the informal public transport sector currently working directly in a corridor or subarea can be re-assigned to the conventional public transport network that replaces it without having to relocate anyone.
Myth 17
Replacing informal with conventional public transport can be accomplished without government financial support of any kind.
“They’re playing my song, again!”
Antiphonal: Did I say the report was excellent? Because it is excellent.
Like I said, I’m still digesting the report but I leave you with this tidbit:
Myth 14
Informal public transport is more than just transport; it represents a cultural phenomenon with considerable political clout.
Reality: True
Like New York’s yellow taxis, British red double- decker buses and black cabs, jeepneys in the Philippines, Matatus in Nairobi, Trotros in Accra, Car Rapides in Dakar, Minibus Taxis in Southern Africa are a part of their respective country’s culture. They seem to embody the creativity, innovativeness, ingenuity, entrepreneurship, and determination to be independent that have characterized urban residents in developing countries for the past many decades. The minibuses are really an important part of daily life in cities and a beloved (and, at the same time, disliked) part of society.
(Emphasis added.)
Antiphonal: Did I say it was excellent? Because it is excellent.
Preaching to the choir
If you want to hear more, Mobilise Your City will highlight the report this Thursday in a Virtual Workshop on "Informal" Public Transit.
You can register for the workshop (for free) via this link. I’ll see you there.
That’s it for this week.
Leave me a comment, if you enjoyed this letter.
I’m Benjie de la Peña and I’m the CEO of the Shared-Use Mobility Center. I co-founded Agile City Partners, and I am the Chair of the Global Partnership for Informal Transportation.
I’m glad the World Bank is now formally recognizing the informal economy.
I’m convinced that informal transportation can be the single greatest lever to decarbonize the urban transport sector, but only if we stop ignoring it and instead learn to celebrate it.
(With apologies to the former college secretary of the old UP Institute of Mass Communication.)
A colleague at work cited a World Bank study that found 87% of their reports were never cited and 31% were never downloaded (the quote was from the person who came up with the Our World in Data site). Good that the WB is acknowledging the informal economy, but will it have any tangible impact?