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The urban informal sector : an alternative analysis Das, Veechibala 1986

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THE URBAN INFORMAL SECTOR: AN ALTERNATIVE ANALYSIS by VEECHIBALA DAS B.A., M.A., P.G. Dip., U.R.P., New D e l h i 1977 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE STUDIES School Of Community And Regional P l a n n i n g We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA October 1986 © Veechibala Das, 1986 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f the requirements f o r an advanced degree a t the U n i v e r s i t y o f B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study. I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying o f t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head o f my department o r by h i s or her r e p r e s e n t a t i v e s . I t i s understood t h a t c o p y i n g or p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be allowed without my w r i t t e n p e r m i s s i o n . Department of The U n i v e r s i t y o f B r i t i s h Columbia 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5 Date A ' &chft< i i A b s t r a c t The Urban Informal S e c t o r : An A l t e r n a t i v e A n a l y s i s The concept of d u a l i s m was a p p l i e d to the urban economies i n the T h i r d World i n the m i d - s i x t i e s . Two s e c t o r s were i d e n t i f i e d , the i n f o r m a l s e c t o r and the formal s e c t o r . The i n f o r m a l s e c t o r was r e c o g n i s e d to be p r i m a r i l y the refuge of the poor, the unemployed, and s u r p l u s labour from r u r a l a r e a s . Consequently, t h e o r i e s were advanced to e x p l a i n how the i n f o r m a l s e c t o r was c r e a t e d , and why i t p e r s i s t e d i n the T h i r d World develoment p r o c e s s . In the l a s t ten years, however, r e s e a r c h f i n d i n g s have shown t h a t the i n f o r m a l s e c t o r may not n e c e s s a r i l y be the s e c t o r of the poor or be c o n f i n e d to the T h i r d World. These s t u d i e s i n d i c a t e t h a t the i n f o r m a l s e c t o r i s sometimes q u i t e t h r i v i n g , and present i n c e n t r a l l y planned s o c i a l i s t economies as w e l l as Western c a p i t a l i s t n a t i o n s . I t i s time t h e r e f o r e f o r a comparative a n a l y s i s of the v a r i o u s types of i n f o r m a l a c t i v i t i e s i n the d i f f e r e n t economies to a s c e r t a i n how and why the phenomenon e x i s t s i n the d i f f e r e n t c o n t e x t s . T h i s r e s e a r c h examines the course of the debate on the i n f o r m a l s e c t o r from 1965-1985 and p r e s e n t s an a l t e r n a t i v e a n a l y s i s on the i n f o r m a l s e c t o r . The a l t e r n a t i v e a n a l y s i s r e d e f i n e s the ' i n f o r m a l s e c t o r ' as the 'petty c a p i t a l i s t s e c t o r ' and proposes that t h i s s e c t o r i s c r e a t e d i n response to the market f o r c e s i n the formal s e c t o r , i r r e s p e c t i v e of the type of economy. The 'petty c a p i t a l i s t s e c t o r ' c a t e r s to the demands fo r goods and s e r v i c e s that are u n f u l f i l l e d by the formal s e c t o r , and these are not n e c e s s a r i l y c o n f i n e d to cheap goods. The labour f o r p e t t y c a p i t a l i s t s e c t o r i s s i m i l a r l y not c o n f i n e d to the poor and the unemployed. There are a v a r i e t y of demands from the p e t t y c a p i t a l i s t s e c t o r and d i f f e r e n t sources of labour f o r i t . I t i s the p o t e n t i a l f o r d i f f e r e n t combinations of labour sources and types of demand that c r e a t e the wide v a r i e t y of p e t t y c a p i t a l i s t a c t i v i t i e s i n the d i f f e r e n t economies. T h i s r e s e a r c h a l s o p r e s e n t s the p o t e n t i a l c o n t r i b u t i o n of the a l t e r n a t i v e a n a l y s i s to T h i r d World p l a n n i n g . P l a n n i n g f o r the i n f o r m a l s e c t o r has been important i n the T h i r d World because i t has been t i e d to poverty and unemployment. But, a c c o r d i n g to the a l t e r n a t i v e a n a l y s i s , because the 'petty c a p i t a l i s t s e c t o r ' i n c l u d e s a range of a c t i v i t i e s with d i f f e r e n t problems, i t would be i n a c c u r a t e to say that i t can be planned f o r per se. At b e s t , a n a t i o n can d e a l with some s p e c i f i c problems of the p e t t y c a p i t a l i s t s e c t o r , and t h i s would depend on the development p r i o r i t i e s of each n a t i o n . Table of Contents A b s t r a c t i i L i s t of Tables v i L i s t of F i g u r e s v i i Acknowledgement v i i i CHAPTER 1: A CASE FOR RESEARCH ON THE URBAN INFORMAL SECTOR 1 1. INTRODUCTION 1 2. PROBLEM STATEMENT 4 1. 1965-1975, The P e r i o d Of Convergence In Thoughts On The Informal Sector 4 2. 1975-1985, The P e r i o d Of Departures In Mainstream Thought . 5 3. OBJECTIVE 10 4. STRUCTURE OF THE RESEARCH 10 5. MATERIALS AND METHODS . 12 6. SCOPE AND LIMITATIONS 14 7. POTENTIAL FOR FUTURE RESEARCH 15 CHAPTER 2: THE DEBATE ON THE INFORMAL SECTOR: THE OLD WISDOM 1965-1975 16 1. INTRODUCTION TO THE INFORMAL SECTOR/FORMAL SECTOR DEBATE 16 2. DEFINITION AND DESCRIPTION OF THE INFORMAL SECTOR 19 2.1 O r i g i n s Of The Dualism Concept 19 2.2 The S p a t i a l Context Of Urban Dualism 21 2.3 Urban Dualism: The Development Of T h e o r e t i c a l Models 21 2.3.1 The C o n t r i b u t i o n s And L i m i t a t i o n s Of Dualism Models 29 3. FORMATION OF THE INFORMAL SECTOR: CONTRIBUTIONS FROM LABOUR UTILITY THEORY AND EMPIRICAL STUDIES 35 3.1 The Question Of Labour U t i l i t y 35 3.2 E m p i r i c a l S t u d i e s On The Informal Sector 37 4. THE ROLE OF DEVELOPMENT PROCESSES IN THE THIRD WORLD IN THE CREATION OF THE INFORMAL SECTOR 40 4.1 U n i l i n e a r Development Theory And The Informal Sector 44 4.2 Dependency Theory And The Informal Sector 51 4.3 Comparison Of U n i l i n e a r And Dependency Approach With Regards To The Informal S e c t o r 55 4.4 New D i r e c t i o n s In T h i r d World Development 56 5. CONCLUSIONS 59 CHAPTER 3: CONTEMPORARY WISDOM ON THE INFORMAL SECTOR: 1975-1985 62 1. THE EVOLUTION OF THE DEBATE ON THE INFORMAL SECTOR IN THE THIRD WORLD 64 1.1 Changes In D e f i n i t i o n Of The Informal Sector 64 1.2 The Concept Of Urban Dualism 70 1.3 The Informal Sector And T h i r d World Development Process 72 1.4 The R e l a t i o n s h i p Between The Informal And Formal S e c t o r s , 76 1.5 Concluding Remarks 77 2. THE INFORMAL SECTOR IN SMALL TOWNS OF THE THIRD WORLD .78 3. THE INFORMAL SECTOR IN WESTERN CAPITALIST COUNTRIES ...85 4. THE INFORMAL SECTOR IN CENTRALLY PLANNED SOCIALIST COUNTRIES 92 5. A COMPARISION OF THE INFORMAL SECTOR IN THE THREE DOMINANT ECONOMIES 98 CHAPTER 4: AN ALTERNATIVE ANALYSIS OF THE INFORMAL SECTOR 108 1. AN ALTERNATIVE ANALYSIS: THE DEMAND AND SUPPLY FOR PETTY CAPITALISM 109 1 .1 D e f i n i t i o n 109 1.2 Formation Of P e t t y C a p i t a l i s m In An Urban Economy 119 1.2.1 Demand For P e t t y C a p i t a l i s m : The Role Of Produc t i o n And Consumption P a t t e r n s 121 1.2.2 Supply Of Labour For P e t t y C a p i t a l i s m 130 1.2.3 C r e a t i o n Of Petty C a p i t a l i s m 134 2. APPLICATION OF THE ALTERNATIVE ANALYSIS TO PETTY CAPITALISM IN DIFFERENT ECONOMIES 136 2.1 Pe t t y C a p i t a l i s m In Western C a p i t a l i s t Economies .136 2.1.1 The Demand P o t e n t i a l Of P e t t y C a p i t a l i s m In Western C a p i t a l i s t Nations 138 2.1.2 The Labour P o t e n t i a l For P e t t y C a p i t a l i s m In Western C a p i t a l i s t Nations 139 2.2 Pe t t y C a p i t a l i s m In The C e n t r a l l y Planned S o c i a l i s t Economies ..141 2.2.1 The Demand P o t e n t i a l Of P e t t y C a p i t a l i s m In V S o c i a l i s t Economies 142 2.2.2 The Labour P o t e n t i a l For Pe t t y C a p i t a l i s m In S o c i a l i s t Economies 143 2.3 Petty C a p i t a l i s m In T h i r d World Economies .145 2.3.1 The P o t e n t i a l Demand From P e t t y C a p i t a l i s m In The T h i r d World 1 45 2.3.2 The Labour P o t e n t i a l For Pe t t y C a p i t a l i s m In The T h i r d World 1 49 2.4 Petty C a p i t a l i s m And Urban S i z e 152 3. CONCLUSION 154 CHAPTER 5: IMPLICATIONS OF THE ALTERNATIVE ANALYSIS TO PLANNING 157 1. REFRAMING THE PROBLEM FOR PLANNING 159 2. THE ROLE OF THE STATE IN THE PAST 165 3. EFFECTIVENESS OF PAST PLANNING EFFORTS 174 4. PROPOSED ROLE OF THE STATE 179 5. SUGGESTIONS FOR PLANNING FOR THE POVERTY-BOUND PETTY CAPITALIST SECTOR IN INDIA 181 5.1 The I n s t i t u t i o n a l Framework For Plan n i n g In I n d i a 183 5.2 Suggestions For Plan n i n g At The N a t i o n a l L e v e l ...185 5.3 Suggestions For Pl a n n i n g At The Town L e v e l 191 5.4 D i f f e r e n c e s Between Proposed S t r a t e g i e s And Others . 197 6. CONCLUSION 201 BIBLIOGRAPHY 203 APPENDIX A - THE TWO CIRCUITS OF THE URBAN ECONOMY: SANTOS 1977 231 APPENDIX B - DUALISM MODEL OF URBAN ECONOMY BASED ON INCOME OPPORTUNITIES: HART 1973 232 APPENDIX C - A SIMPLISTIC CHART ON THE FLOW OF IDEAS ON ECONOMIC DUALISM AND DEVELOPMENT 233 APPENDIX D - A STUDY OF SMALL TOWN DEVELOPMENT STRATEGY IN PUNJAB, INDIA 234 APPENDIX E - A FIELD STUDY ON THE INFORMAL SECTOR IN RAIKOT, A SMALL TOWN IN PUNJAB, INDIA 239 APPENDIX F - INSTITUTIONAL STRUCTURE OF PLANNING IN INDIA 245 v i L i s t of Tables Dichotomous models of urban economy i n underdeveloped n a t i o n s 22 The I.L.O d i s t i n c t i o n between the i n f o r m a l and formal S e c t o r s 24 Estimates of the i n f o r m a l s e c t o r i n s e l e c t e d d e v e l o p i n g n a t i o n s 177 v i i L i s t of F i g u r e s 1. The s t r u c t u r e of the r e s e a r c h 11 2. S t r u c t u r e of the debate on the i n f o r m a l s e c t o r : 1965-1975 1 7 3. D i s t r i b u t i o n of the i n f o r m a l s e c t o r by c i t y s i z e : Santos 1979 80 4. D i s t r i b u t i o n of the i n f o r m a l s e c t o r by c i t y s i z e : E l Shakhs 1984 82 5. S i m p l i s t i c r e p r e s e n t a t i o n of the major means and motives of the i n f o r m a l s e c t o r i n dominant economic systems .106 6. The p o t e n t i a l demand f o r goods and s e r v i c e s from the p e t t y c a p i t a l i s t s e c t o r 122 7. The e f f e c t of the types of demand upon e n t r y of labour i n t o the p e t t y c a p i t a l i s t s e c t o r 128 8. The most l i k e l y r e l a t i o n s h i p s between types of labour and types of demand i n p e t t y c a p i t a l i s m ...133 9. Combinations between types of demand and types of labour i n the c r e a t i o n of p e t t y c a p i t a l i s m 135 10. H y p o t h e t i c a l r e l a t i o n s h i p of income l e v e l s and expenditure i n p e t t y c a p i t a l i s t s e c t o r 150 11. H y p o t h e t i c a l d i s t r i b u t i o n of p e t t y c a p i t a l i s m i n the T h i r d World by c i t y s i z e 153 12. S i m p l i s t i c r e p r e s e n t a t i o n of labour p a r t i c i p a t i o n and type of demand i n p e t t y c a p i t a l i s m by economic systems 155 13. Types of tax e v a s i v e a c t i v i t i e s 161 14. The i m p l i c a t i o n s of the a l t e r n a t i v e a n a l y s i s to p l a n n i n g 201 v i i i Acknowledgement I would l i k e to express my s i n c e r e s t g r a t i t u d e to the s u p e r v i s i n g committee, P r o f s . Pendakur, Wiesman, and McGee, f o r t h e i r h e l p and support through the y e a r s . In p a r t i c u l a r , I thank P r o f . Wiesman f o r h i s c a r e f u l reading f o r the f i n a l d r a f t . I am g r a t e f u l to f r i e n d s and c o l l e a g u e s who d i s c u s s e d the re s e a r c h with me, f o r i t has improved the f i n a l product. I would a l s o l i k e to thank my c o l l e a g u e s i n I n d i a , i n p a r t i c u l a r the l a t e P r o f . B i j i t Ghosh, f o r t h e i r a s s i s t a n c e d u r i n g my f i e l d t r i p to I n d i a . F i n a l l y , I am t h a n k f u l to my husband, S c o t t , f o r having the p a t i e n c e and kindness to h e l p me get through the more d i f f i c u l t days, and to my pa r e n t s without whose i n s p i r a t i o n and support I would not have been a b l e to pursue t h i s degree. 1 CHAPTER 1t A CASE FOR RESEARCH ON THE URBAN INFORMAL SECTOR 1. INTRODUCTION The i n f o r m a l s e c t o r i s mostly r e c o g n i s e d as one p a r t of a d u a l i s t i c urban economy. Dualism, at any s p a t i a l s c a l e , c o n c e p t u a l i s e s an economic system i n terms of a dichotomous model, i n which the two p a r t s of the model are " e s s e n t i a l l y separate and autonomous e n t i t i e s " (Rogerson 1985:10). Urban dualism, t h e r e f o r e , r e f e r s to a dichotomous urban economy, i n which one p a r t , the formal s e c t o r , i s s t a t e r e g u l a t e d , nurtured, and p r o t e c t e d . The second p a r t , of importance i n t h i s r e s e a r c h , i s the i n f o r m a l s e c t o r , and t h i s i s commonly known as the unregulated economy of the poor and the unemployed (Richardson, 1984; Sabot, 1977; Bose, 1977; Mazumdar and Mazumdar, 1975). Many s c h o l a r s agree t h a t the c u r r e n t s t a t e of knowledge about the i n f o r m a l s e c t o r i s q u i t e confused (Moser, 1984; Richardson, 1984). -Although the d e f i n i t i o n of the i n f o r m a l s e c t o r has been a problem s i n c e the beginning of the debate, the a p p l i c a t i o n of a m u l t i t u d e of d e f i n i t i o n s to e m p i r i c a l work over the years has made a n a l y s i s more d i f f i c u l t . "The i n f o r m a l s e c t o r i s s t i l l too broad to be meaningful; at one end i s a po o l of s u r p l u s l a b o u r , at the other a s k i l l e d h i g h income e a r n i n g e n t r e p r e n e u r ; at one end a p r o l i f e r a t i o n of r e s i d u a l e n t e r p r i s e s I n v o l u t i o n d e s c r i b e s a c t i v i t i e s or e n t e r p r i s e s that are unable to generate growth, but onl y reproduce the e x i s t i n g c o n d i t i o n s of s c a l e of o p e r a t i o n s o f t e n at the expense of the c o s t of labour and standard of l i v i n g . 2 i n v o l u t i o n a r y 1 i n nature, at the other end of the spectrum dynamic e v o l u t i o n a r y e n t e r p r i s e s . " Moser 1984, p 160. U n t i l r e c e n t l y , the phenomenon of the i n f o r m a l s e c t o r was debated predominantly i n the context of the T h i r d World. 2 While, not a l l T h i r d World n a t i o n s are a l i k e i n t h e i r development p a t t e r n s , they can be d i s t i n c t l y separated from the prosperous F i r s t World and the s o c i a l i s t Second World. Since the l a t e n i neteen s e v e n t i e s , however, s t u d i e s of the i n f o r m a l s e c t o r i n the s o c i a l i s t and Western c a p i t a l i s t economies have become more common i n the l i t e r a t u r e and t h i s has i n c r e a s e d the complexity of the debate on the i n f o r m a l s e c t o r (Mattera, 1985; Aslund, 1985; Simon and W i t t e , 1982). But then why do we proceed i n t h i s study at a l l ? Perhaps we p e r s i s t , as P e a t t i e (1984:180) has put i t , f o r two reasons: 1. The t o p i c i s important or we would not keep on. 2. We have m i s - s p e c i f i e d i t or we would not be so muddled. The importance of t h i s t o p i c i s e v i d e n t f o r i t i n v o l v e s a s i z a b l e p a r t of the labour f o r c e i n T h i r d World economies (Sethuraman, 1981). Furthermore, the c o r r e l a t i o n of the i n f o r m a l s e c t o r w i t h poverty and unemployment h i g h l i g h t s other socio-economic, and p h y s i c a l problems of d e v e l o p i n g n a t i o n s , a l l of which warrant s c h o l a r l y a t t e n t i o n . I n t e r e s t i n the t o p i c grew p a r t l y f o r academic reasons, but mostly because i t was 2 The T h i r d World i s a very g e n e r a l term a p p l i e d i n t h i s r e s e a r c h to n a t i o n s t h a t are c h a r a c t e r i s e d by a slow pace of development; hig h growth of the labour f o r c e , poverty, l a r g e income and r e g i o n a l growth d i s p a r i t i e s e t c . 3 p e r c e i v e d as a developmental and an urban problem t h a t had to be t a c k l e d by T h i r d World governments (Rogerson, 1985; Bromley, 1978). The i n f o r m a l s e c t o r was estimated to i n c l u d e from 20-60% of the urban p o p u l a t i o n of major c i t i e s of the T h i r d World (Mazumdar 1975), was viewed as an economic m a l f u n c t i o n i n the n a t i o n , and as an unwelcome burden on urban s e r v i c e s and i n f r a s t r u c t u r e . While a p o s i t i v e view of the i n f o r m a l s e c t o r ' s c o n t r i b u t i o n to the urban economy was being i n c r e a s i n g l y proposed i n some s t u d i e s , (Pendakur, 1975; Sethuraman, 1974; I.L.O., 1972) the haphazard d i s t r i b u t i o n of i n f o r m a l a c t i v i t i e s i n the s t r e e t s of T h i r d World c i t i e s , the congested and unhygienic c o n d i t i o n s of the s q u a t t e r s e t t l e m e n t s , and the s t r a i n on the urban i n f r a s t r u c t u r e and a m e n i t i e s , had a g r e a t e r impact on p o l i c i e s (McGee and Yeung, 1977; McGee, 1972; Poethig, 1971). I t i s f o r these reasons that t h i s r e s e a r c h i s undertaken, to s i e v e through the i n f o r m a t i o n . i n order to provide some s y n t h e s i s and d i r e c t i o n . I t i s hoped that the endeavour w i l l be more than a p u r e l y s c h o l a r l y e x e r c i s e and t h a t i t w i l l c o n t r i b u t e to the debate on p u b l i c p o l i c y and p l a n n i n g f o r the i n f o r m a l s e c t o r . 4 2. PROBLEM STATEMENT 1. 1965-1975, The P e r i o d Of Convergence In Thoughts On The  Informal Sector In the e a r l y years of the debate (1965-75), the concept of dualism, which has a long h i s t o r y (Boeke, o r i g . 1910, i n B r o o k f i e l d , 1975), was a p p l i e d to the urban areas of the T h i r d World i n an attempt to understand the presence of c e r t a i n types of economic a c t i v i t i e s and e n t e r p r i s e s . T h i s p e r i o d of study of the i n f o r m a l s e c t o r w i l l be r e f e r r e d to as the ' o l d wisdom 1. The study of these a c t i v i t i e s per se, that f e l l o u t s i d e the realm of the government r e g u l a t e d economy, dominated over the study of the dualism concept i t s e l f . In f a c t , a p p l y i n g the dualism concept e f f o r t s were made to d e l i n e a t e two s e c t o r s of the urban economy. In t h i s decade, some s c h o l a r l y a t t e n t i o n a l s o l e d to the f o r m u l a t i o n of dualism models, which were l a t e r a p p l i e d to e m p i r i c a l work. The models i d e n t i f i e d the phenomenon as i t appeared i n the T h i r d World; on the b a s i s of the c h a r a c t e r i s t i c s of i n f o r m a l and formal a c t i v i t y , modes of p r o d u c t i o n , income c l a s s i f i c a t i o n and so on, and were e s s e n t i a l l y d e s c r i p t i v e . The models d e s c r i b e d the i n f o r m a l s e c t o r as one that was mostly the refuge of the poor. Even at t h i s e a r l y stage i n the debate, there were some problems i n the d e f i n i t i o n of the phenomenon (Moser, 1984). Nonetheless, the a b i l i t y to i d e n t i f y the i n f o r m a l s e c t o r using the models, l e d to a great surge i n e m p i r i c a l r e s e a r c h . The f i n d i n g s not o n l y p r o v i d e d a d d i t i o n a l i n f o r m a t i o n on the 5 i n f o r m a l s e c t o r , but i t a l s o seemed to support the d e s c r i p t i o n p r o v i d e d by the models. For example, i t was found that the i n f o r m a l s e c t o r was composed mostly of the poor, the unemployed and migrants from r u r a l areas (Sabot, 1977; Bose, 1977; Mazumdar and Mazumdar, 1975). A few c o n t r a d i c t i o n s appeared between the e m p i r i c a l f i n d i n g s and the models but these d i d not assume any s i g n i f i c a n c e because the m a j o r i t y of the f i n d i n g s were su p p o r t i v e of the models. Thus, i n the e a r l y y e a r s , the debate on the i n f o r m a l s e c t o r saw a convergence of i d e a s . Although the d e f i n i t i o n of the i n f o r m a l s e c t o r was c o n t e s t e d , few d i s a g r e e d t h a t the s e c t o r was i n t r i c a t e l y t i e d to poverty and unemployment, that r e s u l t e d from the process of T h i r d World development. 2. 1975-1985, The P e r i o d Of Departures In Mainstream Thought While i t i s d i f f i c u l t to deny t h a t the e a r l y wisdom was sound and l o g i c a l i n the context of the evidence of i t s time, i t i s a l s o d i f f i c u l t to continue to accept the p o s i t i o n of the e a r l y r e s e a r c h i n the face an overwhelming amount of c o n t r a d i c t o r y evidence s i n c e the m i d - s e v e n t i e s : 1. S t u d i e s of the i n f o r m a l s e c t o r i n Western c a p i t a l i s t and s o c i a l i s t economies have i n c r e a s e d i n the l a s t decade (1975-85) and have entered the debate s i g n i f i c a n t l y (Mingione, 1985; De G r a z i a , 1984; T a n z i , 1982). I t i s a l s o i n t h i s l a s t decade that s t u d i e s of the i n f o r m a l s e c t o r i n s m a l l e r towns of the T h i r d World gained momentum although Santos (1973; 1979) had i n t r o d u c e d the idea much e a r l i e r ( K u l l , 1984; H i l h o r s t , 1984). 6 Both these r e s e a r c h developments make i t d i f f i c u l t to accept the e a r l i e r i m p l i e d view that the i n f o r m a l s e c t o r i s e x c l u s i v e l y a f e a t u r e common to the l a r g e s t towns of the underdeveloped T h i r d World economies (Richardson, 1984; Mathur and Moser, 1984; Das, 1982). 2. As s t u d i e s have progressed from an e x c l u s i v e l y T h i r d World s e t t i n g to other types of economies, the nature of i n f o r m a l a c t i v i t y was observed to i n c l u d e g r e a t e r v a r i a t i o n s than i d e n t i f i e d e a r l i e r , even i n the context of the T h i r d World. There i s evidence that the i n f o r m a l s e c t o r may be p r o f i t making (Page and S t e e l , 1984; Demol and Nihan, 1982) as w e l l as employment g e n e r a t i n g , and that i t i s not n e c e s s a r i l y based on u n s k i l l e d labour, using a low l e v e l of technology (Richardson, 1984). In the case of b a r t e r a c t i v i t i e s i n Western n a t i o n s , f o r example, s k i l l e d labour and the use of a high l e v e l of technology i s not unusual i n the b a r t e r of p r o f e s s i o n a l s e r v i c e s (Mattera, 1985; T a n z i , 1982; Simon and Wi t t e , 1982). 3. Greater v a r i a t i o n i n the c h a r a c t e r i s t i c s of the p o p u l a t i o n engaged i n the i n f o r m a l s e c t o r was observed. There i s evidence that p a r t i c i p a n t s i n the i n f o r m a l s e c t o r can sometimes be n e i t h e r poor nor unemployed (Fowler, 1978; Nihan and J o u r d a i n , 1978; Aryee, 1977; Webb, 1974). I t has a l s o been found t h a t the m i g r a t i o n of r u r a l p o p u l a t i o n has no s i g n i f i c a n t c o r r e l a t i o n with the i n f o r m a l s e c t o r because the i n f o r m a l s e c t o r does not always i n c l u d e recent migrants (Richardson, 1984; Moser, 1984). Furthermore, recent s t u d i e s show that the i n f o r m a l s e c t o r can sometimes even be a s e c t o r of c h o i c e 7 (Mazumdar, 1981; Sabot, 1979; S i n c l a i r , 1978; Moir, 1978; Fowler, 1978). Because of these recent developments i n the re s e a r c h i t i s d i f f i c u l t to accept the ' o l d wisdom' on the r o l e of the i n f o r m a l s e c t o r i n the urban economy, the r e l a t i o n s h i p of the i n f o r m a l s e c t o r to the urban, the n a t i o n a l , and the i n t e r n a t i o n a l economy, and the r e l a t i o n s h i p of the i n f o r m a l s e c t o r to T h i r d World development p r o c e s s e s . O b v i o u s l y , there i s a case f o r f u r t h e r i n v e s t i g a t i o n of the e v o l u t i o n and f e a t u r e s of the i n f o r m a l s e c t o r i n the T h i r d World and other economies, and why or how i t forms. But, the s i g n i f i c a n c e of these recent f i n d i n g s depends on the nature of the i n q u i r y and the o b j e c t i v e of the r e s e a r c h . Two approaches can be taken. 1. A Non-Comparative approach: S t u d i e s on the i n f o r m a l s e c t o r i n economies that are i n a d i f f e r e n t process of development, not comparable to the T h i r d World, may or may not be co n s t r u e d as a c o n t r a d i c t i o n . I t may be argued that these are separate phenomena, perhaps s i m i l a r but not n e c e s s a r i l y the same. As such there would be no need to e x p l a i n the d i f f e r e n c e s . C e r t a i n l y on the b a s i s of t h i s argument there i s every l i k e l i h o o d that the phenomenon i n d i f f e r e n t economies should not be c o n s i d e r e d r e l a t e d . S i m i l a r l y , other d i f f e r e n c e s can be d i s m i s s e d i f s t u d i e d i n i s o l a t i o n . However, i t i s evident at t h i s time that there are too many c o n t r a d i c t i o n s i n the study of the i n f o r m a l s e c t o r . The range 8 of d i f f e r e n c e s d i s c o v e r e d w i t h i n the T h i r d World i s as great as the d i f f e r e n c e s between the T h i r d World and other economies. One response to the d i f f e r e n c e s w i t h i n the T h i r d World has been to d i s a g g r e g a t e the phenomenon. T h i s has been done by the a d d i t i o n of s u b c a t e g o r i e s w i t h i n the d u a l i s t i c framework eg. the " i n t e r m e d i a t e " s e c t o r ( S t e e l , 1977), the "modern" i n f o r m a l s e c t o r (Nihan e t a l . 1979, Nihan and J o u r d a i n , 1978) and so on. But, how many s e c t o r s w i l l i t be necessary to c r e a t e to accomodate the v a r i a t i o n s that are being d i s c o v e r e d j u s t because they do not f i t the parameters of T h i r d World underdevelopment, p o v e r t y , unemployment, and m i g r a t i o n ? P e a t t i e (1984) s t a t e s t h a t the l a c k of a comparative approach to the i s s u e i s due to a n a l y t i c p r e j u d i c e . She s t a t e s t h a t the c u r r e n t approach i s g e n e r a l l y one i n which the phenomenon i s separated on the b a s i s of d i s s i m i l a r i t i e s , between d i f f e r e n t types of economies and w i t h i n the T h i r d World. 2. A Comparative approach: The other approach would be a c o m p a r i t i v e one, based on commonalities w i t h i n the phenomenon found i n d i f f e r e n t c o n t e x t s . There has been some attempt to i n c l u d e the wide v a r i e t y of a c t i v i t i e s , that l i e o u t s i d e the bounderies of e a r l i e r d e f i n i t i o n s of the i n f o r m a l s e c t o r , by r e d e f i n i n g i t (Sethuraman, 1981). However, these r e d e f i n i t i o n s have been made w i t h i n the context of the urban economies of the T h i r d World, and do not c o n s i d e r the i n f o r m a l s e c t o r i n other economies. Thus, i t appears that the r e d e f i n i t i o n s attempt to r e t a i n the o l d e r views on the i n f o r m a l s e c t o r as an aspect of T h i r d World 9 underdevelopment. T h i s r e s e a r c h a l s o undertakes a comparative approach to the study of the i n f o r m a l s e c t o r but i s one which i n c l u d e s a comparison of the i n f o r m a l s e c t o r i n the three types of economies. T h i s r e s e a r c h i s based on a study of the i n f o r m a l s e c t o r debate of the l a s t 18-20 y e a r s . I t attempts to r e -a n a l y s e the converging and the c o n f l i c t i n g i s s u e s i n the debate f o r two reasons: 1. The recent developments i n the study of the i n f o r m a l s e c t o r needs a s y n t h e s i s of knowledge, so that the s i m i l a r i t i e s and d i f f e r e n c e s are b e t t e r understood as a b a s i s f o r f u r t h e r r e s e a r c h . 2. To p r o v i d e a more complete understanding of the urban i n f o r m a l s e c t o r so that i t can b e t t e r a s s i s t the f o r m u l a t i o n of p l a n n i n g p o l i c i e s . The study of the i n f o r m a l s e c t o r i n t h i s r e s e a r c h l e a d s to the c o n c l u s i o n that a d i f f e r e n t approach to the a n a l y s i s of the i n f o r m a l s e c t o r i s needed . T h i s r e s u l t s i n the p r e s e n t a t i o n of an a l t e r n a t i v e a n a l y s i s , i n an e f f o r t to provide s y n t h e s i s and d i r e c t i o n to the study of the i n f o r m a l s e c t o r . I t i s hoped that t h i s e f f o r t w i l l have a p o s i t i v e impact upon p l a n n i n g endeavours. The s t r u c t u r e of the r e s e a r c h i s r e p r e s e n t e d i n f i g u r e 1. 10 3. OBJECTIVE In the context of the problem statement, the o b j e c t i v e of the t h e s i s i s to i d e n t i f y the processes t h a t c r e a t e the i n f o r m a l s e c t o r . To do t h i s , i t i s necessary to e v a l u a t e the a v a i l a b l e i n f o r m a t i o n on t h i s s u b j e c t and assess i t s s t r e n g t h s and the weaknesses. T h i s , i n i t s e l f , i s not an overwhelming task because many e v a l u a t i v e s t u d i e s have a l r e a d y been done on the the i n f o r m a l s e c t o r (Rogerson, 1985; Moser, 1984; McGee, 1976). What i s more d i f f i c u l t , however, i s a comparative study of the more recent r e s e a r c h on the i n f o r m a l s e c t o r and the ' o l d wisdom'. Although many case s t u d i e s of the i n f o r m a l s e c t o r i n s o c i a l i s t and Western c a p i t a l i s t n a t i o n s e x i s t , few g e n e r a l i s a t i o n s have been made. T h i s r e s e a r c h w i l l p r o v i d e some ge n e r a l c o n c l u s i o n s about the i n f o r m a l s e c t o r i n these types of economies, to f a c i l i t a t e the comparative a n a l y s i s of the i n f o r m a l s e c t o r . 4. STRUCTURE OF THE RESEARCH The re s e a r c h has proceeded as f o l l o w s : 1. Review of the s t u d i e s on the i n f o r m a l s e c t o r i n the T h i r d World, and those on the r e l a t i o n s h i p of t h i s s e c t o r to the T h i r d World development p r o c e s s . T h i s review i s d i v i d e d i n t o two p a r t s . The f i r s t p a r t covers the p e r i o d of the m i d - s i x t i e s to mid-seventies when there was a c l e a r l y e s t a b l i s h e d d i r e c t i o n to the r e s e a r c h on the i n f o r m a l s e c t o r . At t h i s time, the 11 F i g u r e 1 - The s t r u c t u r e of the r e s e a r c h THEORY ON URBAN D U A L I S M , AND ITS R E L A T I O N S H I P TO DEVELOPMENT ( 1 9 6 0 - 1 9 7 5 a p p r o x . ) RECENT DEVELOPMENTS • IN THE DEBATE ON -*-URBAN DUALISM (POST 1 9 7 5 - - ) IMPACT OF THEORY ON URBAN AND REGIONAL PLANNING IN THE THIRD WORLD E F F E C T I V E N E S S OF PLANNING STRATEGIES IN THE THIRD WORLD • AN A L T E R N A T I V E S -A N A L Y S I S IMPLICATIONS FOR EXISTING THEORY I M P L I C A T I O N S FQR PLANNING phenomenon was i d e n t i f i e d as a f e a t u r e of T h i r d World underdevelopment. T h i s can be r e f e r r e d to as the ' o l d wisdom' on the s u b j e c t . The review of t h i s " o l d wisdom" i s important not o n l y because i t was p i o n e e r i n g work, but a l s o because i t has p e r s i s t e d i n p l a n n i n g p o l i c y i n s p i t e of changes i n the debate i n the f o l l o w i n g y e a r s . T h i s review of the " o l d wisdom" forms chapter two. 2. Review of the second phase i n the debate on the 1 2 i n f o r m a l s e c t o r , the p e r i o d from 1975-1985. T h i s i s r e f e r r e d to as the 'contemporary wisdom' on the i n f o r m a l s e c t o r . I t i n c l u d e s a comparision of the contemporary t h i n k i n g to the " o l d wisdom", i d e n t i f i c a t i o n of areas of c o n f l i c t i n the debate, and p r e s e n t a t i o n of a case f o r an a l t e r n a t i v e approach to the study of the i n f o r m a l s e c t o r . T h i s i s the substance of chapter t h r e e . 3. Proposal of an a l t e r n a t i v e a n a l y s i s that w i l l address and e x p l a i n the areas of c o n f l i c t i n the study of the urban i n f o r m a l s e c t o r . T h i s chapter w i l l be the crux of the t h e s i s as i t i d e n t i f i e s the f a c t o r s l e a d i n g to the c r e a t i o n of the i n f o r m a l s e c t o r . Using the a l t e r n a t i v e a n a l y s i s , an e x p l a n a t i o n i s p r o v i d e d f o r the d i f f e r e n c e s i n the i n f o r m a l s e c t o r not only w i t h i n the T h i r d World but a l s o i n other economies. T h i s i s covered i n chapter f o u r . 4. A p p l i c a t i o n of the a l t e r n a t i v e a n a l y s i s to p l a n n i n g purposes. T h i s s e c t i o n d i s c u s s e s whether p l a n n i n g i s necessary f o r the i n f o r m a l s e c t o r , a n d how to proceed. T h i s forms chapter f i v e . 5. MATERIALS AND METHODS Documentary m a t e r i a l has been the primary source of i n f o r m a t i o n f o r t h i s r e s e a r c h . S t u d i e s on the i n f o r m a l s e c t o r have been p r o l i f i c p a r t i c u l a r l y s i n c e the e a r l y s e v e n t i e s . Although a comparison of the s t u d i e s i s sometimes pr o b l e m a t i c due to d i f f e r e n c e s i n d e f i n i t i o n , s t r o n g trends i n the debate can be i d e n t i f i e d . I t was not f e a s i b l e to undertake e x t e n s i v e f i e l d work on 1 3 the i n f o r m a l s e c t o r , p a r t i c u l a r l y to t e s t the f i n d i n g s of the a l t e r n a t i v e a n a l y s i s . However, some f i e l d w o r k was undertaken by the author f o r t h i s r e s e a r c h as w e l l as p r e v i o u s l y to augment the i n f o r m a t i o n on the in f o r m a l s e c t o r . For t h i s r e s e a r c h , a p a r t i c i p a n t - o b s e r v a t i o n survey of 57 persons employed i n the i n f o r m a l s e c t o r was undertaken i n Raiko t , a small town i n Punjab, I n d i a , d u r i n g October 1981-February 1982. The m u n i c i p a l o f f i c e of Raikot p r o v i d e d m u n i c i p a l documents to support the r e s e a r c h . T h i s f i e l d study compensates f o r the scant i n f o r m a t i o n on the i n f o r m a l s e c t o r i n small towns of the T h i r d World and was necessary f o r comparison with the i n f o r m a l s e c t o r i n l a r g e towns. Rai k o t was a l s o i n c l u d e d i n a study of the impact of development p o l i c y on smal l towns i n Punjab, a l s o undertaken i n 1982. Information f o r t h i s study was c o l l e c t e d from the Punjab U n i v e r s i t y , Chandigarh; the A g r i c u l t u r a l U n i v e r s i t y of Punjab, Ludhiana; Town and Country P l a n n i n g o f f i c e , Chandigarh; the Census o f f i c e , Chandigarh; and other government a g e n c i e s . P r e v i o u s l y , i n 1977, q u e s t i o n n a i r e surveys were c a r r i e d out by the author i n Rourkela and Sambalpur, two l a r g e towns i n O r i s s a , I n d i a . The sample s i z e s of the s t u d i e s were 250 and 187 persons i n squatter c o l o n i e s , r e s p e c t i v e l y . Only s e l e c t e d i n f o r m a t i o n from the surveys has been used here. The author has a l s o had experience of the i n f o r m a l s e c t o r i n I n d i a , not onl y as an academic i n t e r e s t , but a l s o because the i n f o r m a l s e c t o r a c t i v i t i e s p r o v i d e a middle c l a s s Indian with goods and s e r v i c e s on almost a d a i l y b a s i s . Knowledge of other n a t i o n s however i s mostly through study of the l i t e r a t u r e . 14 6. SCOPE AND LIMITATIONS 1. T h i s r e s e a r c h has been c o n f i n e d to the use of l i t e r a t u r e i n the comparative a n a l y s i s of the i n f o r m a l s e c t o r i n the three dominant types of economies and the subsequent p r o p o s a l of the a l t e r n a t i v e a n a l y s i s . The a l t e r n a t i v e a n a l y s i s would have b e n e f i t t e d by support from e m p i r i c a l data, but f i e l d work was not p o s s i b l e due to f i n a n c i a l c o n s t r a i n t s . 2. S t u d i e s of the i n f o r m a l s e c t o r i n s o c i a l i s t and Western c a p i t a l i s t n a t i o n s are not as e x t e n s i v e as t h a t of the T h i r d World, and t h i s a f f e c t s comparative a n a y s i s of the three c o n t e x t s . Although s t u d i e s of the i n f o r m a l s e c t o r i n s o c i a l i s t and Western c a p i t a l i s t economies are not new, they have only entered the urban dua l i s m debate i n a s i g n i f i c a n t way s i n c e the m i d - s e v e n t i e s . 3. Information on the i n f o r m a l s e c t o r i n s m a l l towns of the T h i r d World i s not s u b s t a n t i a l but t h i s was p a r t i a l l y compensated by the author's survey of R a i k o t , mentioned e a r l i e r . The l i t e r a t u r e on the i n f o r m a l s e c t o r i s e x t e n s i v e , and although every major p o i n t of view has been c o n s i d e r e d i n the review of the debate on the i n f o r m a l s e c t o r , i t has not been p o s s i b l e to read every document on the s u b j e c t . The review i s none the l e s s comprehensive f o r the purposes of t h i s r e s e a r c h . 15 7 . POTENTIAL FOR FUTURE RESEARCH There are many d i f f e r e n t avenues f o r f u t u r e r e s e a r c h as a r e s u l t of t h i s t h e s i s . The p r e s e n t a t i o n of an a l t e r n a t i v e a n a l y s i s on the urban i n f o r m a l s e c t o r , that i s new and d i f f e r e n t , w i l l no doubt generate d i s c u s s i o n and perhaps l e a d to refinements and m o d i f i c a t i o n s of the a n a l y s i s . Furthermore, the a n a l y s i s i s as yet untested and because i t proposes u n i v e r s a l a p p l i c a b i l i t y , the scope f o r e m p i r i c a l t e s t i n g i s enormous. T h i s , a g a i n , can p r o v i d e feedback that can be used to improve the a n a l y s i s . F i n a l l y , the use of the a l t e r n a t i v e a n a l y s i s f o r pl a n n i n g purposes can be the s u b j e c t f o r c o n s i d e r a b l e r e s e a r c h , t h i s aspect i s o n l y broached i n t h i s t h e s i s . 16 CHAPTER 2: THE DEBATE ON THE INFORMAL SECTOR: THE OLD WISDOM 1965-1975 1. INTRODUCTION TO THE INFORMAL SECTOR/FORMAL SECTOR DEBATE The l i t e r a t u r e on urban dualism i s e x t e n s i v e . However, i n s p i t e of twenty f i v e years of study t h e r e i s c o n s i d e r a b l e disagreement on c e r t a i n aspects of the s u b j e c t . For example: a. What i s the i n f o r m a l s e c t o r ? b. How i s the i n f o r m a l s e c t o r formed? c. What i s the r o l e of the i n f o r m a l s e c t o r i n an urban economy? d. What i s the r e l a t i o n s h i p of the i n f o r m a l s e c t o r to the formal s e c t o r i n an urban economy? Breman's (1976:1871) view, that the d i s c u s s i o n of the i n f o r m a l s e c t o r has "given r i s e to more q u e s t i o n s than i t has s o l v e d " appears to be s u b s t a n t i a t e d . Moser (1984) has reviewed some of these q u e s t i o n s i n her a r t i c l e e n t i t l e d "The i n f o r m a l s e c t o r reworked". In the e a r l y years of the debate, however, there was greater, c l a r i t y , or consensus, on what the in f o r m a l s e c t o r was and how i t formed, p r i m a r i l y because the a n a l y s i s was r e s t r i c t e d to the T h i r d World (Mathur and Moser, 1984). But, that i s not to say there was no c o n f u s i o n i n the e a r l y y e a r s . Indeed, problems of d e f i n i t i o n and d i f f e r i n g views on the r e l a t i o n s h i p of the underdevelopment process to the c r e a t i o n of the i n f o r m a l s e c t o r were present (Kahn, 1980; Moser, 1978; Gerry, 1979). N e v e r t h e l e s s , these d i f f e r e n t p o s i t i o n s were w i t h i n the T h i r d World con t e x t , and t h i s s et boundaries to the debate. Since the mid - s e v e n t i e s , however, t h i s "context" f o r 1 7 F i g u r e 2 - S t r u c t u r e of the debate on the i n f o r m a l s e c t o r : 1965-1975 LABOUR UTILITY STUDIES OBSERVATION MIGRATION PATTERN IN THIRD WORLD OBSERVATION I WHERE IS THE INFORMAL SECTOR FOUND? ORIGIN OF DUALISM CONCEPT URBAN DUALISM MODELS WHAT IS URBAN DUALISM? EMPIRICAL DATA HOW D^ES INFORMAL SECTOR FORM? DEVELOPMENT THEORY WHY DOES INFORMAL . SECTOR FORM? LIBERAL ECONOMICS EXPLANATION NEO-MARXIST EXPLANATION the debate i s no longer s u f f i c i e n t . S t u d i e s on the i n f o r m a l s e c t o r i n other economies, although not new, have e n t e r e d the debate i n a s i g n i f i c a n t way (Mattera, 1985; Aslund, 1985; T a n z i , 1982). I t i s the purpose of t h i s chapter to review the knowledge 18 of the i n f o r m a l s e c t o r that was dominant i n the e a r l y y e a r s , the " o l d wisdom". The . chapter w i l l i d e n t i f y the major streams of thought t h a t converged to understand the phenomenon i n the T h i r d World. There w i l l be three major s e c t i o n s to t h i s d i s c u s s i o n . The f i r s t p a r t w i l l i n c l u d e a review of some of the d e f i n i t i o n s and models that c o n t r i b u t e d to the understanding of what the i n f o r m a l s e c t o r was. The second p a r t w i l l review the ideas on how the i n f o r m a l s e c t o r forms. F i n a l l y , the t h i r d p a r t w i l l d i s c u s s the major t h e o r i e s that have d i r e c t l y or i n d i r e c t l y t r i e d to understand the p e c u l i a r i t i e s of the T h i r d World development process l e a d i n g to the c r e a t i o n of the i n f o r m a l s e c t o r . I t i s necessary to d i s c u s s the " o l d wisdom" s e p a r a t e l y because i t i s d i s t i n g u i s h a b l e from the recent s t u d i e s and a l s o because i t was i n f l u e n t i a l i n g u i d i n g p l a n n i n g p o l i c y f o r the i n f o r m a l s e c t o r i n the T h i r d World. T h i s i n f l u e n c e c o n t i n u e s to the present even though the knowledge about the i n f o r m a l s e c t o r has changed i n recent y e a r s . Much of the argument i n the " o l d wisdom" stems from the o r i g i n s of the dualism concept i t s e l f and e m p i r i c a l o b s e r v a t i o n s of the i n f o r m a l s e c t o r i n T h i r d World c i t i e s . The "whys" and "hows" of the i s s u e were based, i n a l o g i c a l manner, on "where" the s e c t o r was found and "what" i t was. F i g u r e 2 r e p r e s e n t s these a s p e c t s , as the s t r u c t u r e f o r f o l l o w i n g d i s c u s s i o n of the " o l d wisdom" on the i n f o r m a l s e c t o r . 19 2. DEFINITION AND DESCRIPTION OF THE INFORMAL SECTOR 2.1 O r i g i n s Of The Dualism Concept The study of urban dualism d i d not a r i s e i n a vacuum. The concept of economic dualism has a long h i s t o r y . Economic d u a l i s m i s a dichotomous economic formation that has been observed and then d e s c r i b e d and e x p l a i n e d i n d i f f e r e n t s p a t i a l c o n t e x t s over time. Boeke i s c r e d i t e d with the n o t i o n of a dual economy ( o r i g . 1910, i n B r o o k f i e l d , 1975). The concept was i n t r o d u c e d i n E n g l i s h by F u r n i v a l (1939) and along with t r a n s l a t i o n s of Boeke's works, set the stage f o r a debate on economic dualism that c o n t i n u e s today. Boeke observed that i n a c o l o n i a l economy, the c o n t a c t between two socio-economic systems leads to two d i s t i n g u i s h a b l e elements i n the c o l o n i a l economy i e . the w e s t e r n i s e d and the e a s t e r n i s e d elements. His o b s e r v a t i o n s were based on the c o l o n i a l economy of Indonesia. The westernised element a c c o r d i n g to B r o o k f i e l d i s " m a t e r i a l i s t , r a t i o n a l , and i n d i v i d u a l i s t the epitome of e x p l o i t a t i v e and u n y i e l d i n g c a p i t a l i s m . The eastern element, i n c o n t r a s t , i s p r e c a p i t a l i s t , c h a r a c t e r i s e d by a prevalence of self-employment" ( B r o o k f i e l d 1975:54). Not much l a t e r , Chayanov's d i s c u s s i o n (1966, i n B r o o k f i e l d 1975) on the r e l a t i o n s between labour e f f o r t and p r o d u c t i o n , echoed Boeke's b e l i e f s t h a t the concept of a s i n g l e c a p i t a l i s t economy i s i n s u f f i c i e n t to e x p l a i n d i f f e r e n t economic forms. Chayanov had noted that labour input i n t o p r o d u c t i o n i s a drudgery i f i t i s used to produce beyond the needs of the 2 0 people. T h i s concept i s s i m i l a r to Boeke's "eastern element" Almost three decades a f t e r Boeke, Marx ( o r i g . 1935, i n B r o o k f i e l d , 1975) d i s t i n g u i s e d between p r o d u c t i o n f o r use and p r o d u c t i o n f o r gain which are comparable to Boeke's e a s t e r n and western elements r e s p e c t i v e l y . There i s , however, a major d i f f e r e n c e i n the w r i t i n g s of Boeke, Chayanov and Marx. Marx argues that a dual economy w i t h i n a country i s the r e s u l t of a common e v o l u t i o n of each form. By comparision, Boeke and Chayanov p o r t r a y the dua l economy to be n o n - e v o l u t i o n a r y i n c h a r a c t e r . That i s , the dual economy has a t i m e l e s s q u a l i t y , without r e f e r e n c e to any changes th a t may r e s u l t from the course of development. L a t e r , normative models were d e v i s e d to understand the dua l economy, p r i m a r i l y to f i n d one economic theory that c o u l d e x p l a i n dualism and yet be " v a l u e - f r e e " . B r o o k f i e l d (1975) s t a t e s t hat t h i s l e d to the i d e n t i f i c a t i o n of d i f f e r e n t s e t s of dichotomies, that used d i f f e r e n t nomenclature, but were e s s e n t i a l l y s i m i l a r to Boeke's e a s t e r n and western elements i n the c l a s s i c d u a l i s m theory. For example, Hig g i n s (1968) used the terms ' i n d u s t r i a l ' and ' r u r a l ' while B r o o k f i e l d uses the terms ' i n d u s t r i a l ' and ' a g r i c u l t u r a l ' . The use of d i f f e r e n t terminology has l e d to some c o n f u s i o n i n f i n d i n g an exact d e f i n i t i o n of the two s e c t o r s and t h i s permeates the a n a l y s i s of urban economies, that came l a t e r . 21 2.2 The S p a t i a l Context Of Urban Dualism In the s i x t i e s , some s c h o l a r s i d e n t i f i e d a s e c t o r i n T h i r d World c i t i e s that d i d not f i t the c l a s s i c d i s t i n c t i o n of an economy i n t o r u r a l and u r b a n - i n d u s t r i a l s e c t o r s . Richardson (1984) s t a t e s that Reynolds p r o v i d e d the f i r s t model which added t h i s s e c t o r to the c l a s s i c d ualism theory. However, c r e d i t i s u s u a l l y given to G e e r tz's (1963) a n a l y s i s f o r f u r t h e r i n g the e a r l y r e s e a r c h . Geertz d i s t i n g u i s h e d a "bazaar" s e c t o r from the " f i r m c e n t e r e d s e c t o r " ( u r b a n - i n d u s t r i a l s e c t o r ) . The western element of Boeke can be compared to the u r b a n - i n d u s t r i a l / f i r m -c e n t r e d s e c t o r , while the e a s t e r n element that had p r e v i o u s l y been v i s u a l i s e d only i n a r u r a l - a g r i c u l t u r a l context was now compared to the "bazaar" s e c t o r i n c i t i e s . Since then, the study of of dualism moved to the c i t i e s . 2.3 Urban Dualism: The Development Of T h e o r e t i c a l Models Economic dualism, i n the c l a s s i c context of a r u r a l / a g r i c u l t u r a l and u r b a n / i n d u s t r i a l dichotomy as w e l l as w i t h i n the urban context has been a f e a t u r e of the T h i r d World. I t i s not s u r p r i s i n g , t h e r e f o r e , that many d e s c r i p t i v e and e x p l a n a t o r y models of urban du a l i s m were proposed i n the same c o n t e x t . But, even w i t h i n t h i s s p a t i a l context i t was s t i l l d i f f i c u l t f o r s c h o l a r s to agree on the d e f i n i t i o n of the two s e c t o r s . The urban dualism models provide many d i f f e r e n t approaches to the d e f i n i t i o n of the two s e c t o r s , use d i f f e r e n t terminology (see Table 1 ) , and t h e r e f o r e present an u n c l e a r p i c t u r e of t h i s phenomenon. 22 Table I - Dichotomous models of urban economy i n underdeveloped nati o n s 1 . 2. 3. 4. 5. 6. Geertz McGee Hart Emme r j i Mazumdar Santos 1963 1 971 1973 1 974 1976 1976 Bazaar economy - Firm-centered economy Peasant p r o d u c t i o n - C a p i t a l i s t p r o d u c t i o n Informal - Formal U n s t r u c t u r e d - S t r u c t u r e d Unprotected - P r o t e c t e d Upper c i r c u i t - Lower c i r c u i t Source: Adapted from Gerry 1979, c i t e d i n Rogerson, 1984, p. 14 To add to t h i s , Moser (1978) s t a t e s that the a p p l i c a t i o n of the models to e m p i r i c a l r e s e a r c h has r e s u l t e d i n complete c o n f u s i o n . "For i n s t a n c e i t has, at d i f f e r e n t times, been regarded as synonymous with the urban poor or with people l i v i n g i n slums and s q u a t t e r s e t t l e m e n t s , or with immigrant p o p u l a t i o n s of c i t i e s . In a d d i t i o n , c e r t a i n kinds of o c c u p a t i o n s have been t r e a t e d as belonging to the i n f o r m a l s e c t o r . " (Moser 1978:1051) The " P i s c e s " study, by the Georgia I n s t i t u t e of Technology, f o r the Agency of I n t e r n a t i o n a l Development (1981) s t a t e s : "A c o m p i l a t i o n of more than f i f t y d e f i n i t i o n s of t h i s e l u s i v e concept show wide d i s c r e p a n c i e s i n t h e i r assumptions of maximum number of employees, c a p i t a l r e q u i r e d , p r o d u c t i v i t y , modernity and i n t e g r a t i o n i n t o the economy." T h i s c o m p i l a t i o n of d e f i n i t i o n s was made by the Georgia I n s t i t u t e of Technology i n 1975. In order to understand what the two s e c t o r s are, i n the urban context, t h i s chapter w i l l p r esent some of the major views or models and the g e n e r a l concept of urban dualism t h a t can be d e r i v e d from them.. 23 Based p a r t l y on McGee's (1978) c l a s s i f i c a t i o n , f i v e c a t e g o r i e s of dualism models are presented here. These i n c l u d e ; models based on a d e s c r i p t i o n of the s e c t o r , models based on modes of p r o d u c t i o n , models based on the r e l a t i o n s h i p of the s e c t o r s to the government, models based on income o p p o r t u n i t y and models that cannot be p l a c e d i n t o these c a t e g o r i e s . 1. Dualism models based on a d e s c r i p t i o n of the s e c t o r s : With the e x c e p t i o n of Santos, the models i n t h i s c a t e g o r y seek to d e l i n e a t e one s e c t o r from the other without the c o n s i d e r a t i o n of any i n t e r r e l a t i o n s h i p s . Geertz (1963) was the pioneer i n t h i s c a t e g o r y . He drew a t t e n t i o n to the dualism observed i n the economic s t r u c t u r e of Modjokuto, a Javanese town, and d i s t i n g u i s e d between a "bazaar" s e c t o r and a " f i r m c e n t r e d s e c t o r " . Reynolds (1966) d e s c r i b e d a s e c t o r t h a t i s s i m i l a r to the "bazaar" s e c t o r i d e n t i f i e d as: "the p e t t y t r a d e r s , s t r e e t vendors, c o o l i e s and p o r t e r s , small a r t i s a n s messengers, barbers, shoe shine boys and p e r s o n a l servants....most of them r e q u i r e l i t t l e or no s k i l l and a l s o l i t t l e or no c a p i t a l " (Reynolds, 1966). Richardson (1984) i s c r i t i c a l of Reynolds work f o r h i s n e g l e c t of the f u l l spectrum of a c t i v i t i e s t h a t can be c l a s s i f i e d i n the "bazaar" s e c t o r and i n r e t r o s p e c t he appears to be c o r r e c t . Both Reynolds and Geertz d i d not e l a b o r a t e on the c h a r a c t e r i s t i c s of the p a r t i c i p a n t s i n the two s e c t o r s except by s k i l l , c a p i t a l i n p u t , and poverty. But, i n a l l f a i r n e s s , i t has to be s a i d that they l a i d the f o u n d a t i o n f o r the work of other s c h o l a r s . 24 S t u d i e s of the i n f o r m a l s e c t o r by the I n t e r n a t i o n a l labour O r g a n i s a t i o n (1972) and Santos (1973, 1979) expanded on these e a r l i e r works, and a l t h o u g h both are t h e o r e t i c a l l y s i g n i f i c a n t , the I.L.O. had a g r e a t e r impact upon p o l i c y d e c i s i o n s i n the T h i r d World. The I.L.O., along with the World Bank, was i n s t r u m e n t a l i n " s e c u r i n g the r a p i d world wide acceptance of t h i s new concept i n the development l i t e r a t u r e " (Rogerson, 1985, p.8). The I.L.O. p r o v i d e d a l i s t of c h a r a c t e r i s t i c s to d i s t i n g u i s h between the i n f o r m a l and formal s e c t o r s , which were widely used i n e m p i r i c a l s t u d i e s and p o l i c y making. I t i s f o r these reasons t h a t the I.L.O. l i s t of c h a r a c t e r i s t i c s i s presented here: Table II - The I.L.O d i s t i n c t i o n between the i n f o r m a l and formal S e c t o r s The Informal S e c t o r : 1. Ease of e n t r y i n t o the labour f o r c e 2. R e l i a n c e on indegenous resources 3. Family ownership of the e n t e r p r i s e 4. Small s c a l e o p e r a t i o n 5. Labour i n t e n s i v e and use of adapted technology 6. S k i l l s a c q u i r e d o u t s i d e the formal school system 7. Unregulated and c o m p e t i t i v e markets The Formal Sector 1. D i f f i c u l t e n t r y i n t o labour f o r c e 2. Frequent r e l i a n c e on overseas resources 3. Corporate ownership 4. Large s c a l e of o p e r a t i o n 5. C a p i t a l i n t e n s i v e , o f t e n using imported technology 6. F o r m a l l y a c q u i r e d s k i l l s , o f t e n e x p a t r i a t e 7. P r o t e c t e d markets, through t a r i f f s quotas and trade l i c e n c e s Source: I.L.O., 1972, p.6. The I.L.O. study infuenced p o l i c y makers not merely because of t h i s comprehensive l i s t . They a l s o proposed a 25 d i f f e r e n t approach. They argued that the i n f o r m a l s e c t o r complemented the formal s e c t o r , and was necessary f o r economic development. They proposed, t h e r e f o r e , that the i n f o r m a l s e c t o r should be r e t a i n e d . T h i s was a r e f o r m i s t idea at a time when the i n f o r m a l s e c t o r was c o n s t r u e d as a negative aspect of the growth and development of an underdeveloped economy. "the i n f o r m a l s e c t o r i s a s e c t o r of t h r i v i n g economic a c t i v i t y and a source of Kenya's f u t u r e wealth" (I.L.O., Kenya r e p o r t , 1971) Santos' (1973) l i s t of c h a r a c t e r i s t i c s i s even more d e t a i l e d than the I.L.O's but i t i s not as w i d e l y used. The more important c o n t r i b u t i o n of Santos' work i s a model that shows the two s e c t o r s to be i n t e r a c t i n g and i n t e r l o c k i n g c i r c u i t s of economic a c t i v i t y . The upper and lower c i r c u i t s are e q u i v a l e n t to the formal and i n f o r m a l s e c t o r s r e s p e c t i v e l y , (see appendix A f o r the Santos' model). H i s model even attempted to i n t e g r a t e the concept of the two c i r c u i t s i n t o the h e i r a r c h y of urban s e t t l e m e n t s by s i z e of p o p u l a t i o n . Santos' s t u d i e s were not as u s e f u l when p u b l i s h e d as they have become i n the e i g h t i e s s i n c e i n t e r e s t i n the r e l a t i o n s h i p of the i n f o r m a l s e c t o r and the urban h e i r a r c h y has grown (El-Shakhs, 1984; Kundu and Mathur, 1984; K u l l , 1984; H i l h o r s t , 1984; Mathur, 1983; Das, 1982). The work of Souza and Tokman (1976) can a l s o be p l a c e d i n t h i s c a t e g o r y of dualism models based on a d e s c r i p t i o n of the two s e c t o r s . They d e s c r i b e the i n f o r m a l s e c t o r as unorganised a c t i v i t i e s t h a t use simple technology. Although the d e s c r i p t i o n s used by the s c h o l a r s i n t h i s 26 c a t e g o r y d i f f e r e d , i t can be deduced that the i n f o r m a l s e c t o r was small s c a l e , g e n e r a l l y the economy of the poor and a l l other c h a r a c t e r i s t i c s such as the l e v e l of technology used, the source of resources f o r p r o d u c t i o n c o u l d be p l a c e d i n the context of p o v e r t y . 2. Dualism models based on Modes of P r o d u c t i o n A c c o r d i n g to McGee (1973) the approach of the models i n t h i s c a t e g o r y can be t r a c e d to F r a n k l i n ' s (1965) d i s t i n c t i o n between three systems of p r o d u c t i o n : the c a p i t a l i s t , the s o c i a l i s t and the peasant. In the f i r s t two systems, labour i s a commodity to be h i r e d and d i s m i s s e d by the e n t e r p r i s e a c c o r d i n g to market c o n d i t i o n s , technology e t c . . In the peasant type, the entrepreneur i s committed to the u t i l i s a t i o n of h i s t o t a l labour supply, that of h i s f a m i l y . McGee (1973) s t a t e s that the i n f o r m a l s e c t o r conforms to the peasant system of p r o d u c t i o n . In t h i s sense, t h e r e f o r e , the i n f o r m a l s e c t o r i s s i m i l a r to the e a s t e r n element of Boeke's c l a s s i c dualism. That i s , the i n f o r m a l s e c t o r l i k e the r u r a l s e c t o r , i s a t r a d i t i o n a l / p r e c a p i t a l i s t s e c t o r ( B r o o k f i e l d 1975). Chayanov (1925, i n B r o o k f i e l d , 1975), i t may be r e c a l l e d , l i k e F r a n k l i n (1965), based h i s d i s t i n c t i o n of a dual economy on a study of r e l a t i o n s h i p between labour and p r o d u c t i o n . The Friedmann and S u l l i v a n (1972) model a l s o d i s t i n g u i s h e s between modes of p r o d u c t i o n , with a s l i g h t v a r i a t i o n . Friedmann and S u l l i v a n i n t r o d u c e d a t h i r d mode of p r o d u c t i o n and t h e r e f o r e the urban economy was not seen as a s t r i c t l y d u a l i s t i c s t r u c t u r e . T h e i r t r i - s e c t o r a l model combines labour f o r c e 27 c h a r a c t e r i s t i c s with an i n s t i t u t i o n a l model of T h i r d World c i t i e s and i d e n t i f i e s : i n d i v i d u a l e ntrepreneurs ( i n c l u d i n g the open unemployed), f a m i l y e n t e r p r i s e s , and the c o r p o r a t e s e c t o r . The i n f o r m a l s e c t o r a c c o r d i n g to t h i s model i n c l u d e s both the i n d i v i d u a l and the f a m i l y e n t e r p r i s e s . In a sense, the Friedmann and S u l l i v a n model i n d i c a t e s a d i s s a t i s f a c t i o n with the d u a l i s t i c framework that i s f u r t h e r expressed i n l a t e r years by Sethuraman (1981), S t e e l (1977), and Nihan and Jou r d a i n (1978) and o t h e r s , because i t f a i l s to cover the gamut of urban a c t i v i t i e s . 3. Dualism models based on the r e l a t i o n s h i p of the s e c t o r s to  the s t a t e ; i . e . f a c t o r s e x t e r n a l to the e n t e r p r i s e Mazumdar (1976) d i s t i n g u i s e d the two s e c t o r s on the b a s i s of a dichotomy i n the labour market, i n which on l y a pa r t of the labour f o r c e had t h e i r wage l e v e l s and working c o n d i t i o n s p r o t e c t e d by the government or trade unions. The remaining labour f o r c e was not only unprotected but found i t d i f f i c u l t to gain entry i n t o the p r o t e c t e d labour f o r c e . Weeks (1975) makes a s i m i l a r d i s t i n c t i o n but he r e f e r s to the p r o t e c t i o n of the a c t i v i t y , not labour, by the s t a t e . The formal s e c t o r , a c c o r d i n g to Weeks c o n s i s t s of government and p r i v a t e e n t e r p r i s e s , and i s o f f i c i a l l y r e c o g n i s e d , r e g u l a t e d , p r o t e c t e d , and n u r t u r e d by the s t a t e . The i n f o r m a l s e c t o r r e c e i v e s no such r e c o g n i t i o n or support. T h i s c a t e g o r y of models a l s o had a c o n s i d e r a b l e impact on p o l i c y makers f o r i t was easy to i d e n t i f y the i n f o r m a l s e c t o r by a process of e l i m i n a t i o n of the e n t e r p r i s e s r e c e i v i n g government 28 r e c o g n i t i o n or support through r e g i s t r a t i o n , and l i c e n c e s (Popola, 1979; P o e t h i g , 1971). While t h i s i s h i g h l y debatable, i t was common to view u n r e g i s t e r e d a c t i v i t i e s i n the T h i r d World as the e q u i v a l e n t to the i n f o r m a l s e c t o r . For i n s t a n c e , Sethuraman (1976, p.126) i n an e a r l y a r t i c l e on J a k a r t a , d e f i n e s the i n f o r m a l s e c t o r as " a l l u n r e g i s t e r e d commercial e n t e r p r i s e s " . 4. Dualism Models based on Income Opportunity; H a r t ' s (1973) work on Ghana i s o f t e n s a i d to be one of the more s i g n i f i c a n t c o n t r i b u t i o n s to the debate as i t o f f e r s q u i t e a d i f f e r e n t p e r s p e c t i v e on urban dualism. He i s a l s o c r e d i t e d with i n t r o d u c i n g the terms i n f o r m a l and formal that are the most widely used terms i n the debate. H i s study of Accra's economy showed t h a t almost 55% of the labour f o r c e was c l a s s i f i e d as l a c k i n g wage employment. He, t h e r e f o r e , focussed h i s a t t e n t i o n on t h i s non-wage s e c t o r . He d e f i n e s the i n f o r m a l s e c t o r as self-employment as opposed to wage, employment. Although he r e t a i n s the d u a l i s t i c framework, h i s model based on income o p p o r t u n i t i e s makes the framework f a r more f l e x i b l e than other models. The model i n c l u d e s a wide range of a c t i v i t i e s (see appendix B f o r the Hart c l a s s i f i c a t i o n of a c t i v i t i e s i n the two s e c t o r s ) . H a r t ' s work showed that there was a wide range in the s i z e and s c a l e of a c t i v i t i e s that c o u l d not be encompassed by the models t h a t based t h e i r d i s t i n c t i o n s on modes of p r o d u c t i o n , or r e c o g n i t i o n by the government. Hi s c l a s s i f i c a t i o n of the i n f o r m a l s e c t o r based on income o p p o r t u n i t i e s showed that the 29 i n f o r m a l s e c t o r i s composed of both i l l e g a l and l e g i t i m a t e a c t i v i t i e s . I l l e g a l i t y , then, i s not u s u a l l y a consequence of the nature of the a c t i v i t y but a consequence of the lack of any o f f i c i a l r e c o g n i t i o n . Hart's p o s i t i o n t h e r e f o r e c o n f l i c t s with that of Mazumdar, Weeks and Sethuraman c i t e d i n the previous c a t e g o r y . Both the Hart and the Friedmann and S u l l i v a n models are i n d i c a t i o n s of concern about the r i g i d i t y of the d u a l i s t i c framework, as being u n r e p r e s e n t a t i v e of the range of a c t i v i t i e s i n an urban economy. 5. Other d e f i n i t i o n s There have been numerous other d e f i n i t i o n s of the i n f o r m a l s e c t o r t h a t do not f i t i n t o the above c a t e g o r i e s . The i n f o r m a l s e c t o r has been d e f i n e d as: c o m p r i s i n g c a s u a l workers (Sethuraman, 1976), on the b a s i s of s c a l e of a c t i v i t y ( J o s h i and J o s h i , 1976), as a s e c t o r where wages are lower than the minimum wage r a t e (Schaefer, 1976), and e n t e r p r i s e s where labour i s employed at a " r e l a t i v e l y low wage" (Sethuraman, 1974) and so on. There can be no doubt that d u r i n g t h i s e a r l y decade of the study on the i n f o r m a l s e c t o r , i . e . 1965-75, there was no l a c k of e f f o r t to d e f i n e the two s e c t o r s of the urban economy. 2.3.1 The C o n t r i b u t i o n s And L i m i t a t i o n s Of Dualism Models  The c o n t r i b u t i o n s The most important c o n t r i b u t i o n of the urban dualism models was that they p r o v i d e d some e x p l a n a t i o n of urban dualism that was without precedent. The i m p l i c a t i o n s of these e a r l y models were t h r e e f o l d : 30 1. The conceptual framework c o u l d be used to i d e n t i f y t a r g e t groups i n the urban p o p u l a t i o n f o r r e s e a r c h as w e l l as f o r p o l i c y making. While the f i n d i n g s from r e s e a r c h on the t a r g e t groups served to improve our understanding of the phenomenon, the use of the t a r g e t groups i n p o l i c y making had a more d i r e c t impact. The t a r g e t groups c o u l d p o t e n t i a l l y be planned f o r . However, although the models f a c i l i t a t e d r e s e a r c h and p l a n n i n g , l a c k of agreement on the d e f i n i t i o n of the two s e c t o r s meant that the composition of the t a r g e t groups was h i g h l y v a r i a b l e . The t a r g e t group c o u l d mean the urban poor, the poor r u r a l migrants, the p a r t i c i p a n t s i n i l l e g a l a c t i v i t i e s , the i n h a b i t a n t s of s q u a t t e r c o l o n i e s and so on (Moser, 1984). In t h i s a s p e c t , t h e r e f o r e , the c o n t r i b u t i o n of the models was a mixed b l e s s i n g . While the d e f i n i t i o n of the two s e c t o r s promoted e m p i r i c a l study, the use of m u l t i p l e d e f i n i t i o n s r e s t r i c t e d comparative r e s e a r c h . 2. Some models i n c o r p o r a t e concepts on the r o l e of the i n f o r m a l s e c t o r i n urban and n a t i o n a l development and thereby s t r o n g l y i n f l u e n c e d n a t i o n a l p o l i c y making (Rogerson, 1985; Moser, 1984; Bromley, 1978). The c o n t r i b u t i o n of the I n t e r n a t i o n a l Labour O r g a n i s a t i o n i s a case i n p o i n t . As a r e s u l t of the I.L.O. study (1972), p o l i c i e s r e g a r d i n g the i n f o r m a l s e c t o r became more p o s i t i v e towards the needs and c o n t r i b u t i o n s of i t s p a r t i c i p a n t s (Sethuraman, 1976; Popola, 1978; Konigsberger, 1976). 3. The concept of urban d u a l i s m c o u l d be used to understand some other i s s u e s i n development f o r which there was 31 inadequate p r i o r e x p l a n a t i o n . For i n s t a n c e , the i s s u e of labour u t i l i t y . M i g r a t i o n of r u r a l p o p u l a t i o n i n t o l a r g e c i t i e s i n the T h i r d World, was known to be e x c e s s i v e but the urban areas d i d not seem to face gross unemployment ( B e i n e f i e l d and M a r t i n , 1974). The i d e n t i f i c a t i o n of an i n f o r m a l s e c t o r was used to e x p l a i n the f a t e of the r u r a l m i g r a n t s . E m p i r i c a l work born out of the use of d u a l i s m models seemed to support t h i s l o g i c (McGee, 1977; Sethuraman, 1976; Mookerjee, 1975). T h i s w i l l be e l a b o r a t e d i n the f o l l o w i n g s u b - s e c t i o n of t h i s c h a pter. The l i m i t a t i o n s There are many l i m i t a t i o n s to the dualism models, but perhaps the most c r i t i c a l one i s the lack of agreement on a d e f i n i t i o n of the i n f o r m a l s e c t o r (Rogerson, 1985; Moser, 1984; Richardson, 1984). I t i s d i f f i c u l t to g e n e r a l i s e , or compare and c o n t r a s t the a c t i v i t i e s i n the two s e c t o r s , f o r academic and p r a c t i c a l purposes, without a p r e c i s e d e f i n i t i o n . 1 . Problems of d e f i n i t i o n I t can be seen from the d i s c u s s i o n thus f a r that the i n f o r m a l s e c t o r has been d e f i n e d : as a mode of p r o d u c t i o n s i m i l a r to the peasant mode of p r o d u c t i o n ; a s e c t o r of i l l e g a l / u n r e g i s t e r e d a c t i v i t i e s ; a labour f o r c e that l a c k s c a p i t a l , s k i l l , formal t r a i n i n g and t e c h n i c a l knowhow; a s e c t o r of s m a l l s c a l e a c t i v i t i e s without government p r o t e c t i o n , and self-employment. None of these d e f i n i t i o n s are completely a c c e p t a b l e f o r they exclude a c t i v i t i e s r e cognised under other d e f i n i t i o n s as i n f o r m a l a c t i v i t i e s . Nor does i t s u f f i c e to 32 amalgamate the d e f i n i t i o n s because t h e i r c o n t r a d i c t i o n cannot be r e s o l v e d . For i n s t a n c e , a c c o r d i n g to Hart, the i n f o r m a l s e c t o r c o n t a i n s i l l e g a l and l e g a l a c t i v i t i e s but Sethuraman b e l i e v e d t h a t i t was composed only of i l l e g a l a c i t i v i t i e s . Another problem i n the d e f i n i t i o n s i s that the d e s c r i p t i o n of those who p a r t i c i p a t e i n i n f o r m a l a c t i v i t i e s i s o f t e n based on ambiguous and s i m p l i f i e d assumptions without s u f f i c i e n t e m p i r i c a l evidence (McGee, 1978). T h i s a s c r i b e s a homogeniety to the a c t i v i t i e s and e n t e r p r i s e s i n the i n f o r m a l s e c t o r that f a i l s to approximate r e a l i t y (Breman, 1976; Hart, 1976). For example, McGee, 1978; McGee and Yeung, 1977; Mazumdar, 1975; Papanek, 1975 i n Rogerson, 1985; i n d i c a t e that the 'ease of e n t r y ' a t t r i b u t e d to the i n f o r m a l s e c t o r by the I.L.O. (1972) and Reynolds (1966) i s f a l s e . Gerry (1974) found that the i n f o r m a l s e c t o r sometimes used imported m a t e r i a l s i n the p r o d u c t i o n of goods and t h e r e f o r e the assumption that the i n f o r m a l s e c t o r r e l i e s only on indigenous resources i s a l s o i n v a l i d . Thus, i t can be seen that not only are there too many d e f i n i t i o n s but that some of the d e f i n i t i o n s are a l s o c o n t r a d i c t o r y . For both, a n a l y t i c a l s t u d i e s and a p p l i c a t i o n to p o l i c y , comparative s t u d i e s are d i f f i c u l t to a chieve (Breman, 1976; Mazumdar, 1976; Tokman and Souza, 1976). T h i s c r e a t e s other problems in d e v e l o p i n g the concept of urban dualism, and i t s r o l e i n the urban economy. Thus, the d e f i n i t i o n a l problem has r e p e r c u s s i o n s i n every other aspect of the debate. 2. Problems with c o n c e p t u a l i s a t i o n of the models; 33 A l l of the urban du a l i s m models c i t e d i n the v a r i o u s c a t e g o r i e s are e s s e n t i a l l y d e s c r i p t i v e , although the terms of the d e s c r i p t i o n s d i f f e r . These models are s t a t i c i n time and have, consequently, low p r e d i c t i v e or explanatory powers that can be used i n d e c i s i o n making on the f u t u r e . Santos (1973) i s perhaps the e x c e p t i o n f o r h i s model does attempt to i n t e r r e l a t e the f u n c t i o n s of the two s e c t o r s . But, the u n i t y and t o t a l i t y of the p r o d u c t i o n system i s l o s t i n most of the dualism models by t h e i r focus on the m u t u a l l y e x c l u s i v e c h a r a c t e r i s t i c s of the two s e c t o r s (Gerry, 1979; McGee, 1976, 1979). Futhermore, the dualism models do not r e l a t e to any other c i r c u i t s of p r o d u c t i o n , n a t i o n a l or i n t e r n a t i o n a l (McGee, 1978; Bose, 1974; Ley, 1974). The concept of dualism i t s e l f i s a l s o under attack.. Breman (1976) and o t h e r s f i n d i t d i f f i c u l t to accept that the urban labour market can be d i v i d e d i n t o t i g h t compartments. They argue that the d i v i s i o n of the economy i n t o two s e c t o r s o f t e n excludes some a c t i v i t i e s t h a t cannot be s t r i c t l y c l a s s i f i e d under e i t h e r one. Friedmann and S u l l i v a n (1972) and Hart (1973) t r y to overcome t h i s problem, to a degree, by making t h e i r models more f l e x i b l e . S i n c e the m i d-seventies, other s o l u t i o n s have been proposed, such as the i n t r o d u c t i o n of a ' t h i r d ' s e c t o r such as the i n t e r m e d i a t e s e c t o r ( S t e e l , 1977), or the modern s e c t o r (Nihan and J o u r d a i n , 1978), but these w i l l be covered i n the review of post-1975 l i t e r a t u r e i n the f o l l o w i n g c h a p t e r . C l e a r l y then the h e s i t a n c y of some e a r l y s t u d i e s to accept the d u a l i s t i c framework c o n t r i b u t e s f u r t h e r to the problems of 34 d e f i n i t i o n of the two s e c t o r s . 3. Problems with the focus on the economics of a dual economy. The focus on the economic aspect of the i s s u e n e g l e c t s many s o c i o l o g i c a l dimensions that may be as c r i t i c a l to the understanding of the i n f o r m a l s e c t o r as economics (Skinner' 1980; Das, 1978; Breman, 1976; L u b e l l , 1974). For i n s t a n c e , there may or may not be a r e l a t i o n s h i p between economic c l a s s e s and s o c i a l c l a s s e s i n the i n f o r m a l s e c t o r but t h i s has not been adequately researched. In the study of one s q u a t t e r c o l o n y i n Sambalpur, In d i a (Das, 1978), the evidence suggested t h a t t h e r e was a c l o s e r e l a t i o n s h i p between the untouchable c a s t e and poverty of the p a r t i c i p a n t s i n the i n f o r m a l s e c t o r . In a survey of 187 households i n that s q u a t t e r colony, 118 belonged to the 'untouchable' c a s t e , and were long time r e s i d e n t s of the c i t y . C o n s i d e r i n g the r e l i g i o u s h i s t o r y of the c i t y , i t was apparent that s o c i a l o s t r a c i s a t i o n of t h i s c a s t e group, made i t d i f f i c u l t f o r them to work i n any c a p a c i t y other than the most menial l e v e l . T h i s suggests that the s o c i a l h i s t o r y of a community may be as important as i t s economic h i s t o r y i n understanding i t s inf o r m a l s e c t o r . Andrew Paul et a l (1974) and Payne (1974) have found that there i s a st r o n g s o c i a l p a t t e r n i n terms of k i n s h i p p a t t e r n s and r u r a l urban l i n k s , i n squ a t t e r c o l o n i e s i n Zambia and New D e l h i , r e s p e c t i v e l y . T h i s i m p l i e s t h a t s o c i a l networks p l a y an important r o l e i n the s i z e of the i n f o r m a l s e c t o r and i t s l o c a t i o n w i t h i n an urban a r e a , because they sometimes f u n c t i o n as a mechanism f o r recru i t m e n t i n t o the labour f o r c e . For i n s t a n c e , the rickshaw p u l l e r s i n C a l c u t t a tend t o be from 35 the s t a t e of Bihar ( L u b e l l , 1974) and based on p e r s o n a l experience, i t i s found t h a t the cooks tend to be from the s t a t e of O r i s s a . Such tre n d s are a l s o found i n D e l h i (N.C.A.E.R., 1973) and Bombay (Z a c h a r i a h , 1968) Granted that f u r t h e r s t u d i e s are necessary before f i r m c o n c l u s i o n s can be drawn co n c e r n i n g the r o l e of s o c i a l f a c t o r s , dualism models have n e v e r t h e l e s s had a b i a s towards economic v a r i a b l e s . In summary, i t can be s a i d that although many q u e s t i o n s remain unanswered by the dualism models, such as the r e l a t i o n s h i p of the two s e c t o r s to each other and to the n a t i o n a l and i n t e r n a t i o n a l economy e t c . some g e n e r a l i s a t i o n s can, n e v e r t h e l e s s , be drawn from the models r e g a r d i n g what the i n f o r m a l s e c t o r i s . The f o l l o w i n g d e s c r i p t i o n of the i n f o r m a l s e c t o r i s the author's summary of the ideas t h a t were p a r t of the e a r l y years of the debate: The i n f o r m a l s e c t o r can be d e s c r i b e d as a p r e c a p i t a l i s t mode of p r o d u c t i o n c o n s i s t i n g of i n d i v i d u a l o p e r a t o r s or small e n t e r p r i s e s , o p e r a t i n g on low c a p i t a l , s k i l l and technology, r e l y i n g l a r g e l y on l o c a l r e s o u r c e s , e x i s t i n g p r i m a r i l y f o r employment of the poor. I t i n c l u d e s a l a r g e range of a c t i v i t i e s most of which are u n r e g u l a t e d by the government. 3. FORMATION OF THE INFORMAL SECTOR: CONTRIBUTIONS FROM LABOUR  UTILITY THEORY AND EMPIRICAL STUDIES 3.1 The Question Of Labour U t i l i t y Economists i n the f i f t i e s , t r i e d to f i n d ways to i n c r e a s e p r o d u c t i o n i n the underdeveloped economies by the e f f e c t i v e use of a v a i l a b l e l a b o u r . Since underdeveloped economies were a g r a r i a n i n nature much of the p o p u l a t i o n , and labour f o r c e , was found i n r u r a l a r e a s . I t was a common b e l i e f , at that time, 36 that i n d u s t r i a l p r o d u c t i o n l e d to q u i c k e r and g r e a t e r r e t u r n s from investment, and thus i t would be b e t t e r f o r underdeveloped economies to i n d u s t r i a l i s e . I n d u s t r i a l p r o d u c t i o n was c o n c e n t r a t e d i n urban areas and the economists sought ways to measure the labour i n r u r a l areas that c o u l d be t r a n s f e r r e d f o r use i n p r o d u c t i v e a c t i v i t i e s i n urban areas (Nurkse, 1955; Lewis, 1954). However i t was soon r e a l i s e d t h a t labour need not be p r i e d away from the r u r a l a r e a s . In f a c t , labour was l e a v i n g the r u r a l areas at an alarming pace ( Z e l i n s k y , 1971), and there was concern that the T h i r d World would s u f f e r "under the weight of a p o p u l a t i o n that c o u l d not be put to p r o d u c t i v e use" (Hart, 1976, p.5). Estimates of urban unemployment e s c a l a t e d (Weeks, 1974; Singer, i n B e i n e f e l d and M a r t i n , 1974). Rogerson ( 1985, p.5) s t a t e s that the a c t i v i t i e s of the modern s e c t o r had not expanded f a s t enough to absorb the enormous stream of people who migrated to the c i t i e s of L a t i n America, A s i a , and A f r i c a . Economists, t h e r e f o r e , s h i f t e d t h e i r a t t e n t i o n to labour use i n the urban areas, and found that there were few accounts of the use of migrant labour i n p r o d u c t i v e a c t i v i t i e s . More impo r t a n t l y , there was not much v i s i b l e unemployment e i t h e r . What, then, was happening to the migrants from the r u r a l areas? Some e x p l a i n e d t h i s l a c k of c o n f o r m i t y between employment and labour f o r c e by proposing the concept of underemployment, which has been d e s c r i b e d as a l l forms of non-wage economic a c t i v i t y (Gerry, 1979; Hart, 1976); or d i s g u i s e d unemployment which i s some form of unrecognised job s h a r i n g . For i n s t a n c e , K r i t z and 37 Ramos (1976) proposed under-employment as a reason f o r the low unemployment f i g u r e s i n Managua, Santo Domingo, and Asuncion, c i t i e s i n L a t i n America. Consequently, measurements of labour under-employment were attempted but t h i s form of study d i d not l e a d anywhere and was based on l i t t l e evidence ( B e i n e f i e l d and M a r t i n , 1974). The o b s e r v a t i o n of urban dualism and consequently the c r e a t i o n of du a l i s m models came as a welcome r e l i e f to the s t e r i l e d i s c u s s i o n s on labour u t i l i t y . These models p r o v i d e d a d e s c r i p t i v e a n a l y s i s of how labour was being used i n the urban areas of the T h i r d World. I t was hypothesised that the migrants from r u r a l areas f i n d t h e i r way i n t o the i n f o r m a l s e c t o r and t h e r e f o r e r ecords of unemployment remained low. When t h i s was t e s t e d e m p i r i c a l l y , evidence supported the h y p o t h e s i s (Richardson, 1984; Das, 1978; Sethuraman, 1976). (See appendix C f o r a c h a r t , based on the author's view of the flow of ideas on dualism and development). 3.2 E m p i r i c a l S t u d i e s On The Informal Sector Dualism models c o n t r i b u t e d g r e a t l y to the f e a s i b i l i t y of e m p i r i c a l r e s e a r c h on the i n f o r m a l s e c t o r . The f i n d i n g s from e m p i r i c a l work had a t h r e e - f o l d e f f e c t : 1. They t e s t e d the hyp o t h e s i s p r o v i d e d by labour u t i l i t y t h e o r e t i c i a n s . 2. They c o r r o b o r a t e d or i n v a l i d a t e d some of the assumptions made by the du a l i s m models. 3. They p r o v i d e d a d d i t i o n a l i n f o r m a t i o n on urban dua l i s m that 38 helped to r e f i n e the t h e o r i e s of the i n f o r m a l s e c t o r such as the r o l e of the i n f o r m a l s e c t o r i n the urban economy. S t u d i e s conducted i n v a r i o u s p a r t s of the T h i r d World supported many of the assumptions made by the d u a l i s m models. I t was found that the i n f o r m a l s e c t o r was l a r g e l y composed of the poor and the u n s k i l l e d (Sabot, 1977; Bose, 1977; Schaefer, 1976; I.L.O., 1972). I t was a l s o found t h a t the s e c t o r was dominated by s m a l l e n t e r p r i s e s operated i n d i v i d u a l l y or by the use o f ' f a m i l y labour (Sethuraman, 1976; J o s h i and J o s h i , 1976). I r r e s p e c t i v e of whether the i n f o r m a l s e c t o r was s t u d i e d on the b a s i s of i t s a c t i v i t i e s at a given l o c a t i o n , ( S t r e e t occupations of C a l i : Bromley and Birbeck 1984) or by type (Hawkers and Vendors i n South east Asian c i t i e s : McGee 1977, Lucknow Ri c k s h a w a l l a s : Gould 1965, Manila Jeepneys: Pendakur 1976) or by the r e s i d e n t i a l areas of the p a r t i c i p a n t s i . e . s q u a t t e r c o l o n i e s (Das, 1978; Andrew Paul, 1974; Payne, 1974), i t was c l e a r t h at the i n f o r m a l s e c t o r was a symptom of the T h i r d World's slow pace of development, i n the face of a r a p i d l y growing labour f o r c e . These c o n d i t i o n s c r e a t e d an economy that i s c h a r a c t e r i s e d by poverty and unemployment, both of which c o n t r i b u t e to the formation of the i n f o r m a l s e c t o r . But some e m p i r i c a l s t u d i e s a l s o p r o v i d e d some evidence to the c o n t r a r y , such as the l a c k of c o r r e l a t i o n of r u r a l m i g r a t i o n to the i n f o r m a l s e c t o r (Breman, 1976), but such f i n d i n g s d i d not weaken the g e n e r a l o p i n i o n of what the i n f o r m a l s e c t o r was and how i t formed. I t was l a r g e l y accepted i n the e a r l y y ears that the i n f o r m a l s e c t o r was a " s e c t o r of l a s t r e s o r t " f o r the poor and 39 the unemployed (Mathur and Moser, 1984). The e m p i r i c a l r e s e a r c h a l s o p r o v i d e d overwhelming evidence that the i n f o r m a l s e c t o r was composed of recent migrants, s u p p o r t i n g the hypothesis that was proposed by the labour u t i l i t y s t u d i e s . For example, 82% of recent migrants to Asuncion, Paraguay, worked i n the i n f o r m a l s e c t o r ; 70% d i d the same i n Santo Domingo (Richardson, 1984). The r a t e s were hig h i n J a k a r t a (Sethuraman, 1976), and i n Rourkela (Das, 1978). See a l s o Singh, 1978? McGee, 1977; Mookerjee, 1975; Mazumdar and Mazumdar, 1975. A c c o r d i n g to Bose (1977), the primary reason f o r m i g r a t i o n i s to search f o r employment f o r economic s u r v i v a l , and not to b e t t e r economic o p p o r t u n i t i e s . T h i s does not n e c e s s a r i l y mean that the i n f o r m a l s e c t o r i s predominantly composed of migrants, but i t does suggest t h a t the i n f o r m a l s e c t o r i s a source of employment and sustenance f o r r u r a l migrants who cannot enter the formal s e c t o r labour f o r c e . I t was b e l i e v e d t h a t the i n f o r m a l s e c t o r may be a " s t e p p i n g stone" to the formal s e c t o r , a concept that grew with H a r r i s - T o d a r o i n the s i x t i e s (Richardson, 1984; H a r r i s and Todaro, 1970). In l a t e r y e a r s , neo-marxists, proposed that the i n f o r m a l s e c t o r was i n f a c t the " m a r g i n a l i s e d " economy of r u r a l migrants (Perlman, 1976; Quijano, 1974; Sunkel, 1974). The m a r g i n a l i s a t i o n concept s t a t e s that the r u r a l migrants are m a r g i n a l i s e d i n the process of T h i r d World development, which i s dependent upon the Western c a p i t a l i s t n a t i o n s . In one way or another, most s c h o l a r s have t i e d the i n f o r m a l s e c t o r to the dominant model of m i g r a t i o n and development. 40 In these concepts of ' m a r g i n a l i s a t i o n ' and 'stepping stone', the u n d e r l y i n g message i s that the i n f o r m a l s e c t o r i s c r e a t e d when the labour f o r c e i s e i t h e r i n excess of employment o p p o r t u n i t i e s i n the formal s e c t o r or unable to meet the en t r y requirements of the formal s e c t o r , i . e . i n terms of s k i l l , l i t e r a c y , c a p i t a l e t c . As a r e s u l t of the labour u t i l i t y s t u d i e s and e m p i r i c a l r e s e a r c h based on the dualism models, some key f a c t o r s l e a d i n g to the c r e a t i o n of the i n f o r m a l s e c t o r , were i d e n t i f i e d . But, dualism models, e m p i r i c a l r e s e a r c h and labour u t i l i t y s t u d i e s do not study the i n f o r m a l s e c t o r i n a h i s t o r i c a l c o n t e x t . They h e l p us to understand the phenomenon at a giv e n time, but do not prov i d e any i n s i g h t i n t o why the f a c t o r s that c r e a t e the in f o r m a l s e c t o r e x i s t and p e r s i s t . However, the development processes of the T h i r d World can p r o v i d e some understanding of how the c l i m a t e was c r e a t e d f o r the formation of the i n f o r m a l s e c t o r . 4. THE ROLE OF DEVELOPMENT PROCESSES IN THE THIRD WORLD IN THE  CREATION OF THE INFORMAL SECTOR E m p i r i c a l evidence suggests that m i g r a t i o n , poverty and l a c k of employment i n the formal s e c t o r c o n t r i b u t e to the formation of the i n f o r m a l s e c t o r (Rogerson, 1985; Mathur and Moser, 1984; McGee, 1977; Sethuraman, 1976). To put t h i s more c l e a r l y , i t can be s a i d t hat the i n f o r m a l s e c t o r i s c r e a t e d as a r e s u l t o f : 1. A hig h r a t e of growth of the labour f o r c e through n a t u r a l 41 i n c r e a s e and m i g r a t i o n , although the m i g r a t i o n r a t e of the r u r a l poor i n t o urban areas i s o f t e n higher than the r a t e of n a t u r a l i n c r e a s e (Richardson, 1984). 2. A slow pace of development, that leads t o : slow growth of the formal s e c t o r and t h e r e f o r e low employment o p p o r t u n i t i e s i n i t . Even though the l e v e l s of development w i t h i n the T h i r d World vary, i t can be assumed that some combination of these two f a c t o r s must e x i s t to c r e a t e the i n f o r m a l s e c t o r . T h e r e f o r e , some g e n e r a l i s a t i o n can be made r e g a r d i n g the presence of the two f a c t o r s i n the T h i r d World. In order two understand how these f e a t u r e s were c r e a t e d i t i s necessary to look at the development processes of the T h i r d World i n a ' g e n e r a l i s e d way. The i n f o r m a l s e c t o r was a phenomenon observed i n the s i x t i e s and although i t may have e x i s t e d i n the T h i r d World i n the pre-independence phase, before 1950, t h i s i s a debated p o i n t in the l i t e r a t u r e . Santos (1979), f o r example, b e l i e v e s that an i n f o r m a l s e c t o r c o u l d not have formed i n the c o l o n i a l phase. On the other hand, i t i s d i f f i c u l t to accept t h a t there was no poverty and unemployment i n the urban areas i n the c o l o n i a l phase. However, the pros-and-cons of the argument are not r e l e v a n t here. The i n f o r m a l s e c t o r was n o t i c e d i n the po s t -independance phase and t h i s phase of development should s u f f i c e f o r the purposes of t h i s e v a l u a t i o n , keeping i n mind that the p r e c e d i n g development d i d p r o v i d e the base upon which T h i r d World development p l a n n i n g was implemented. What i s to be examined here i s not the h i s t o r i c a l courses of development 42 e x t e r n a l l y imposed on a T h i r d World n a t i o n , but the i n t e r n a l l y c o n t r o l l e d development i n the l a s t t h i r t y - f i v e y e a r s . There are three g e n e r a l aspects that d e v e l o p i n g n a t i o n s have c o n s i d e r e d i n p o l i c y making: 1. The s p e c i f i c needs of the c o u n t r y . 2. The f i n a n c i a l r esources a v a i l a b l e f o r development and the s e t t i n g of g o a l s . 3. The theory used to guide development i n order to achieve g o a l s . Of these three a s p e c t s that.have a f f e c t e d the development p a t t e r n s l e a d i n g to the c r e a t i o n of the i n f o r m a l s e c t o r , the use of theory had a long l a s t i n g e f f e c t . S p e c i f i c needs and f i n a n c i a l resources of n a t i o n s h e l p to i d e n t i f y the immediate development goals but theory i s necessary to guide the implemention and can s t r e t c h over y e a r s . I t i s f o r t h i s reason that development approaches w i l l be d i s c u s s e d i n g r e a t e r d e t a i l . S p e c i f i c needs In g e n e r a l i t can be s a i d that the newly independent d e v e l o p i n g n a t i o n s were i n severe economic c r i s i s . r T h e i r t r a d i t i o n a l economic base had been d i s r u p t e d by years of c o l o n i a l r u l e and the superimposed economy l e f t by the c o l o n i s e r s was no longer e n t i r e l y f u n c t i o n a l to t h e i r needs (Mookerjee, 1981). In most i n s t a n c e s there was a need to c r e a t e a p a t t e r n of economic develoment with i n t e r n a l c o n t r o l of r e s o u r c e s . There were three o p t i o n s these n a t i o n s c o u l d f o l l o w (Santos, 1979): 1. Revert to the p r e - c o l o n i a l , t r a d i t i o n a l path of development. 2. Evolve a new but indigenous response to the problems of 43 development. 3. Adopt a non-indigenous course of development that had been t r i e d i n other n a t i o n s . T h i s proved to be a source of c o n f l i c t f o r there were p r o s -and-cons to each of these o p t i o n s . In I n d i a , f o r example, there was a major s t r u g g l e between Mahatma Gandhi's " t r a d i t i o n a l approach" and Nehru's d e s i r e to use a non-indigenous, pro-i n d u s t r i a l i s a t i o n approach (Dhar, 1976; Vepa, 1975). In I n d i a as w e l l as many other d e v e l o p i n g c o u n t r i e s the non-indigenous approaches, p r i m a r i l y the western model, that i s m odernisation through i n d u s t r i a l s a t i o n and t e c h n o l o g i c a l advance, seemed to have more appeal. The main reason f o r t h i s was t h a t Western n a t i o n s stood as a testament to the success of that model. F i n a n c i a l r e s o u r c e s : F i n a n c i a l resources f o r development were l i m i t e d , because n a t i o n a l wealth had been d r a i n e d by independence wars and the e a r l i e r e x t r a c t i o n s by c o l o n i a l powers. Thus, the only recourse was.to co n c e n t r a t e the l i m i t e d investment funds a v a i l a b l e . The net r e s u l t was that development was to be achieved q u i c k l y with high r e t u r n s from minimum investment by f o l l o w i n g the western model of i n d u s t r i a l i s a t i o n and by a c c e p t i n g p r i o r i t i e s f o r development that were e n t i r e l y economic. Having decided i n the s i x t i e s , to emulate the western ex p e r i e n c e of development, most T h i r d World n a t i o n s have p e r s i s t e d with t h i s o p t i o n s i n c e then. They adopted what was known as the u n i l i n e a r or the s i m i l a r - P a t h development th e o r y . I t s b a s i c premise i s that underdevelopment and development are 44 on a continuum, that i s a one-way pr o c e s s , so that n a t i o n s c o u l d move from underdevelopment to development f o l l o w i n g the c a p i t a l i s t model of i n d u s t r i a l i s a t i o n . I t i s necessary to examine t h i s theory of T h i r d World development i n order to understand how the c o n d i t i o n s f o r the c r e a t i o n of the i n f o r m a l s e c t o r e v o l v e d . 4.1 U n i l i n e a r Development Theory And The Informal Sector The u n i l i n e a r development theory stemmed from an h i s t o r i c a l a n a l y s i s of development tre n d s i n the developed world and from contemporary concepts of economic growth. The i n d u s t r i a l i s a t i o n of Europe and consequent modernisation and development of the Western n a t i o n s l e d to the b e l i e f t h a t i n d u s t r y and technology should be the b a s i s f o r T h i r d World development. The h i s t o r i c a l a n a l y s i s of economic development i n Western n a t i o n s a l s o l e d to the i d e n t i f i c a t i o n of f i v e stages of economic growth (Rostow, 1961) which were assumed to be i m i t a b l e . A c c o r d i n g to t h i s theory T h i r d World n a t i o n s l a c k e d the p r e - c o n d i t i o n s f o r "take-o f f " towards development, and had to c r e a t e these c o n d i t i o n s by a l l o c a t i n g l i m i t e d f i n a n c i a l r e s o u r c e s towards t h i s o b j e c t i v e . But how? Contemporary economic concepts were h e l p f u l here p a r t i c u l a r l y those d e a l i n g with the dynamics of r e g i o n a l development. The growth c e n t r e concept evolved d u r i n g t h i s time and p r o v i d e d the means f o r a p p l y i n g the u n i l i n e a r development theory, i . e . c r e a t i n g the c o n d i t i o n s f o r " t a k e - o f f " . The growth c e n t r e concept was b a s i c a l l y a concept to induce growth 45 i n l a g g i n g regions by the use of a pole ( u s u a l l y an urban a r e a ) . Although the concept was new to r e g i o n a l development, the idea dates to Perroux ( 1 949). 3 The concept went through c o n s i d e r a b l e e v o l u t i o n u n t i l i t was a p p l i e d to r e g i o n a l space. Here the work by Hirschman (1958) and Myrdal (1957) are important. Both b e l i e v e d that growth c o u l d be induced i n l a g g i n g regions by c r e a t i n g the f a c t o r s that s t i m u l a t e i t , p r i m a r i l y by investment i n i n d u s t r y . A c c o r d i n g to Myrdal and Hirschman, t h i s would c r e a t e the c o n d i t i o n s f o r " t a k e - o f f " and development would u l t i m a t e l y be a c h i e v e d because b e n e f i t s of the c o n c e n t r a t e d investment w i l l t r i c k l e - d o w n to the surrounding r e g i o n s . I t was accepted that i n i t i a l l y , a p e r i o d of i n c r e a s i n g s p a t i a l d i s p a r i t y w i l l be c r e a t e d before t r i c k l e - d o w n o c c u r s . " Darwent (1969), Hansen (1975), Lasuen (1973), and o t h e r s made the growth pole idea a p p l i c a b l e to r e g i o n a l space u s i n g C h r i s t a l l e r ' s (1966) work on the h e i r a r c h y of s e t t l e m e n t s . While r e g i o n a l planners c o n c e n t r a t e d on the a p p l i c a t i o n of the growth pole concept i n l a g g i n g r e g i o n s , development geographers s t u d i e d the s p a t i a l p a t t e r n s of modernisation i n some T h i r d World n a t i o n s (Gould, 1970; S o j a , 1968). T h i s l e d to a g e n e r a l agreement amongst s c h o l a r s that modernisation was a d e s i r a b l e path f o r T h i r d World development. These t h e o r i e s assured that the T h i r d World n a t i o n s had the 3 See Weaver C.1979, Development theory and the r e g i o n a l q u e s t i o n , f o r o r i g i n s of economic growth t h e o r i e s i n the Western world. 4 Terms used by Hirschman and Myrdal f o r the c e n t r i f u g a l and c e n t r i p e t a l f o r c e s of growth are trickle-down/backwash and s p r e a d / p o l a r i s a t i o n r e s p e c t i v e l y . 46 means to emulate the Western development experience and c o u l d o b t a i n maximum b e n e f i t s from t h e i r l i m i t e d f i n a n c i a l r e s o u r c e s by c o n c e n t r a t e d investment i n growth p o l e s ( A p p a l a r a j u and S a f i e r , i n G i l b e r t 1976). I t can be assumed that these n a t i o n s were prepared to face the i n i t i a l i n e q u a l i t i e s i n development that were expected to occur a n t i c i p a t i n g f u t u r e t r i c k l e - d o w n of b e n e f i t s and e q u a l i s a t i o n of development i n regions and amongst people. In t h i s phase of i n i t i a l i n e q u a l i t i e s , a displacement of labour from r u r a l areas was expected because the path to u n i l i n e a r development meant that the r u r a l economy would be n e g l e c t e d . I t was t h e r e f o r e l o g i c a l to assume t h a t t h i s d i s p l a c e d labour would c o n s i s t of poor peasants, and l a n d l e s s l a b o u r e r s who would be l e a s t a b l e to s u r v i v e i n a sagging a g r i c u l t u r a l economy (Moser, 1984). M i g r a t i o n to urban areas would be the o n l y a l t e r n a t i v e to t h e i r p l i g h t . M i g r a t i o n trends d i d indeed bear t h i s out, and i t w i l l be r e c a l l e d from the p r e v i o u s d i s c u s s i o n that i n the e a r l y s i x t i e s economists had n o t i c e d t h a t labour was l e a v i n g the r u r a l areas at a f a s t e r pace than a n t i c i p a t e d . Since t h i s labour i n f l u x was i n excess of the requirements of the p r o d u c t i v e urban a c t i v i t i e s t here was s p e c u l a t i o n on what would happened to i t u n t i l urban dual i s m models were proposed. The i n f o r m a l s e c t o r thus came to be i d e n t i f i e d with the poor and the unemployed, the h o l d i n g ground f o r the d i s p l a c e d r u r a l p o p u l a t i o n , i n the process of u n i l i n e a r development. I t was a l s o r e c o g n i s e d t h a t the i n f l u x of r u r a l p o p u l a t i o n i n t o c i t i e s c r e a t e d a s o c i e t y i n which some had permanent access to 47 the goods and s e r v i c e s a v a i l a b l e and o t h e r s who had s i m i l a r needs but were unable to support them. T h i s s o c i e t y had a q u a l i t a t i v e and q u a n t i t a t i v e d i f f e r e n c e i n consumption (Santos, 1979) and t h i s n e c e s s a r i l y c r e a t e d the i n f o r m a l s e c t o r . E m p i r i c a l evidence, as i n d i c a t e d e a r l i e r , c o r r o b o r a t e d the l i n k s between m i g r a t i o n and the i n f o r m a l s e c t o r . However, i t was assumed that labour displacement and the consequent m i g r a t i o n of the unemployed r u r a l p o p u l a t i o n i n t o urban areas was to be a temporary phase. " i n the process of modernisation the migrant workers would become absorbed i n t o the c i t y . . . . t h e y would s h i f t from t h e i r 'marginal' p o s i t i o n towards ' i n t e g r a t i o n ' such problems as s q u a t t e r s e t t l e m e n t s and unemployment were seen as temporary p r e s s u r e s which would pass with time" (Moser 1978, p.1042). In the e a r l y years of development p l a n n i n g the d e s i r e to modernise was so desperate that even though s q u a t t e r s e t t l e m e n t s , and the i n f o r m a l s e c t o r , were assumed to be temporary, they were a l s o reminders of non-modern growth. T h e i r presence was, t h e r e f o r e , c o n s i d e r e d as an i n t o l e r a b l e blockage to economic growth (McGee, 1976). As a r e s u l t of t h i s n e g a t i v e view, i n s t e a d of w a i t i n g f o r the achievment of modernised development, attempts were made to remove or prevent the i n f o r m a l s e c t o r from forming. However, by the e a r l y s e v e n t i e s , as knowledge of the i n f o r m a l s e c t o r grew, a t t i t u d e s changed (eg. the I.L.O. study, 1972) and the i n f o r m a l s e c t o r was viewed p o s i t i v e l y , complementing the modern s e c t o r , perhaps w i t h the e x p e c t a t i o n that labour would soon be g a i n f u l l y employed. 48 As time went by, the T h i r d World n a t i o n s d i d not appear to be moving any c l o s e r towards modernisation. One reason f o r t h i s , was the high r a t e of p o p u l a t i o n growth i n many T h i r d World c o u n t r i e s s i n c e the f i f t i e s (Moser, 1984). Thus, i n c r e a s e s i n employment , generated by i n d u s t r i a l growth, was o u t s t r i p p e d by the growth i n l a b o u r . Other reasons c i t e d were; f a u l t y a p p l i c a t i o n of the growth pol e s s t r a t e g y , problems with the u n i l i n e a r / g r o w t h p o l e concept, and a b i a s i n favour of urban development ( C o r r a g i o , 1975; Friedmann and Weaver, 1979; Kongstad, 1974). By the mid s e v e n t i e s the use of growth p o l e s and indeed the e n t i r e u n i l i n e a r approach was h i g h l y q u e s t i o n a b l e , p a r t i c u l a r l y i n the l i g h t of the o i l c r i s i s of the s e v e n t i e s . S e v e r a l s c h o l a r s had warned of the impending f a i l u r e of t h i s approach? Myrdal (1957) c a u t i o n e d that the i n i t i a l i n e q u a l i t i e s may not l e a d to t r i c k l e - d o w n due to the tendency of c a p i t a l i s m to perpetuate f u r t h e r i n e q u a l i t i e s . A view that was supported by Friedmann's (1969) study of C h i l e a n development. Myrdal had advocated government i n t e r f e r e n c e i n the development process to c o u n t e r a c t the f o r c e s of c a p i t a l i s m . These c r i t i c i s m s of the growth pole s t r a t e g y and the u n i l i n e a r development approach , i n the view of t h i s author, probably went unheeded because: 1. The approach seemed c r e d i b l e . Western n a t i o n s stood as testament to development through i n d u s t r i a l i s a t i o n . 2. The approach was p r e s c r i p t i v e . By the use of growth c e n t r e s the U n i l i n e a r development approach was easy to apply. 49 3. No a l t e r n a t i v e approach was proposed at t h a t time, in such c l e a r l y d e f i n e d terms to compete with i t . 4. The e x p a t r i a t e education of many p o l i t i c i a n s and d e c i s i o n makers i n the T h i r d World b i a s e d t h e i r d e c i s i o n s i n favour of w e s t e r n i s e d r a t h e r than indigenous approaches. On t h i s b a s i s , the growth c e n t r e approach was widely used in the T h i r d World from the nineteen s i x t i e s onwards. But, when c r i t i c i s m s of the growth c e n t r e approach began, some r e t h i n k i n g of the s t r a t e g y was necessary. The most important c r i t i c i s m was that the t r i c k l e - d o w n of b e n e f i t s that was expected to occur would not happen, i f l e f t to the f o r c e s of c a p i t a l i s m a l o n e . Although, the growth c e n t r e s were i n c r e a s i n g i n e q u a l i t y i n the n a t i o n s that adopted the s t r a t e g y , the proponents rushed to i t s defense. I t was s a i d that the c r i t i c i s m s came too soon, that i n s u f f i c i e n t time had been allowed f o r t r i c k l e - d o w n to occur, that the growth c e n t r e s were improperly p l a c e d and the s t r a t e g y was a p p l i e d i n a piecemeal and fragmented manner ( B o i s e r , 1980; Richardson, 1978). Was the i n e f f e c t i v e n e s s of the s t r a t e g y merely a matter of time? U n f o r t u n a t e l y , although the idea of i n d u c i n g growth i n l a g g i n g r e g i o n s i s m e r i t o r i o u s , i t s t r a n s f e r to the T h i r d World f a i l e d to take i n t o account the d i f f e r e n c e s between the T h i r d World and Western n a t i o n s (Kuznets, 1968, 1 979): a) The economic l e v e l at which the T h i r d World i n t r o d u c e d t h i s s t r a t e g y was g e n e r a l l y much lower. b) The r e l a t i o n s h i p between p o p u l a t i o n and r e s o u r c e s was u s u a l l y much more unfavourable and the p o p u l a t i o n growth trends more 5 0 dynamic and dangerous i n the T h i r d World. c) The T h i r d World d i d not have at i t s d i s p o s a l an i n t e r n a t i o n a l c a p i t a l market nor o u t l e t s f o r l a r g e s c a l e e m i g r a t i o n . d) The T h i r d World d i d not have the o p p o r t u n i t y to advance as i n d u s t r i a l i s l a n d s i n a surrounding world of backward n a t i o n s which c o u l d be e x p l o i t e d as markets f o r manufactured goods and as sources of raw m a t e r i a l s , and f o r t h i s purpose even keep a colony i n bondage. As s c e p t i c i s m of the growth c e n t r e s t r a t e g y as a means f o r a c h i e v i n g development grew, other views on development ascended i n importance. Ideas such as "small i s b e a u t i f u l " , " i n t e r m e d i a t e technology" (Schumacher, 1973), and "minimum b a s i c needs" (Ghai et a l . , 1979; Singer, 1977) entered the l i t e r a t u r e . The Club of Rome presented i t s r e p o r t on the " L i m i t s to Growth" (Meadows et a l , 1972). Environmental concerns about the d e s t r u c t i o n of the ecosystem by i n d u s t r i a l development brought out the c o n f l i c t s between economic growth and " q u a l i t y of l i f e " . The T h i r d World was not untouched by these i d e a s . Two major streams of thought re g a r d i n g i t s development process gained a t t e n t i o n . One was the dependency theory/ bottom-up s t r a t e g y or r a d i c a l p h i l o s o p h y , and the other was the m o d i f i c a t i o n of the u n i l i n e a r approach. Both of these a l t e r e d the e x i s t i n g wisdom about the i n f o r m a l s e c t o r . C h r o n o l o g i c a l l y , the e v o l u t i o n of the r a d i c a l approach preceded changes i n the l i b e r a l economic p h i l o s o p h y . 51 4.2 Dependency Theory And The Informal S e c t o r E x p l o i t a t i o n of the T h i r d World by c a p i t a l i s t p u r s u i t s i s not a new d i s c o v e r y . I t dates to the " e t h i c a l p e r i o d " i n the development of l i b e r a l economic p h i l o s o p h y (Hobson 1902, c i t e d i n B r o o k f i e l d 1975). L a t e r , marxist i n t e r p r e t a t i o n s r e i n f o r c e d the i d e a . However, l i b e r a l economic p h i l o s o p h y dominated the f i e l d of development thought i n the Western world and i t was not u n t i l the 1950's that a c r i t i q u e of contemporary noti o n s of development e v o l v e d from the marxist approaches (See appendix C f o r a c h a r t , based on the author's view of the flow of ideas on dualism and development). T h i s c r i t i q u e rose i n importance i n the l a t e s i x t i e s c o i n c i d i n g with, and perhaps b e n e f i t t i n g from, the d e c l i n e i n f a i t h i n the growth c e n t r e s t r a t e g y . Neo-m a r x i s t s i n L a t i n America are c r e d i t e d with the o r i g i n s of the c r i t i q u e now g e n e r a l l y known as the dependency/underdevelopment theory (Emmanuel and Amin, 1974; Sunkel, 1973; Frank, 1967; Cardozo, 1965). In essence, the theory a n a l y s e s the s o c i o -p o l i t i c a l r e l a t i o n s of underdevelopment: "A s i t u a t i o n i n which the economy of c e r t a i n c o u n t r i e s i s c o n d i t i o n e d by the development and expansion of another economy to which the former i s s u b j e c t e d . The r e l a t i o n of interdependence between the two or more economies and between these and World t r a d e assumes the form of dependence when some c o u n t r i e s (the dominant ones) can expand and be s e l f - s u s t a i n i n g while other c o u n t r i e s (the dependent ones) can o n l y do t h i s as a r e f l e c t i o n of that expansion which can have a p o s i t i v e or a negative e f f e c t on t h e i r immediate development" (Dos Santos, 1968, P.6 i n C h i l c o t e , 1977). T h i s neo-marxist view d i d not j u s t a r i s e i n a vacuum. 52 There was i n c r e a s i n g evidence of a world economy, suggesting that the a n a l y s i s of development of one country c o u l d not be done i n i s o l a t i o n ( W a l l e r s t e i n , 1975). There was a l s o , as a r e s u l t of i n t e r l i n k a g e s i n the economy, an i n t e r n a t i o n a l d i v i s i o n of labour ( F r o e b e l et a l , 1981) and t h e r e f o r e the monetary exchange value of labour was not n e c e s s a r i l y r e t a i n e d i n the producing country and was e a s i l y e x p l o i t e d . The T h i r d World was the dependent world and i t was argued that i t was kept dependent on the Western world by the spread of i n t e r n a t i o n a l c a p i t a l i s m , p a r t l y through the medium of m u l t i n a t i o n a l c o r p o r a t i o n s (Kassalow, 1979; Snow, 1979). Thus i t was argued t h a t , development and underdevelopment are m a n i f e s t a t i o n s of the process of c a p i t a l i s t expansion (Quijano 1974; Sunkel, 1973; Frank, 1967). I t should be mentioned t h a t the concept of dependency i n c l u d e s many d i f f e r e n t forms of dependency, from e x t e r n a l l y c o n t r o l l e d dependency to i n t e r n a l l y manipulated ones. The v a r i a t i o n s are summarised s u c c i n t l y i n C h i l c o t e ' s a r t i c l e (1977). I t i s not necessary to go i n t o such d e t a i l s i n t h i s study, as the dependency theory i s presented o n l y as an ascending and opposing view of T h i r d World development. While the dependency approach i s an important c r i t i q u e of development, i t merely e x p l a i n s why the underdevelopment has p e r s i s t e d i n the post-independance phase of the T h i r d World, and does not propose, i n p r e c i s e terms, an a l t e r n a t i v e approach to development. In the same v e i n , and of more relevance to t h i s r e s e a r c h , i t merely e x p l a i n s why the i n f o r m a l s e c t o r p e r s i s t s i n 5 3 the T h i r d World, not what i t i s or why and how i t forms. I t can be assumed then that the p r e v i o u s d e f i n i t i o n s of the i n f o r m a l s e c t o r and the c o n d i t i o n s f o r i t s c r e a t i o n i e . a high growth of the labour f o r c e and slow pace of development i s to be accepted. T h e r e f o r e , the p o i n t of departure i n the arguments of the u n i l i n e a r development approach and the dependency theory i s ; 'why does the i n f o r m a l s e c t o r p e r s i s t ' not 'how i s i t c r e a t e d ' . The main focus i n the disagreement on why the i n f o r m a l s e c t o r p e r s i s t s , i s the r o l e of urban areas i n the development process of the T h i r d World. I t was expected under the u n i l i n e a r development theory that urban areas would act as "growth c e n t r e s " from which development impulses would r a d i a t e outwards i n t o the r e g i o n . T h i s process would i n i t i a l l y c r e a t e r e g i o n a l i n e q u a l i t i e s , s u r p l u s labour i n r u r a l areas, and consequent m i g r a t i o n i n t o urban areas, but t h i s was to be temporary, as was the i n f o r m a l s e c t o r (Moser, 1984). However, the i n f o r m a l s e c t o r has p e r s i s t e d , and i t may be argued a c c o r d i n g to t h i s theory because modernisation has not been a c h i e v e d . In c o n t r a s t , a c c o r d i n g to the dependency theory the urban areas, have become enclaves or s a t e l l i t e s i n i n t e r n a t i o n a l c a p i t a l i s t expansion, as a r e s u l t of the c o n c e n t r a t e d investment i n m o d e r n i s a t i o n (Friedmann and Weaver, 1979). C o r r a g i o (1972) was c o n v i n c e d that the "growth c e n t r e s " had a c t u a l l y thwarted the development of the T h i r d World by i m p l a n t i n g p l a c e s f o r the a p p r o p r i a t i o n of c a p i t a l i n the dependent economy. Friedmann (1966) a l s o r e c o g n i s e d t h i s when he s t a t e d i n h i s c o r e - p e r i p h e r y theory that development i n the T h i r d World needed to be made 54 more ' r e s i d e n t i a r y ' . However, the r e a l i s a t i o n that T h i r d World c i t i e s are g r a f t e d onto western development, and t h e r e f o r e a l i e n a t e d from t h e i r h i n t e r l a n d i s not new. Although not under the m a r x i s t banner, Mahatma Gandhi, speaking of I n d i a , had s a i d i n 1921: "The c i t i e s are not I n d i a . The c i t y people are brokers and commission agents f o r the b i g houses of Europe, America and Japan. The c i t i e s have cooperated with the l a t t e r i n the b l e e d i n g process that has gone on f o r the l a s t two hundred y e a r s " (Gandhi, 1921 i n G a n g u l i , 1978:184). Thus, i t i s argued that the T h i r d World moved from one form of e x p l o i t a t i o n to another, from one r e l a t e d to p o l i t i c a l c o n t r o l to one i n s p i t e of p o l i t i c a l independence, that l e f t no room f o r economic recov e r y . Development i s , i n a sense, suspended, f o r as long as the c a p i t a l i s t p u r s u i t s of the n a t i o n c o n t i n u e to c o n t r i b u t e to western development, the n a t i o n must put much of i t s r e s o u r c e s to prevent r e t r o g r e s s i o n i n development. A c c o r d i n g to the dependency theory, progress i n development i s v i r t u a l l y i m possible under these c o n s t r a i n t s , and t h i s e x p l a i n s the p e r s i s t e n c e of underdevelopment. In l i g h t of t h i s argument, McGee (1978) an a l y s e d the economic s t r u c t u r e of the T h i r d World c i t i e s and d e s c r i b e d a d i s t i n c t form of p r o d u c t i o n ; p e r i p h e r a l c a p i t a l i s m . He argued t h a t , i n the urban economy, there i s a c a p i t a l i s t s e c t o r deeply i n t e g r a t e d i n t o the i n t e r n a t i o n a l economy and a n o n - c a p i t a l i s t mode (the i n f o r m a l s e c t o r ) i n which the a r t i c u l a t i o n of r e l a t i o n s h i p between the two s e c t o r s i s p r i m a r i l y a response to the pace of expansion i n the dominant c a p i t a l i s t s e c t o r . The 55 n o n - c a p i t a l i s t mode does not d i s s o l v e because of i t s advantages to the dominant c a p i t a l i s t s e c t o r and i t s st r o n g s e l f p r e s e r v a t i o n t e n d e n c i e s . T h i s " c o n s e r v a t i o n - d i s s o l u t i o n " concept was i n t r o d u c e d by B e t t l e h e i m (1972) and e l a b o r a t e d by McGee (1978). In a n u t s h e l l , the dependency argument r e g a r d i n g the i n f o r m a l s e c t o r i s : the s t a t e of dependency i n a T h i r d World n a t i o n c r e a t e s and perpetuates underdevelopment such that the i n f o r m a l s e c t o r t h a t has formed as a r e s u l t of t h i s underdevelopment i s unable to d i s s o l v e as long as underdevelopment p e r s i s t s . And because development i s dependent, the pace of development w i l l remain p e r p e t u a l l y slow. 4.3 Comparison Of U n i l i n e a r And Dependency Approach With Regards  To The Informal Sector I t i s necessary to summarise the main ideas of the two development t h e o r i e s r e g a r d i n g the i n f o r m a l s e c t o r , to h i g h l i g h t t h e i r agreements and disagreements. 1. Both t h e o r i e s are concerned with the development process of the T h i r d World. The u n i l i n e a r development theory i s a p r e s c r i p t i v e theory f o r economic development and as such the e x p l a n a t i o n of the r e l a t i o n s h i p between the i n f o r m a l s e c t o r and the development process i s not c o n t a i n e d d i r e c t l y w i t h i n the theo r y . However, the theory does e x p l a i n the presence of s u r p l u s labour and poverty, both of which have been c i t e d as f a c t o r s c r e a t i n g the i n f o r m a l s e c t o r . In c o n t r a s t to t h i s , the dependency theory i s a c r i t i q u e on the s t a t e of T h i r d World 56 underdevelopment. A c c o r d i n g to i t s arguments, f e a t u r e s i n the economy of d e v e l o p i n g n a t i o n s are not temporary but q u i t e permanent as long as the development process c o n t i n u e s to be dependent on the Western c a p i t a l i s t world. The i n f o r m a l s e c t o r i s amongst the f e a t u r e s of the economy that w i l l p e r s i s t i n dependent development. 2. In both t h e o r i e s , migrant r u r a l labour i s i n d i c a t e d as a major cause f o r the presence of the i n f o r m a l s e c t o r i n l a r g e urban ar e a s . To be more exact, migrant labour adds to the labour f o r c e i n the c i t y f a r beyond the c a p a c i t y of labour a b s o r p t i o n by the formal s e c t o r . Since the migrant labour i s poor and u n s k i l l e d , f o r formal s e c t o r employment requirements, i t i s f o r c e d i n t o the i n f o r m a l s e c t o r . The t h e o r i e s d i f f e r o n l y on how these migrants are f o r c e d i n t o the i n f o r m a l s e c t o r , i . e . "the s t e p p i n g stone" versus " m a r g i n a l i s a t i o n " concepts; and on why the i n f o r m a l s e c t o r p e r s i s t s . 3 . Both t h e o r i e s are concerned with the slow pace of T h i r d World development, -and view the i n f o r m a l s e c t o r to be a symptom of T h i r d World underdevelopment or dependency. 4.4 New D i r e c t i o n s In T h i r d World Development Dependency theory d i d not i t s e l f p r o v i d e a p r e s c r i p t i o n f o r the development of underdeveloped n a t i o n s but i t i s easy to surmise from the arguments that autonomous development was promoted. I t was a combination of ideas that i n c l u d e the dependency approach, 'small i s b e a u t i f u l ' , i n t e r m e d i a t e technology, eco-develoment, a g r o p o l i t a n development, t e r r i t o r i a l 57 approach e t c . that a f f e c t e d T h i r d World development d e c i s i o n s (Friedmann and Weaver, 1979; Weaver, 1979; Schumacher, 1973; Sunkel, 1973). A bottom-up approach was proposed to reverse the top-down development p r o c e s s of the T h i r d World. That i s , " b u i l d most of our theory from the ground" ( B r o o k f i e l d , 1973, p.16). There were two major ways of a c h i e v i n g t h i s , e i t h e r a d r a s t i c break from dependent r e l a t i o n s h i p s or a g r a d u a l weaning away from them (Friedmann and Weaver, 1979). Not a l l n a t i o n s changed t h e i r course of development, and most of the n a t i o n s d i d so i n a g r a d u a l , t e s t i n g manner. Some T h i r d World n a t i o n s i n t r o d u c e d r u r a l and r e g i o n a l development i n t o t h e i r p l a n n i n g endeavours to r e v e r s e the pro-urban approach, and s t a r t e d p l a n n i n g a t the grass r o o t s l e v e l i n c l u d i n g socio-economic programmes to a s s i s t the poor and the unemployed, the p o p u l a t i o n t h a t d i d not b e n e f i t from the top-down s t r a t e g i e s (Mabogunje, 1980; S i n g e r , 1977; Funnel, 1976; Johnson, 1970). In I n d i a , f o r i n s t a n c e , not only was r u r a l development s t a r t e d but the poor were p a r t i c u l a r l y t a r g e t e d f o r compensation by programmes such as 'food f o r work', and 'minimum b a s i c needs' ( S r i v a s t a v a and George, 1977). But, these e f f o r t s were undertaken without r e l i n q u i s h i n g the o l d e r s t r a t e g i e s . That i s top-down and bottom-up approaches were e i t h e r being combined or merely c o - e x i s t e d . For i n s t a n c e , i t became popular to c o n c e p t u a l i s e the e n t i r e system of human set t l e m e n t s as growth c e n t r e s of v a r y i n g i n t e n s i t y , performing v a r y i n g s e r v i c e s a c c o r d i n g to settlement s i z e . Furthermore at the lower end of the s e t t l e m e n t h e i r a r c h y the small towns were 58 to be f u n c t i o n a l l y i n t e g r a t e d with the r u r a l r e g i o n so that the urban areas and t h e i r h i n t e r l a n d were viewed i n a harmonious r e l a t i o n s h i p (Mabogunje, 1980; P i o r o , 1975; T a y l o r , 1975; M i s r a , 1972; Roy, 1972; Johnson, 1970). T h i s i s a c a u t i o u s route to change. The dependency theory, i f accepted, should have l e d to a r e v e r s a l of development processes i n which bottom-up approaches r e p l a c e d the former top-down ones. But, i n the view of the author, t h i s probably d i d not happen f o r s e v e r a l reasons. F i r s t l y , i t was e v i d e n t that bottom-up approaches would not i n c r e a s e n a t i o n a l wealth as q u i c k l y as i n d u s t r i a l i s a t i o n . I t was a r i s k the poor n a t i o n s d i d not want to take at t h i s time i n t h e i r development e f f o r t s . Secondly, the bottom-up approach d i d not d e f i n e i n c l e a r - c u t terms, such as the growth pole s t r a t e g y , the p r e c i s e methods to be used and the expected r e t u r n s . T h i r d l y , the c r i t i c i s m s of the bottom-up approach came too soon, l e a v i n g i n s u f f i c i e n t time f o r t r i a l s (Gore, 1984; Friedmann, 1983; K i t c h i n g , 1982; Weaver, 1981; Godfrey, 1980; Palma, 1978)). I t was s a i d that t h e r e were p o l i t i c a l dangers to r e g i o n a l autonomy; that the dynamics of r u r a l and urban r e l a t i o n s i n i n d u s t r i a l i s e d s o c i e t y were ignored; and that l o c a l s o c i e t y and r u l e r s were f a l s e l y a b s o l v e d from r e s p o n s i b i l i t i e s of underdevelopment (Weaver, 1981). While the bottom-up s t r a t e g i e s were being c r i t i c i s e d , the proponents of the growth pole s t r a t e g y c o n t i n u e d to s e l l i t s m e r i t s ( B o i s e r , 1980). The e f f e c t of the dependency theory on development p o l i c y i n the T h i r d World has been one of r e v e r s i n g the i n e q u a l i t i e s 59 c r e a t e d by the growth pole s t r a t e g y but not one to c r e a t e a d i s t i n c t a l t e r n a t i v e course of development. I t i s too soon to judge, whether the i n t e r m e d i a t e measures c u r r e n t l y i n use, w i l l change the pace of development or the s i z e of the i n f o r m a l s e c t o r . S t a t i s t i c a l l y t here does not appear to be much change i n the s i z e of the i n f o r m a l s e c t o r i n the l a s t decade (see chapter 5) . 5. CONCLUSIONS T h i s chapter has a r t i c u l a t e d the g e n e r a l ideas on urban dualism and development t h a t p r e v a i l e d i n the s i x t i e s and e a r l y s e v e n t i e s . Although c o n f u s i o n on some asp e c t s has been noted, the concensus on most i s s u e s has been h i g h l i g h t e d to i n d i c a t e the c o n v e n t i o n a l wisdom on: 1. The g e o g r a p h i c a l c o n t e x t of urban dualism 2 . The d e f i n i t i o n and d e s c r i p t i o n of urban dualism 3 . The s p e c i f i c f a c t o r s that c o n t r i b u t e to the formation of urban dualism i n the T h i r d World 4 . The t h e o r e t i c a l e x p l a n a t i o n f o r the e x i s t e n c e of these f a c t o r s i n the T h i r d World n a t i o n s . To r e c a p i t u l a t e the d i s c u s s i o n very b r i e f l y : the i n f o r m a l s e c t o r was observed and l a t e r s t u d i e d and e x p l a i n e d i n the context of the T h i r d World. Although there i s a l a c k of agreement on the d e f i n i t i o n of the i n f o r m a l s e c t o r , there i s a gen e r a l b e l i e f t h a t i t i s a peasant-type economy, smal l s c a l e , o p e r a t i n g under s i n g l e or f a m i l y ownership, based on l i t t l e c a p i t a l , low technology, and s k i l l . There i s an un r e s o l v e d 60 debate, on whether t h i s s e c t o r s u r v i v e s independent of the formal s e c t o r , i . e . i s s e l f c o n t a i n e d , or whether i t i s dependent on the formal s e c t o r f o r employment o p p o r t u n i t i e s . E m p i r i c a l and t h e o r e t i c a l s t u d i e s show the i n f o r m a l s e c t o r to be composed of poor, i l l i t e r a t e and g e n e r a l l y u n s k i l l e d people, mostly r u r a l migrants. L o g i c a l l y , i t can be d e r i v e d from theory and e m p i r i c a l data that the f a c t o r s l e a d i n g to the formation of the i n f o r m a l s e c t o r a r e : a r a p i d growth of the labour f o r c e by m i g r a t i o n and n a t u r a l i n c r e a s e i n the l a r g e c i t i e s and; a c orresponding slow pace of development of employment o p p o r t u n i t i e s i n the formal s e c t o r . These two f a c t o r s can be e x p l a i n e d by a t h e o r e t i c a l e v a l u a t i o n of the p r o c e s s of T h i r d World development. Two t h e o r i e s are c r i t i c a l here; the u n i l i n e a r approach that has g r e a t l y i n f l u e n c e d the course of T h i r d World development, and dependency theory which i s a c r i t i q u e of development under the former. The t h e o r i e s d i f f e r on the p o t e n t i a l of and p o s s i b i l i t i e s f o r an i n c r e a s e d pace of development of the formal s e c t o r . Both t h e o r i e s agree, however, that the i n f o r m a l s e c t o r i s a symptom of the T h i r d World development p r o c e s s . The " o l d wisdom" on the i n f o r m a l s e c t o r has an important p l a c e i n the e n t i r e debate on the phenomenon. I t s e t s the stage fo r a l l f u r t h e r p r o g r e s s i n the debate, i t has brought to l i g h t an i s s u e that had not been s t u d i e d i n a comprehensive manner, p r i o r to the s i x t i e s and i t has a f f e c t e d the a t t i t u d e s of T h i r d World pl a n n e r s i n the f o r m u l a t i o n of development s t r a t e g i e s . In the next ch a p t e r , the progress i n the debate i n the l a s t 61 decade (1975-85) w i l l be reviewed, and although the recent developments have t h e i r importance, they have added the problems t h a t were a l r e a d y p r e s e n t i n the study of the i n f o r m a l s e c t o r . 62 CHAPTER 3: CONTEMPORARY WISDOM ON THE INFORMAL SECTOR: 1975-1985 The debate on the i n f o r m a l s e c t o r has always been complex, but advances d u r i n g the l a s t decade have c o n t r i b u t e d to t h i s s i t u a t i o n . There are four areas to be covered i n t h i s d i s c u s s i o n of the contemporary wisdom. 1. Advances i n the debate on the i n f o r m a l s e c t o r i n the context of the T h i r d World. 2. The study of the i n f o r m a l s e c t o r i n small towns of the T h i r d World. 3. The study of the i n f o r m a l s e c t o r i n Western c a p i t a l i s t economies. 4. The study of the i n f o r m a l s e c t o r i n c e n t r a l l y planned s o c i a l i s t economies. The f i r s t area f o r d i s c u s s i o n has a voluminous amount of r e s e a r c h . There are many reviews of the debate i n recent years (Rogerson, 1985; Moser, 1984; Richardson, 1984). Thus the review that w i l l be presented here i s a b r i e f e r v e r s i o n . The second, t h i r d , and f o u r t h s e c t i o n s are of a more recent o r i g i n i n the debate. The study of the i n f o r m a l s e c t o r i n c e n t r a l l y planned s o c i a l i s t or Western c a p i t a l i s t economies i s not new,but " r e d i s c o v e r e d " i n the context of the dualism debate ( R e d c l i f t and Mingione 1985 p.3). I t i s i n t e r e s t i n g to note that no comparative s t u d i e s have been done between the T h i r d World and the other economies. S c h o l a r s elude to t h i s as the task of the f u t u r e . Mathur and Moser (1984) have presented an agenda f o r f u t u r e r e s e a r c h which 63 i n c l u d e s the comparative study of the i n f o r m a l s e c t o r i n d i f f e r e n t types of economies. Rogerson (1985 p.65) s t a t e s that "the comparative s i t u a t i o n of the i n f o r m a l economy i n post-i n d u s t r i a l s o c i e t y appears set as a f u r t h e r 'growth pole ' i n the academic l i t e r a t u r e of the second decade." 5 Perhaps comparative s t u d i e s w i l l come with time, because many of the s t u d i e s of the i n f o r m a l s e c t o r i n s o c i a l i s t or Western c a p i t a l i s t c o u n t r i e s have only r e c e n t l y entered the debate. Information on the working c l a s s p o p u l a t i o n , f o r in s t a n c e i n Engand and Europe, has e x i s t e d (Benson, 1985; Braudel, o r i g . 1967, t r a n s . 1977) but these were not u t i l i s e d i n the co n t e x t of urban dualism. T h i s i s an added dimension i n the debate and, t h e r e f o r e , c r i t i c a l to the understanding of the in f o r m a l s e c t o r . I t i s d i f f i c u l t to compare the i n f o r m a l s e c t o r i n the T h i r d World to th a t of Western c a p i t a l i s t economies, or s o c i a l i s t economies. Comparitive s t u d i e s of the i n f o r m a l s e c t o r w i t h i n the s o c i a l i s t or Western c a p i t a l i s t economies has only j u s t begun (Mattera, 1985; Aslund, 1985; De G r a z i a , 1985). Most s t u d i e s are d e s c r i p t i v e or a n a l y t i c a l and g e n e r a l i s a t i o n s have not been made about the phenomenon i n these economies as has been done f o r the T h i r d World. G e n e r a l i s a t i o n s w i l l , however, have to be drawn i n the review presented i n t h i s chapter to f a c i l i t a t e the comparisons made i n the c o n c l u s i o n . T h i s chapter w i l l review the e v o l u t i o n of the debate about 5 A c c o r d i n g to Rogerson the second decade of the debate on urban dualism i s 1983-1993. 64 the i n f o r m a l s e c t o r i n the T h i r d World as w e l l as other economies. The c o n c l u s i o n w i l l attempt to i d e n t i f y the converging and d i v e r g i n g ideas on the i n f o r m a l s e c t o r i n the three dominant types of economies. 1. THE EVOLUTION OF THE DEBATE ON THE INFORMAL SECTOR IN THE  THIRD WORLD The recent developments i n the debate on the i n f o r m a l s e c t o r i n the T h i r d World can be d i v i d e d i n t o four a r e a s . 1. The d e f i n i t i o n of the i n f o r m a l s e c t o r . 2. The concept of dualism. 3. The r e l a t i o n s h i p of the i n f o r m a l s e c t o r to T h i r d World development processes i . e . the f a c t o r s t h a t c r e a t e the i n f o r m a l s e c t o r . 4. The r e l a t i o n s h i p of the i n f o r m a l s e c t o r to the formal s e c t o r i n an urban economy. 1.1 Changes In D e f i n i t i o n Of The Informal S e c t o r Much of the debate of the l a s t decade appears to be i n f l u e n c e d by one major area of i n q u i r y : what i s the i n f o r m a l s e c t o r ? Although the dualism concept has been a p p l i e d to T h i r d World economies s i n c e the m i d - s i x t i e s , some s c h o l a r s have from the beginning been uncomfortable with i t s r i g i d i t y (Breman, 1976; Hart, 1972; Friedmann and S u l l i v a n , 1972). Over the l a s t decade, t h i s concern has grown. I t has been r e a l i s e d that many a c t i v i t i e s do not f a l l n e a t l y i n t o the c l a s s i f i c a t i o n of the i n f o r m a l and formal s e c t o r s . 65 One can r e c a l l from the p r e v i o u s chapter that the i n f o r m a l s e c t o r , i n g e n e r a l , presented "a gloomy v i s i o n of the urban economy dominated by two r e l a t e d paradigms: a prosperous, modern component of urban employment c h a r a c t e r i s e d by new technology and c a p i t a l , e x i s t i n g a l o n g s i d e t r a d i t i o n a l s u b s i s t e n c e a c t i v i t y and a c h r o n i c excess of labour supply ( r u r a l ) r e l a t i v e to l i m i t e d urban demand" (Bracket i n o r i g i n a l ) (Kannappan, 1984, p.55) Although the comment here i s g e n e r a l , t h e r e i s no doubt that the d e f i n i t i o n of the i n f o r m a l s e c t o r , i n the e a r l y y e a r s , l e d to the b e l i e f that the i t was a ' s e c t o r of l a s t r e s o r t ' f o r the poor, and the unemployed, u s u a l l y migrants from r u r a l a r e a s . Of course there were d i f f e r e n c e s i n o p i n i o n on how the i n f o r m a l s e c t o r should be i d e n t i f i e d i . e . s e l f employment, i l l e g a l a c t i v i t i e s , low wage a c t i v i t i e s and so on. But, i t was i m p l i c i t i n the e a r l y d e f i n i t i o n s , t h at the i n f o r m a l s e c t o r was the refuge of the poor. In the l i g h t of t h i s o l d e r view, l e t us compare some of the f i n d i n g s of the l a s t decade that c o n t r a d i c t i t . 6 1. I t has been found i n recent s t u d i e s that the i n f o r m a l  s e c t o r i s not n e c e s s a r i l y a " s e c t o r of l a s t r e s o r t " . S i n c l a i r (1978) and Sabot (1979) have found that the i n f o r m a l s e c t o r can be a s e c t o r of c h o i c e . Sabot (1979, p.67-68) s t a t e s t h a t the i n f o r m a l s e c t o r can be a s t a b l e economy " p r o v i d i n g s t a b l e The reviews presented i n t h i s chapter w i l l emphasise the c o n t r a d i c t i o n s i n the debate on the i n f o r m a l s e c t o r of the l a s t decade. However,it must be s t a t e d that there were a l s o s t u d i e s that strengthened the o l d wisdom. 66 employment and 'adequate' incomes f o r workers i n t h e i r prime and r e t i r e d wage employees, r a t h e r than a halfway house f o r new labour f o r c e e n t r a n t s i n which a l l p a r t i c i p a n t s are n e g l i g i b l y p r o d u c t i v e , incomes are low." In a . sample study of the i n f o r m a l s e c t o r i n J a k a r t a , Moir (1978) found that 86 percent of the i n f o r m a l s e c t o r workers p r e f e r r e d to be self-employed. S i m i l a r l y , 75 percent of the workers i n the i n f o r m a l s e c t o r p r e f e r r e d self-employment i n a sample study of Freetown (Fowler, 1978). Rogerson and Beavon (1982; i n Rogerson, 1985) a l s o f i n d t h i s to be true i n Soweto, South A f r i c a , where the i n f o r m a l s e c t o r was a p r e f e r r e d a l t e r n a t i v e to the low wages i n the formal s e c t o r o f f e r e d to the b l a c k s . In f a c t , i t appears that p r e f e r e n c e s can l e a d to a s h i f t from the formal s e c t o r to the i n f o r m a l s e c t o r . A notable work in t h i s regard has been done i n M a l a y s i a , by Mazumdar (1981). He shows that f a m i l y owned busi n e s s i s an a t t r a c t i o n to workers l a t e i n t h e i r c a r e e r . That i s , wage earners o f t e n p r e f e r to s h i f t i n t o the self-employed c a t e g o r y l a t e i n l i f e . A p r e f e r e n c e f o r work i n the i n f o r m a l s e c t o r can be based on s e v e r a l reasons. King (1975) s t a t e s t h a t i n the case of Kenyan road s i d e manufacturers, t h e r e was a f i e r c e d e t e r m i n a t i o n not to be employed a g a i n . Cohen (1980) s t a t e s that f o r the A f r i c a n workers the i n f o r m a l s e c t o r i s a form of a labour p r o t e s t or r e s i s t a n c e to low wages. T h i s view i s supported by Kahn (1980) and van Onlesen (1976; i n Rogerson, 1985). 2. Understandably then, i f the i n f o r m a l s e c t o r can be a 67 s e c t o r of c h o i c e , i t must imply t h a t the i n f o r m a l s e c t o r i s not  n e c e s s a r i l y as low paying as p r e v i o u s l y c o n c e i v e d . Recent s t u d i e s show that while the formal s e c t o r as a whole may be h i g h e r paying i n wages, there i s a c o n s i d e r a b l e range i n incomes i n the i n f o r m a l s e c t o r . Furthermore, although the u n s k i l l e d workers i n the i n f o r m a l s e c t o r may have low incomes, they are not n e c e s s a r i l y lower than the u n s k i l l e d wages i n the formal s e c t o r . In Peru, small p r o p r i e t o r s and the self-employed earned more than f a c t o r y workers (Webb, 1974). In Tanzania, B e i n e f i e l d (1975) r e p o r t s that more than 60 percent of the survey respondents earned above the minimum wage r a t e i n the formal s e c t o r , and 25 percent even earned twice the minimum wage. A s i m i l a r experience i s r e p o r t e d f o r Noukachott, M a u r i t a n i a where 93 percent of the i n f o r m a l s e c t o r entrepreneurs earned higher than or e q u i v a l e n t to the s k i l l e d formal s e c t o r wages (Nihan and Jourdai.n, 1978). Such o b s e r v a t i o n s have a l s o been made i n Yaounde (Demol and Nihan, 1983), S i e r r a Leone (Fowler, 1978), Kumasi, Ghana (Aryee, 1977), Kenya (King, 1974), C a l c u t t a (Bose, 1974), and J a k a r t a (Sethuraman, 1976). 3. The c o r r e l a t i o n of the i n f o r m a l s e c t o r with r u r a l - u r b a n m i g r a t i o n i s a l s o not without c o n t r a d i c t i o n . I t was p e r c e i v e d , i n the e a r l y years of the decade that the i n f o r m a l s e c t o r was a temporary haven f o r recent migrants ( i . e . the H a r r i s - T o d a r o ' s t e p p i n g stone' concept or the Sunkel, Quijano m a r g i n a l i s a t i o n c o n c e p t ) . Recent s t u d i e s show t h a t the i n f o r m a l s e c t o r i s not  n e c e s s a r i l y a t y p i c a l source of employment f o r the newly a r r i v e d 68 migrants i n a c i t y . In T a nzania, only 6 percent of the new migrants were i n the i n f o r m a l s e c t o r , t h i s excludes m i g r a t i o n f o r e d u c a t i o n . In f a c t , the p a r t i c i p a n t s i n the i n f o r m a l s e c t o r had been i n the s e c t o r and i n the same a c t i v i t y f o r the l a s t t h ree years or more at the time of the study (Sabot, 1979). Mazumdar (1981) d i s c o v e r e d t h a t new migrants i n M a l a y s i a , tended to be i n the formal s e c t o r and he h y p o t h e s i s e d that many migrants have entered the l a r g e c i t i e s v i a the s m a l l e r ones i . e . s t e p - m i g r a t i o n . T h e r e f o r e , the i n f o r m a l s e c t o r was not used as a s t e p p i n g stone and migrants were ab l e to f i n d employment d i r e c t l y i n t o the formal s e c t o r . Thus, "the balance of the evidence suggests that migrants are as l i k e l y to work i n the formal s e c t o r as long time r e s i d e n t s . . . the i n f o r m a l s e c t o r can be as a t t r a c t i v e as the formal s e c t o r , both f o r migrants and non-migrants. Although there are some low l e v e l i n f o r m a l s e c t o r a c t i v i t i e s to which, i n c e r t a i n c o u n t r i e s and i n c e r t a i n c i r c u m s t a n c e s , new migrants may g r a v i t a t e , t h i s i s a t y p i c a l r a t h e r than t y p i c a l " (Richardson, 1984, p.18). Moser (1984, p . x i ) a f f i r m s t h i s p o i n t : "The ILO sponsored s t u d i e s have a l s o generated s u f f i c i e n t m a t e r i a l to show t h a t i t i s not n e c e s s a r i l y a r e s i d u a l occupation f o r newly a r r i v e d migrants but can, i n p a r t , be a dynamic s e c t o r c o n t r i b u t i n g income and output and capable of a t t r a c t i n g and s u s t a i n i n g labour i n i t s own r i g h t . 4. The i n f o r m a l s e c t o r i s not n e c e s s a r i l y a p r e c a p i t a l i s t s e c t o r . There i s much evidence i n the l i t e r a t u r e to suggest that the i n f o r m a l s e c t o r i s not o n l y an economy f o r employment  g e n e r a t i o n , but a dynamic t h r i v i n g s e c t o r as w e l l . According to 69 Sethuraman (1981) the c h a r a c t e r i s t i c s of the Kenya m i s s i o n (1972) "do not add up to a d e f i n i t i o n of the s e c t o r " . H i s r e d e f i n i t i o n of the i n f o r m a l s e c t o r i s a continuum of e n t e r p r i s e s engaged i n the p r o d u c t i o n of goods and s e r v i c e s , based on one or more of the f o l l o w i n g : mode of p r o d u c t i o n ; o r g a n i s a t i o n ; and s c a l e of o p e r a t i o n . "The i n f o r m a l s e c t o r e n t e r p r i s e s can be i n t e r p r e t e d as belonging to the lower end of the urban continuum of e n t e r p r i s e s . . . t h e term 'small e n t e r p r i s e s ' as commonly used can be i n t e r p r e t e d as belo n g i n g to the middle of the continuum. I t uses a mode of pr o d u c t i o n and o r g a n i s a t i o n s i m i l a r to the formal s e c t o r e n t e r p r i s e but on a r e l a t i v e l y small s c a l e . . . the d i s t i n g u i s i n g f e a t u r e between the i n f o r m a l s e c t o r u n i t and the small e n t e r p r i s e i s t h e i r o r i e n t a t i o n ; whereas the former i s motivated p r i m a r i l y by employment c r e a t i o n , the l a t t e r i s concerned p r i m a r i l y with p r o f i t maximisation" (Sethuraman, 1981, p.17). Sethuraman's s u b - c a t e g o r i s a t i o n i s one response to the range of a c t i v i t i e s present i n the i n f o r m a l s e c t o r . Others have i d e n t i f i e d the dynamic areas i n the i n f o r m a l s e c t o r i n d i f f e r e n t ways (Page and S t e e l , 1984; Demol and Nihan, 1982; J o u r d a i n , 1982; House, 1978). Nihan and J o u r d a i n (1978) i d e n t i f y a 'modern' i n f o r m a l s e c t o r i n Noukachott, M a u r i t a n i a . A 'modern' i n f o r m a l s e c t o r was a l s o i d e n t i f i e d f o r Lome (Nihan et a l , 1977). S t e e l (1977) based on a study of Kumasi, Ghana, i n t r o d u c e s an 'interme d i a t e ' s e c t o r to i n c l u d e the manufacturing u n i t s that are small but modern. F o r t y percent of the manufacturing u n i t s f e l l i n t o t h i s c a t e g o r y . A p e t t y commodity s e c t o r has a l s o been d e f i n e d by s c h o l a r s to account f o r the a c t i v i t i e s t h a t appear to small but modern and t h r i v i n g (Forbes, 70 1981; Gerry, 1979; McGee, 1979). These ideas w i l l be d i s c u s s e d i n the s e c t i o n on the 'concept of dualism'. 5. F i n a l l y , the i n f o r m a l s e c t o r can no longer be viewed as  a homogeneous e n t i t y . The term i s used to d e s c r i b e a heterogeneous group of i n d i v i d u a l s and o c c u p a t i o n s . "There i s no evidence e i t h e r of t h i s s e c t o r being dominated by s p e c i f i c c h a r a c t e r i s t i c s of sex, age, or s o c i a l s t a t u s " (Mathur and Moser, 1984, p . x i ) . Richardson (1984) s t a t e s i n h i s l i t e r a t u r e survey t h a t the i n f o r m a l s e c t o r i s not always composed of the i l l i t e r a t e and c e r t a i n l y i n c l u d e s s k i l l e d workers, even though the s k i l l s may be i n f o r m a l l y a c q u i r e d . Thus, i t would appear that the range of a c t i v i t i e s t h a t can be c l a s s i f i e d as i n f o r m a l i s f a r g r e a t e r than e a r l i e r p e r c e i v e d . T h i s d i s c o v e r y i s not merely a problem of d e f i n i t i o n . I t h i g h l i g h t s other problems i n the debate. For i n s t a n c e , the concept of dualism. 1.2 The Concept Of Urban Dualism In the e a r l y years of the debate, Breman (1976) had s t a t e d t h a t the urban economy was fragmented r a t h e r than d u a l i s t i c . However, the use of a d u a l i s t i c framework i n the a n a l y s i s of the i n f o r m a l s e c t o r d i d not change at that time. Friedmann and S u l l i v a n (1972) and Hart (1972) in t r o d u c e d some measure of f l e x i b i l i t y i n t o t h e i r d u a l i s m models to i n c l u d e a wider range of a c t i v i t i e s . But the concept of dualism was, by and l a r g e , r e t a i n e d . 71 In recent years, the r e c o g n i t i o n of 'modern' a c t i v i t i e s and the range of low to w e l l paying a c t i v i t i e s w i t h i n the i n f o r m a l s e c t o r , makes i t d i f f i c u l t to continue u s i n g the concept of dualism. There i s c o n s i d e r a b l e degree of i n t e r n a l d i f f e r e n t i a t i o n "among p e t t y e n t e r p r i s e s i n the manufacturing, s e r v i c e s , and t r a n s p o r t a t i o n s e c t o r s " (Moser 1978 p.1061) In s p i t e of t h i s , some s c h o l a r s continue to use the d u a l i s t i c framework i n the a n a l y s i s of the i n f o r m a l s e c t o r , although they do i n c o r p o r a t e a broader range of a c t i v i t i e s i n the i n f o r m a l s e c t o r . Sethuraman's (1981) r e d e f i n i t i o n , quoted e a r l i e r , i s an example. S i m i l a r l y , Bromley and Gerry (1979) pro v i d e a continuum of work s i t u a t i o n s i . e . s t a b l e wage work, short term wage work, d i s g u i s e d wage work, dependent work and true self-employment. In t h i s continuum, the s t a b l e wage work c o n s t i t u t e s the formal s e c t o r a c t i v i t i e s and a l l other forms of work are p a r t s of the i n f o r m a l s e c t o r . Other s t u d i e s , however, r e j e c t the d u a l i s t i c framework i n favour of a d i f f e r e n t approach. S t e e l (1977) f o r i n s t a n c e , i n t r o d u c e s an ' i n t e r m e d i a t e ' s e c t o r to i n c l u d e the s m a l l s c a l e , modern, manufacturing u n i t s . E s s e n t i a l l y t h i s i s a t r i s e c t o r a l model not u n l i k e the Friedmann and S u l l i v a n ' s (1972) i n concept. A 'modern' i n f o r m a l s e c t o r , i d e n t i f i e d i n Noukachott (Nihan and J o u r d a i n , 1978) and Lome (Nihan et a l , 1977) i s yet another form of s u b - c a t e g o r i s a t i o n . The 'petty commodity p r o d u c t i o n ' approach, i s perhaps the most d i s c u s s e d i n l i t e r a t u r e (Forbes, 1981; Gerry, 1979; Bromley and Gerry, 1979; McGee, 1979; LeBrun and Gerry, 1975). The 72 'petty commodity p r o d u c t i o n s e c t o r ' i s s a i d to l i e at the margins of the c a p i t a l i s t mode of p r o d u c t i o n , s u b o r d i n a t e d by i t (LeBrun and Gerry, 1975). The 'petty commodity p r o d u c t i o n ' approach a n a l y s e s the small s c a l e p r o d u c t i o n u n i t s on the b a s i s of t h e i r r e l a t i o n s h i p to e x t e r n a l l i n k a g e s of p r o d u c t i o n and d i s t r i b u t i o n . Most other approaches have s t u d i e d the small s c a l e e n t e r p r i s e s i n i s o l a t i o n from e x t e r n a l l i n k a g e s . T h i s d i f f e r e n t i a t e s the p e t t y commodity p r o d u c t i o n approach from the other approaches. Most s c h o l a r s p r e f e r to c o n c e p t u a l i s e the 'petty commodity p r o d u c t i o n s e c t o r ' as a form of p r o d u c t i o n i n s t e a d of a mode of p r o d u c t i o n , because the l a t t e r r e f e r s to a " t o t a l i t y " , a complete economic system (LeBrun and Gerry, 1975) with the e x c e p t i o n of Davies (1979). Although the 'petty commodity s e c t o r ' approach has dominated the debate on the in f o r m a l s e c t o r i n recent years, i t has not been f r e e from c r i t i c i s m s , f o r example, "the l e v e l of a s s e r t i o n and counter a s s e r t i o n with l i t t l e i f any e m p i r i c a l backing" (Rogerson, 1985, p.32; Forbes, 1981; Moser, 1980). 7 1.3 The Informal S e c t o r And T h i r d World Development Process The observed d i v e r s i t y of in f o r m a l s e c t o r a c t i v i t i e s , i n c l u d i n g what has been r e f e r r e d to as 'modern' dynamic a c t i v i t i e s (Demol and Nihan, 1982; S t e e l , 1977), n e c e s s i t a t e s a r e t h i n k i n g on the r e l a t i o n s h i p of the in f o r m a l s e c t o r to T h i r d World development p r o c e s s e s . Not much work has been done i n 7 See Rogerson 1985, f o r a d e t a i l e d review of the p e t t y commodity p r o d u c t i o n approach. 73 t h i s regard because most s t u d i e s of the i n f o r m a l s e c t o r have been a h i s t o r i c a l . Without a h i s t o r i c a l approach to the study of the i n f o r m a l s e c t o r , i t i s d i f f i c u l t to s t a t e i f the i n f o r m a l s e c t o r i s a f f e c t e d by T h i r d World development p r o c e s s . However, development theory combined with the s t u d i e s of the i n f o r m a l s e c t o r have given r i s e to four trends of thought (Kahn, 1980). In the e a r l y years of the i n f o r m a l s e c t o r debate, i t was p e r c e i v e d that the i n f o r m a l s e c t o r would evolve as a t r a n s i t i o n a l form i n the development of T h i r d World c a p i t a l i s t economies. 8 T h i s i s known as the e v o l u t i o n i s t approach. But, the i n f o r m a l s e c t o r p e r s i s t e d and i t was necessary to e x p l a i n why t h i s was so. In response, the ' f u n c t i o n a l i s t ' approach entered the debate, i n the m i d - s e v e n t i e s , p a r t i c u l a r l y through the w r i t i n g s on dependency and the m a r g i n a l i s e d economy i n L a t i n America (Perlman, 1976; Quijano, 1974; Sunkel, 1973). T h i s approach, proposed that the i n f o r m a l s e c t o r e v o l v e s i n response to the needs of c a p i t a l i s m . L i s t e r (1980, i n Rogerson, 1985) f o r example, s t a t e s that the i n f o r m a l s e c t o r r e p r e s e n t s a s u b s t i t u t e d i s c o v e r e d by the c a p i t a l i s t c l a s s to r e p l a c e the r u r a l s e c t o r that bore the c o s t s of labour and p r o d u c t i o n i n the formal s e c t o r . The concept of ' c o n s e r v a t i o n - d i s s o l u t i o n ' was presented by B e t t l e h e i m (1972) and e l a b o r a t e d by McGee (1979) to e x p l a i n why the i n f o r m a l s e c t o r i s unable to d i s s o l v e , as a r e s u l t of t h i s f u n c t i o n a l need of c a p i t a l i s m . B a s i c a l l y , t h i s concept s t a t e s that the n o n - c a p i t a l i s t mode, i . e . the i n f o r m a l 8 T h i s approach was d e s c r i b e d i n d e t a i l i n chapter two. 74 s e c t o r , i s prevented from complete d i s s o l u t i o n because i t serves the f u n c t i o n a l needs of the dominant c a p i t a l i s t mode and i s , t h e r e f o r e , conserved. N e i t h e r the ' e v o l u t i o n i s t ' nor the ' f u n c t i o n a l i s t ' approaches are f r e e from c r i t i c i s m s . The ' e v o l u t i o n i s t ' approach i s c r i t i c i s e d on many grounds, but perhaps the most important one i s the assumption of a u n i v e r s a l t r a n s i t i o n a l p rocess i n T h i r d World development. Kahn (1980) s t a t e s that the i n f o r m a l s e c t o r does not emerge as a predominant form i n c a p i t a l i s t development of the T h i r d World, but has "remained so f o r c o n s i d e r a b l e p e r i o d s of time. I t i s t h e r e f o r e i n c o r r e c t to assume that the p e t t y c a p i t a l i s t p r o d u c t i o n i s a t r a n s i t i o n a l form" (Kahn, 1980, p.8). The f u n c t i o n a l i s t approach was widely accepted i n the s e v e n t i e s because i t was c l o s e l y t i e d to the reasons f o r the p e r s i s t e n c e of underdevelopment i n the T h i r d World. But i t a l s o has shortcomings. The ' f u n c t i o n a l i s t ' approach f a i l s to s p e c i f y how the i n f o r m a l s e c t o r i s f u n c t i o n a l to c a p i t a l . Gerry (1979), f o r i n s t a n c e , shows that low wages can be assured by means other than simply c r e a t i n g and s u b o r d i n a t i n g the i n f o r m a l s e c t o r . In e a r l i e r s e c t i o n s of t h i s chapter i t was i n d i c a t e d t h a t the i n f o r m a l s e c t o r was i n f a c t t h r i v i n g i n some i n s t a n c e s (Demol and Nihan, 1982; S t e e l , 1977; Nihan et a l , 1977). A c c o r d i n g to Rogerson (1985, p.36), "even though the i n f o r m a l s e c t o r may perform f u n c t i o n s f o r c a p i t a l i s m t h i s does not mean that i t was a pure c r e a t i o n of c a p i t a l i s m " . The concepts of dependency and m a r g i n a l i s a t i o n that gave r i s e to the ' f u n c t i o n a l i s t ' approach 7 5 are c r i t i c i s e d f o r t h e i r "obsession with i s s u e s of dependence, e x p l o i t a t i o n , and p r o j e c t i n g a t o t a l h e l p l e s s n e s s of the people i n the face of ( e x t e r n a l ) f o r c e s o p e r a t i n g i n the world economy" (Rogerson, 1985, p.26; Schmitz ,1982). Gerry (1979) f e e l s that t h i s approach i s over g e n e r a l i s e d . In the l a s t few years two other ideas have come to l i g h t . The f i r s t i s the 'by d e f a u l t ' approach. T h i s approach has not had as much a t t e n t i o n as o t h e r s . . In t h i s approach, the i n f o r m a l s e c t o r i s p e r c e i v e d to emerge w i t h i n the c a p i t a l i s t dominated economy i n those branches of p r o d u c t i o n t h a t the dominant c a p i t a l i s t s e c t o r f i n d s u n p r o f i t a b l e (Kahn, 1980). Roberts (1978) and B e i n e f i e l d (1975) suggest t h a t the i n f o r m a l s e c t o r takes over 'high r i s k ' areas of the economy viewed to be u n p r o f i t a b l e . Although there are no s p e c i f i c c r i t i c i s m of the 'by d e f a u l t ' approach i n the l i t e r a t u r e some authors have s t a t e d that i t i s an incomplete e x p l a n a t i o n (Rogerson, 1985; Kahn, 1980). The f o u r t h approach i n the debate i s of recent o r i g i n , but i t i s easy to see how i t evolved from the s t u d i e s of underdevelopment, e x p l o i t a t i o n and dependency. Kahn (1980) s t a t e s t hat the i n f o r m a l s e c t o r i s c r e a t e d i n the process of p r o l e t a r i a n i z a t i o n 9 a s s o c i a t e d with c a p i t a l i s t p e n e t r a t i o n of the T h i r d World, and i n the appearance of s u r p l u s labour which i s a consequence of world forms of c a p i t a l accumulation. The 9 P r o l e t a r i a n i z a t i o n r e f e r s to the process by which r u r a l labour i s f r e e d from i t s means of p r o d u c t i o n i . e . l a n d , c r e a t i n g the p r o l e t a r i a t which i s a labour f o r c e f r e e f o r wage employment. 76 idea of s u r p l u s labour i s not new. Amin (1973) f o r example, i n d i c a t e d the broad v a r i a t i o n i n p a t t e r n s of p r o l e t a r i a n i z a t i o n i n A f r i c a (see a l s o R i d d e l , 1981; f o r West A f r i c a ) . Stuckey and Fay (1981, p.11) are s i m i l a r l y of the o p i n i o n that "what i s c a l l e d the. growth of the urban i n f o r m a l s e c t o r i s i n f a c t the movement-the r e l o c a t i o n - t h e m i g r a t i o n o f - t h e r u r a l s u b s i s t e n c e s e c t o r s i n t o towns." 1.4 The R e l a t i o n s h i p Between The Informal And Formal S e c t o r s C l o s e l y t i e d to how the i n f o r m a l s e c t o r i s c r e a t e d i n the T h i r d World, i s the r e l a t i o n s h i p between the formal and i n f o r m a l s e c t o r s i n an urban economy. The I.L.O. study (1972) p o r t r a y e d the i n f o r m a l s e c t o r as an independent mode of p r o d u c t i o n and h y p o t h e s i s e d a benign r e l a t i o n s h i p between the two s e c t o r s . T h i s view corresponds to the ' e v o l u t i o n i s t ' approach to the e x i s t e n c e of the i n f o r m a l s e c t o r . That i s , the i n f o r m a l s e c t o r i s a t r a n s i t i o n a l form i n the development p r o c e s s . Although the I.L.O. study promoted r e f o r m i s t p u b l i c p o l i c y f o r the i n f o r m a l s e c t o r , the assumption of a benign r e l a t i o n s h i p between the two s e c t o r s was c r i t i c i s e d by those with more r a d i c a l views on urban dualism and development. By the mid-seventies, r a d i c a l ideas on dependent development and the m a r g i n a l i s e d economy ent e r e d the debate and with i t the view of an e x p l o i t a t i v e r e l a t i o n s h i p between the formal and i n f o r m a l s e c t o r s . The ' f u n c t i o n a l i s t ' approach to the emergence of the i n f o r m a l s e c t o r promotes t h i s view of e x p l o i t a t i o n where the i n f o r m a l s e c t o r " i s to s e r v i c e the formal s e c t o r through i t s impact on wage s t r u c t u r e s and 77 labour s u p p l i e s (Davies, 1979, p.90). The proponents of the 'petty commodity p r o d u c t i o n s e c t o r ' , although a l s o r a d i c a l , do not b e l i e v e that the r e l a t i o n s h i p between the two s e c t o r i s e x p l o i t a t i v e . Rather, i t i s s t a t e d that the' two s e c t o r s c o - e x i s t i n a manner of dominance and s u b o r d i n a t i o n , the 'petty commodity s e c t o r ' being dominated by the c a p i t a l i s t mode. More r e c e n t l y , Portes (1978) has proposed that even the view of dominance and s u b o r d i n a t i o n may not be c o r r e c t . He proposes that the two s e c t o r s may enjoy a "symbi o t i c " r e l a t i o n s h i p . He even p r e s e n t s a case f o r a reverse s i t u a t i o n of dependency. "The concept of the i n f o r m a l economy i s fundamental to the understanding of the o p e r a t i o n s of c a p i t a l i s m as a world phenomenon and c o n s t i t u t e s a m i s s i n g element i n contemporary world f o r m u l a t i o n s of r e l a t i o n s h i p s between core and p e r i p h e r y " ( P o r t e s , 1978, p.35). 1.5 Concluding Remarks In the 1975-85 decade, there was c o n s i d e r a b l e progress i n the debate on the i n f o r m a l s e c t o r i n the T h i r d World. While only those ideas that c o n f l i c t with e a r l i e r views were h i g h l i g h t e d i n t h i s review, there were many s t u d i e s i n t h i s decade t h a t a l s o supported the e a r l i e r p o s i t i o n s on the d e f i n i t i o n , r o l e , and formation of the i n f o r m a l s e c t o r . In s p i t e of t h i s p r o g r e s s , the i n f o r m a l s e c t o r debate has not a c h i e v e d g r e a t e r c l a r i t y . There are s t i l l many d i v e r g e n t views on what the i n f o r m a l s e c t o r i s , how i t i s c r e a t e d , why i t 78 p e r s i s t s and so on. I t a l s o appears that the i s s u e was com p l i c a t e d by the d i s c o v e r y of t h r i v i n g , modern smal l e n t e r p r i s e s w i t h i n the in f o r m a l s e c t o r . T h i s r a i s e s many q u e s t i o n s on the r o l e of the i n f o r m a l s e c t o r i n the urban economy, i t s r e l a t i o n s h i p to the formal s e c t o r , and the v a l i d i t y of the dualism concept i n understanding the urban economy. However, these approaches to the a n a l y s i s of the in f o r m a l s e c t o r are s t i l l l i m i t e d to the T h i r d World c o n t e x t , p a r t i c u l a r l y i t s l a r g e c i t i e s , as i f the phenomenon were e x c l u s i v e to i t . In t h i s l i g h t , the c o m p l e x i t i e s of the i s s u e are compounded by the review to be presented i n the next three s e c t i o n s of t h i s chapter which i n c l u d e the study of the i n f o r m a l s e c t o r i n sm a l l towns of the T h i r d World, i n c e n t r a l l y planned s o c i a l i s t economies, and i n Western c a p i t a l i s t economies. 2. THE INFORMAL SECTOR IN SMALL TOWNS OF THE THIRD WORLD Richardson has s t a t e d : "Almost a l l the in f o r m a l s e c t o r surveys are f o r primate c i t i e s or o c c a s i o n a l l y , other l a r g e c i t i e s and have never been undertaken f o r a l a r g e sample of urban areas i n a l l s i z e c l a s s e s w i t h i n a s p e c i f i c c o untry" (Richardson, 1984, p.23). There may be s e v e r a l reasons f o r t h i s : 1. The i n f o r m a l s e c t o r has been t i e d to the dominant model of r u r a l m i g r a t i o n and urban development. Large towns encountered a g r e a t e r i n f u x of migrants and t h e i r i n a b i l i t y to f i n d employment was a s e r i o u s problem i n these towns. 2. The c o n t r a s t between the formal and in f o r m a l s e c t o r s i s acce n t u a t e d i n l a r g e towns because more of the formal s e c t o r 79 p r o d u c t i o n u n i t s are found i n these towns. 3. Large towns were more important i n the development s t r a t e g i e s i n the T h i r d World, f o r i n s t a n c e , i n the top-down, growth p o l e approach. 4. The sources of funding the r e s e a r c h and/or p l a n n i n g f o r the i n f o r m a l s e c t o r ( i . e . government, p r i v a t e a g e n c i e s , u n i v e r s i t i e s ) are mainly l o c a t e d i n the l a r g e towns. The i n f o r m a l s e c t o r i n l a r g e towns was more a c c e s s i b l e to these funding sources, f o r study or p l a n n i n g purposes. "Small and i n t e r m e d i a t e c i t i e s were i n g e n e r a l excluded from t h e i r (I.L.O.) coverage presumably on the ground t h a t : f i r s t they d i d not encounter the s c a l e of i n f l u x of r u r a l migrants as l a r g e c i t i e s d i d , thereby a v o i d i n g the s e r i o u s problem of f i n d i n g employment o p p o r t u n i t i e s f o r the migrants and second these c i t i e s were not as important i n the development s t r a t e g i e s i n t h i r d World c o u n t r i e s " (bracket author's) (Mathur and Moser, 1984, p . x i i ) . Paul B a i r o c h (1976; i n Mathur and Moser, 1984) presented one of the e a r l i e s t s t u d i e s on c i t y s i z e and economic development i n the T h i r d World. But i t was " l i m i t e d i n scope". Since then there have been few s t u d i e s on c i t y s i z e and the i n f o r m a l s e c t o r i n the more rec e n t l i t e r a t u r e . I t i s q u i t e l i k e l y t h a t the study of the i n f o r m a l s e c t o r i n small towns was a c o r o l l o r y to the study of s m a l l towns f o r development purposes, which has been promoted s i n c e the m i d - s e v e n t i e s . A c c o r d i n g to E l Shakhs (1984, p.81): "The a r t i c u l a t i o n of the s p a t i a l development of l a r g e c i t i e s i n t o interdependent settlement systems of s m a l l - and medium-sized c i t i e s c o u l d enhance the p r o d u c t i v e c o n t r i b u t i o n of the i n f o r m a l s e c t o r " . 80 Santos 1 (1979) work i s p r o b a b l y one of the e a r l i e s t s t u d i e s on urban dualism to i n t r o d u c e urban s i z e . His model c l e a r l y i n d i c a t e s a d e c l i n i n g p r o p o r t i o n of the i n f o r m a l s e c t o r with i n c r e a s i n g c i t y s i z e . However the Santos model was not backed by e m p i r i c a l data ( F i g u r e 3). F i g u r e 3 - D i s t r i b u t i o n of the i n f o r m a l s e c t o r by c i t y s i z e : Santos 1979 POPULATION SIZE COMPLETE METROPOLIS PARTIAL METROPOLIS INTERMEDIATE CITY LOCAL TOWN Source: Adapted from Santos.(1979) Because t h i s i s a new area of enquiry, much of the evidence on the i n f o r m a l s e c t o r i n the s m a l l towns tends to be i m p r e s s i o n i s t i c ( E l Shakhs, 1984; B e r l i n c k et a l , 1981; Mabogunje and F i l a n i , 1981). However, Richardson (1984) does say that these views are supported p a r t i a l l y by s u r v e y s . " f i e l d t r i p s to i n t e r m e d i a t e c i t i e s i n a v a r i e t y of d e v e l o p i n g c o u n t r i e s r e v e a l a l a r g e number of i n f o r m a l s e c t o r e n t e r p r i s e s and a c t i v i t i e s and a s c a r c i t y , i n some cases a v i r t u a l absence, of formal s e c t o r 81 e n t e r p r i s e s " (Richardson, 1984, p.23). While the i n f o r m a t i o n may be scant, the dominant h y p o t h e s i s i s that the "share of the i n f o r m a l s e c t o r i n t o t a l urban employment d e c l i n e s with i n c r e a s i n g c i t y s i z e " (Mathur and Moser, 1984, p . x i i i ) Proponents of a n e g a t i v e c o r r e l a t i o n between c i t y s i z e and the i n f o r m a l s e c t o r i n c l u d e K u l l , 1984; E l Shakhs, 1984; Richardson, 1983; Das, 1982; Aryee, 1981; B e r l i n c k et a l , 1981; Mabogunje and F i l a n i , 1981; Saget, 1976 i n K u l l , 1984. See F i g u r e 4. With the e x c e p t i o n of K u l l (1984) and Das (1982) Mabogunje and F i l a n i (1981), the s t u d i e s of the i n f o r m a l s e c t o r i n s m a l l towns s u f f e r from a l a c k of e m p i r i c a l support. In f a c t , s t u d i e s are o f t e n h y p o t h e t i c a l c a l c u l a t i o n s ( H i l h o r s t , 1984; Richardson, 1983). "to i l l u s t r a t e , c o n s i d e r the f o l l o w i n g h y p o t h e t i c a l example. The primate c i t y accounts f o r 50 percent of the n a t i o n a l urban p o p u l a t i o n and the F S 1 0 data r e v e a l that i t p r o v i d e s 60-percent of FS jobs. A n a t i o n a l estimate of the IFS, perhaps using v e r s i o n s of the s e l f employed, p l u s unpaid f a m i l y labour and the s m a l l e s t a b l i s h m e n t employment method, suggests that the IFS accounts f o r 40 percent of t o t a l urban employment. If employment i s p r o p o r t i o n a l to p o p u l a t i o n , then i t i s easy to c a l c u l a t e t h a t the IFS accounts f o r 28 percent of t o t a l employment i n the primate c i t y and f o r 52 percent of t o t a l employment i n the r e s t of the n a t i o n a l urban system. A l s o the same data r e v e a l s that the primate c i t y accounts f o r only 35 percent of n a t i o n a l IFS employment" (Richardson, 1983, p.40). 1 0 Richardson uses the a b b r e v i a t i o n s FS and IFS to stand f o r the formal s e c t o r and i n f o r m a l s e c t o r r e s p e c t i v e l y . 82 E m p i r i c a l s t u d i e s have been c a r r i e d out in Kano (Mabogunje and F i l a n i , 1981), Ivory coast ( K u l l , 1984), Campinas, B r a z i l (Berli.nck et a l , 1981), and Raikot (Das, 1982). K u l l (1984) suggests that the share of the i n f o r m a l s e c t o r employment d e c l i n e s with i n c r e a s i n g c i t y s i z e . F i g u r e 4 - D i s t r i b u t i o n of the i n f o r m a l s e c t o r by c i t y s i z e : E l Shakhs 1984 CITY POPULATION SIZE ———•——» Share of the Informal s e c t o r as a whole _ _ _ _ _ Share of the e s s e n t i a l component of the Informal sector Share of the nonessential component of the Informal sector S o u r c e : E l Shakhs., 1984 To augment the l a c k of e m p i r i c a l data i n t h i s regard, a p a r t i c i p a n t o b s e r v a t i o n survey was undertaken by the author in R a i k o t , a s m a l l town in Punjab, I n d i a . D e t a i l s of t h i s survey are a t t a c h e d i n Appendix F. The survey r e v e a l e d that the i n f o r m a l s e c t o r was p r o p o r t i o n a t e l y higher than the formal s e c t o r , l e a n i n g i n support of K u l l ' s f i n d i n g s . For i n s t a n c e , the m u n i c i p a l c o r p o r a t i o n o f f i c e of Raikot s t a t e s that there are approximately 600 i n f o r m a l s e c t o r commercial a c t i v i t i e s 83 ( r e g i s t e r e d and u n r e g i s t e r e d ) as opposed to 123 formal s e c t o r commercial a c t i v i t i e s . S i m i l a r f i n d i n g s occur f o r the t r a n s p o r t and s e r v i c e s e c t o r s of R a i k o t . Advocates of a n e g a t i v e c o r r e l a t i o n , between the s i z e of the i n f o r m a l s e c t o r and c i t y s i z e present three main arguments (Mathur and Moser, 1984). 1. F u n c t i o n a l c o m p l e x i t y : Large c i t i e s are f u n c t i o n a l l y complex and have a l a r g e r share of the labour f o r c e i n manufacturing, managerial, and p r o f e s s i o n a l o c c u p a t i o n s . These are a p a r t of the formal s e c t o r . L o g i c a l l y then the i n f o r m a l s e c t o r must dominate i n small towns. 2. S u b s t i t u t i o n e f f e c t : Larger c i t i e s , assumed to be at a higher l e v e l of development, can s u b s t i t u t e the i n f o r m a l s e c t o r a c t i v i t i e s by formal s e c t o r a c t i v i t i e s . Small towns are l e s s a b l e to make these s u b s t i t u t i o n s . 3. If the formal s e c t o r employment i s c o n c e n t r a t e d i n l a r g e towns, the share of i n f o r m a l s e c t o r employment must be higher i n other towns. T h i s view was i n t r o d u c e d by Santos (1979). There i s an opposing p o i n t of view i n the study of the i n f o r m a l s e c t o r i n s m a l l towns, that advocates a p o s i t i v e c o r r e l a t i o n between i n f o r m a l s e c t o r and c i t y s i z e . i . e . the i n f o r m a l s e c t o r i n c r e a s e s p r o p o r t i o n a t e to c i t y s i z e (Kundu and Mathur, 1984). T h e i r view i s a l s o based on three arguments: 1. Large c i t i e s have a s i z a b l e "autonomous" demand which c r e a t e s b e t t e r c o n d i t i o n s f o r the i n f o r m a l s e c t o r to s u b s i s t and expand. Small c i t i e s are u n l i k e l y to c r e a t e such c o n d i t i o n s due to the l a c k of autonomous demand. 84 2. Large c i t i e s c r e a t e more o p p o r t u n i t y f o r the i n f o r m a l s e c t o r to e f f e c t i v e l y u t i l i z e t e c h n o l o g i e s that are made redundant in the formal s e c t o r . Such o p p o r t u n i t i e s are l i k e l y to a r i s e i n l a r g e c i t i e s and not i n s m a l l ones on account of the pace of t e c h n o l o g i c a l t r a n s f o r m a t i o n . 3. The average incomes as w e l l as the l e v e l of p u b l i c amenities i n l a r g e c i t i e s are g e n e r a l l y higher than i n s m a l l towns. T h i s suggests that the p o s s i b i l i t i e s f o r the emergence and growth of i n f o r m a l a c t i v i t i e s would be higher i n these towns. I t can be seen t h a t the study of the i n f o r m a l s e c t o r i n small towns i s h i g h l y s p e c u l a t i v e . A c c o r d i n g to Rogerson (1985, p.64) " i t remains that e m p i r i c a l and t h e o r e t i c a l s t u d i e s concerning the i n f o r m a l s e c t o r s r o l e i n small and i n t e r m e d i a t e s i z e c e n t r e s of the d e v e l o p i n g world are an undeveloped r e s e a r c h f i e l d " . Although one can concede that the area i s r e l a t i v e l y unexplored and needs f u r t h e r r e s e a r c h , there a r e , at the same time, c e r t a i n c r i t i c a l q u e s t i o n s that a r i s e i n the context of the i n f o r m a l s e c t o r debate. 1. Is the i n f o r m a l s e c t o r i n the small towns s i m i l a r , i n type or range of a c t i v i t y , to i t s c o u n t e r p a r t i n the l a r g e towns? E l Shakhs (1984), Kundu and Mathur (1984), K u l l (1984), Das (1982) address t h i s i s s u e to a c e r t a i n extent as i n d i c a t e d e a r l i e r i n t h i s s e c t i o n . 2. What i s the r e l a t i o n s h i p of the i n f o r m a l s e c t o r to the formal s e c t o r i n the s m a l l town economy? Only Kundu and Mathur (1984) have d e a l t with t h i s a s p e c t . T h e i r study i m p l i e s a 85 benign r e l a t i o n s h i p , but t h i s i s a p o s i t i o n that may be v u l n e r a b l e to c r i t i c i s m i n contemporary t h i n k i n g . 3. What i s the r e l a t i o n s h i p of the i n f o r m a l s e c t o r i n the small towns to the T h i r d World development process? Which of the major approaches i . e . e v o l u t i o n i s t , f u n c t i o n a l i s t , b y - d e f a u l t , and p r o l e t a r i a n i z a t i o n can e x p l a i n the e x i s t e n c e of i n f o r m a l s e c t o r i n small towns? T h i s i s an unexplored a r e a . The study of the i n f o r m a l s e c t o r i n small towns adds to the many aspects of the i n f o r m a l s e c t o r that must be c o n s i d e r e d i n the a n a l y s i s of the formation, p e r s i s t e n c e , and and d i s t r i b u t i o n of the i n f o r m a l s e c t o r i n urban ar e a s . The debate gets more complex. 3. THE INFORMAL SECTOR IN WESTERN CAPITALIST COUNTRIES T h i s s e c t i o n , and the f o l l o w i n g one are c r i t i c a l to understanding the i n f o r m a l s e c t o r . The presence of the i n f o r m a l s e c t o r i n economies d i s t i n c t l y d i f f e r e n t from the T h i r d World i m p l i e s that the T h i r d World context of the debate on the i n f o r m a l s e c t o r may no longer be t e n a b l e . T h i s s e c t i o n d e s c r i b e s the i n f o r m a l s e c t o r i n Western c a p i t a l i s t n a t i o n s . Although the a n a l y s i s of the i n f o r m a l s e c t o r i n Western c o u n t r i e s has not been as e x t e n s i v e as that of the T h i r d World, there i s n o n e t h e l e s s a s u b s t a n t i a l amount of study. The term ' i n f o r m a l s e c t o r ' has been used i n a l i m i t e d way i n d i s c u s s i n g the phenomenon i n the Western c a p i t a l i s t c o u n t r i e s . A c c o r d i n g to Simon and Witte (1982, p . x i ) : "In England i t i s c a l l e d the ' f i d d l i n g ' ; i n France, 86 ' t r a v a i l au n o i r ' ; i n Germany, ' s w a r t z a r b e i t ' ; i n Japan, 'the hidden economy'." 1 1 Simon and Wi t t e use the term 'underground economy' which i s one of the more common terms a p p l i e d . T h i s term i s a l s o used by Mattera (1985), T a n z i (1982), Molefsky (1982), Tucker (1982) and others i n the study of v a r i o u s p a r t s of the Western world. Other terms used i n c l u d e : the second economy ( C o n t i n i 1982); i r r e g u l a r economy (Reuter, 1982; Mirus and Smith, 1982; Fermal et a l , 1978); subterranean economy (Bawly, 1982; Guttman, 1977); the black economy (Mattera, 1985; D i l n o t and M o r r i s , 1982); and c l a n d e s t i n e employment (De G r a z i a 1984). Only N i c h o l l s and and Dyson (1983), Mingione (1985), and Co n n o l l y (1985) use the terms i n f o r m a l and formal s e c t o r s . . Thus i t can be seen t h a t , s i m i l a r to the T h i r d World, there i s no l a c k of d e f i n i t i v e terms to d e s c r i b e the phenomenon i n Western n a t i o n s . But do these d e f i n i t i o n s d e s c r i b e the same pa r t of the economy i n the case of Western n a t i o n s ? "The s t r e e t vendors of Manhattan, the improvised boardwalk market s t a l l s of V e n i c e , C a l i f o r n i a and f r u i t s t a l l s o u t s i d e the f e d e r a l b u i l d i n g s i n Washington D.C. ( j u s t as they are i n B r a z i l i a and i n Bangkok) are evidence enough that there are market n i c h e s f o r the IFS e n t e r p r i s e s even i n the most a f f l u e n t of c o u n t r i e s " (bracket i n o r i g i n a l ) (Richardson, 1984 p.4). In g e n e r a l , i t appears that the i n f o r m a l s e c t o r a c t i v i t i e s are The term hidden economy has a l s o been used i n s t u d i e s of the U.K. (Macafee 1982), Norway (Isachsen et a l 1982), s e l e c t e d European n a t i o n s (Frey et a l 1982). 87 s i m i l a r , but the emphasis i s l a i d on the a c t i v i t i e s that are i l l e g a l , tax e v a s i v e , and are means f o r a c q u i r i n g undeclared income. Consider some of the d e f i n i t i o n s g i v e n . "The underground economy i s a term used to d e s c r i b e t r a n s a c t i o n s that i n v o l v e payment i n money or i n s i m i l a r goods but are not recorded i n o f f i c i a l economic s t a t i s t i c s (such as t a x a b l e income or the unemployment r a t e ) . These t r a n s a c t i o n s may not be recorded f o r a number of reasons. For example, the goods or s e r v i c e s s o l d may be i l l e g a l , as are n a r c o t i c s and p r o s t i t u t i o n . On the other hand, the p r o v i d e r of these goods may want to a v o i d paying income, s a l e s or s o c i a l s e c u r i t y taxes or a v o i d obeying some f r u s t r a t i n g government r e g u l a t i o n s . C h i l d r e n who s e l l lemonade i n f r o n t of t h e i r homes, teenagers who b a b y s i t f o r t h e i r neighbours, and a d u l t s who use garage s a l e s to c l e a n out t h e i r a t t i c s a l l p a r t i c i p a t e i n the underground economy i f they do not r e p o r t t h e i r income" (Simon and W i t t e , 1982, p . x i ) . A c c o r d i n g to De G r a z i a (1984, p.8), the i n f o r m a l s e c t o r can cover two a r e a s . "The f i r s t c overs a l l forms of tax avoidance and are to some extent i l l i c i t and i l l e g a l , b a r t e r (exchange of goods and s e r v i c e s i n order to evade t a x e s ) , and black marketing and other a c t i v i t i e s t h a t generate u n d e c l a r e d income. The second covers a c t i v i t i e s t h a t are of a f e l o n i o u s or c r i m i n a l order such as p r o s t i t u t i o n , drug-peddling and i l l e g a l gambling." P h i l l i p Mattera (1985, p.4-14) uses a l i s t of forms of i n f o r m a l i t y i n Western economies, a l l of which are unregulated, untaxed and unmeasured. The p a r t i c i p a n t s are e i t h e r m o o n l i g h t i n g from a r e g u l a r job, the o f f i c i a l l y unemployed, pr those o f f i c i a l l y not i n the labour f o r c e (students, d i s a b l e d p e r s o n s ) . The forms of i n f o r m a l i t y u s i n g the above p r o f i l e i n c l u d e : the hidden economy ( u n o f f i c i a l forms of income); the 88 c r i m i n a l economy ( p r o s t i t u t i o n , gambling); the s o c i a l economy ( b a r t e r ) ; and the household economy (work done by housewives). Richardson (1984 p.4) a l s o s t a t e s that t h e r e i s " s u b s t a n t i a l m o o n l i g h t i n g and m u l t i p l e j o b h o l d i n g by s k i l l e d tradesmen". E s s e n t i a l l y , the d e s c r i p t i o n s p r o v i d e d by these s c h o l a r s are s i m i l a r . I t appears that e s t i m a t i n g the amount of tax evasion i s a major focus of these s t u d i e s even though tax evasion i s not the primary i n t e n t of some i n f o r m a l a c t i v i t i e s eg. b a b y s i t t i n g , c h i l d r e n ' s lemonade stands and so on. Guttman's (1977, i n Simon and W i t t e 1982; Bawly, 1982) was i n s t r u m e n t a l i n drawing a t t e n t i o n to tax evasion i n the underground economy. The problem of tax evasion by the underground economy i s not s m a l l . I t was estimated i n 1979 t h a t one t h i r d o f . I t a l y ' s labour f o r c e p a r t i c i p a t e d i n the ' l a v o r o nero', the underground economy (Simon and W i t t e , 1982, p . x i ) With r e f e r e n c e to the U n i t e d S t a t e s of America, the main focus of t h e i r book, Simon and Witte (1982, p.xv) s t a t e ; "The $19 to $26 b i l l i o n of l o s t f e d e r a l income tax revenue d e s c r i b e d by the IRS 1979 study would almost have been enough to wipe out the $27 b i l l i o n d e f i c i t i n the 1979 f e d e r a l budget the underground economy i s an important phenomenon i n the U n i t e d S t a t e s . We can no longer a f f o r d to ignore i t . " E s t imates of the underground economy f o r other n a t i o n s are as h i g h . I t a l y i s one of the most researched areas (Mingione, 1985; Mattera, 1985; De G r a z i a , 1984; Frey et a l , 1982; C o n t i n i , 1982) and the estimates presented v a r y . A c c o r d i n g to Frey 89 (1982) I t a l y ' s hidden economy i s 30-40 percent of the GNP, while C o n t i n i (1982) estimates i t at 20 percent of the work f o r c e . The i n f o r m a l s e c t o r i n Canada was estimated roughly at 5-20 p e r c e n t of the t o t a l economic e c t i v i t y i n 1976 (Mirus and Smith, 1982). In A u s t r a l i a , the i n f o r m a l s e c t o r was 10 percent of the GDP i n 1979 (Tucker, 1982). The estimates f o r other n a t i o n s , i n percentage of labour f o r c e , i n c l u d e : France, 3-6 percent; Belgium, 20-30 percent; Sweden, 13-14 percent; Germany, 8-12 p e r c e n t ; Norway, 40 percent (De G r a z i a , 1984). 1 2 Frey (1982) c a u t i o n s a g a i n s t the accuracy of these s t a t i s t i c s . A ccording to Frey, most of these f i g u r e s are s p e c u l a t i o n s or educated guesses and were not obtained by the use of w e l l d e f i n e d methods. However, i t i s obvious that the hidden economy w i l l always be d i f f i c u l t to measure simply because i t i s hidden. Although s t u d i e s of the i n f o r m a l s e c t o r i n the developed world tend to c o n c e n t r a t e on tax e v a s i o n and b a r t e r , the a c t i v i t i e s i n the s e c t o r are q u i t e v a r i e d . They i n c l u d e : 1 . B a r t e r of p r o f e s s i o n a l and s k i l l e d s e r v i c e s on an i n d i v i d u a l b a s i s eg. d o c t o r , lawyer, plumber, repairmen e t c . 2. O p e r a t i o n of small u n r e g i s t e r e d f i r m s under s i n g l e or f a m i l y ownership eg. household p r o d u c t i o n of g r e e t i n g c a r d s , t a i l o r i n g , p o t t e r y and so on. 3. Use of labour i l l e g a l l y f o r c a s u a l work, f o r i n s t a n c e the 1 2 See De G r a z i a 1984, C l a n d e s t i n e Employment, f o r data on the s i z e , and the general c h a r a c t e r i s t i c s of the hidden economy i n European n a t i o n s . 90 use of Mexican labour i n U.S.A.. 4. Self-employment that i s unreported, eg. b a b y s i t t i n g , house c l e a n i n g s e r v i c e s , garage s a l e s , s t r e e t entertainment, empty b o t t l e c o l l e c t i n g , s t r e e t hawkers and vendors, ' s c a l p e r s ' by r e s a l e of t i c k e t s . 5. M o o n l i g h t i n g i n a d d i t i o n to r e g u l a r job or other forms of c o l l e c t i n g unrecorded money eg. t i p s , b r i b e s . 6. C r i m i n a l a c t i v i t i e s eg. drug p e d d l i n g , i l l e g a l p r o s t i t u t i o n , i l l e g a l gambling. While there are many types of i n f o r m a l s e c t o r a c t i v i t i e s i n Western n a t i o n s the focus of the s t u d i e s tends to be on measurement of tax evasion ( T a n z i , 1982; Bawly, 1982; Kenadjian, 1982; Isachsen, 1982; Mirus and Smith, 1982) or on r e f i n i n g measurement techniques (Frey et a l , 1982; Reuter, 1982; D i l n o t and M o r r i s , 1982). In s p i t e of t h i s emphasis, Tanzi (1982) s t a t e s that survey methods have not been a p p l i e d to the e s t i m a t i o n of the hidden economy i n North America as i t has been done i n Europe. Some other aspects of the i n f o r m a l s e c t o r such as the c h a r a c t e r i s t i c s of the s e c t o r are a l s o s t u d i e d (Mattera, 1985; R e d c l i f t and Mingione, 1985; De G r a z i a , 1984); the use of i l l e g a l immigrant or s u r p l u s labour (De G r a z i a , 1984; Del Boca and F o r t e , 1982; C o n t i n i , 1982). R e f e r i n g to I t a l y , C o n t i n i and Del Boca (1978; i n Del Boca and F o r t e , 1982, p.182) say: "the s u r p l u s labour supply i s no longer openly manifest as i t was i n the be g i n n i n g of the I t a l i a n m i r a c l e but i s on the c o n t r a r y hidden". 91 F i n a l l y the aspect of p u b l i c p o l i c y i s a l s o a pa r t of the s t u d i e s on the i n f o r m a l s e c t o r but mostly i n r e f e r e n c e to the c o n t r o l of tax evasion (Simon and Wi t t e , 1982; Bawly, 1982). The q u e s t i o n that a r i s e s , i s why should t h i s s o r t of an economy form i n r e l a t i v e l y prosperous n a t i o n s . The hidden economy i n Western n a t i o n s , i s not new, i t i s "as o l d as t a x a t i o n " but " r e d i s c o v e r e d " i n recent years (Mingione, 1985). One can sp e c u l a t e that changing times have i n some way e i t h e r i n c r e a s e d the hidden economy or changed i t s c h a r a c t e r such that i t i s important to study. Some reasons have been proposed by s c h o l a r s . Rogerson (1985) s t a t e s t h a t d e p r e s s i n g wage l e v e l s f o r c e i n d i v i d u a l s i n t o the i n f o r m a l s e c t o r . Gershuny (1985) Gerry (1979), and Pahl and Wallace (1985) p o i n t to the f a c t t h at sometimes the p r o v i s i o n of s e r v i c e s by the s t a t e i s inadequate n e c e s s i t a t i n g the s e r v i c e s from the i n f o r m a l s e c t o r . Frey (1982) suggests that o f t e n the burden of t a x a t i o n i n f l a t e s the i n f o r m a l s e c t o r , a view that i s shared by Simon and Witte (1982) i n t h e i r study of the U.S.A., and Hansson (1982) i n h i s study of Sweden. Del Boca and F o r t e (1982) present an i n t e r e s t i n g p o i n t of view. They s t a t e that higher education l e v e l s induce i n d i v i d u a l s , who have some work time a v a i l a b l e , t o s h i f t t h e i r p r e f e r e n c e s f o r jobs to the i n f o r m a l s e c t o r . Speaking of the case study of Canada, N i c h o l l s and Dyson (1983) propose that the i n f o r m a l s e c t o r i s a response to the l i m i t s of mo n e t i s a t i o n i . e . the l i m i t s of d e p e r s o n a l i s e d and d i s t a n t human r e l a t i o n s h i p s i n soc i e t y . "On the other hand, to the extent that i n f o r m a l 92 economic a c t i v i t i e s i n c r e a s e de-monetisation (non-money t r a n s a c t i o n s ) , i t i s necessary f o r people to i n c r e a s e the number and q u a l i t y of t h e i r i n t e r p e r s o n a l r e l a t i o n s h i p s " ( N i c h o l l s and Dyson, 1983, p.25). I t i s evident from t h i s d i s c u s s i o n of the i n f o r m a l s e c t o r i n Western c a p i t a l i s t economies t h a t c o n s i d e r a b l e work has been done, c e r t a i n l y s u f f i c i e n t to p r o v i d e a t e n t a t i v e p r o f i l e of the s e c t o r . But, as y e t , there has been no c o m p a r i t i v e study with the T h i r d World s i t u a t i o n . 4. THE INFORMAL SECTOR IN CENTRALLY PLANNED SOCIALIST COUNTRIES St u d i e s of the i n f o r m a l s e c t o r i n c e n t r a l l y planned, s o c i a l i s t economies are not as e a s i l y a c c e s s i b l e . I t i s sometimes d i f f i c u l t to o b t a i n documents, some of which are not i n E n g l i s h , and when these are made a v a i l a b l e by the government, the accuracy of the i n f o r m a t i o n i s o f t e n suspect (Aslund, 1985). Nonetheless, there i s enough i n f o r m a t i o n to i n d i c a t e the e x i s t e n c e of the i n f o r m a l s e c t o r i n s o c i a l i s t economies. Although the terminology used f o r the i n f o r m a l s e c t o r i s not as v a r i e d as that i n Western c a p i t a l i s t and T h i r d World c a p i t a l i s t economies, i t appears to be a common f e a t u r e i n s o c i a l i s t economies (Mattera, 1985; Aslund, 1985; Ping Yu, 1984; De G r a z i a , 1984; Time magazine, A p r i l , 1984; S i t , 1983; Newsweek magazine, March, 1983; Grossman, 1982; White, 1978; Gormsen et a l , 1977). The ge n e r a l term a p p l i e d to the i n f o r m a l s e c t o r i s ' p r i v a t e s e c t o r e n t e r p r i s e s ' t o d i s t i n g u i s h these from the s t a t e c o n t r o l l e d economy. P r i v a t e s e c t o r e n t e r p r i s e s are mostly forms of self-employment, or smal l group ventures. The presence of 93 p r i v a t e e n t e r p r i s e s i s a p o l i t i c a l / i d e o l o g i c a l c o n t r a d i c t i o n w i t h i n the c e n t r a l l y planned s o c i a l i s t systems but t h i s aspect w i l l not be d i s c u s s e d i n t h i s r e v i e w . 1 3 The purpose of t h i s review i s only to e s t a b l i s h the presence and predominant c h a r a c t e r i s t i c s of the i n f o r m a l s e c t o r i n the s o c i a l i s t economies. Studie s of the i n f o r m a l s e c t o r i n s o c i a l i s t economies show th a t i t i s sometimes underground, but sometimes even s t a t e encouraged. I t used to be easy to d i s m i s s the i n f o r m a l s e c t o r as a holdover of c a p i t a l i s m but t h i s i s h a r d l y a c c e p t a b l e now s i n c e some s o c i a l i s t n a t i o n s have acknowledged the presence of the s e c t o r as an inherent p a r t of the s o c i a l i s t system, eg. i n China (Ping Yu, 1984; L i n et a l , 1980), Poland, Hungary, East Germany (Aslund, 1985; Mattera, 1985), and U.S.S.R. (Mattera, 1985; Grossman, 1982). L i n (1980) f o r i n s t a n c e s t a t e s t h a t the p r i v a t e e n t e r p r i s e s were p a r t of the " u n i f i e d s o c i a l i s t market" of China. Mattera (1985, p.11), q u o t i n g a Moscow correspondent of the New York Times s t a t e s that " p a r a l l e l to the o f f i c i a l economy there e x i s t s an e n t i r e t h r i v i n g counter economy...(which) has become an i n t e g r a l p a r t of the S o v i e t system a b u i l t i n permanent f e a t u r e of S o v i e t s o c i e t y " . The i n f o r m a l s e c t o r comprises " a t l e a s t a few percent of employment" in e a s t e r n European n a t i o n s (Aslund, 1985, p.2), and 1 3 See Aslund Anders 1985, P r i v a t e E n t e r p r i s e i n E a s t e r n Europe, f o r an i n s i g h t i n t o the i d e o l o g i c a l c o n t r a d i c t i o n of the p r i v a t e e n t e r p r i s e s e c t o r i n the s o c i a l i s t economies. 94 i n most i n s t a n c e s these are o f f i c i a l l y r e c o g n i s e d by government (Aslund, 1985; De G r a z i a , 1984). The s i z e of the i n f o r m a l s e c t o r i n s o c i a l i s t economies v a r i e s , depending on whether the estimates i n c l u d e the l e g a l , the i l l e g a l , or both forms of in f o r m a l a c t i v i t y . Both are u s u a l l y p r e s e n t . Aslund (1985) s t u d i e d only the l e g a l p r i v a t e e n t e r p r i s e s i n Poland and East Germany. S i m i l a r l y , Shen Ping Yu (1984) s t u d i e d the l e g a l p r i v a t e e n t e r p r i s e s i n China and Gormsen (1977), the l e g a l p r i v a t e e n t e r p r i s e s i n U.S.S.R. Grossman (1982), Mattera (1985), and Cai (1980) on the other hand, s t u d i e d the i l l e g a l s i d e of the i n f o r m a l s e c t o r i n the U.S.S.R.; the U.S.S.R., Poland and Hungary; and China r e s p e c t i v e l y . E stimates f o r the U.S.S.R. i n d i c a t e that the l e g a l and the i l l e g a l i n f o r m a l s e c t o r was 20 percent of the o f f i c i a l economy in 1970 ( K a i s e r , 1976; i n Frey et a l , 1982). A c c o r d i n g to Mattera (1985 p.115), "Andrei Sakharov has been quoted as e s t i m a t i n g the second economy a t about 10 percent of the o f f i c i a l one, but he a p p a r e n t l y based that f i g u r e on nothing more than i m p r e s s i o n s " . Estimates are hard to get, but i t i s i n d i c a t e d by s c h o l a r s that the p r i v a t e e n t e r p r i s e s e c t o r i s q u i t e l a r g e i n Poland, Hungary, Y u g o s l a v i a (Aslund, 1985; Mattera, 1985; De G r a z i a , 1984). The e x c e p t i o n , Aslund (1985) p o i n t s out, i s the i n f o r m a l s e c t o r i n East Germany, which i s small due to a s t r i c t e r c o n t r o l on c o r r u p t i o n . De G r a z i a (1984) s t a t e s that i n Y u g o s l a v i a the 95 p r o p o r t i o n of wage e a r n e r s , r e g u l a r l y engaged i n the i n f o r m a l s e c t o r was at l e a s t 10 percent r i s i n g to 25 percent, i n areas with a shortage of s k i l l e d l a b o u r . The second economy of Hungary was estimated at one t h i r d of the co u n t r y ' s p r o d u c t i o n and 40 percent of the p e r s o n a l income i n 1981 (Mattera, 1985). For China, Cai (1980) estimated that there were about 10,000 i l l e g a l hawkers i n Shanghai d u r i n g the c u l t u r a l r e v o l u t i o n , although t h i s f i g u r e does not r e a l l y i n d i c a t e the t o t a l s i z e of the i n f o r m a l s e c t o r . Most s c h o l a r s admit that the f i g u r e s may not be a c c u r a t e , but there i s an agreement that the i n f o r m a l s e c t o r e x i s t s "on a l a r g e s c a l e i n the S o v i e t Union and i n Eas t e r n Europe" (Grossman, 1982, p.245). D e s c r i p t i v e l y , the i n f o r m a l s e c t o r i n s o c i a l i s t economies does not d i f f e r much from the i n f o r m a l s e c t o r i n other n a t i o n s . "The exchange of goods and s e r v i c e s ( i . e . v a r i o u s forms of b a r t e r c a r r i e d out mainly f o r tax e v a s i o n purposes i n most i n d u s t r i a l i s e d market economy c o u n t r i e s ) , which i s o f t e n c o n s i d e r e d as a branch of the underground economy i s a l s o viewed as an important f e a t u r e of the secondary economy i n s o c i a l i s t c o u n t r i e s " (De G r a z i a , 1984, p.1). De G r a z i a (1984) i n d i c a t e s that tax e v a s i v e p r i v a t e e n t e r p r i s e s are as much a p a r t of the i n f o r m a l s e c t o r i n s o c i a l i s t economies as Western c a p i t a l i s t economies. But other forms of i l l e g a l a c t i v i t i e s e x i s t as w e l l , are h i g h l y v a r i e d "and appear to be l i m i t e d only by human i n g e n u i t y " (Grossman, 1982, p.248). These a c t i v i t i e s i n c l u d e : 1. M o o n l i g h t i n g from r e g u l a r jobs, t y p i c a l l y f o r household r e p a i r and b u i l d i n g s e r v i c e s (Mattera, 1985; De G r a z i a , 1984; 96 Grossmann, 1982). 2. Small s c a l e p r o d u c t i o n of garments, footwear, Vodka e t c . u s u a l l y w i t h i n l e g a l premises eg. behind the facade of a c o l l e c t i v e farm (Mattera, 1985; Grossman, 1982). 3. Sale of. smuggled goods, eg. blue jeans. 4. S t e a l i n g on the job, eg. black market s a l e by t r u c k d r i v e r s of f r i e g h t i n t h e i r custody (Grossman, 1982). 5. S t e a l i n g from the s t a t e , eg. d i v e r s i o n of f i n i s h e d goods (Grossman, 1982). 6. Other forms of c o l l e c t i n g undeclared income, eg. b r i b e s . 7. C r i m i n a l a c t i v i t i e s such as n a r c o t i c s a l e s and p r o s t i t u t i o n (Mattera, 1985; Grossman, 1982). On the l e g a l s i d e the use of government s t a l l s f o r the p r i v a t e s a l e of f r u i t s and v e getables seems to be one of the most common i n f o r m a l a c t i v i t y i n the U.S.S.R. (Grossman, 1982; Gormsen et a l , 1977) as w e l l as i n China (Ping Yu, 1984). The p r i c e s f o r the s a l e of these goods are higher than i n the s t a t e c o n t r o l l e d economy* but s u b j e c t to a c e i l i n g on p r o f i t s imposed by the s t a t e (Gormsen, 1977). Acc o r d i n g to Grossman (1982), the government permits some p r i v a t e a c t i v i t y i n c e r t a i n p r o f e s s i o n s such as p h y s i c i a n s , d e n t i s t s , t e a c h e r s , t u t o r s , and i n a few c r a f t s and t r a d e s . But Grossman (1982) emphasises t h a t even i n the l e g a l s i d e of p r i v a t e a c t i v i t y , i l l e g a l t r a n s a c t i o n s do take p l a c e . He c i t e s examples of ' s t e a l i n g on the j o b ' , b r i b e s , u s i n g s t a t e r e s o u r c e s f o r p r i v a t e e n t e r p r i s e s e t c . . I t appears from these s t u d i e s that reasons f o r the e x i s t e n c e of p r i v a t e e n t e r p r i s e s i n the s o c i a l i s t economies 97 i n c l u d e , tax e v a s i o n , making e x t r a money, and meeting shortages i n consumer goods. The i l l e g a l i n f o r m a l s e c t o r appears to be the haven f o r prosperous e n t r p r e n e u r s . T h i s seems l o g i c a l f o r the r i s k s of i l l e g a l ventures are too h i g h f o r the poorer i n d i v i d u a l . "the i l l e g a l s i d e of the S o v i e t second economy adds c o n s i d e r a b l y to the consumers w e l l being, both by enhancing the flow of goods and s e r v i c e s a v a i l a b l e to him, q u a l i t a t i v e l y as much as q u a n t i t a t i v e l y , a n d p r o v i d e s him with e x t r a income" (Grossman, 1982, p.259). Most s c h o l a r s tend to d e s c r i b e a dynamic i n f o r m a l s e c t o r f o r i n s t a n c e ; "A new type of entreprenuer has appeared, formed by s o c i a l i s m and cut o f f from the o l d b u s i n e s s t r a d i t i o n . He i s g e n e r a l l y very a b l e and i n n o v a t i v e . . . d e s i r i n g quick and l a r g e p r o f i t s , he i s more market than p r o d u c t i o n o r i e n t e d " (Aslund, 1985, p.209). However, not a l l the p r i v a t e e n t e r p r i s e s are properous. In China and Poland poverty can be r e l a t e d to the i n f o r m a l s e c t o r (Aslund, 1985; C a i , 1980). By c o n t r a s t , Aslund s t a t e s that the p r i v a t e e n t e r p r i s e r i n East Germany i s " o l d , c o n s e r v a t i v e , and f a i r l y law abiding...he has not been transformed by s o c i a l i s m but i s a remnant of the o l d s o c i e t y " (Aslund, 1985, p.169). In c o n c l u d i n g t h i s s e c t i o n i t can be s a i d t h a t while the i n f o r m a l s e c t o r i n Western economies was g e n e r a l l y viewed n e g a t i v e l y due to tax e v a s i o n , there i s q u i t e the opposite response f o r the s o c i a l i s t economies. Consider t h i s remark: "By permanently f i l l i n g i n the gaps l e f t by the 98 r e g u l a r economic i n s t i t u t i o n s , the second economy becomes an i n s t i t u t i o n i t s e l f and probably even serves as a p o l i t i c a l s t a b i l i s e r . Rather than being a s u b v e r s i v e f o r c e , i t may be the t h i n g that keeps the ' s o c i a l i s t ' system from c o l l a p s i n g " (Mattera, 1985, p.121 ) . 5. A COMPARISION OF THE INFORMAL SECTOR IN THE THREE DOMINANT  ECONOMIES From the review of the i n f o r m a l s e c t o r i n the T h i r d World, Western c a p i t a l i s t c o u n t r i e s and c e n t r a l l y planned s o c i a l i s t c o u n t r i e s , i t may appear that the phenomenon i s d i f f e r e n t i n the three c o n t e x t s . On c l o s e r s c r u t i n y however, one can f i n d many commonalities. F i r s t l y , a comparision can be made of the d e f i n i t i o n s and  d e s c r i p t i o n s of the i n f o r m a l s e c t o r . In the case of the T h i r d World, the d e f i n i t i o n of the i n f o r m a l s e c t o r v a r i e d from s e l f -employment (hawkers, vendors), the low wage s e c t o r ( c a s u a l h i r e d h e l p ) , s m a l l e n t e r p r i s e s that are low or w e l l paying in p r o f i t s (food s t a l l s , s m a l l manufacturing u n i t s ) to c r i m i n a l a c t i v i t i e s (drug p e d d l i n g , b l a c k marketing). These a c t i v i t i e s are a form of employment and income but can be tax e v a s i v e i f they are unreported or i l l e g a l . Compare t h i s l i s t to the a c t i v i t i e s i n Western c a p i t a l i s t and s o c i a l i s t c o u n t r i e s . In these n a t i o n s the i n f o r m a l s e c t o r i s a l s o a means to a c q u i r e undeclared income and evade taxes. However, w h i l e t h i s aspect may be emphasised i n the l i t e r a t u r e , the nature of the a c t i v i t y i s not very d i f f e r e n t from that of 99 the T h i r d World. Most a c t i v i t i e s whether these are vendors i n China ( C a i , 1980), or b a b y s i t t e r s i n U.S.A. (Simon and Witte, 1982) or the b a r t e r of p r o f e s s i o n a l s e r v i c e s (De G r a z i a , 1984), are forms of s e l f employment. While most may be w e l l paying a c t i v i t i e s , i t does not exclude low paying a c t i v i t i e s such as the income earned i l l e g a l l y from house c l e a n i n g , baby s i t t i n g , gardening e t c . In China and the U.S.S.R, i t was i n d i c a t e d that i l l e g a l small manufacturing u n i t s are p r e v a l e n t , o f t e n using the s t a t e r e s o u r c e s (Mattera, 1985; Grossman, 1982). C r i m i n a l a c t i v i t i e s , such as p r o s t i t u t i o n , and smuggling were present i n these economies as w e l l ( T a n z i , 1982; Bawly, 1982). In f a c t , smuggling of f o r e i g n goods i s an important p a r t of the in f o r m a l s e c t o r i n s o c i a l i s t economies (Grossman, 1982) as w e l l as the T h i r d World. Con v e r s e l y , i t appears that because the sm a l l e n t e r p r i s e s , and self-employment are so w e l l s t u d i e d i n the T h i r d World that the tax evasion aspect of the i n f o r m a l s e c t o r may not have been as thoroughly examined. In the case of I n d i a , tax evasion by black marketing i s very l a r g e and even though economists have s t u d i e d i t f o r a long time i t has onl y e n t e r e d the in f o r m a l s e c t o r debate r e c e n t l y (Mattera, 1985; Kabra, 1982; Ray, 1981; Wisser, 1981). "The combination of under-reported r e g u l a r income and bla c k market p r o f i t s has reached so h i g h a l e v e l that the London economists has d e c l a r e d t h a t I n d i a i s awash with 'black money'" (Mattera, 1985. p.107). Mattera (1985) and C a b a l l e r o (1982) a l s o d i s c u s s tax 1 00 e v a s i v e a c t i v i t i e s i n Colombia, and Mattera s t a t e s that the "underground economies of Colombia and I n d i a seem to have more i n common with the off-the-books a c t i v i t i e s i n the U.S.A. and Western Europe than with the i n f o r m a l p r o d u c t i o n i n other p a r t s of the T h i r d World" (Mattera, 1985, p.9). However, speaking of I n d i a from p e r s o n a l experience, i t would be more a c c u r a t e to say that I n d i a has both the a l a r g e black market as w e l l as a l a r g e low p r o f i t i n f o r m a l s e c t o r , both of which evade taxe s . While the experience of I n d i a or Colombia cannot be used as i n d i c a t o r s of tax evasion i n other T h i r d World n a t i o n s , t h i s cannot be r u l e d out e i t h e r , pending e m p i r i c a l work. What the s t u d i e s on I n d i a and Colombia do i n d i c a t e i s that tax e v a s i v e i n f o r m a l e c t i v i t i e s are not e x c l u s i v e to the Western c a p i t a l i s t or s o c i a l i s t n a t i o n s . S i m i l a r l y , because not many s t u d i e s i n the Western world have c o n c e n t r a t e d on the p e t t y a c t i v i t i e s such as baby s i t t i n g or empty b o t t l e c o l l e c t i o n , i t would not be f a i r to draw c o n c l u s i o n s on the p r o p o r t i o n of such a c t i v i t i e s w i t h i n the i n f o r m a l s e c t o r . These a c t i v i t i e s may be small i n the amount of money t r a n s f e r r e d but l a r g e i n the numbers employed. There i s l i t t l e s t a t i s t i c a l evidence. What the comparision of the type and s i z e of the i n f o r m a l s e c t o r s i n d i c a t e s i s that c e r t a i n types of i n f o r m a l a c t i v i t i e s appear to predominate over other forms i n p a r t i c u l a r n a t i o n s , and types of economy. The second p a r t of the comparison i s based on the form of  t r a n s a c t i o n used i n the i n f o r m a l s e c t o r . The c h o i c e i s between the b a r t e r of goods and s e r v i c e s or money t r a n s f e r . I t appears 101 from the review of the three dominant economies that d i r e c t money t r a n s f e r may be more important i n the T h i r d World and s o c i a l i s t economies while b a r t e r may be a important aspect of the i n f o r m a l s e c t o r i n the Western n a t i o n s (De G r a z i a , 1984; Bawly, 1982.; T a n z i , 1982). Again, t h i s c o n c e p t i o n may simply be the r e s u l t of the c u r r e n t focus of the s t u d i e s i n these n a t i o n s . E s t i m a t i o n of tax evasion by the use of b a r t e r may be important i n terms of the t o t a l money i n v o l v e d but number of persons i n the i n f o r m a l s e c t o r who d i r e c t l y t r a n f e r money may a l s o be l a r g e , but t h i s has not been s t u d i e d . The bottom l i n e i n such s t u d i e s i s how much does i t c o s t the government. T h i s i s not a f a i r r e p r e s e n t a t i o n of the i n f o r m a l s e c t o r i n Western n a t i o n s because al t h o u g h other forms of a c t i v i t i e s are re c o g n i s e d they are l e s s i n v e s t i g a t e d . On the other hand, i t would a l s o be u n f a i r to say that b a r t e r i s unimportant to the i n f o r m a l s e c t o r i n T h i r d World. C e r t a i n l y i n I n d i a the black market i n v o l v e s b a r t e r t r a n s a c t i o n i n v o l v i n g l a r g e amounts of money f o r tax evasion purposes (Mattera, 1985; Kabra, 1982). But the r e i s another l e v e l of b a r t e r that i s not apparent i n the l i t e r a t u r e , perhaps because the money value i s l e s s s i g n i f i c a n t . In I n d i a , f o r example, constant b a r t e r between those employed i n the i n f o r m a l s e c t o r and the upper income groups e x i s t s u s u a l l y i n v o l v i n g the trade of s e r v i c e f o r food. For i n s t a n c e , the laundry-man w i l l i r o n garments f o r a c l i e n t i n exchange f o r a meal or a r a t i o n of r i c e f o r h i s f a m i l y . Hawkers of new s t a i n l e s s s t e e l u t e n s i l s come f r e q u e n t l y t o the doors of the w e l l - t o - d o to b a r t e r t h e i r wares 1 02 f o r o l d c l o t h e s , which they r e s e l l to the poor. One can i n f e r from these comparisons, that i r r e s p e c t i v e of the nature of the t r a n s a c t i o n , the i n f o r m a l s e c t o r a c t i v i t i e s are mostly i l l e g a l i n a l l three types of economies (Mattera, 1985; Grossman 1982; Simon and W i t t e , 1982; Sethuraman, 1981). T h i s i n c l u d e s the c r i m i n a l as w e l l as the n o n - c r i m i n a l a c t i v i t i e s . The t h i r d p a r t of the comparison d e a l s with the reasons why  the i n f o r m a l s e c t o r forms i n the three very d i s t i n c t l y d i f f e r e n t  types of economies. In the T h i r d World the e x i s t e n c e of the i n f o r m a l s e c t o r has been c l o s e l y t i e d t o poverty and unemployment, i . e . underdevelopment. Four approaches were reviewed e a r l i e r , the e v o l u t i o n i s t , the f u n c t i o n a l i s t , by d e f a u l t , and p r o l e t a r i a n i z a t i o n (Kahn, 1980). E s s e n t i a l l y , these approaches have e x p l a i n e d the c o n d i t i o n s i n the T h i r d World t h a t n e c e s s i t a t e the i n f o r m a l s e c t o r . These approaches, by and l a r g e , cannot be t r a n s f e r r e d to the other types of economies simply because they are not i n a s i m i l a r development p r o c e s s . There i s an obvious c o n t r a d i c t i o n here. I f the i n f o r m a l s e c t o r i s present i n other economies, why can these approaches not be t r a n f e r r e d u n l e s s perhaps i t i s because they are unsound i n which case there i s e i t h e r a case f o r modifying the approaches or f i n d i n g a new one. Of the four approaches, perhaps o n l y the 'by d e f a u l t ' approach can be s t r e t c h e d to cover the presence of the i n f o r m a l s e c t o r i n the other economic systems. Under the 'by d e f a u l t ' approach, .the i n f o r m a l s e c t o r i s c r e a t e d i n areas that the 103 dominant c a p i t a l i s t mode f i n d s u n p r o f i t a b l e or high r i s k (Kahn, 1980; Roberts, 1978). I f the 'dominant c a p i t a l i s t mode' i s changed to 'any dominant mode' then the concept may apply. In any case, i t i s d i f f i c u l t t o view the i n f o r m a l s e c t o r as a symptom of underdevelopment. "the IFS i s a symptom of underdevelopment i s a l s o exposed by ob s e r v i n g how w e l l i t t h r i v e s i n h i g h l y developed c o u n t r i e s " (Richardson, 1984, p.4). In the case of the s o c i a l i s t economies one of the reasons c i t e d f o r the c r e a t i o n of the i n f o r m a l s e c t o r i s meeting shortages of goods and s e r v i c e s (Grossman, 1982). In the Western n a t i o n s , although the shortages are l e s s i d e n t i f i a b l e , i t has been suggested by some s c h o l a r s that the i n f o r m a l s e c t o r has evolved as a r e s u l t of the inadequate p r o v i s i o n of s e r v i c e s by the s t a t e , and t h i s i n c l u d e s even p e t t y s e r v i c e s such as baby s i t t i n g (Gershuny, 1985; Pahl and Wallace, 1985). The shortages of goods i s l e s s s t u d i e d but smuggling of drugs would f i t i n t o t h i s category (Mattera 1985; Bawly, 1982). However, the t r a n s f e r of the 'by d e f a u l t ' approach i s p u r e l y s p e c u l a t i v e at t h i s p o i n t and c e r t a i n l y needs more r e s e a r c h . Apart from t h i s there are no other c o r r e l a t i o n s apparent, p a r t l y because the reasons f o r the inf o r m a l s e c t o r i n the Western c a p i t a l i s t and the s o c i a l i s t c o u n t r i e s have not been c l o s e l y examined and no coherent approaches have as yet been formed. The f o u r t h p a r t of the comparison i s why the c o n d i t i o n s  t h a t c r e a t e the i n f o r m a l s e c t o r e x i s t i n the three types of 1 04 economies. In the case of the T h i r d World the presence of s u r p l u s labour and poverty are two c a u s a l f a c t o r s (Sabot, 1977; Bose, 1977; Mookerjee, 1975), while i n the other two economies, d e p r e s s i n g wage l e v e l s 1 4 (Rogerson, 1985), burden of t a x a t i o n (Simon and Witte, 1982), and meeting shortages (Grossman, 1982) are some of the reasons c i t e d . I t appears, however, that while some reasons may dominate i n a p a r t i c u l a r economy other reasons may e x i s t as w e l l . D e p ressing wage l e v e l s f o r i n s t a n c e , a source f o r the c r e a t i o n of the i n f o r m a l s e c t o r i n western n a t i o n s may a l s o account f o r the 'modern' and t h r i v i n g i n f o r m a l s e c t o r a c t i v i t i e s (Demol and Nihan, 1982; House, 1978; Nihan et a l , 1977; King, 1974)) i n the T h i r d World. The burden of t a x a t i o n may s i m i l a r l y have l e d to the black markets i n India because the burden of t a x a t i o n i s g r e a t e r on a poor p o p u l a t i o n (Kabra, 1982; Ray, 1981). S i m i l a r l y , poverty and s u r p l u s labour are not exempt i n the c r e a t i o n of the i n f o r m a l s e c t o r i n Western c a p i t a l i s t and s o c i a l i s t economies. Poverty i s a r e l a t i v e term and to say that the poor u s u a l l y p a r t i c i p a t e i n the i n f o r m a l s e c t o r should mean tha t people at the lower end of the income s c a l e p a r t i c i p a t e . How low t h i s p o i n t i s , d e c i d e s perhaps how desperate the need f o r employment i n i n f o r m a l s e c t o r may be. In the case of the T h i r d World i t i s a matter of s u r v i v a l but i t appears t h a t i n other economic systems, i n f o r m a l a c t i v i t i e s such as mo o n l i g h t i n g are p r i m a r i l y a means of augmenting income. 1 4 Depressing wage l e v e l s r e f e r s to the d e c l i n i n g v alue of f i x e d incomes as a r e s u l t of i n f l a t i o n 105 The aspect of s u r p l u s labour i n the c r e a t i o n of the in f o r m a l s e c t o r i s a l s o present i n the Western c a p i t a l i s t and s o c i a l i s t n a t i o n s . For example, i n China migrants from r u r a l areas were encouraged to ent e r the in f o r m a l s e c t o r so that t h i s s e c t o r would develop i n a planned manner (Ping Yu, 1984). In I t a l y , s u r p l u s labour has c o n t r i b u t e d to the labour f o r c e i n the hidden economy (Del Boca and F o r t e , 1982). While d i s c u s s i n g the use of labour i t should be mentioned that i t i s not only the use of s u r p l u s labour t h a t i s at is s u e here, but a l s o i t s e x p l o i t a t i o n . When labour i s s u r p l u s i n a n a t i o n , i t o f t e n c o i n c i d e s with the labour t h a t i s e x p l o i t e d . But t h i s does not mean that labour i s not e x p l o i t e d i n other n a t i o n s . The use of i l l e g a l immigrants i s a p a r t of the i n f o r m a l s e c t o r i n Western n a t i o n s and e x p l o i t a t i o n of t h i s labour f o r c e e x i s t s i n U.S.A, eg. i l l e g a l immigrants from Mexico (Simon and Wit t e , 1982) as w e l l i n S w i t z e r l a n d , France, Belgium, West Germany and other Eupropean n a t i o n s (De G r a z i a , 1984). Often the immigrants are brought i n to be e x p l o i t e d . In S w i t z e r l a n d , De G r a z i a (1984, p.16) s t a t e s that the problem i s very s e r i o u s and " v a r i o u s e s t i m a t e s put the number of i l l e g a l r e s i d e n t s at between 25,000 to 100,000. Banerjee (1984) s t a t e s , however, that t h e r e i s l i t t l e e x p l o i t a t i o n of labour i n the s o c i a l i s t economies. However having s a i d throughout t h i s s e c t i o n that there are many s i m i l a r i t i e s , i t should be a l s o s a i d t h at there are many d i f f e r e n c e s which are p r o p o r t i o n a l rather than a b s o l u t e . For i n s t a n c e , i n the T h i r d World the in f o r m a l s e c t o r i s i n most cases i t s p a r t i c i p a n t s o n l y source of income, whereas i n the 1 06 F i g u r e 5 - S i m p l i s t i c r e p r e s e n t a t i o n of the major means and motives of the i n f o r m a l s e c t o r i n dominant economic systems TYPE MOTIVE FOR PARTICIPATION IN PETTY CAPITALISM MEANS USED TO ACHIEVE MOTIVE OF ECONOMY DECREASE COSTS INCREASE PROFITS EMPLOYMENT OR SURVIVAL TAX EVASION SALE OF GOODS AND SERVICES WESTERN CAPITALISM XXX XX X XX XX SOCIALIST X XX X X XX THIRD WORLD X XX XXX XX XX < X-XXX: LEAST T 0 MOST COMMON Western c a p i t a l i s t n a t i o n s , the i n f o r m a l s e c t o r u s u a l l y supplements income from other s o u r c e s . Thus, the labour f o r c e i n the T h i r d World i s o f t e n compelled to work i n the i n f o r m a l s e c t o r , while i n the other n a t i o n s i t i s a matter of c h o i c e . In the T h i r d World and the s o c i a l i s t economies there appears to be a g r e a t e r number of a c t i v i t i e s i n the p r o d u c t i o n and d i s t r i b u t i o n of goods than i n the p r o v i s i o n s e r v i c e s . Perhaps t h i s i s , i n some way, the r e s u l t of shortages of goods from the formal s e c t o r . But i n the Western c a p i t a l i s t economies, the p r o v i s i o n of s e r v i c e s i s dominant i n the in f o r m a l s e c t o r perhaps because, the consumer market i s s a t u r a t e d or s e r v i c e s are more e a s i l y b a r t e r e d , and even i f money i s exchanged cash i s used and ther e i s no t a n g i b l e evidence. Thus, tax evasion i s easy. I t 107 appears that t h e r e i s a g r e a t e r use of t e c h n i c a l and p r o f e s s i o n a l s k i l l s i n the Western n a t i o n s , perhaps because b a r t e r of these s e r v i c e s can be used to evade taxes i n a s i g n i f i c a n t way. These d i f f e r e n c e s , which appear to be more p r o p o r t i o n a l than a b s o l u t e , occur because of the d i f f e r e n c e s i n the motives and means of the i n f o r m a l s e c t o r i n the three dominant economies. T h i s i s r e p r e s e n t e d i n a simple way i n f i g u r e 5. T h i s comparision i s ad m i t t e d l y g e n e r a l , but i t does show that most types of i n f o r m a l s e c t o r a c t i v i t i e s are found i n a l l three types of economies, although i n v a r y i n g p r o p o r t i o n s . I t a l s o suggests that t h i s c o u l d be the b a s i s f o r a re-examination of the f a c t o r s t h a t c r e a t e the i n f o r m a l s e c t o r . Perhaps the commonalties as w e l l as the d i f f e r e n c e s i n the p r o p o r t i o n a l d i s t r i b u t i o n of i n f o r m a l s e c t o r a c t i v i t i e s has a common e x p l a n a t i o n . The f o l l o w i n g c hapter proposes an a l t e r n a t i v e a n a l y s i s on the urban i n f o r m a l s e c t o r t a k i n g i n t o account the debate thus f a r . 108 CHAPTER 4: AN ALTERNATIVE ANALYSIS OF THE INFORMAL SECTOR "Hawkers and vendors have not disappeared from the s t r e e t s of London, New York, and P a r i s . I f t h i s i s not i n some sense the same t h i n g as what i s being c a l l e d the i n f o r m a l s e c t o r i n Bogota and Hongkong, one would l i k e to know why not" ( P e a t t i e , 1984 p.179)" T h i s chapter i s i n p u r s u i t of an answer to t h i s dilemma. The study on the urban i n f o r m a l s e c t o r has expanded so much i n recent years that i t i n c l u d e s a wide range of a c t i v i t i e s i n d i f f e r e n t economic systems and, t h e r e f o r e , c e r t a i n q u e s t i o n s a r i s e . How i s the i n f o r m a l s e c t o r to be d e f i n e d , s i n c e i t e x i s t s not only i n the T h i r d World but a l s o with c o n s i d e r a b l e s i m i l a r i t y i n the s o c i a l i s t and Western c a p i t a l i s t c o u n t r i e s ? More c r i t i c a l than t h a t , how does the i n f o r m a l s e c t o r form i n the three q u i t e d i f f e r e n t economic systems? O b v i o u s l y , i f a common e x p l a n a t i o n i s to be found, i t must be capable of e x p l a i n i n g the commonalities and the d i f f e r e n c e s . T h i s chapter proposes an a l t e r n a t i v e e x p l a n a t o r y a n a l y s i s of the i n f o r m a l s e c t o r . The argument i s based on the c u r r e n t s t a t e of knowledge, much of which i s e m p i r i c a l l y d e r i v e d , by a l i t e r a t u r e review. But, i t has not been p o s s i b l e to undertake f i e l d survey s p e c i f i c a l l y to t e s t the a l t e r n a t i v e a n a l y s i s . T h i s chapter i s d i v i d e d i n t o two p a r t s . The f i r s t c o n t a i n s the arguments of the a l t e r n a t i v e a n a l y s i s . In the second, t h i s argument i s used to e x p l a i n the s i m i l a r i t i e s and d i f f e r e n c e s i n the i n f o r m a l s e c t o r T h i r d World, s o c i a l i s t n a t i o n s and Western c a p i t a l i s t n a t i o n s d e s c r i b e d i n chapter f o u r . 109 1. AN ALTERNATIVE ANALYSIS: THE DEMAND AND SUPPLY FOR PETTY  CAPITALISM 1.1 D e f i n i t i o n The problem wi t h d e f i n i t i o n of the i n f o r m a l s e c t o r i s that there are too many of them (Rogerson, 1985; Richardson, 1984; Moser, 1978). Most of these adequately d e f i n e the phenomenon i n a p a r t i c u l a r c i r c u m s t a n c e , or at a p a r t i c u l a r p l a c e . While one cannot be c r i t i c a l of these d e f i n i t i o n s per se, i t i s a l s o d i f f i c u l t to comprehend how one phenomenon can be d e f i n e d i n so many d i f f e r e n t ways. In the l i s t below i t can be seen that e x c e p t i o n s can be found f o r some of the c r i t e r i a s e l e c t e d f o r the d e f i n i t i o n of the i n f o r m a l s e c t o r : 1. The i n f o r m a l s e c t o r has been d e f i n e d as a t r a d i t i o n a l s e c t o r u s i n g a low l e v e l of technology and s k i l l i n the T h i r d World and s o c i a l i s t economies (Aslund, 1985; I.L.O., 1972), but a 'modern 1, t h r i v i n g i n f o r m a l s e c t o r a l s o e x i s t s i n a l l three economic systems (Grossman, 1982; T a n z i , 1982; S t e e l , 1977; Nihan et a l , 1 977) . 2. The i n f o r m a l s e c t o r has been d e f i n e d as a low paying, employment g e n e r a t i n g s e c t o r i n the T h i r d World, but a w e l l paying, p r o f i t making s e c t o r a l s o e x i s t s i n a l l three types of economies (Richardson, 1984; Aryee, 1977; B e i n e f i e l d , 1975). 3. The i n f o r m a l s e c t o r has been d e f i n e d as self-employment (Hart, 1973), as w e l l as small e n t e r p r i s e s using f a m i l y or wage labour (Sethuraman, 1976). 4. The i n f o r m a l s e c t o r has sometimes been conceived as a 110 refuge f o r the poor and the unemployed (Moser, 1978; Friedmann and S u l l i v a n , 1972) but a l s o found to be a p r e f e r r e d employment in a l l three economic systems (Mazumdar, 1981; Moir, 1978; Fowler, 1978). 5. The i n f o r m a l s e c t o r has at times been found r e l a t e d to r u r a l - u r b a n m i g r a t i o n , s u r p l u s labour and at other times to have no such c o r r e l a t i o n (Richardson, 1984; Das, 1978; McGee, 1977; Sethuraman, 1976). In f a c t , the i n f o r m a l s e c t o r has been d e f i n e d i n so many ways that i t appears to be composed of a h i g h l y heterogenous group of people, and a c t i v i t i e s . I f an all-encompassing d e f i n i t i o n i s to be found then i t must d i r e c t l y or i n d i r e c t l y p r o v i d e an e x p l a n a t i o n f o r t h i s d i v e r s i t y and y e t a r r i v e at some boundary to d i s t i n g u i s h between the two s e c t o r s . In t h i s regard, the work of P o l y a n i (1968) i s important. R e f e r r i n g to the problems of d e f i n i n g boundaries i n s o c i a l systems he has s t a t e d that the boundary should not be c o n c e i v e d of as an e n v e l o p i n g membrane which d e f i n e s some s o r t of p h y s i c a l l i m i t to the system. Instead, the system boundary should be i d e n t i f i e d by the concept of c o n t r o l l i n g paradigm. I t i s perhaps b e t t e r to use t h i s view i n the search f o r a d e f i n i t i o n here, because f i n d i n g a p r e c i s e boundary between the i n f o r m a l and formal s e c t o r has been a problem s i n c e the beginning of the debate. In order to p r o v i d e a d e f i n i t i o n , the approach i n t h i s r e s e a r c h i s to i d e n t i f y the more s t a b l e c h a r a c t e r i s t i c s of the i n f o r m a l s e c t o r . A f t e r reviewing the d e f i n i t i o n s p r o v i d e d over the l a s t twenty y e a r s , some of the more s t a b l e or dominant 111 c h a r a c t e r i s t i c s a r e : F i r s t l y , i t appears that i n a l l three economic systems the in f o r m a l s e c t o r has been p o r t r a y e d to i n c l u d e a c t i v i t y t h a t i s mostly s m a l l i n terms of numbers engaged i n the a c t i v i t y . For i n s t a n c e , hawkers i n T h i r d World c i t i e s (McGee and Yeung, 1977), b a r t e r of p r o f e s s i o n a l s e r v i c e s i n the Western c a p i t a l i s t economies (Simon and Wit t e , 1982; T a n z i , 1982) or moonlighting of r e p a i r s e r v i c e s i n s o c i a l i s t n a t i o n s (Mattera, 1985; Grossman, 1982) are a l l s m a l l - s c a l e o p e r a t i o n s . However, the o r g a n i s a t i o n of these s m a l l - s c a l e o p e r a t i o n s , i n some cases, may be much l a r g e r such as i n sub- c o n t r a c t e d work. The s i z e of the a c t i v i t y alone i s not s u f f i c i e n t to d i s t i n g u i s h the i n f o r m a l from the formal s e c t o r because the l a t t e r has smal l s c a l e a c t i v i t y as w e l l . Secondly, a c t i v i t i e s i n the i n f o r m a l s e c t o r , can be d i s t i n g u i s h e d from t h e i r formal s e c t o r c o u n t e r p a r t s by the lower c a p i t a l input i n t o the i n f o r m a l a c t i v i t i e s a lthough p r o f i t s may be l a r g e . C a p i t a l i n p u t appears to be r e l a t i v e l y small due t o : 1. A l a c k of c a p i t a l , as i s the case f o r the poor i n the T h i r d World. 2. By c h o i c e , when the a c t i v i t y i s temporary and g r e a t e r c a p i t a l input would be u n p r o f i t a b l e , (eg. hawkers s e l l i n g seasonal produce). 3. By c h o i c e , when the a c t i v i t y i s i l l e g a l . T h i s e x i s t s i n the three types of economies because smal l e n t e r p r i s e s are e a s i e r to org a n i s e and d i s g u i s e from d e t e c t i o n (eg. small r e p a i r s t a l l s i n s o c i a l i s t c o u n t r i e s ) . There are some exce p t i o n s i n t h i s 1 1 2 c a t e g o r y . I l l e g a l drug p e d d l i n g , f o r i n s t a n c e , has a h i g h c a p i t a l input i n t o the a c t i v i t y . T h i r d l y , i t appears that i n f o r m a l s e c t o r a c t i v i t i e s can be d i s t i n g u i s e d from the formal s e c t o r a c t i v i t i e s by the degree of l e g a l p r o t e c t i o n r e c e i v e d and the degree of government r e g u l a t i o n f o l l o w e d . Informal a c t i v i t i e s o f t e n v i o l a t e the m u n i c i p a l , p r o v i n c i a l or f e d e r a l r u l e s and r e g u l a t i o n s governing economic a c t i v i t y . These i n c l u d e q u a l i t y and q u a n t i t y c o n t r o l of the merchandise s o l d , the enforcement of proper working c o n d i t i o n s and the enforcement of a p p r o p r i a t e payment to labour by minimum wage l e v e l s , and overtime pay. But, by the same token, p a r t i c i p a n t s i n i n f o r m a l a c t i v i t i e s are unable to take l e g a l recourse i n cases of d i s p u t e over a p p r o p r i a t e pay to labour or q u a l i t y of goods. In some T h i r d World n a t i o n s i n f o r m a l a c t i v i t y i s o f t e n l i c e n s e d by the government but i n such i n s t a n c e s , l i c e n s i n g i s merely a permit to work, there are few other b e n e f i t s . Thus, i t can be seen by the above d i s c u s s i o n that most of the c h a r a c t e r i s t i c s p r e v i o u s l y a t t r i b u t e d to the i n f o r m a l s e c t o r , such as the l e v e l of technology used, the l e v e l of p r o f i t s gained, the s c a l e of o p e r a t i o n , type of labour used and so on, are s u b j e c t to a great many v a r i a t i o n s . Some c h a r a c t e r i s t i c s , on the other hand, such as the small s c a l e of a c t i v i t y , and the small c a p i t a l input i n t o the i n f o r m a l a c t i v i t y are more common but e x c e p t i o n s a l s o e x i s t . Furthermore, these very same c h a r a c t e r i s t i c s , t h at are e i t h e r h i g h l y v a r i a b l e or more s t a b l e i n p e t t y c a p i t a l i s m , are a l s o present i n the formal 113 s e c t o r a c t i v i t i e s . T h i s makes i t d i f f i c u l t to use the c h a r a c t e r i s t i c s to a r r i v e at an exact boundary. I t appears, t h e r e f o r e , that the a c t i v i t i e s i n the urban economy are on a continuum ranging i n s c a l e from l a r g e to s m a l l , from h i g h p r o f i t to low, us i n g a hig h l e v e l of technology to low, c r e a t i n g what Dunn (1971) c a l l s 'nested h i e r a r c h i e s ' . T h i s makes i t d i f f i c u l t to i d e n t i f y a p r e c i s e boundary between the two s e c t o r s . However, as Dunn (1971, pp 191) s t a t e s , "systems do not always form a simple formal h i e r a r c h y but commonly o v e r l a p i n many ways to form e x c e e d i n g l y complex f u n c t i o n a l p a t t e r n s " . However, what does d i s t i n g u i s h the in f o r m a l from the formal s e c t o r , and t h i s i s perhaps the c o n t r o l l i n g paradigm d e s c r i b e d by P o l y a n i (1968), i s the la c k of r e g u l a t i o n of the i n f o r m a l a c t i v i t y by the government, and the lack of l e g a l recourse f o r d i s p u t e s over labour and working c o n d i t i o n s or q u a l i t y of goods and s e r v i c e s i n the i n f o r m a l s e c t o r . The more common c h a r a c t e r i s t i c s of the in f o r m a l s e c t o r a c t i v i t i e s such as the s c a l e of o p e r a t i o n , may not be e x c l u s i v e to the i n f o r m a l s e c t o r but because they are r e l a t i v e l y more common these can be used to d e f i n e the a c t i v i t i e s i n the s e c t o r . S i m i l a r l y c e r t a i n c h a r a c t e r i s t i c s are more common to the formal s e c t o r a c t i v i t i e s such as the use of high technology or l a r g e r p r o f i t s . As a r e s u l t of t h i s , there i s l i k e l y to be a continuum of a c t i v i t i e s where at one end l i e the formal s e c t o r a c t i v i t i e s , at the other end the i n f o r m a l s e c t o r a c t i v i t i e s more e a s i l y i d e n t i f i a b l e by the dominant c h a r a c t e r i s t i c s , and i n between an in t e r m e d i a t e zone where the a c t i v i t i e s cannot be e a s i l y 1 1 4 i d e n t i f i e d as formal or i n f o r m a l except by the degree of government r e g u l a t i o n s f o l l o w e d and the l e g a l recourse a v a i l a b l e to those i n v o l v e d i n the a c t i v i t y . An example of t h i s s i t u a t i o n i s the "family-owned corner s t o r e s " i n Vancouver. While the s c a l e of o p e r a t i o n may be small and use of f a m i l y labour common, resembling an i n f o r m a l s e c t o r a c t i v i t y , these s t o r e s are a c t u a l l y a p a r t of the formal s e c t o r because they abide by m u n i c i p a l , p r o v i n c i a l and f e d e r a l laws with r e s p e c t to q u a l i t y c o n t r o l of goods, maintenance of t r a n s a c t i o n records f o r t a x a t i o n purposes e t c . Furthermore, i f h i r e d labour had been used i t would be p r o t e c t e d by the minimum wage laws. In the i n f o r m a l s e c t o r , a s i m i l a r small s c a l e o p e r a t i o n u s i n g f a m i l y labour such as the "dhabas" or tea s t a l l s i n I n d i a , would n e i t h e r abide by government r e g u l a t i o n nor be p r o t e c t e d by the l e g a l system. In the a l t e r n a t i v e a n a l y s i s , t h e r e f o r e , a r e d e f i n i t i o n of the i n f o r m a l s e c t o r i s proposed, keeping i n mind that the f e a t u r e s i d e n t i f i e d are not e x c l u s i v e to the in f o r m a l s e c t o r , but are the common f e a t u r e s , and t h a t the boundary i s a t h i n one based on government r e g u l a t i o n and l e g a l p r o t e c t i o n of the a c t i v i t y . To begin with the i n f o r m a l s e c t o r i s r e d e f i n e d as the p e t t y c a p i t a l i s t s e c t o r not because p e t t y c a p i t a l i s m i s e x c l u s i v e to the s e c t o r ( i n f a c t formal s e c t o r a c t i v i t i e s can a l s o be p e t t y c a p i t a l i s t ) but because a c t i v i t i e s i n the pe t t y c a p i t a l i s t s e c t o r are mostly sma l l s c a l e c a p i t a l i s t e n t e r p r i s e s . T h i s p e t t y c a p i t a l i s t s e c t o r can be d e s c r i b e d as: 1 1 5 Small s c a l e c a p i t a l i s t e n t e r p r i s e s , unregulated by government laws on q u a l i t y and q u a n t i t y of goods s o l d , the wages p a i d and the working c o n d i t i o n s p r o v i d e d . I t i s a subordinate market economy that c o - e x i s t s with any type of dominant market economy. 1 5 The c o - e x i s t e n c e of the two s e c t o r s i s mostly an i n t e r a c t i v e one, and t h i s i n t e r a c t i o n can sometimes be e x p l o i t a t i v e . I t i s a market form of exchange t h a t i s comparable to the dominant market e c o n o m i e s 1 6 and between which the r e l a t i o n s h i p i s s y m b i o t i c . 1 7 Both labour, c a p i t a l and r e s o u r c e s flow between the two s e c t o r s . However because the market c o n d i t i o n s i n the p e t t y c a p i t a l i s t s e c t o r i s a response to the market c o n d i t i o n s i n the dominant economy, the p e t t y c a p i t a l i s t s e c t o r i s put i n the subordinate p o s i t i o n . That i s , the subordinate s e c t o r responds to the f l u c t u a t i o n s i n the l e v e l of p r o d u c t i o n and labour f o r c e demand i n the dominant s e c t o r and t h i s makes the subordinate s e c t o r u n s t a b l e and unorganised. T r a n s a c t i o n s with c l i e n t s are i n f o r m a l l y set and i n t e r a c t i o n s are p e r s o n a l . In the balance of t h i s c h a p t e r , the term 'petty c a p i t a l i s t s e c t o r ' w i l l be used to i d e n t i f y the i n f o r m a l s e c t o r i n c o n n e c t i o n with the a l t e r n a t i v e a n a l y s i s , while the term ' i n f o r m a l s e c t o r ' w i l l be used i n c o n n e c t i o n with a l l p r e c e e d i n g work. At t h i s stage i n the p r e s e n t a t i o n of the a l t e r n a t i v e a n a l y s i s not a l l aspects of t h i s d e f i n i t i o n w i l l be c l e a r . However, as d e t a i l s of the a n a l y s i s u n f o l d , i t i s hoped that the l o g i c behind t h i s d e f i n i t i o n w i l l become apparent. But, before the d e t a i l s can be presented i t i s necessary to show how t h i s d e f i n i t i o n d i f f e r s from other d e f i n i t i o n s of the i n f o r m a l s e c t o r . 1 5 A c c o r d i n g to D. Harvey 1973, a market economy i s a system of exchange that occurs through the o p e r a t i o n of p r i c e f i x i n g markets. 1 6 In the dominant economy the p r i c e f i x i n g marketis supported by s p e c i f i c l e g a l and p o l i t i c a l i n s t i t u t i o n s , while i n the s u b o r d i n a t e economy i t i s not. 1 7 Although t h i s idea i s independently conceived, i t i s found that P o r t e s , 1978, has a p p l i e d the same term to the r e l a t i o n s h i p between the p e t t y commodity p r o d u c t i o n s e c t o r and the formal s e c t o r . 1 16 F i r s t l y , the p e t t y c a p i t a l i s t s e c t o r as d e f i n e d here, i s not the same as the i n f o r m a l s e c t o r c o n c e i v e d by the I n t e r n a t i o n a l Labour O r g a n i s a t i o n (1972), and widely supported i n the s e v e n t i e s (Popola, 1978; Konigsberger, 1976; Pendakur, 1975; Sethuraman, 1974). The l i s t of c h a r a c t e r i s t i c s presented by the I.L.O. d e s c r i b e a poor s e c t o r , that complements the formal s e c t o r but i s independent of i t and t h r i v e s i n a s e l f -s u s t a i n i n g manner. The p e t t y c a p i t a l i s t s e c t o r , on the other hand, does not imply a c o r r e l a t i o n with any p a r t i c u l a r income group. In f a c t , i n d i v i d u a l s from any income group can be employed i n or consume from the p e t t y c a p i t a l i s t s e c t o r . Thus, the a c t i v i t i e s can be p r o f i t making or low paying depending on who i s employed i n the p e t t y c a p i t a l i s t s e c t o r and what t h e i r motives f o r employment a r e . How and why they w i l l do so depends on the p r e v a i l i n g market c o n d i t i o n s . Poverty can i n f l u e n c e the market c o n d i t i o n s i n an economy and t h i s can a f f e c t the composition of a c t i v i t i e s i n the p e t t y c a p i t a l i s t s e c t o r . Furthermore, i n - c o n t r a s t to the I.L.O. approach, the a l t e r n a t i v e a n a l y s i s proposes t h a t the p e t t y c a p i t a l i s t s e c t o r complements the formal s e c t o r i n t e r a c t i v e l y r a t h e r than independantly. Secondly, the p e t t y c a p i t a l i s t s e c t o r d i f f e r s from the d e f i n i t i o n of the i n f o r m a l s e c t o r as a p r e c a p i t a l i s t , t r a d i t i o n a l , peasant-type mode of p r o d u c t i o n ( L i s t e r , 1980; McGee, 1979; B e t t l e h e i m , 1972). The l a t t e r view can be r e l a t e d to the ' e v o l u t i o n i s t ' approach to the c r e a t i o n of the i n f o r m a l s e c t o r (Kahn, 1980), i . e . the i n f o r m a l s e c t o r i s seen as a 1 1 7 t r a n s i t i o n a l f e a t u r e i n the T h i r d World development process i n an e s s e n t i a l l y one way p r o c e s s . In c o n t r a s t , i t i s argued that the p e t t y c a p i t a l i s t s e c t o r i s n o n - e v o l u t i o n a r y i n c h a r a c t e r . That i s , while i t c o - e x i s t s with the formal s e c t o r , i t w i l l not evolve i n t o the formal s e c t o r . The f l u c t u a t i o n s i n the p e t t y c a p i t a l i s t s e c t o r w i l l correspond to market c o n d i t i o n s i n the formal s e c t o r i n a back and f o r t h p r o c e s s , not i n a one way p r o c e s s . The p e t t y c a p i t a l i s t s e c t o r may r e p e a t e d l y i n c r e a s e and decrease i n an urban economy a c c o r d i n g to the market c o n d i t i o n s . T h i s means th a t the p e t t y c a p i t a l i s t s e c t o r i s not t i e d to a s p e c i f i c course of development such as that of the T h i r d World economies, because i t s presence has more to do with market f o r c e s i n the formal s e c t o r r e g a r d l e s s of the type of economy. There i s ample evidence of an i n f o r m a l s e c t o r i n s o c i a l i s t and Western c a p i t a l i s t economies even though these are undergoing d i s t i n c t l y d i f f e r e n t p rocesses of development (Aslund, 1985; Mattera, 1985; Mingione, 1985; Richardson, 1984; Ping Yu, 1984). The co-e x i s t e n c e of the p e t t y c a p i t a l i s t s e c t o r with the formal s e c t o r i n d i c a t e s that both s e c t o r s are p a r t of the same h i s t o r i c a l p rocess of development, and not at two d i f f e r e n t stages of a development process, a view that i s not u n l i k e that p r e s e n t e d by P e a t t i e (1968) and Stavenhagen (1968). T h i s i s a l s o s i m i l a r to Kahn's (1980) suggestion that i n f o r m a l a c t i v i t i e s e x i s t "by d e f a u l t " i n areas that the formal s e c t o r f i n d s u n p r o f i t a b l e . T h i r d l y , the p e t t y c a p i t a l i s t s e c t o r i s not the same as the 'petty commodity p r o d u c t i o n s e c t o r ' (Forbes, 1981; McGee, 1979; 118 Bromley and Gerry, 1979; LeBrun and Gerry, 1975), which i s a recent view proposed by neo-marxists. T h i s d e f i n i t i o n arose when s c h o l a r s n o t i c e d t h a t the i n f o r m a l s e c t o r i n the T h i r d World was not always an employment g e n e r a t i n g s e c t o r but sometimes p r o f i t - m a k i n g , and 'modern' ( S t e e l , 1977). The concept of a p e t t y commodity p r o d u c t i o n s e c t o r was used to d e f i n e the a c t i v i t i e s t h a t c o u l d not be s t r i c t l y c l a s s i f i e d under the i n f o r m a l or the formal s e c t o r . The p e t t y commodity i p r o d u c t i o n s e c t o r was s a i d to l i e at the margins of the dominant c a p i t a l i s t mode, su b o r d i n a t e d by i t i n a dependent way (LeBrun and Gerry, 1975). The problem with the p e t t y commodity p r o d u c t i o n approach i s t h a t i t only e x p l a i n s the presence of p r o f i t o r i e n t e d commodity p r o d u c t i o n and not the p r o f i t making s e r v i c e s that may be presen t i n the economy. Recent s t u d i e s have shown, that p r o f i t making s e r v i c e s can be a l a r g e p a r t of the i n f o r m a l s e c t o r , not o n l y i n Western n a t i o n s eg. the b a r t e r of p r o f e s s i o n a l s e r v i c e s , but a l s o i n some of the T h i r d World n a t i o n s as w e l l (Mattera, 1985; Mingione, 1985; Grossman, 1982). In c o n t r a s t , the p e t t y c a p i t a l i s t s e c t o r i n c l u d e s the p r o f i t making a c t i v i t i e s p r o v i d i n g e i t h e r goods or s e r v i c e s or both. P e t t y c a p i t a l i s t a c t i v i t i e s respond to market f o r c e s i n the urban economy which c r e a t e a demand f o r goods or s e r v i c e s . Furthermore, the a l t e r n a t i v e a n a l y s i s proposes t h a t the p e t t y c a p i t a l i s t s e c t o r i s o n l y dependent upon the formal s e c t o r f o r the c r e a t i o n of f a v o u r a b l e market c o n d i t i o n s but the p e t t y c a p i t a l i s t s e c t o r does not e x i s t only to serve the formal s e c t o r , nor i s i t n e c e s s a r i l y always e x p l o i t e d . The 1 19 r e l a t i o n s h i p between the formal s e c t o r and the p e t t y c a p i t a l i s t s e c t o r i s mostly s y m b i o t i c , where labour, c a p i t a l and resources flow back and f o r t h between the two s e c t o r s . F i n a l l y , the p e t t y c a p i t a l i s t s e c t o r i s not a s e c t o r i n a d d i t i o n to the i n f o r m a l and formal s e c t o r s . Some s c h o l a r s have presented a t h i r d s e c t o r c a l l e d the 'modern', or ' i n t e r m e d i a t e ' , s e c t o r to i n c l u d e a c t i v i t i e s t h a t c o u l d not be c l a s s i f i e d i n the formal or i n f o r m a l s e c t o r s (Nihan and J o u r d a i n , 1978; Nihan et a l , 1977; S t e e l 1977). In' c o n t r a s t , the a l t e r n a t i v e p e t t y c a p i t a l i s t approach maintains that the boundary between the formal and the p e t t y c a p i t a l i s t s e c t o r i s one based on government r e g u l a t i o n and l e g a l p r o t e c t i o n of the a c t i v i t y and a l l other c h a r a c t e r i s t i c s , such as l e v e l of technology used, are not only v a r i a b l e w i t h i n the p e t t y c a p i t a l i s t s e c t o r but a l s o not e x c l u s i v e to the s e c t o r . There i s , t h e r e f o r e a continuum of a c t i v i t i e s i n the urban economy but i n t h i s continuum the r e l a t i o n s h i p of the a c t i v i t y to the s t a t e r e g u l a t o r y and l e g a l system determines whether i t belongs to the formal or the p e t t y c a p i t a l i s t s e c t o r . 1.2 Formation Of Petty C a p i t a l i s m In An Urban Economy "The p r i n c i p a l e r r o r of many ' d u a l i s t s ' i s t h e i r p a r t i a l approach to the study of the t h i r d world economy and s o c i e t y , f o c u s s i n g almost e x c l u s i v e l y on p r o d u c t i o n " (Santos, 1979, p.26). Santos' o b s e r v a t i o n i s important i n the p r e s e n t a t i o n of the 1 20 argument f o r the a l t e r n a t i v e a n a l y s i s . In agreement with Santos, i t i s proposed here that the pr o d u c t i o n i s only a pa r t of the i s s u e i n the c r e a t i o n of the p e t t y c a p i t a l i s m i n an urban economy. There are two aspects to the formation of p e t t y c a p i t a l i s m : 1. The p r o d u c t i o n p a t t e r n : r e f e r s to the supply and s p a t i a l d i s t r i b u t i o n of the goods and s e r v i c e s a v a i l a b l e from the formal s e c t o r . T h i s p r o d u c t i o n p a t t e r n i n d i c a t e s i f the supply from the formal s e c t o r s has met the demands of the p o p u l a t i o n and whether there are any gaps i n i t . The p r o d u c t i o n p a t t e r n a l s o i n d i c a t e s the labour employed i n the formal s e c t o r and t h e r e f o r e the s i z e of the unemployed labour f o r c e . 2. The consumption p a t t e r n : r e f e r s to types of demand f o r goods and s e r v i c e s t h a t can e x i s t i n an urban economy. Some of t h i s demand may not be met by the formal s e c t o r and t h e r e f o r e an a l t e r n a t i v e source, such as p e t t y c a p i t a l i s m , can p o t e n t i a l l y meet t h i s demand. These two a s p e c t s , i n combination with each other can i n d i c a t e the p o t e n t i a l f o r the growth of the p e t t y c a p i t a l i s t s e c t o r i n the T h i r d World, the Western c a p i t a l i s t as w e l l as the s o c i a l i s t economies. D i f f e r e n t development processes c r e a t e v a r i a t i o n s i n the p r o d u c t i o n and consumption p a t t e r n s . The s i z e 1 8 of the p e t t y c a p i t a l i s t s e c t o r and the type of p e t t y c a p i t a l i s t a c t i v i t i e s w i l l be c o n d i t i o n e d by the s p e c i f i c p a t t e r n of p r o d u c t i o n and consumption i n the dominant economy. T h i s i s perhaps the reason why so many types of The s i z e r e f e r s t o the numbers employed i n p e t t y c a p i t a l i s m . 121 i n f o r m a l a c t i v i t i e s e x i s t not only w i t h i n s i m i l a r economies, but a l s o between d i f f e r e n t types of economies, as d i s c u s s e d i n chapter t h r e e . 1.2.1 Demand For Pe t t y C a p i t a l i s m : The Role Of P r o d u c t i o n And  Consumption P a t t e r n s In the c u r r e n t t h e o r i e s of the i n f o r m a l s e c t o r , p r o d u c t i o n i n the formal s e c t o r i s used to i d e n t i f y the s i z e of the unemployed labour f o r c e and t h e r e f o r e the p o t e n t i a l s i z e of the i n f o r m a l s e c t o r . T h i s equates the s u r p l u s labour f o r c e to the labour i n the i n f o r m a l s e c t o r (Moser, 1984). Another approach i s to l o c a t e the needs of the formal s e c t o r t h a t can be served by the i n f o r m a l s e c t o r i . e . the e x p l o i t a t i o n approach (Kahn, 1980). The a l t e r n a t i v e a n a l y s i s suggests t h a t both approaches present an incomplete understanding of the f a c t o r s t h a t form the p e t t y c a p i t a l i s t s e c t o r . A c c o r d i n g to t h i s a n a l y s i s , both p r o d u c t i o n and consumption p a t t e r n s p l a y a r o l e i n the c r e a t i o n of the p o t e n t i a l -demand f o r the goods and s e r v i c e s from p e t t y c a p i t a l i s m , and a l s o provide some estimate of the s i z e and types of demands from p e t t y c a p i t a l i s m . Both of these a s p e c t s are d i s c u s s e d below. In a p a r t i c u l a r economy, the combination of the pr o d u c t i o n and consumption p a t t e r n i s such that not a l l the consumption demands of the p o p u l a t i o n are met by p r o d u c t i o n i n the formal s e c t o r . The e q u i l i b r i u m between demand and supply of a good i n a homogenous market can be determined by p r i c e , but not a l l can a f f o r d the p r i c e . There i s t h e r e f o r e a demand f o r cheaper 1 22 Fi g u r e 6 - The p o t e n t i a l demand f o r goods and s e r v i c e s from the p e t t y c a p i t a l i s t s e c t o r QUANTITY A: Demand (D) and Supply (S^) equilibrium i s based on p r i c e B: Equilibrium point between demand (D) and Supply (S^) i s higher. This- occurs when the government r e s t r i c t s the supply of goods. Costs of production r i s e and only the r i c h can a f f o r d the r e s t r i c t e d goods (for example, smuggled items) and C 2: Indicates the demands that are not f u l f i l l e d by the market. Cheaper su b s t i t u t e s are required. * a l t e r n a t i v e s below the market p r i c e ( F i g u r e 6 ) . Furthermore, i f the p r o d u c t i o n of a good i s r e s t r i c t e d by the government, the demand f o r that good may e x i s t at a higher p r i c e e q u i l i b r i u m between supply and demand, because economic and s o c i a l c o s t s of p r o v i d i n g that r e s t r i c t e d good w i l l be higher and onl y the 1 23 r i c h e r p o p u l a t i o n can a f f o r d i t . In both i n s t a n c e s the source of supply f o r cheaper s u b s t i t u t e s or the r e s t r i c t e d good can be the p e t t y c a p i t a l i s t s e c t o r . F i n a l l y , the chances of demand and supply being t o t a l l y i n balance i s not onl y s l i m but s h o r t l i v e d . The imbalance w i l l r a r e l y be on the s i d e of ov e r p r o d u c t i o n because i t l e a d s to lower p r i c e s and consequently lower r e t u r n s to investment i n the p r o d u c t i o n s e c t o r . Overproduction i n the formal s e c t o r i s economically unsound, and when such a s i t u a t i o n a r i s e s (and t h i s o f t e n happens i n farming a c t i v i t i e s ) d e l i b e r a t e steps are taken to curb i t . For i n s t a n c e , farmers i n the U.S.A., are p a i d to keep t h e i r f i e l d s f a l l o w to prevent a g l u t i n the market. Overproduction i s not n e c e s s a r i l y a p r o d u c t i o n i s s u e , i t may happen when demand suddenly plunges because buyers .decide to reduce t h e i r purchases. While o v e r p r o d u c t i o n of a good i n r e l a t i o n t o the demand i s uncommon, i t i s as uncommon to f i n d a p e r f e c t e q u i l i b r i u m between consumer demands and p r o d u c t i o n f o r s e v e r a l reasons. F i r s t l y , consumer demands are ever changing as a r e s u l t of changes i n pu r c h a s i n g power, changes i n consumer t a s t e , and changes i n p o p u l a t i o n s i z e or composition. I t i s d i f f i c u l t f o r the formal s e c t o r p r o d u c t i o n to keep pace with these changes as they occur and i t i s not always d e s i r a b l e to do so as the changes may be t r a n s i e n t . Secondly, some of the demands are such that the formal s e c t o r may d e l i b e r a t e l y l i m i t or c o n t r o l the supply , i f i t i s deemed e c o n o m i c a l l y , s o c i a l l y or p o l i t i c a l l y d e s i r a b l e to do so. In t h i s category one may 124 i n c l u d e c e r t a i n luxury items that are r e s t r i c t e d i n a s o c i a l i s t s t a t e (Grossman, 1982). F i n a l l y , some demands are not l a r g e enough to warrant formal s e c t o r p r o d u c t i o n because the c o s t s of p r o d u c t i o n may be too high and the b e n e f i t s i n s u f f i c i e n t (Kahn, 1980; Roberts, 1978; B e i n e f i e l d , 1976). Thus, i t i s q u i t e l i k e l y that there w i l l be a d i s c r e p a n c y i n the demand f o r and supply of goods and s e r v i c e s from the formal s e c t o r such that there are some demands that are l e f t u n f u l f i l l e d . These u n f u l f i l l e d demands may be f o r cheaper s u b s t i t u t e s or r e f l e c t a p e r s o n a l c h o i c e f o r a good or s e r v i c e even at a h i g h p r i c e . In e i t h e r case, these demands c o n s t i t u t e the demand p o t e n t i a l of the p e t t y c a p i t a l i s t s e c t o r . The s i z e of the u n f u l f i l l e d demand, i f i t can be assessed, i s t h e r e f o r e the p o t e n t i a l p r o d u c t i o n c a p a c i t y of the p e t t y c a p i t a l i s t s e c t o r . But, t h i s w i l l not e x p l a i n the p a r t i c u l a r types of a c t i v i t i e s w i l l form w i t h i n the p e t t y c a p i t a l i s t s e c t o r , u n l e s s there i s a f u r t h e r understanding of the types of demand that the urban p o p u l a t i o n p l a c e s upon the s e c t o r . E s s e n t i a l l y , there can be two types of demands from the p e t t y c a p i t a l i s t s e c t o r and these can be r e l a t e d to the income l e v e l s of the p o p u l a t i o n . 1. Cost-based demands; Demands i n t h i s c a t e g o r y are s t r o n g l y t i e d t o the purchasing power of the people. Cost-based demands are c r e a t e d when the p r i c e s of the goods and s e r v i c e s from the formal s e c t o r are too high f o r the consumer. Cheaper a l t e r n a t i v e s become a n e c e s s i t y f o r t h i s group of i n d i v i d u a l s , not a c h o i c e . Cost-based demands are , t h e r e f o r e , mostly i n e l a s t i c . The poor belong to t h i s category and t h e i r c o s t -125 based demands from the p e t t y c a p i t a l i s t s e c t o r are mainly f o r the e s s e n t i a l needs of food and c l o t h i n g . For example, the poor i n I n d i a need a cheap source of v e g e t a b l e s and b a s i c c l o t h i n g , but once these needs are s u p p l i e d , they are not l i k e l y to t o be abl e to a f f o r d f a n c i e r c l o t h i n g or expensive v e g e t a b l e s . T h i s l i n k to e s s e n t i a l needs, r e s u l t s i n r e l a t i v e l y f i x e d c o s t - b a s e d demands, i . e . unchanging over time. While the poor may buy cheap vegetables one day and cheap f i s h the next, both items are e s s e n t i a l to t h e i r s u r v i v a l and are t h e r e f o r e c l a s s i f i e d as cost-based demands'. As a r e s u l t , the p e t t y c a p i t a l i s t a c t i v i t i e s that c a t e r to these demands w i l l be r i g i d or ' s t a t i c ' i n s i z e and growth p o t e n t i a l , unless there i s a change i n the s i z e or the income l e v e l of the p o p u l a t i o n as i n d i c a t e d i n f i g u r e 7. In ' s t a t i c ' p e t t y c a p i t a l i s m labour supply and the demand f o r i t s goods and s e r v i c e s are o f t e n i n e q u i l i b r i u m . The labour engaged i n p e t t y c a p i t a l i s t a c t i v i t i e s q u i c k l y e s t a b l i s h e s the extent of c o s t - b a s e d demands of a f i x e d p o p u l a t i o n s i z e and maintains a steady supply of the same commodities over an extended p e r i o d of time. I t i s d i f f i c u l t f o r labour to enter i n t o t h i s poverty-bound p e t t y c a p i t a l i s m u n l e s s f o r some reason the p o p u l a t i o n s i z e i n c r e a s e s or decreases suddenly and thereby i n c r e a s e s or decreases cost-based demands. In a sense, the cos t - b a s e d demands are poverty r e l a t e d and, t h e r e f o r e , more common to economies that are as yet d e v e l o p i n g . 2. O p t i o n a l demands: O p t i o n a l demands are demands f o r goods th a t are n o n - e s s e n t i a l to the persons s u r v i v a l . These demands 1 26 are made from the p e t t y c a p i t a l i s t s e c t o r as a matter of c h o i c e by the consumer. That i s , the consumer c o u l d have consumed from the formal s e c t o r , f o r s i m i l a r goods or s u b s t i t u t e s , but has a p r e f e r e n c e f o r an a l t e r n a t i v e source of p r o d u c t i o n . T h i s c h o i c e can be based on c o s t , q u a l i t y , uniqueness or convenience. I t i s important to d i s t i n g u i s h cost-based demands that were d i s c u s s e d above from the o p t i o n a l demands based on c o s t . O p t i o n a l demands can be c r e a t e d f o r a c e r t a i n p r i c e of p e t t y c a p i t a l i s t good but not because p r i c e s i n the formal s e c t o r were u n a f f o r d a b l e . For example, cheap ve g e t a b l e s from the p e t t y c a p i t a l i s t s e c t o r f u l f i l l an e s s e n t i a l need of the poor but the very same cheap v e g e t a b l e purchased by the r i c h i s only a way of redu c i n g e x p e n d i t u r e . O p t i o n a l demands, with a few e x c e p t i o n s , are h i g h l y e l a s t i c because c h o i c e s can change c o n s t a n t l y due to changing income and purchasing power, the i n f l u e n c e of a d v e r t i s i n g , f a s h i o n s , f a d s , f i n a n c i a l c h o i c e s such as i n c r e a s i n g savings as w e l l as i r r a t i o n a l d e c i s i o n s . For i n s t a n c e , the consumer can i n d i c a t e a p r e f e r e n c e f o r hand made p o t t e r y items from the p e t t y c a p i t a l i s t s e c t o r one year, and the next year p r e f e r the mass manufactured p o r c e l a i n items from the formal s e c t o r . In I n d i a , fads i n consumer t a s t e s have l e a d to the p r o d u c t i o n of many "copy c a t " products by the p e t t y c a p i t a l i s t s e c t o r . For example, i n the e a r l y s e v e n t i e s , the lower middle c l a s s , was p r o v i d e d with a cheaper v e r s i o n of Revlon's perfume, "Intimate" by the p e t t y c a p i t a l i s t s e c t o r . T h i s perfume c a l l e d s i m i l a r l y "Intimacy" was packaged to resemble the a u t h e n t i c good. But, as 127 the f a d disappeared, so d i d the b o t t l e s of "Intimacy". P e t t y c a p i t a l i s t a c t i v i t i e s t h a t a re based on such o p t i o n a l demands must respond to these changes and t h i s makes the s e c t o r capable of g r e a t f l u c t u a t i o n s i n type of a c t i v i t y and s i z e of labour f o r c e ( F i g u r e 7 ) . O p t i o n a l demands can come from the p o p u l a t i o n b e l o n g i n g to any income group but i t i s l o g i c a l t h a t the poor can a f f o r d to have very few c h o i c e s . S i m i l a r l y , the poor tend to have more c o s t based demands. Thus the type of demand from the p e t t y c a p i t a l i s t s e c t o r i s a r e f l e c t i o n of the income l e v e l s of the p o p u l a t i o n . I t i s d i f f i c u l t f o r a government to d i r e c t l y c o n t r o l the demands made from the p e t t y c a p i t a l i s t s e c t o r , i r r e s p e c t i v e of whether they are o p t i o n a l or c o s t based. C o n t r o l l i n g demands merely f o r c e s the demand to l i e l a t e n t i n the economy, or to be met by the p e t t y c a p i t a l i s t s e c t o r . For i n s t a n c e , the government cannot c o n t r o l the demand f o r c h i l d care u n l e s s i t p r o v i d e s f o r i t . F a i l i n g t h i s , i l l e g a l b a b y s i t t i n g w i l l develop i n the p e t t y c a p i t a l i s t s e c t o r . In China, i t was found t h a t when government p o l i c i e s r e g a r d i n g the i n f o r m a l s e c t o r were s t r i c t the i n f o r m a l s e c t o r went underground, i n s t e a d of d i s a p p e a r i n g ( C a i , 1980). The study of consumer demands i n the c r e a t i o n of p e t t y c a p i t a l i s m has had l i m i t e d c o n s i d e r a t i o n i n the l i t e r a t u r e . The most s i g n i f i c a n t work i n t h i s r e gard i s perhaps that of Santos (1979). But h i s work i s q u i t e d i f f e r e n t from the ideas p r e s e n t e d here. Santos, d i s t i n g u i s h e s two types of consumption: 1 28 F i g u r e 7 - The e f f e c t of the types of demand upon en t r y of labour i n t o the p e t t y c a p i t a l i s t s e c t o r LABOUR SUPPLY IN PETTY CAPITALISM ENTRY OF LABOUR ENTRY OF LABOUR-TIME DEMANDS A. OPTIONAL DEMANDS FROM A FIXED POPULATION, OVER TIME LABOUR SUPPLY IN PETTY CAPITALISM ENTRY OF LABOUR TIME DEMANDS B. COST BASED DEMANDS FROM A FIXED POPULATION, OVER TIME NOTE: CHANGES IN POPULATION S IZE WILL DISTURB THE EQUILI-BRIUM OF LABOUR SUPPLY AND DEMAND IN BOTH CASES. HOWEVER, COST BASED DEMANDS AND LABOUR WILL SOON RE-ESTABLISH A BALANCE the modern and the non-modern type. He r e l a t e s these to income groups so t h a t the high e r income groups have a l a r g e r p r o p o r t i o n of the 'modern type' consumption, r e f l e c t i n g the i n f l u e n c e of mod e r n i s a t i o n and t e c h n o l o g i c a l p r o g r e s s i n the T h i r d World and the lower income groups have a l a r g e r p r o p o r t i o n of the non-129 modern type consumption. Santos' study i s l i m i t e d to the T h i r d World context but the arguments of the a l t e r n a t i v e a n a l y s i s have u n i v e r s a l a p p l i c a t i o n . Furthermore, the 'non-modern type' consumption which Santos equates with the inf o r m a l s e c t o r does not d i s t i n g u i s h between the o p t i o n a l and cost-based demands of the in f o r m a l s e c t o r i d e n t i f i e d by the a l t e r n a t i v e a n a l y s i s . F i n a l l y , equating non-modern type consumption with the i n f o r m a l s e c t o r does not cover consumption of 'modern' goods and s e r v i c e s such as b a r t e r of p r o f e s s i o n a l s e r v i c e s , or smuggled c l o t h e s and watches, i n the T h i r d World and i n Western c a p i t a l i s t and s o c i a l i s t n a t i o n s . There are many i n d i c a t i o n s i n recent years of modern-type consumption and pro d u c t i o n i n the i n f o r m a l s e c t o r , d e s c r i b e d i n chapter t h r e e , that are not encompassed by the Santos model. In c o n t r a s t , the a l t e r n a t i v e a n a l y s i s holds that the o p t i o n a l demands can give r i s e to modern-type p r o d u c t i o n and consumption i n the in f o r m a l s e c t o r . Other ideas i n the l i t e r a t u r e on the consumption aspect are l e s s d e t a i l e d than Santos'. Sq u i r e (1981) d e f i n e d the i n f o r m a l s e c t o r as "that i n which the r e t u r n to labour, whether or not i t be i n the form of wages i s determined by the f o r c e s of demand and supply ( S q u i r e , 1981, p.81). But, he does not e x p l a i n how these f o r c e s c r e a t e the i n f o r m a l s e c t o r . Kundu and Mathur (1984) make r e f e r e n c e s t o "autonomous" demands that can be found i n l a r g e towns as a f o r c e to a t t r a c t migrants but they do not d i s t i n g u i s h between types of demand i n the l a r g e town as presented i n the a l t e r n a t i v e a n a l y s i s . E l Shakhs (1984) does 130 d i f f e r e n t i a t e the i n f o r m a l s e c t o r a c t i v i t i e s based on e s s e n t i a l needs from those based on n o n - e s s e n t i a l ones. These can, to some extent, be equated to the cost-based and o p t i o n a l demands that are proposed here. The i d e n t i f i c a t i o n of the p o t e n t i a l s i z e or types of demand from p e t t y c a p i t a l i s m does not i n d i c a t e the numbers t h a t w i l l be a c t u a l l y employed i n t h i s s e c t o r . The a c t u a l numbers employed, w i l l depend a l s o on the labour a v a i l a b l e to p a r t i c i p a t e i n p e t t y c a p i t a l i s t a c t i v i t i e s . F i g u r e 8 i n d i c t e s the three c a t e g o r i e s of labour and two c a t e g o r i e s of demand that must combine to c r e a t e the p e t t y c a p i t a l i s t s e c t o r . Although the a s p e c t of labour i n the c r e a t i o n of the i n f o r m a l s e c t o r i s a w e l l trodden path i n the debate, the a l t e r n a t i v e a n a l y s i s b r i n g s a d d i t i o n a l ideas to bear. 1.2.2 Supply Of Labour For P e t t y C a p i t a l i s m Most of the s t u d i e s of the i n f o r m a l s e c t o r i n d i c a t e t h a t , i n terms of persons employed, the s i z e of the s e c t o r ranges from 20-60 percent i n the T h i r d World and l e s s e r numbers i n the other economies (De G r a z i a , 1984; Richardson, 1984; Mazumdar, 1975). T h i s i n d i c a t e s that the formal s e c t o r whether i t i s s o c i a l i s t , Western c a p i t a l i s t or T h i r d World, does not employ the t o t a l labour f o r c e . In a l l of these economies there i s , t h e r e f o r e , a p o p u l a t i o n that does not p a r t i c i p a t e i n formal s e c t o r p r o d u c t i o n , i e . the unemployed. Some of t h i s unemployed p o p u l a t i o n may work i n the p e t t y c a p i t a l i s t s e c t o r , as the e x i s t i n g view suggests. However, the a l t e r n a t i v e a n a l y s i s 131 proposes that t h i s i s not the only category of labour that c o n t r i b u t e s to the p e t t y c a p i t a l i s t s e c t o r . There are three c a t e g o r i e s of labour t h a t can p o t e n t i a l l y engage i n p e t t y c a p i t a l i s m . 1. Unemployed by compulsion: I n d i v i d u a l s can be prevented from p a r t i c i p a t i o n i n the formal s e c t o r p r o d u c t i o n when they are unable to gain access to i t . T h i s i n a b i l i t y can be due to many f a c t o r s that are c a t e g o r i e d here as socio-economic disadvantages. These i n c l u d e poverty, i l l i t e r a c y , l a c k of a p p r o p r i a t e s k i l l s , s o c i a l stigmas (r a c e , r e l i g i o n , c a s t e , c r e e d ) , p h y s i c a l and mental handicaps, and age ( c h i l d r e n and e l d e r l y ) . Not a l l persons with s o c i o -economic disadvantages are a l i e n a t e d from p a r t i c i p a t i n g i n the formal s e c t o r but these disadvantages do make i t d i f f i c u l t f o r them to compete f o r employment i n that s e c t o r . For those who are a l i e n a t e d , employment i n the p e t t y c a p i t a l i s t s e c t o r i s not an a c t of c h o i c e but r a t h e r a compulsion. Unless the circumstances change so as to a f f e c t the socio-economic disadvantages, the labour f o r c e from t h i s category should be r e l a t i v e l y easy to i d e n t i f y . But circumstances can change c o n s i d e r a b l y . For i n s t a n c e , i n I n d i a 20% of government employment i s r e s e r v e d f o r low c a s t e groups. T h i s means that the low c a s t e persons are no longer completely disadvantaged f o r employment i n the formal s e c t o r . The supply of labour f o r the p e t t y c a p i t a l i s t s e c t o r , from t h i s category i s e a s i l y ident i f i a b l e . 2. Unemployed by c h o i c e : 1 32 Some i n d i v i d u a l s may v o l u n t a r i l y a b s t a i n from p a r t i c i p a t i o n i n the formal s e c t o r . T h i s form of unemployment, i s l i m i t e d but i t i n d i c a t e s an e x e r c i s e of c h o i c e . T h i s i m p l i e s , t h e r e f o r e , that the n e c e s s i t i e s of l i v i n g are met from some other source, so that a c t i v e employment i n the formal s e c t o r i s not r e q u i r e d even though i t may be a v a i l a b l e . For i n s t a n c e , an i n d i v i d u a l may p r e f e r to l i v e o f f a s s e t s or s a v i n g s . Some may v o l u n t a r i l y a b s t a i n from p a r t i c i p a t i n g i n the formal s e c t o r to make a s o c i a l , p o l i t i c a l or moral statement and some may a b s t a i n due to l e t h a r g y or c h o i c e . For example,, i n North America, some people c l a i m they do not work i n the formal s e c t o r " t o break the est a b l i s h m e n t " . In such i n s t a n c e s , a c h o i c e has been made to a b s t a i n from work i n the formal s e c t o r . If i n d i v i d u a l s i n t h i s c ategory, p a r t i c i p a t e i n the p e t t y c a p i t a l i s t s e c t o r they must seek e i t h e r monetary r e t u r n s g r e a t e r than that those a v a i l a b l e from the formal s e c t o r , or other forms of p e r s o n a l s a t i s f a c t i o n . I t would make no sense to make a ch o i c e to earn l e s s income un l e s s i t pr o v i d e d some non-monetary s a t i s f a c t i o n . Thus the a c t i v i t i e s may be f a r rang i n g , from the c r i m i n a l to p o t t e r y making. T h i s category does not p r o v i d e a steady source of labour f o r p e t t y c a p i t a l i s m because i t can f i n d a l t e r n a t i v e employment i n the formal s e c t o r . T h i s category would be uncommon i n the poorer n a t i o n s where unemployment r a t e s are high, and income l e v e l s low. 3. The o p p o r t u n i s t s : F i n a l l y t here i s a category that i n c l u d e s persons that p a r t i c i p a t e i n both s e c t o r s as a matter of c h o i c e and the main 133 motive i s to i n c r e a s e monetary r e t u r n s . However, because the F i g u r e 8 - The most l i k e l y r e l a t i o n s h i p s between types of labour and types of demand i n p e t t y c a p i t a l i s m P e t t y C a p i t a l i s m Type o f , Labour 1. V o l u n t a r y a b s t i n e n c e f rom f o r m a l s e c t o r employment Dual p a r t i c i p a t i o n i n f o r m a l and i n f o r m a l s e c t o r I n v o l u n t a r i l y a l i ena ted f rom f o r m a l s e c t o r employment "ype o f Demand # Op t i ona l : based on q u a l i t y , q u a n t i t y , u n i q u e n e s s or c o s t 2. Cos t b a s e d : based s o l e l y on p r i ce Most l i k e l y r e l a t i o n s h i p people can p a r t i c i p a t e i n the formal s e c t o r , the need to engage i n p e t t y c a p i t a l i s m i s not a n e c e s s i t y and can change over time. I t i s not easy to monitor t h i s category of workers because p a r t i c i p a t i o n i n p e t t y c a p i t a l i s m i s o f t e n t r a n s i e n t , underground and i l l e g a l . , A worker can engage i n one type of work (e.g. t y p i n g , r e p a i r s e r v i c e s ) and p a r t i c i p a t e i n the two s e c t o r s or can work i n two d i f f e r e n t types of work i n the two 1 34 s e c t o r s . The a c t i v i t i e s can be tax e v a s i v e , such as through the b a r t e r of p r o f e s s i o n a l s e r v i c e s , or m o o n l i g h t i n g . T h i s category of labour can be found i n the three types of economies but i s perhaps g r e a t e s t i n the developed world. Labour from t h i s c a t e g o r y i s not a steady source f o r p e t t y c a p i t a l i s t a c t i v i t i e s . What a l l these c a t e g o r i e s of labour p r e s e n t , s e p a r a t e l y or i n combination, i s the p o t e n t i a l labour supply t h a t i s a v a i l a b l e to engage i n p e t t y c a p i t a l i s m . Labour i s the t a n g i b l e element, as opposed to demand, i n the c r e a t i o n of p e t t y c a p i t a l i s m and t h e r e f o r e labour can be manipulated by governments. For example, government p o l i c i e s can reduce the labour supply f o r p e t t y c a p i t a l i s m i n three ways: f i r s t , p r o v i d e employment i n the formal s e c t o r to those who seek i t , second, p r o v i d e some form of w e l f a r e so t h a t there i s no desparate need f o r a source of employment and t h i r d , r e s t r i c t p e t t y c a p i t a l i s t a c t i v i t i e s as they form. The f i r s t two are more c o s t l y but they do d e a l with the problems of s u r p l u s labour, while the t h i r d approach i s the l e a s t e f f e c t i v e method as i t only masks the problem. 1.2.3 C r e a t i o n Of P e t t y C a p i t a l i s m Both, a p o t e n t i a l demand composed of o p t i o n a l and c o s t -based demands, and a labour supply, composed of labour that i s unemployed by compulsion, unemployed by c h o i c e , or the o p p o r t u n i s t s , must e x i s t i n an economy f o r the c r e a t i o n of p e t t y c a p i t a l i s m . V a r i a t i o n s i n the numbers employed i n the p e t t y c a p i t a l i s t s e c t o r and the d i f f e r e n c e s i n types of p e t t y c a p i t a l i s t a c t i v i t i e s are caused by the p a r t i c u l a r combinations 135 of labour supply and consumer demand. F i g u r e 8 i n d i c a t e s the most l i k e l y r e l a t i o n s h i p s between labour and demand. T h i s i n turn i s the r e s u l t of market f o r c e s i n an economy. Thus, as market f o r c e s f l u c t u a t e i n the formal s e c t o r , so w i l l the pe t t y c a p i t a l i s t s e c t o r . F i g u r e 9 - Combinations between types of demand and types of labour i n the c r e a t i o n of p e t t y c a p i t a l i s m TYPE OF DEMAND TYPE OF LABOUR PARTICIPATION IN PETTY CAPITALISM BY CHOICE BY COMPULSION OPTIONAL (FOR NON-ESSENTIALS) DYNAMIC DYNAMIC COST-BASED (FOR ESSENTIALS) — STATIC The d i f f e r e n t development p a t t e r n s i n the Western c a p i t a l i s t , s o c i a l i s t and T h i r d World economies c r e a t e d i f f e r e n t combinations of labour and consumer demands i n p e t t y c a p i t a l i s m 1 36 ( f i g u r e 9). A p a r t i c u l a r combination of labour and consumer demands from p e t t y c a p i t a l i s m may r e f l e c t underdevelopment of the economy but underdevelopment i s not necessary f o r the c r e a t i o n of p e t t y c a p i t a l i s m . P e t t y c a p i t a l i s m e x i s t s without underdevelopment as i n Western c a p i t a l i s t and some s o c i a l i s t n a t i o n s . F i g u r e 9 i n d i c a t e s that the combinations between labour supply and demand f o r p e t t y c a p i t a l i s m can c r e a t e e s s e n t i a l l y two types of p e t t y c a p i t a l i s t s e c t o r s ; the dynamic and the s t a t i c . The e f f e c t of these two types of p e t t y c a p i t a l i s m upon e n t r y of labour has a l r e a d y been d i s c u s s e d under the s e c t i o n on demands. I t i s necessary to note, however, that the s t a t i c s e c t o r i s more r e l a t e d to underdevelopment. The i n f l u e n c e of development p a t t e r n s upon market f o r c e s and consequently the c r e a t i o n of the p e t t y c a p i t a l i s t s e c t o r w i l l be c l e a r e r i n the f o l l o w i n g s e c t i o n where the arguments of the a l t e r n a t i v e a n a l y s i s are a p p l i e d to the t h r e e dominant types of economies, i n order to understand, the f e a t u r e s of p e t t y c a p i t a l i s m found in. each. 2. APPLICATION OF THE ALTERNATIVE ANALYSIS TO PETTY CAPITALISM  IN DIFFERENT ECONOMIES 2.1 P e t t y C a p i t a l i s m In Western C a p i t a l i s t Economies In the Western c a p i t a l i s t economies evidence suggests that the i n f o r m a l s e c t o r i s mostly i l l e g a l eg. tax evasion, s m a l l e r than the formal s e c t o r i n the numbers employed, and t y p i c a l l y uses b a r t e r as a form of t r a n s a c t i o n (De G r a z i a , 1984; T a n z i , 1982; Simon and W i t t e , 1982). I t s s i z e i s debatable, because 1 37 e s t i m a t e s have tended to exclude the minor forms of a c t i v i t y such as garage s a l e s , and baby s i t t i n g . But, a c c o r d i n g to the a l t e r n a t i v e a n a l y s i s , both the tax e v a s i v e a c t i v i t i e s and the minor a c t i v i t i e s , can be r e l a t e d to the types of demands from p e t t y c a p i t a l i s m (cost-based and o p t i o n a l ) and the types of labour a v a i l a b l e , (unemployed by compulsion, unemployed by c h o i c e , and the o p p o r t u n i s t s ) i n Western n a t i o n s . In a c a p i t a l i s t economy, uneven d i s t r i b u t i o n of wealth i s common (Weaver, 1981) and t h e r e f o r e poverty and unemployment w i l l e x i s t which can c r e a t e a labour pool f o r the p e t t y c a p i t a l i s t s e c t o r as w e l l as c r e a t e c o s t - b a s e d demands f o r goods and s e r v i c e s of the p e t t y c a p i t a l i s t s e c t o r . However, Western c a p i t a l i s t n a t i o n s are now w e l f a r e s t a t e s and w e l f a r e c a p i t a l i s m s t r o n g l y m o d i f i e s both the labour supply f o r p e t t y c a p i t a l i s m as w e l l as the p o t e n t i a l demand f o r p e t t y c a p i t a l i s t goods and s e r v i c e s . Thus, the p e t t y c a p i t a l i s t s e c t o r that c o u l d have formed i s reduced by the i n t r o d u c t i o n of w e l f a r e p o l i c i e s w i t h i n the c a p i t a l i s t s t a t e . Welfare i s a form of compensation f o r those who have not b e n e f i t t e d by the gains of c a p i t a l i s m and u s u a l l y takes the form of t r a n s f e r payments to the poor and unemployed; unemployment insurance f o r workers t e m p o r a r i l y out of employment; workers compensation f o r those d i s a b l e d as a r e s u l t w o r k - r e l a t e d a c c i d e n t ; o l d age pension f o r the e l d e r l y who are no longer capable of being e c o n o m i c a l l y p r o d u c t i v e and so on. These t r a n s f e r payments r a i s e the purchasing powers people and t h i s impacts upon both the demand p o t e n t i a l and the labour p o t e n t i a l f o r p e t t y c a p i t a l i s m i n the western economy. 1 38 2.1.1 The Demand P o t e n t i a l Of P e t t y C a p i t a l i s m In Western  C a p i t a l i s t Nations The demand f o r goods and s e r v i c e s from p e t t y c a p i t a l i s m i s a f f e c t e d by w e l f a r e measures. Welfare r a i s e s purchasing power and thereby enables consumption from the formal s e c t o r . That i s , the s o c i o - e c o n o m i c a l l y disadvantaged p o p u l a t i o n i s a b l e to a f f o r d more, as a r e s u l t of government t r a n s f e r payments. A d d i t i o n a l l y , non-monetary compensation i s a l s o a v a i l a b l e to the poor or needy who are p r o v i d e d w i t h food banks, food stamps, and s h e l t e r (eg. S a l v a t i o n Army, Homes f o r the e l d e r l y , orphanages). T h i s means that c o s t - b a s e d demands, (eg. f o r food or b a s i c c l o t h i n g ) , are l e s s than what would have e x i s t e d without w e l f a r e s t a t e measures. However, the urban p o p u l a t i o n i n Western c a p i t a l i s t n a t i o n s does c r e a t e o p t i o n a l demands f o r p e t t y c a p i t a l i s t goods and s e r v i c e s , based on p r e f e r e n c e f o r i t s c o s t , q u a l i t y , and convenience, even though a l t e r n a t i v e s are a v a i l a b l e from the formal s e c t o r . T h i s e x p l a i n s the types of p e t t y c a p i t a l i s t a c t i v i t i e s t h a t have been observed i n the Western n a t i o n s , such as b a b y s i t t i n g , garage s a l e s , s t r e e t e n t e r t a i n e r s , use of cheap immigrant labour and b a r t e r i n g of p r o f e s s i o n a l s e r v i c e s , f o r which e q u i v a l e n t s are a v a i l a b l e i n the formal s e c t o r (eg. day care c e n t r e s , second hand s t o r e s , n i g h t c l u b s and so on). The o p t i o n a l demands are, as d e s c r i b e d e a r l i e r , s u b j e c t to many changes as a r e s u l t of changes i n consumer t a s t e s , a v a i l a b i l i t y of money, i n f l u e n c e of the media and the l i k e . T h e r e f o r e , the p o t e n t i a l demand f o r p e t t y c a p i t a l i s m i n Western 1 39 n a t i o n s can be q u i t e i n c o n s i s t e n t and f l u c t u a t i n g . For i n s t a n c e , tax e v a s i v e a c t i v i t i e s may reduce i f the tax burden i s reduced; or baby s i t t i n g s e r v i c e s may not be r e q u i r e d i f the government p r o v i d e d adequate day c a r e c e n t r e s . 2.1.2 The Labour P o t e n t i a l For P e t t y C a p i t a l i s m In Western  C a p i t a l i s t Nations Welfare measures i n Western c a p i t a l i s t economies a l s o have an e f f e c t on the labour a v a i l a b l e f o r p e t t y c a p i t a l i s m . Compensation f o r the poor, the unemployed and the d i s a b l e d depresses the urgency of f i n d i n g other sources of income to meet e s s e n t i a l needs. That i s , economic n e c e s s i t y i s not the major reason f o r p a r t i c i p a t i o n i n p e t t y c a p i t a l i s m . S u r v i v a l i s mostly assured under welfa r e c a p i t a l i s m even though the st a n d a r d of l i v i n g of some people may f a l l below the accepted poverty l e v e l . In e f f e c t , w e l f a r e removes the economic n e c e s s i t y and thereby reduces the numbers that c o u l d have engaged i n p e t t y c a p i t a l i s m . Those who do p a r t i c i p a t e i n the p e t t y c a p i t a l i s t s e c t o r w i l l do so by c h o i c e , by v o l u n t a r i l y a b s t a i n i n g from employment i n the formal s e c t o r and/or by p a r t i c i p a t i n g i n both s e c t o r s . Only a few w i l l need to p a r t i c i p a t e f o r l a c k of c h o i c e . Even the unemployed or the poor have a c h o i c e because t h e i r e s s e n t i a l needs can be met by the s t a t e through w e l f a r e payments. Employment i n p e t t y c a p i t a l i s m merely r a i s e s t h e i r standard of l i v i n g . In the case s t u d i e s of the i n f o r m a l s e c t o r i n Western n a t i o n s , there i s ample evidence of t h i s (Mattera, 1985; Simon .1 40 and Witte, 1982). I t can be r e c a l l e d from the p r e v i o u s chapter that the i n f o r m a l a c t i v i t i e s were mostly tax evasive e i t h e r through the b a r t e r of p r o f e s s i o n a l s e r v i c e s or by m o o n l i g h t i n g (Tucker, 1982; Bawly, 1982; T a n z i , 1982). These a c t i v i t i e s , a ssure an i n c r e a s e d net economic g a i n . Thus, i f a c h o i c e i s made, i t must mean that p a r t i c i p a t i o n i n the p e t t y c a p i t a l i s t s e c t o r must provide the p a r t i c i p a n t with something that i s not a v a i l a b l e i n the formal s e c t o r . T h i s can be one or both of the f o l l o w i n g : p e r s o n a l s a t i s f a c t i o n i n the c r e a t i v e , r e l i g i o u s , s o c i a l a s p e c t s of l i f e and/or o p p o r t u n i t i e s f o r economic g a i n . The l a t t e r may be i n two forms: i n c r e a s e d income or i n c r e a s e d s a v i n g s . P e t t y c a p i t a l i s m a l l o w s i l l e g a l ways of i n c r e a s i n g g a i n s , mostly through tax e v a s i o n , by b a r t e r of s e r v i c e s and the accumulation of undeclared income. I t can be seen that both the demand f o r p e t t y c a p i t a l i s t goods and s e r v i c e s and labour supply f o r p e t t y c a p i t a l i s t a c t i v i t i e s are l a r g e l y temporary. Demand i s mostly o p t i o n a l , and labour has a l t e r n a t i v e c h o i c e s of employment. There i s , t h e r e f o r e , no urgency to work i n or consume from the p e t t y c a p i t a l i s t s e c t o r as an economic n e c e s s i t y . Furthermore, there i s no s p e c i f i c r e l a t i o n s h i p between the p o p u l a t i o n that demands the p e t t y c a p i t a l i s t goods and s e r v i c e s and the labour that i s employed i n p e t t y c a p i t a l i s m . Both demands and labour supply come from the p o p u l a t i o n at l a r g e and not n e c e s s a r i l y from a s p e c i f i c economic or s o c i a l group. For example, a l l income groups can need the s e r v i c e s of a b a b y s i t t e r , or i n d i v i d u a l s from any income group can engage i n b a r t e r eg. b a r t e r of 141 s e r v i c e s between a plumber and a d e n t i s t . In summary, i t can be s a i d t h at the combination of labour supply and demand f o r p e t t y c a p i t a l i s m i n Western n a t i o n s i s such that the a c t i v i t i e s t h a t are c r e a t e d e x i s t p r i m a r i l y : 1. To i n c r e a s e the economic gains of those who have chosen to work i n the s e c t o r by d e c r e a s i n g c o s t s or i n c r e a s i n g e a r n i n g s , both of which c r e a t e i n c r e a s e d net incomes. I l l e g a l means make t h i s e f f o r t to i n c r e a s e income p r o f i t a b l e , because tax can be avoided on undeclared income, t a x a b l e income can be reduced by b a r t e r of s e r v i c e s , and wages and p r i c e s can be set lower than i n the formal s e c t o r . 2. To pro v i d e f o r the demands of the p o p u l a t i o n that a re not s a t i s f i e d by the formal s e c t o r f o r reasons of c o s t , q u a l i t y or convenience eg. some hand made goods, and c h i l d c a r e . 2.2 Petty C a p i t a l i s m In The C e n t r a l l y Planned S o c i a l i s t  Economies In s o c i a l i s t economies such as the U.S.S.R., China, or the East e r n European n a t i o n s , the presence of p e t t y c a p i t a l i s m r e p r e s e n t s a c o n f l i c t with the p r e v a i l i n g p o l i t i c a l i d e o l o g y . In the c e n t r a l l y planned s o c i a l i s t economy, the o p p o r t u n i t i e s f o r p r i v a t e p r o f i t are extremely l i m i t e d . T h e o r e t i c a l l y , any form of c a p i t a l i s m (and t h i s would i n c l u d e p e t t y c a p i t a l i s m ) i s u n d e s i r a b l e i n the s o c i a l i s t economy. But, there i s evidence of a p e t t y c a p i t a l i s t economy, both l e g a l and i l l e g a l , i n China (Ping Yu, 1984, L i n , 1980), the U.S.S.R. (Mattera, 1985; Grossman, 1982), and E a s t e r n European n a t i o n s (Aslund, 1985; De 1 42 G r a z i a , 1984), which suggests that a demand f o r p e t t y c a p i t a l i s t goods and s e r v i c e s and a labour supply f o r p e t t y c a p i t a l i s m must e x i s t . I t i s the purpose of t h i s s e c t i o n to i n v e s t i g a t e the demand p o t e n t i a l and the labour p o t e n t i a l w i t h i n the s o c i a l i s t economy, i n the l i g h t of the t h e o r e t i c a l arguments of the a l t e r n a t i v e a n a l y s i s . 2.2.1 The Demand P o t e n t i a l Of Pe t t y C a p i t a l i s m In S o c i a l i s t  Economies In the s o c i a l i s t system, minimum ba s i c needs, such as food, s h e l t e r , b a s i c c l o t h i n g , should be a f f o r d a b l e through the formal s e c t o r , a v o i d i n g d i r e economic n e c e s s i t y f o r cheaper a l t e r n a t i v e s , but t h i s i s not e n t i r e l y t r u e . Both poverty and unemployment are present (Aslund, 1985; Banerjee, 1984). Thus, cost-based demands from the p e t t y c a p i t a l i s t s e c t o r are l i k e l y to be p r e s e n t . In China, and Poland the i n f o r m a l s e c t o r a c t i v i t i e s have been l i n k e d to the needs of the poor (Aslund, 1985; Mattera, 1985; C a i , 1980). Furthermore, because the s o c i a l i s t market i s c o n t r o l l e d , the supply of goods and s e r v i c e s i s r e s t r a i n e d i n v a r i e t y , q u a l i t y and q u a n t i t y (Mattera, 1985; Grossman, 1982). There i s , t h e r e f o r e , a l s o a str o n g p o t e n t i a l demand f o r goods t h a t are d i f f e r e n t , more e a s i l y a c c e s s i b l e or s u p e r i o r i n q u a l i t y . For i n s t a n c e , the demand f o r f o r i e g n goods such as blue jeans, i s an important p a r t of the i n f o r m a l s e c t o r (Grossman, 1982). P e t t y c a p i t a l i s m can form i n response to these cost-based and o p t i o n a l demands i f labour i s a v a i l a b l e . One can suspect that because the dominant consumer market 143 i s not inundated with goods and s e r v i c e s , that the demands for an a l t e r n a t i v e source may be l a t e n t l y q u i t e h i g h . In China, f o r example, the p e t t y c a p i t a l i s t s e c t o r i n c r e a s e d a t every o p p o r t u n i t y , and even when government p o l i c i e s were s t r i c t the underground p e t t y c a p i t a l i s t economy was s i z a b l e i n Shanghai ( C a i , 1980). The demand p o t e n t i a l f o r p e t t y c a p i t a l i s m i n the s o c i a l i s t economies, t h e r e f o r e , can be c o n s i d e r a b l e . 2.2.2 The Labour P o t e n t i a l For P e t t y C a p i t a l i s m In S o c i a l i s t  Economies In s o c i a l i s t economies, unemployment and the d e s i r e to improve the standard of l i v i n g can both c o n t r i b u t e to the labour supply f o r the p e t t y c a p i t a l i s t s e c t o r . The labour supply can, t h e r e f o r e , come from any income group. However, i t appears that the motive f o r p a r t i c i p a t i o n i n p e t t y c a p i t a l i s m i s p a r t l y economic s u r v i v a l but mostly economic g a i n , i n s i g n i f i c a n t as i t may appear i n some ca s e s . T h i s i s only p a r t l y l i k e i t s western co u n t e r p a r t because the motive i s to i n c r e a s e incomes and not n e c e s s a r i l y to evade taxe s . Unless allowed by the s t a t e , most p r i v a t e e n t e r p r i s e s must operate i l l e g a l l y . The p e n a l t i e s f o r t h i s are s t i f f and those who r i s k being engaged i n i l l e g a l a c t i v i t i e s must l o g i c a l l y want to outwiegh the r i s k by the money earned. I t i s a l s o u n l i k e l y that workers would choose not to work i n the formal s e c t o r so i t i t more l i k e l y t h a t labour e i t h e r p a r t i c i p a t e s i n both s e c t o r s , eg. m o o n l i g h t i n g of r e p a i r s e r v i c e s i n the U.S.S.R. (Grossman, 1982), or p a r t i c i p a t e s due to a l a c k of c h o i c e , eg. vendors i n China (Cai 1980), and 1 44 Hungary (Aslund, 1985). T h i s was i l l u s t r a t e d i n the case s t u d i e s of the i n f o r m a l s e c t o r i n s o c i a l i s t economies presented i n chapter t h r e e . Thus, the labour f o r the p e t t y c a p i t a l i s t s e c t o r i n s o c i a l i s t n a t i o n s comes from those who have a l t e r n a t i v e employment as w e l l as those who do not. In s o c i a l i s t economies, p e t t y c a p i t a l i s m r e p r e s e n t s a v i o l a t i o n of the economic as w e l l as the p o l i t i c a l system of the n a t i o n , although the s o c i a l i s t n a t i o n s have s t a r t e d to accept the i n f o r m a l s e c t o r as an ' i n t e g r a l p a r t of the system. For in s t a n c e i n China the i n f o r m a l s e c t o r i s r e c o g n i s e d t o be a p a r t of the " u n i f i e d s o c i a l i s t market" ( L i n , 1980). S i m i l a r statements have been made f o r the U.S.S.R. and the Eas t e r n European n a t i o n s (Mattera, 1985; Aslund, 1985). In Western c a p i t a l i s t , and T h i r d World n a t i o n s p e t t y c a p i t a l i s m i s only a v i o l a t i o n of the economic system. The v i o l a t i o n of a p o l i t i c a l i d e o l o g y i s v u l n e r a b l e to gr e a t e r c r i t i c i s m and, t h e r e f o r e , the p e t t y c a p i t a l i s t s e c t o r w i l l be more s t r i c t l y c o n t r o l l e d i n the s o c i a l i s t n a t i o n s . I t i s the gre a t p e r s o n a l r i s k s i n v o l v e d i n p a r t i c i p a t i o n i n p e t t y c a p i t a l i s t a c t i v i t i e s as w e l l as s t r i c t s t a t e s u r v e i l l a n c e that r e s t r i c t s the p r o l i f e r a t i o n of p e t t y c a p i t a l i s m even though the demand i s presen t and there i s labour w i l l i n g to p a r t i c i p a t e . As a r e s u l t , p e t t y c a p i t a l i s m i s o f t e n underground and not j u s t openly i l l e g a l . T h i s i n s t a b i l i t y , however, i s conducive to easy e n t r y and e x i t of labour i n the p e t t y c a p i t a l i s t s e c t o r . E m p i r i c a l evidence has shown that r e l a x a t i o n of s t a t e r e s t r i c t i o n s l e d to a p r o l i f e r a t i o n of p e t t y c a p i t a l i s m 1 45 i n the case of China, Hungary, Poland (Aslund, 1985; De G r a z i a , 1984; C a i , 1980) 2.3 Petty C a p i t a l i s m In T h i r d World Economies P e t t y c a p i t a l i s m i n the T h i r d World i s s u b s t a n t i a l (Moser, 1984). I t has been s t a t e d that the i n f o r m a l s e c t o r i s a r e s u l t of the f a s t growth i n labour f o r c e and the slow growth i n formal s e c t o r p r o d u c t i o n , l e a d i n g to poverty and unemployment. But t h i s view i s too l i m i t e d . I t cannot e x p l a i n , f o r i n s t a n c e , the 'modern' t h r i v i n g i n f o r m a l s e c t o r . However, i f the a l t e r n a t i v e a n a l y s i s i s a p p l i e d to the T h i r d World and both the consumer demand and the labour supply p o t e n t i a l of the p e t t y c a p i t a l i s t s e c t o r i s c o n s i d e r e d , then the great v a r i a t i o n s i n type and d i s t r i b u t i o n of a c t i v i t y becomes more comprehensible. 2.3.1 The P o t e n t i a l Demand From P e t t y C a p i t a l i s m In The T h i r d  World In the T h i r d World the demands from p e t t y c a p i t a l i s m are l a r g e . Poverty and unemployment i s a problem i n most of the d e v e l o p i n g n a t i o n s and there i s l i m i t e d compensation i n the form of government we l f a r e ( f i g u r e 10). Some c h a r i t a b l e i n s t i t u t i o n s look a f t e r the needs of some of the poor but t h i s i s not e x t e n s i v e . In I n d i a , the Ramakrishna M i s s i o n , the S a l v a t i o n army and other such i n s t i t u t i o n s are p r e s e n t , but these are c l e a r l y not s u f f i c i e n t because the poor can s t i l l be seen l i v i n g on the c i t y s t r e e t s . Thus, not a l l the b a s i c minimum needs of the poor, such as food and s h e l t e r , are met. s 146 The p u r c h a s i n g power of the poor i s so low that formal s e c t o r products and s e r v i c e s are g e n e r a l l y beyond t h e i r reach. For the poor, cheaper a l t e r n a t i v e s are a v i t a l n e c e s s i t y and s i n c e the formal s e c t o r can only p r o v i d e some of these cheap goods, there i s an a r r a y of cost-based demands f o r cheaper s u b s t i t u t e s to be met. For i n s t a n c e , i n I n d i a , the formal s e c t o r does attempt to b r i n g some consumer goods to the reach of the poor by packaging techniques or cheaper products, eg. c i g a r e t t e s s o l d i n d i v i d u a l l y ; small packages of soap; ' b i d d i ' , a type of cheap c i g a r e t t e ; and coarse c o t t o n c l o t h . R a t i o n s t o r e s e x i s t to p r o v i d e e s s e n t i a l foods such as r i c e , wheat and sugar at government c o n t r o l l e d p r i c e s . But, there are many needs of the poor t h a t a re not met through the formal s e c t o r , f o r example, p e r i s h a b l e foods, c l o t h i n g , and u t e n s i l s . Thus c o s t -based demands can be a l a r g e p a r t of the p o t e n t i a l demand from the p e t t y c a p i t a l i s t s e c t o r . But t h i s i s not a l l . In the T h i r d World the income d i s p a r i t i e s are s i g n i f i c a n t , mostly due to the l a r g e middle income group. T h i s i s a t t r i b u t a b l e t o two f a c t o r s . F i r s t l y , many jobs are c r e a t e d i n the support systems of the i n d u s t r i a l i s a t i o n p rocess ( i . e . commerce, t r a n s p o r t , and marketing). Secondly, p r o v i d i n g employment i n the government, f o r a d m i n i s t r a t i v e or c l e r i c a l p o s i t i o n s , i s a d e l i b e r a t e s t r a t e g y of many T h i r d World n a t i o n s f o r combating unemployment. The l a r g e income range, from the upper income groups to those poverty s t r i c k e n , c r e a t e s a wide v a r i e t y of demands both of the c o s t - b a s e d and o p t i o n a l c a t e g o r i e s , from the p e t t y 1 47 c a p i t a l i s t s e c t o r . T h i s i s best understood by a general d e s c r i p t i o n of the types of demands from the p e t t y c a p i t a l i s t s e c t o r a c c o r d i n g to income groups, as d i s c u s s e d i n the f o l l o w i n g paragraphs. The upper income group, i n every s o c i e t y , l i k e s to i n c r e a s e i t s l e i s u r e time. While i t i s d i f f i c u l t to reduce the work time, time spent on other a s p e c t s of l i v i n g can be reduced to a c q u i r e l e i s u r e without a f f e c t i n g e a r n i n g c a p a c i t y . For i n s t a n c e , time spent on domestic chores i s e a s i l y reduced, and the l e i s u r e time gained can be.used to f u r t h e r m a t e r i a l g a i n s , or f o r p e r s o n a l achievements, s o c i a l or r e c r e a t i o n a l b e n e f i t s . In the developed n a t i o n s , t e c h n o l o g i c a l i n n o v a t i o n s have reduced the time spent on domestic c h o r e s . eg. microwave ovens, and power lawn mowers. In the labour s u r p l u s T h i r d World economies, l e i s u r e time i s a c q u i r e d by the use of cheap l a b o u r . Thus, the p e t t y c a p i t a l i s t s e c t o r p r o v i d e s the upper income groups, who are employed i n the formal s e c t o r , with cheap labour to be used as domestic h e l p (gardeners, cooks, laundrymen) or f o r use i n the p r o d u c t i o n of goods of the formal s e c t o r . 1 9 Santos (1979) has observed, f o r i n s t a n c e , that the amount of domestic h e l p i s q u i t e h i g h i n Rio de J a n i e r o and C a l c u t t a . Upper income groups a l s o l i k e the convenience of door to door s a l e of goods such as f r u i t s , v e g e t a b l e s and i c e , by the p e t t y c a p i t a l i s t s e c t o r . The m a r g i n a l l y higher p r i c e s of these goods i s compensated f o r by 1 9 T h i s can be n a t i o n a l l y or an i n t e r n a t i o n a l l y c o n t r o l l e d venture depending on the i n t e g r a t i o n of the n a t i o n i n t o the i n t e r n a t i o n a l c a p i t a l i s t market. 1 48 the s a v i n g s i n time, c o s t s , and inconvenience of going to a market. The demands of the upper income p o p u l a t i o n are thus based on p r e f e r e n c e s f o r convenience, c o s t , and q u a l i t y , which are s i m i l a r to those i n Western c a p i t a l i s t or s o c i a l i s t economies. Most of the e s s e n t i a l and n o n - e s s e n t i a l needs of the r i c h can be met by the formal s e c t o r , but i f they consume i n any form from the p e t t y c a p i t a l i s t s e c t o r then they e x e r c i s e a p r e d i l e c t i o n to do so. Because a c h o i c e i s i n v o l v e d , demands from p e t t y c a p i t a l i s m by the r i c h are o p t i o n a l and l i k e l y to f l u c t u a t e over time. For example, domestic h e l p can be r e p l a c e d by the a c q u i s i t i o n of modern household gadgets. The middle income group c r e a t e s both o p t i o n a l demands as w e l l as co s t - b a s e d demands from the p e t t y c a p i t a l i s t s e c t o r . The o p t i o n a l demands are s i m i l a r to those d e s c r i b e d f o r the upper income group. Much of the middle c l a s s demands r e f l e c t t h e i r d e s i r e to emulate the l i f e s t y l e s of the r i c h i n the use of consumer goods. These are not e s s e n t i a l to s u r v i v a l , but enhances t h e i r standard of l i v i n g . Products from the p e t t y c a p i t a l i s t s e c t o r , based on such demands, tend to be cheaper v e r s i o n s of formal s e c t o r goods. Here the p e t t y c a p i t a l i s t s e c t o r e x h i b i t s a great c a p a c i t y to be i n n o v a t i v e and f l e x i b l e . For i n s t a n c e , cheap lemonade s e t s made from o l d b o t t l e s are s o l d i n I n d i a as s u b s t i t u t e s f o r the b e t t e r q u a l i t y , more expensive ones from the formal s e c t o r . In I n d i a , t h i s f i x a t i o n of the middle c l a s s f o r the s t a t u s of the r i c h borders on humour. The p e t t y c a p i t a l i s t s e c t o r i s quick to take advantage of t h i s need. For i n s t a n c e , f o r those who cannot a f f o r d 'Kwality' i c e cream, 149 the reputed best brand, the p e t t y c a p i t a l i s t s e c t o r p r o v i d e s a cheaper i m i t a t i o n c a l l e d ' q u a l i t y ' i c e cream. The demands from the p e t t y c a p i t a l i s t s e c t o r , by the middle c l a s s are not only v a r i a b l e but on a continuum between o p t i o n a l and c o s t - b a s e d demands. The r i c h e r middle c l a s s w i l l c r e a t e o p t i o n a l demands such as the s e r v i c e s of a cook, or gardener, while those b o r d e r i n g on poverty w i l l c r e a t e l a r g e l y c o s t based demands f o r bare, e s s e n t i a l s l i k e food items. The lower income bracket, the poor, are l e s s a b l e to consume from the formal s e c t o r . For t h i s group, p e t t y c a p i t a l i s m p r o v i d e s many of the needs e s s e n t i a l f o r s u r v i v a l . For example, i n the s q u a t t e r c o l o n i e s i n Rourkela, I n d i a , the poor rented shacks from o t h e r s i n the same income group (Das, 1977). The i n t e r e s t i n g p o i n t to note was that the l a n d l o r d s were i l l e g a l occupants of the l a n d . Others r e l y on the p e t t y c a p i t a l i s t s e c t o r f o r food, c l o t h i n g and even medical and other s e r v i c e s . The demands from the p e t t y c a p i t a l i s t s e c t o r , by the lower income group i s t h e r e f o r e almost e n t i r e l y cost-based. Only a s m a l l m i n o r i t y may be able t o a f f o r d o p t i o n a l demands. Cost-based demands a r e , as s t a t e d e a r l i e r , unchanging i n time and c r e a t e a p e t t y c a p i t a l i s t s e c t o r t h a t i s ' s t a t i c ' . 2.3.2 The Labour P o t e n t i a l For Pe t t y C a p i t a l i s m In The T h i r d  World In the T h i r d World, the unemployed and the poor are uncompensated by we l f a r e s t a t e measures. Those who are s o c i o -e c o n o m i c a l l y disadvantaged from e n t e r i n g the labour f o r c e i n the 150 Figure 10 - Hypothet ical r e l a t i o n s h i p of income leve l s and expenditure in petty c a p i t a l i s t sector MIG MIG LIG EXPENDITURE IN PETTY CAPITALISM EXPENDITURE BY AN INDIVIDUAL FAMILY BY INCOME.IN.THE THIRD WORLD EXPENDITURE IN PETTY CAPITALISM EXPENDITURE BY AN INDIVIDUAL FAMILY BY INCOME IN A DEVELOPED NATION LIG EXPENDITURE IN PETTY CAPITALISM EXPENDITURE BY TOTAL POPULATION BY INCOME GROUP IN THE THIRD WORLD LIG EXPENDITURE IN PETTY CAPITALISM EXPENDITURE BY TOTAL POPULATION BY INCOME GROUP IN A DEVELOPED NATION LIG; MIG, HIG: LOWER, MIDDLE AND HIGHER INCOME CROUP dominant mode are in great need of a source of l i v e l i h o o d and income. Petty cap i ta l i sm of fers a means of s u r v i v a l for the poor but i t i s not chosen in preference to employment in the formal sector . Labour supply for the petty c a p i t a l i s t sector comes p a r t l y from the poor and the unemployed in urban areas 151 some of which i s through m i g r a t i o n of the r u r a l poor. The poor c a t e r to both the cost-based and o p t i o n a l demands. However, the c o s t - b a s e d demands are a l s o c r e a t e d by the poor and thus when the needs of the poor are met by the poor through the p e t t y c a p i t a l i s t s e c t o r , the s e c t o r i s poverty-bound. For i n s t a n c e , i n I n d i a the poor go to the main vegetable and f r u i t markets i n the e a r l y morning hours, as the t r u c k s with the produce a r r i v e , and c o l l e c t the d i s c a r d e d items to s e l l to the poor. The p r i c e of f r u i t s or vegetables i n the formal s e c t o r i s too h i g h f o r the poor. I t i s , t h e r e f o r e , unique to the T h i r d World that the source of demand and the labour supply f o r p e t t y c a p i t a l i s m can come from the same income group. T h i s type of p e t t y c a p i t a l i s t a c t i v i t y was n o t i c e d i n the e a r l y years o f the dualism debate (Reynolds, 1966; G e e r t z , 1963) and was consequently r e l a t e d to T h i r d World underdevelopment/dependency. However, labour supply f o r p e t t y c a p i t a l i s m i s not r e s t r i c t e d to the poor a l o n e . The w e l l - t o - d o may j o i n the p e t t y c a p i t a l i s t s e c t o r i n p r e f e r e n c e to employment i n the formal s e c t o r , or h o l d dual p a r t i c i p a t i o n . T h e i r motive i s not economic s u r v i v a l but economic g a i n , and they are more l i k e l y to work i n response to the o p t i o n a l demands eg. handmade c a r d s , m o o n l i g h t i n g of s e r v i c e s , or tax e v a s i v e a c t i v i t i e s , which resemble the p e t t y c a p i t a l i s t a c t i v i t i e s i n other economic systems. Such p e t t y c a p i t a l i s t a c t i v i t i e s are l i k e l y to be more t h r i v i n g and perhaps modern. T h i s can e x p l a i n the modern p r o f i t making a c t i v i t i e s t h a t have been found i n the i n f o r m a l s e c t o r i n recent y e a r s . While s c h o l a r s have sought to separate these from 1 52 the o t h e r s , the a l t e r n a t i v e a n a l y s i s p o s t u l a t e s that they are no d i f f e r e n t . The d i f f e r e n c e s are only the r e f l e c t i o n of a p a r t i c u l a r combination of labour supply and type of demand. Thus, i n the T h i r d world p e t t y c a p i t a l i s t a c t i v i t i e s can range from the ' s t a t i c ' t o the 'dynamic'. In the s t a t i c type, the needs of the poor are met by the poor a l l o w i n g l i t t l e scope f o r growth i n employment or income. The dynamic type has a g r e a t e r input of other income groups and a l l o w s f o r labour a b s o r p t i o n and economic g a i n . These a r e , however, the p o l a r ends and many a c t i v i t i e s w i l l be.on a continuum between the two. 2.4 P e t t y C a p i t a l i s m And Urban S i z e Rural-urban m i g r a t i o n has been found to i n f l a t e the s i z e of the p e t t y c a p i t a l i s t s e c t o r i n the T h i r d World c i t i e s . While i t i s t r u e that m i g r a t i o n c o n t r i b u t e s to the s i z e of the s e c t o r i t must be s t r e s s e d that i t i s not necessary f o r the c r e a t i o n of the p e t t y c a p i t a l i s t s e c t o r i n an urban economy. Rural migrants c e r t a i n l y add to the labour pool and a l s o i n c r e a s e the c o s t -based demands from p e t t y c a p i t a l i s m , but other c a t e g o r i e s of labour and other demands are a l r e a d y present from other income groups. Thus, the p e t t y c a p i t a l i s t s e c t o r can e x i s t independent of m i g r a t i o n as has been observed i n recent years (Richardson, 1984; Mazumdar, 1981; Sabot, 1979). The T h i r d World development process, one should r e c a l l from chapter two, i s such that p r o d u c t i o n e f f o r t s of the formal s e c t o r are c o n c e n t r a t e d i n the l a r g e towns l e a d i n g t o the c o n c e n t r a t i o n of middle and upper c l a s s e s that are employed i n 1 53 F i g u r e 11 - H y p o t h e t i c a l d i s t r i b u t i o n of p e t t y c a p i t a l i s m in the T h i r d World by c i t y s i z e PETTY CAPITALISM PETTY CAPITALISM DOMINANT _ _ MODE vCBO = OPTIONAL OEMAND TOWN CBD « COST BASED OEMAND NOTE: 1. S IZE OF OPTIONAL DEMAND FROM PETTY CAPITALISM AND UPPER INCOMES DECREASE PROPORTIONATELY WITH CITY S I ZE . 2. S IZE OF DOMINANT MODE AND UPPER INCOME GROUP OECREASE PROPORTIONATELY WITH CITY S I ZE . 3. S IZE OF COST BASED DEMANDS ANO LOW INCOMES INCREASE INVERSELY WITH CITY S I ZE . and consume from t h i s s e c t o r . The upper income groups, i t was e x p l a i n e d i n the a l t e r n a t i v e a n a l y s i s , c r e a t e o p t i o n a l demands which are unstable over time and consequently allow labour to ent e r the p e t t y c a p i t a l i s t s e c t o r e a s i l y . Large towns a r e , t h e r e f o r e , a t t r a c t i v e to migrants from r u r a l a r e a s . 1 54 Small towns, on the other hand, were n e g l e c t e d i n the e a r l y phases of development and are l e f t with few or no formal s e c t o r p r o d u c t i o n u n i t s , and consequently a poorer p o p u l a t i o n . T h i s d i s t r i b u t i o n p a t t e r n leads to the presence of mostly c o s t - b a s e d demands in s m a l l towns, that are unchanging i n time, and a supply of labour from the poor ( f i g u r e 11). The p e t t y c a p i t a l i s t s e c t o r that forms i n small towns i s poverty bound and r i g i d . I t i s i n c a p a b l e of growing once a balance i s reached between the demand f o r goods and s e r v i c e s of the poor and the labour supply. Small towns w i l l not e a s i l y permit labour e n t r y unless the balance i s d i s t u r b e d by the c r e a t i o n of o p t i o n a l demands or by a s u b s t a n t i a l i n c r e a s e i n cost-based demands. In s m a l l e r towns, because the formal s e c t o r i s l a c k i n g , the p e t t y c a p i t a l i s t s e c t o r i s not only present i t i s p r o p o r t i o n a t e l y l a r g e r than the formal s e c t o r . But, because i t i s based on cost-based demands, i t i s a s t a t i c s e c t o r , and i s l e s s a b l e to absorb l a b o u r . T h i s e x p l a i n s why some s t u d i e s have found a l a r g e r p r o p o r t i o n of the i n f o r m a l s e c t o r i n the s m a l l towns ( K u l l , 1984; E l Shakhs, 1984; Das, 1982). T h i s s p a t i a l d i s t r i b u t i o n of p e t t y c a p i t a l i s m i n the T h i r d World, i s an aspect to c o n s i d e r i n development p l a n s . 3. CONCLUSION T h i s chapter has presented an a l t e r n a t i v e a n a l y s i s on the i n f o r m a l s e c t o r that not only e x p l a i n s the v a r i o u s types of p e t t y c a p i t a l i s t a c t i v i t i e s that have been observed i n the T h i r d World but a l s o i t s d i s t r i b u t i o n i n d i f f e r e n t s s i z e d urban 1 55 Fi g u r e 12 - S i m p l i s t i c r e p r e s e n t a t i o n of labour p a r t i c i p a t i o n and type of demand i n p e t t y c a p i t a l i s m by economic systems TYPE OF ECONOMY TYPE OF LABOUR PARTICIPATION IN PETTY CAPITALISM TYPE OF DEMANDS UNEMPLOYED BY CHOICE UNEMPLOYED BY COMPULSION PARTICIPANTS IN BOTH SECTORS OPTIONAL (FOR NON-ESSENTIAL NEEDS) COST-BASED (FOR ESSENTIA! NEEDS) WESTERN CAPITALIST X X XX XXX X SOCIALIST X XX XXX X THIRD WORLD X XXX XX XX XXX X-XXX: LEAST TO MOST COMMON c e n t r e s . I t e x p l a i n s the presence of p e t t y c a p i t a l i s m i n Western c a p i t a l i s t and s o c i a l i s t economies and the d i f f e r e n c e s t h a t occur i n the p e t t y c a p i t a l i s t s e c t o r i n each economy. A l t o g e t h e r , the a l t e r n a t i v e a n a l y s i s has i n c o r p o r a t e d r e c e n t e m p i r i c a l f i n d i n g s that c o u l d not be e x p l a i n e d under the o l d view of the i n f o r m a l s e c t o r as a symptom of underdevelopment/dependency. 1 56 The a l t e r n a t i v e a n a l y s i s p r e s e n t s the i n f o r m a l s e c t o r as a p e t t y c a p i t a l i s t s e c t o r that responds to the u n f u l f i l l e d consumer demands i n each type of economy p r o v i d e d t h a t there i s a labour supply w i l l i n g ( v o l u n t a r i l y or i n v o l u n t a r i l y ) to engage i n i t . T h i s a l l o w s many d i f f e r e n t combinations between labour supply and consumer demand such that many v a r i a t i o n s i n type of a c t i v i t y are present ( F i g u r e 12). The p e t t y c a p i t a l i s t s e c t o r i s thus a s e c t o r of a great v a r i e t y of a c t i v i t i e s , o n l y some of which are a r e f l e c t i o n of poverty and unemployment. 1 57 CHAPTER 5: IMPLICATIONS OF THE ALTERNATIVE ANALYSIS TO PLANNING The i n f o r m a l s e c t o r has been of concern to p l a n n e r s i n the T h i r d World because of i t s a s s o c i a t i o n with poverty and unemployment. The causes of poverty and unemployment were t a c k l e d by economic planners at the n a t i o n a l l e v e l . The m a n i f e s t a t i o n s of poverty and unemployment i n the urban areas i n the form of hawkers, vendors, and s q u a t t e r c o l o n i e s c r e a t e d problems of housing q u a l i t y , t r a f f i c c o n g e s t i o n s , u n s a n i t a r y c o n d i t i o n s and s t r a i n on urban i n f r a s t r u c t u r e , a l l of which a t t r a c t e d the a t t e n t i o n of urban p l a n n e r s . T h i s focus on poverty and unemployment i n p l a n n i n g , at the n a t i o n a l and urban s c a l e , has not changed over the l a s t t h i r t y y e ars a l t h o u g h the p l a n n i n g approach has. These e f f o r t s by p l a n n e r s w i l l be reviewed l a t e r i n the chapter. I t i s the i n t e n t i o n here only to p o i n t out t h a t the i n f o r m a l s e c t o r i n the T h i r d . World has been viewed as a p l a n n i n g problem at the n a t i o n a l and urban s c a l e . In l i g h t of t h i s p o s i t i o n , the i m p l i c a t i o n s of the a l t e r n a t i v e a n a l y s i s w i l l be d i s c u s s e d . There are some d i f f e r e n c e s between the i n f o r m a l s e c t o r and the p e t t y c a p i t a l i s t s e c t o r , proposed i n the a l t e r n a t i v e a n a l y s i s , t h a t w i l l a f f e c t the c u r r e n t p o s i t i o n of p l a n n i n g . These a r e : 1. The p e t t y c a p i t a l i s t s e c t o r i n c l u d e s a wider range of a c t i v i t i e s . 2. The p e t t y c a p i t a l i s t s e c t o r i s not r e s t r i c t e d to the poor. 3. The p e t t y c a p i t a l i s t s e c t o r i s not r e s t r i c t e d to the T h i r d 158 World. 4. The formation of the p e t t y c a p i t a l i s t s e c t o r i s not determined by the presence of s u r p l u s labour a l o n e . Other sources of labour a re a l s o necessary f o r i t s c r e a t i o n . 5. A demand f o r goods and s e r v i c e s from the p e t t y c a p i t a l i s t s e c t o r i s a l s o necessary f o r i t s c r e a t i o n . The f i r s t d i f f e r e n c e reframes the 'problem' to be planned f o r . The other d i f f e r e n c e s a f f e c t p l a n n i n g s t r a t e g y , that i s , how should p l a n n i n g proceed i n the l i g h t of the re.framed 'problem'. Between i d e n t i f y i n g the problem and p l a n n i n g f o r i t , l i e s the d e c i s i o n whether p l a n n i n g i s necessa r y . T h e r e f o r e , t h i s chapter i s d i v i d e d i n t o f i v e s e c t i o n s , the goal of pl a n n i n g ; the r o l e of the s t a t e i n the pa s t ; the success of past p l a n n i n g e f f o r t s ; the proposed r o l e of the s t a t e ; and suggestions f o r p l a n n i n g f o r the p e t t y c a p i t a l i s t s e c t o r . The f i r s t , f o u r t h and f i f t h s e c t i o n s are based upon the f i n d i n g s of the a l t e r n a t i v e a n a l y s i s . Most of the d i s c u s s i o n i n these three  s e c t i o n s i s i n the context of the poverty-bound p e t t y c a p i t a l i s t  s e c t o r i n the T h i r d World but the focus i n the l a s t s e c t i o n , i s on I n d i a . References w i l l be made to the past p l a n n i n g e f f o r t s  where necessary. References to p e t t y c a p i t a l i s m i n other  economies and to other c a t e g o r i e s of p e t t y c a p i t a l i s t a c t i v i t i e s  w i l l only be made f o r c o m p a r i t i v e purposes. 1 59 1. REFRAMING THE PROBLEM FOR PLANNING As a l r e a d y mentioned, the i n f o r m a l s e c t o r has been viewed to be l a r g e l y the refuge of the poor i n the T h i r d World. While the more p r o f i t a b l e i n f o r m a l a c t i v i t i e s have been r e c o g n i s e d i n the l a s t few years ( S t e e l , 1977; Nihan and J o u r d a i n , 1978), p l a n n i n g e f f o r t s have not covered these a c t i v i t i e s . Consequently the context of p l a n n i n g i s r e s t r i c t e d to the a c t i v i t i e s of the poor. In t h i s l i g h t , c o n s i d e r the range of a c t i v i t i e s t h a t are proposed by the a l t e r n a t i v e a n a l y s i s as be l o n g i n g to the p e t t y c a p i t a l i s t s e c t o r . Four major c a t e g o r i e s of a c t i v i t i e s a re presented here. 1. Tax e v a s i v e a c t i v i t i e s , the underground or black  economy a c t i v i t i e s are present i n the T h i r d World and should be r e c o g n i s e d as a p a r t of the p e t t y c a p i t a l i s t s e c t o r . In Western c a p i t a l i s t economies these a c t i v i t i e s have not on l y been i n c l u d e d i n the i n f o r m a l s e c t o r , but have been accorded a g r e a t e r importance i n the study of the i n f o r m a l s e c t o r than low paying a c t i v i t i e s such as b a b y - s i t t i n g , because of the l o s s of n a t i o n a l revenue. In the T h i r d World, tax e v a s i v e a c t i v i t i e s have been t r e a t e d as a separate problem. Speaking of tax evasion i n I n d i a , Kabra (1982 p.1) s t a t e s , " I t i s a f a r more p e r v a s i v e and s e r i o u s e q u i v a l e n t of what i s known as 'moonlighting' or the 'second economy' i n many developed market economies". What i s common i n tax e v a s i v e a c t i v i t i e s i n the T h i r d World or developed economies i s that s e v e r a l f a c e t s of the economy are hidden i . e . , p r o d u c t i o n , consumption, employment, and income d i s t r i b u t i o n ( Heertje and Ahers 1982). 1 60 Tax e v a s i v e a c t i v i t i e s i n c l u d e the use of l e g i t i m a t e economic a c t i v i t i e s to a c q u i r e u n d e c l a r e d income, (eg. by b a r t e r of p r o f e s s i o n a l s e r v i c e s , or m o o n l i g h t i n g ) , as w e l l as the use of i l l e g a l a c t i v i t i e s (eg. underground f a c t o r i e s , or s e l l i n g of goods at p r i c e s higher than the government c o n t r o l l e d r a t e ) . In I n d i a , hoarding of e s s e n t i a l commodities to c r e a t e an a r t i f i c i a l shortage and then s e l l i n g the commodity at e x o r b i t a n t p r i c e s i n the black market i s a major problem f o r the government that i s t r y i n g to p r o v i d e e s s e n t i a l goods at government c o n t r o l l e d p r i c e s . (Ray, 1982; Kabra, 1982). M o o n l i g h t i n g i s q u i t e common i n the lower income groups of I n d i a . For i n s t a n c e , i n d i v i d u a l s with low wages i n the formal s e c t o r , (eg. peons i n a government o f f i c e s ) sometimes a l s o work as pa r t time domestic h e l p . B r i b e s can c o n t r i b u t e to the money earned i l l e g a l l y . Customers can be cheated i n t o paying h i g h e r p r i c e s by the use of i n a c c u r a t e weigh s c a l e s i n produce s t o r e s , or i n a c c u r a t e meters on a s c o o t e r - r i c k s h a w s . I t i s only i n rec e n t years, that any s i m i l a r i t y has been r e c o g n i s e d between the tax e v a s i v e a c t i v i t i e s i n the T h i r d World and the underground economy i n Western n a t i o n s (Mattera, 1985). The types of a c t i v i t i e s that can e x i s t i n t h i s category are e x t e n s i v e but as Ray (1981, p.33) s t a t e s they are " a l l working with a common o b j e c t i v e , p r o f i t e e r i n g " . Ray (1981) has p r o v i d e d some of the major types of tax e v a s i v e a c t i v i t i e s t h a t can be found i n the T h i r d World (See f i g u r e 13). 2. The second category i n c l u d e s a c t i v i t i e s that are sub- c o n t r a c t e d to the p e t t y c a p i t a l i s t s e c t o r . S u b - c o n t r a c t i n g i s 161 F i g u r e 13 - Types of tax e v a s i v e a c t i v i t i e s THE. BLACK M A R K E T JLZ C o S J E C T I V E S j ' | F I N A N c F I ["MONOPOLISATION! [PROFITEERING! I PROFIT I J PROFIT 1 tOPTIMISATIONl IMAXIMISATIONJ CORSANISATIOSQ 1 I 1 UNLAWFUL SLACK SHADOW GHOST BLACK MONEY HIGH MONEY BILATERAL. MONEY ACCOUNTS TRANSACTIONS TREASURES FINANCING AND MULTIPLE FINANCING 8 PARALLEL AND THEIR FOR FINANCING BANKING CONVERSIONS SMUGG LING (CORNERING) {HOARDING^ CC O M M O D I T l T \ / _ p W C E >y B L A C K JISPIRAL I MARKETING ^/^MANOEUVRES./ (I M I T A T I O N S , A F A K E S A M D I S U S S T I T U T I O M . / (UNLAWFUL "\ SPECULATION^ (ADULTERATION) f SLACK MARKtTN x ' I IN SCARCITY AND J p F A M I N E J -(SKiUCaLING') T A X E V A S I O N ) Source: Ray, 1981, p. 44, u s u a l l y a s s o c i a t e d with e x p l o i t a t i o n of the labour i n the p e t t y c a p i t a l i s t s e c t o r , u s u a l l y by the formal s e c t o r . E s s e n t i a l l y , the p e t t y c a p i t a l i s t s e c t o r p r o v i d e s goods and s e r v i c e s to the formal s e c t o r i . e . T h i r d World e n t r e p r e n e u r s , and m u l t i n a t i o n a l c o r p o r a t i o n s at a cheap p r i c e (Mattera, 1985; Kassalow, 1979; Snow, 1979). I t i s t h i s type of a c t i v i t y t h a t c o n t r i b u t e d to the 1 argument that the i n f o r m a l s e c t o r p e r s i s t e d due to e x p l o i t a t i o n of the labour by c a p i t a l i s t p u r s u i t s . A t y p i c a l f e a t u r e of s u b - c o n t r a c t e d a c t i v i t i e s i n the p e t t y c a p i t a l i s t s e c t o r i s the hig h use of female labour (Meis, 1982; Schmitz 1982). T h i s i s not , however, n e c e s s a r i l y a f e a t u r e of the T h i r d World, because the use of female labou r i n Western n a t i o n s i s a l s o w e l l documented ( R e d c l i f t and Mingione 1985; 1 62 Mattera, 1985). For example, the yarn s t o r e s i n Vancouver o f t e n c o n t r a c t work to k n i t t e r s , mostly h o u s e w i v e s . 2 0 Perhaps the f a c t t h a t s u b c o n t r a c t i n g work can be c a r r i e d out i n the workers home makes i t easy to use female labour eg. the l a c e makers i n Naraspur, I n d i a (Mies, 1982), or the hammock makers i n B r a z i l (Schmitz, 1982). However, f u r t h e r s u b - c o n t r a c t i n g and e x p l o i t a t i o n of labour i s a l s o found w i t h i n the p e t t y c a p i t a l i s t s e c t o r . Mattera s t a t e s that sometimes s u b - c o n t r a c t e d a c t i v i t i e s from the formal s e c t o r are d i s p e r s e d w i t h i n the i n f o r m a l s e c t o r i . e . " f u r t h e r i n t o t i n y workshops' (Mattera 1985, p.104) 3. The t h i r d category i n c l u d e s a c t i v i t i e s t h a t were  i d e n t i f i e d i n the T h i r d World as the "modern i n f o r m a l s e c t o r " . E s s e n t i a l l y these are a c t i v i t i e s t h a t are small s c a l e , and engage i n the p r o v i s i o n of goods t h a t are s o l d at lower p r i c e s than that of the formal s e c t o r . Most s t u d i e s of t h i s 'modern in f o r m a l s e c t o r ' have focussed on the A f r i c a n n a t i o n s (Page and S t e e l , 1984; Demol and Nihan, 1982; S t e e l , 1977) but, there are i n d i c a t i o n s of a p r o f i t a b l e modern s e c t o r i n other d e v e l o p i n g n a t i o n s , eg. I n d i a ( L i t t l e et a l . , 1984), L a t i n America (Cortez and Berry, 1983). The d e f i n i t i o n of the small s c a l e , t h r i v i n g i n f o r m a l s e c t o r i s i n c o n s i s t e n t (Page and S t e e l , 1984) but a c c o r d i n g to the World Bank s e c t o r p o l i c y paper (1978), most such e n t e r p r i s e s are dependent on middlemen or money l e n d e r s f o r working c a p i t a l and 2 0 Information i s based on p e r s o n a l communication with k n i t t i n g s t o r e s . 1 63 p e r s o n a l emergencies i n s t e a d of the banks. These e n t e r p r i s e s are not a g g r e s s i v e i n marketing techniques, and the use of i n f r a s t r u c t u r e and s e r v i c e s such as power, water, and access roads i s i n f e r i o r . But, " t h e i r a b i l i t y to f u n c t i o n without such s e r v i c e s may h e l p to p r o t e c t t h e i r market niche from powerful c o m p e t i t o r s " (World Bank s e c t o r p o l i c y paper, 1978). T h i s type of a c t i v i t y i s not onl y l u c r a t i v e but i s o f t e n a p r e f e r r e d form of employment. In recent y e a r s , these small s c a l e e n t e r p r i s e s have been i d e n t i f i e d as "having a r i g h t f u l p l a c e i n the s t r a t e g i e s f o r socio-economic development" (Page and S t e e l , 1984). 4. The f o u r t h category i n c l u d e s the types of a c t i v i t i e s  t h a t are not h i g h l y p r o f i t a b l e . These a c t i v i t i e s i n c l u d e forms of self-employment based on u n s k i l l e d labour, low technology and small c a p i t a l input eg. hawking of goods. T h i s ca t e g o r y of a c t i v i t i e s has had the most a t t e n t i o n i n the debate on the i n f o r m a l s e c t o r i n the T h i r d World, p a r t i c u l a r l y i n the e a r l y y e a r s . These a c t i v i t i e s are not n e c e s s a r i l y an e x p r e s s i o n of pov e r t y , although i n the T h i r d World t h i s may be the case. For i n s t a n c e , hawking i n the s t r e e t s of D e l h i may be the r e s u l t of unemployment and poverty, but the hawking of sandwiches at wreck beach i n Vancouver i s j u s t another way to make some money. S i m i l a r l y , although a c t i v i t i e s such as baby s i t t i n g and garage s a l e s found i n Western n a t i o n s would f a l l i n t h i s category they are not ex p r e s s i o n s of po v e r t y . What these four c a t e g o r i e s of p e t t y c a p i t a l i s t a c t i v i t i e s i n d i c a t e i s that the p e t t y c a p i t a l i s t s e c t o r i n the T h i r d World 1 64 i s much more d i v e r s e than c u r r e n t l y p e r c e i v e d . The c u r r e n t focus on poverty and unemployment d e a l s with only one category but there are many other types of p e t t y c a p i t a l i s t a c t i v i t i e s and, t h e r e f o r e , many other problems. Each category of a c t i v i t y  p r e s e n t s a d i f f e r e n t type of problem and each should be a n a l y s e d  s e p a r a t e l y f o r p l a n n i n g purposes. Because of the d i v e r s i t y of the a c t i v i t i e s i n the p e t t y c a p i t a l i s t s e c t o r , the " g o a l s " f o r p l a n n i n g a l s o becomes d i v e r s e . That i s , p l a n n i n g f o r the p e t t y c a p i t a l i s t s e c t o r can i n c l u d e s e v e r a l p o l i c i e s , each one r e f l e c t i n g the p l a n n i n g needs of a p a r t i c u l a r category of a c t i v i t i e s . For example, p l a n n i n g f o r the p e t t y c a p i t a l i s t s e c t o r i n I n d i a can i n c l u d e c o n t r o l on smuggling a c t i v i t y as w e l l as p l a n n i n g f o r the s t r e e t vendor, but both w i l l need a separate a n a l y s i s and a separate p l a n n i n g s t r a t e g y . The p e t t y c a p i t a l i s t a c t i v i t i e s that are s e l e c t e d f o r p l a n n i n g w i l l depend on the development p r i o r i t i e s of the n a t i o n . Each n a t i o n has i t s own mix of p e t t y c a p i t a l i s t a c t i v i t i e s and some a c t i v i t i e s may pose a problem i n some na t i o n s but not o t h e r s . For example, small s c a l e , low p r o f i t a c t i v i t i e s has been the focus of much pl a n n i n g i n the T h i r d World, but i n Western c a p i t a l i s t n a t i o n s s i m i l a r a c t i v i t i e s such as b a b y - s i t t i n g and garage s a l e s are of l e s s e r concern. T h e r e f o r e , the o b j e c t i v e of p l a n n i n g f o r the poverty-bound p e t t y  c a p i t a l i s t s e c t o r i n the T h i r d World would be to reduce i t s s i z e  by i n c r e a s i n g incomes and employment o p p o r t u n i t i e s or to cope  with the s e c t o r , i n other ways, at the urban l e v e l . 1 65 2. THE ROLE OF THE STATE IN THE PAST In the past, i t was l a r g e l y determined that some s o r t of p l a n n i n g was necessary f o r the i n f o r m a l s e c t o r a c t i v i t i e s , which a c c o r d i n g to the a l t e r n a t i v e a n a l y s i s c o n s t i t u t e s o n l y the poverty-bound p a r t of the p e t t y c a p i t a l i s t s e c t o r . I t i s f o r t h i s reason, the the terms ' i n f o r m a l s e c t o r ' and 'poverty-bound p e t t y c a p i t a l i s t s e c t o r ' are used i n t h i s chapter to convey the same s e c t o r . The term ' i n f o r m a l s e c t o r ' i s r e t a i n e d i n the d i s c u s s i o n of p l a n n i n g e f f o r t s i n the past because t h a t was the term o r i g i n a l l y a p p l i e d to the s e c t o r . For t h i s c a t e g o r y of a c t i v i t i e s , the r o l e of the s t a t e has moved from a n e g a t i v e one, i . e . d i s c o u r a g i n g the a c t i v i t y , to a more p o s i t i v e one of compensating and r e h a b i l i t a t i n g the p a r t i c i p a n t s . There are three major phases i d e n t i f i a b l e : The negative phase: 1965-70 At t h i s time s t u d i e s of the i n f o r m a l s e c t o r were j u s t beginning and although models were proposed to e x p l a i n urban dualism (Reynolds, 1966; Ge e r t z , 1963) they were not s u f f i c i e n t to i n f l u e n c e p l a n n i n g . What i n f l u e n c e d p l a n n i n g i n the mid-s i x t i e s was the pro-modernisation approach towards development of T h i r d World n a t i o n s . In t h i s l i g h t , the i n f o r m a l s e c t o r , was not viewed f a v o u r a b l y because i t was d e s c r i b e d as a peasant-type, p r e c a p i t a l i s t s e c t o r . I t was a l s o a p e r i o d when T h i r d World urban p l a n n i n g was s t r o n g l y under the i n f l u e n c e of urban design concepts and the B r i t i s h system of p h y s i c a l p l a n n i n g . Planners had a b i a s towards p h y s i c a l d e sign s o l u t i o n s to urban problems 1 66 (Wishwakarma, 1981). The net r e s u l t was t h a t the i n f o r m a l s e c t o r was not only p e r c e i v e d to be an impediment to the process of modernisation, but a l s o an u n a e s t h e t i c f e a t u r e of the c i t y . P l a n n i n g had a n e g a t i v e a t t i t u d e towards the i n f o r m a l s e c t o r and t h e r e f o r e e r a d i c a t i o n , c o n t r o l , and r e s t r i c t i o n were dominant i n the s t r a t e g i e s of t h i s p e r i o d . Of course, p l a n n i n g f o r the i n f o r m a l s e c t o r was v i r t u a l l y synonymous with p l a n n i n g f o r the urban poor and s q u a t t e r c o l o n i e s (Moser, 1978). The r e l a t i o n s h i p of the i n f o r m a l s e c t o r to the formal s e c t o r or the n a t i o n a l economy, was not understood at t h i s time (Gerry, 1979; McGee, 1979; Bose, 1974) and so the p o s s i b l e consequences of these n e g a t i v e measures upon the urban and n a t i o n a l economy were not taken i n t o account. I t i s as i f the i n f o r m a l s e c t o r was assumed to f u n c t i o n independently of the formal s e c t o r and the p o p u l a t i o n at l a r g e . Thus, s t r a t e g i e s such as removal of s q u a t t e r s and i n f o r m a l a c t i v i t i e s were not viewed as a c t i o n s t h a t c o u l d a f f e c t the c i t y ' s economy-. Rather they were viewed as a c t i o n s towards the maintenance of m o d e r n i s a t i o n of c i t i e s , by the removal of impediments to modern growth. Planning f o r the i n f o r m a l s e c t o r was h i g h l y p h y s i c a l design and 'cosmetic' i n c o n t e n t . That i s , the s t r a t e g i e s at the urban l e v e l c o n s i d e r e d the outward m a n i f e s t a t i o n of the p a r t i c i p a n t s i n the i n f o r m a l economy i . e . s q u a t t e r c o l o n i e s , hawker zones e t c . and not the economic or s o c i a l a spects of the i n f o r m a l economy. Some of the n e g a t i v e measures used were: 1. C l o s u r e of the c i t y t o r u r a l migrants eg. J a k a r t a (McGee, 1 67 1972). 2. Removal of s q u a t t e r s f o r the purposes of c i t y b e a u t i f i c a t i o n eg. Kuala Lumpur (Poe t h i g , 1971), D e l h i (Ghosh, 1979). 3. Removal of the i n f o r m a l a c t i v i t i e s to the p e r i p h e r y of the c i t i e s eg. P h i l l i p i n e s , Indonesia (McGee and Yeung, 1977), D e l h i (Ghosh, 1979). 4. Discouragement of the i n f o r m a l economy through higher l i c e n s i n g f e e s , and propaganda a g a i n s t the use of t h e i r s e r v i c e s and goods eg. J a k a r t a (McGee, 1972). One must note that d u r i n g t h i s phase there was an absence of a r e g i o n a l approach to the problem. One reason f o r t h i s may be that r e g i o n a l p l a n n i n g had not developed as a p r o f e s s i o n . There was a lack of t r a i n e d r e g i o n a l p l a n n e r s at t h i s time and, as i n the case of I n d i a , there was no l e g i s l a t i v e backing f o r implementation of r e g i o n a l p l a n s even i f they had been made (Poulose, 1979). Secondly, n a t i o n a l development s t r a t e g i e s were pro-modernisation, which a l s o meant p r o - u r b a n i s a t i o n . Consequently, r u r a l and r e g i o n a l development were not a p r i o r i t y . I t may be s a i d t h at the a p p l i c a t i o n of the growth pole concept d u r i n g t h i s phase, i . e . by the c r e a t i o n of new towns, and s a t e l l i t e towns f o r the l a r g e c i t i e s ( A p p a l a r a j u and S a f i e r i n G i l b e r t 1976), d i d syphon some r u r a l migrants away from the crowded l a r g e c i t i e s and, t h e r e f o r e , i n d i r e c t l y a f f e c t the s i z e of the i n f o r m a l s e c t o r . However, growth pol e s were p r i m a r i l y o r i e n t e d to the achievement of r a p i d economic growth, and not development of the r u r a l h i n t e r l a n d i n order to reduce r u r a l 168 unemployment or p o v e r t y . The growth p o l e s , t h e r e f o r e , were not e n v i s a g e d as l o c a t i o n s f o r r e c i e v i n g r u r a l m i g r a n t s as an a l t e r n a t i v e t o l a r g e c i t i e s , a l t h o u g h t h a t might have been the i n d i r e c t r e s u l t . In t h e n e g a t i v e p h a s e , t h e r e f o r e , the poor and the unemployed w e r e , by and l a r g e , e i t h e r n e g l e c t e d or t r e a t e d c a l l o u s l y . The p o s i t i v e p h a s e : 1 9 7 0 - l a t e s e v e n t i e s D u r i n g the s e v e n t i e s , the l i t e r a t u r e on the i n f o r m a l s e c t o r had grown v o l u m i n o u s l y (see c h a p t e r s two and t h r e e ) . Many more urban d u a l i s m models had been p r o p o s e d ( H a r t , 1973; S a n t o s , 1973; McGee, 1973: I . L . O . , 1972). Some a t t e m p t s had a l s o been made t o i d e n t i f y t h e r e l a t i o n s h i p of the i n f o r m a l s e c t o r t o the urban economy, and even t o the n a t i o n a l and i n t e r n a t i o n a l economy ( S a n t o s , 1973). A l t h o u g h t h i s decade marks a p e r i o d of wide v a r i a t i o n i n p e r c e p t i o n of the i n f o r m a l s e c t o r , t h e r e i s l i t t l e doubt t h a t the work of the I . L . O . (1972) d o m i n a t e d the a p p r o a c h i n p l a n n i n g ( R i c h a r d s o n , 1984). The I . L . O . p r o p o s e d t h a t the i n f o r m a l s e c t o r a l t h o u g h i n d e p e n d e n t i n f u n c t i o n , was a l s o complementary t o the f o r m a l s e c t o r , and s h o u l d , t h e r e f o r e , be p r e s e r v e d r a t h e r t h a n removed. F u r t h e r m o r e , i f the p h y s i c a l p r e s e n c e of t h e i n f o r m a l a c t i v i t i e s or s q u a t t e r a r e a s was u n a c c e p t a b l e f o r a e s t h e t i c r e a s o n s , then u p g r a d i n g t h e w o r k i n g and l i v i n g c o n d i t i o n s of the poor c o u l d r e t a i n the s e c t o r as w e l l as b e a u t i f y t h e c i t y . T h i s a p p r o a c h was a c c e p t a b l e t o some of t h e p o l i c y makers and p l a n n e r s i n the T h i r d W o r l d because the i n f o r m a l s e c t o r seemed t o p e r s i s t i n s p i t e of the n e g a t i v e measures t h a t were 169 a p p l i e d , and because the pro-modernisation approach was alre a d y under c r i t i c i s m . I t was, t h e r e f o r e , thought to be, no longer c r i t i c a l to maintain an image of modernisation i n c i t i e s , or to e r a d i c a t e the i n f o r m a l s e c t o r f o r the purposes of modernisation (Angel and Benjamin, 1976; Poet h i g , 1971). Some plan n e r s were r e c e p t i v e to ideas such as those of the I.L.O. as an a l t e r n a t i v e approach to s p e c i f i c problems of development. Thus, there was a move towards a more p o s i t i v e a t t i t u d e towards the in f o r m a l s e c t o r at the urban l e v e l . T h i s was not the only change d u r i n g t h i s phase. With the onslaught of c r i t i c i s m s of the pro-modernisation approach, n a t i o n a l p l a n n i n g encouraged g r e a t e r development of r u r a l areas to e l e v i a t e the problems of r u r a l poverty and unemployment (Mabogunje, 1980; S i n g e r , 1977; Funnel, 1976). Regional development s t r a t e g i e s were i n t r o d u c e d , although not e x c l u s i v e l y f o r the purposes of reducing the magnitude of the in f o r m a l s e c t o r i n l a r g e towns. They were, r a t h e r , s t r a t e g i e s f o r a l a r g e r scope of problems. Almost as a complement to t h i s change i n development approach, r e g i o n a l p l a n n i n g was growing as a p r o f e s s i o n . T h i s l e d to an i n c r e a s i n g number of s o c i a l s c i e n t i s t s i n the p l a n n i n g p r o f e s s i o n , and r e s u l t e d i n the c o n s i d e r a t i o n of the s o c i a l and economic a s p e c t s of problems, along with the p h y s i c a l a s p e c t s , i n urban and r e g i o n a l p l a n n i n g . I t was, thus, a combination of f a c t o r s t h a t l e d to the more p o s i t i v e s t r a t e g i e s f o r the i n f o r m a l s e c t o r i n the se v e n t i e s i . e . the d e c l i n e i n f a i t h i n the growth c e n t r e approach as a v e h i c l e f o r modernisation; the r i s e of r e g i o n a l p l a n n i n g , and 170 the i n c l u s i o n of s o c i a l and economic f a c t o r s i n p l a n n i n g s t r a t e g i e s . Some of the p o s i t i v e approaches to p l a n n i n g f o r the i n f o r m a l s e c t o r i n t r o d u c e d i n t h i s p e r i o d were: Urban l e v e l : 1. R e l o c a t i o n of the i n f o r m a l a c t i v i t i e s such as "hawking" to new areas with minimal r e g i s t r a t i o n fees eg. Singapore (McGee and Yeung, 1977) . 2. O r g a n i s a t i o n of c o - o p e r a t i v e s to s u b s i d i s e the c o s t s of i n f r a s t r u c t u r e and c o n s t r u c t i o n of housing eg. Ahmedabad, I n d i a (Shah, 1976), (Sethuraman, 1974). 3. R e t e n t i o n of a c t i v i t y " a s - i s " eg. Manila Jeepney d r i v e r s (Pendakur, 1975), Hawkers i n South-east A s i a (McGee and Yeung, 1977). 4. Loans and d i s t r i b u t i o n of equipment necessary f o r s p e c i f i c work at a s u b s i d i s e d r a t e eg. a c a r t f o r vendors. 5. P r o v i s i o n of ' s i t e s and s e r v i c e s ' as a housing a l t e r n a t i v e to s q u a t t e r c o l o n i e s eg. C h i l e (Poethig, 1971), D e l h i (Rao, 1974). 6. R e h a b i l i t a t i o n and r e l o c a t i o n of s q u a t t e r s eg. Bangkok and J a k a r t a ( P o e t h i g , 1971). 7. I n t e n s i v e housing programmes eg. Singapore and Hongkong (L u i Thai Ker, 1974, Poethig, 1971). Regiona l l e v e l : 1. R u r a l development as a means to reduce the flow of r u r a l -urban m i g r a t i o n . 2. Development of small towns to act as countermagnets to 171 migrants from r u r a l areas heading f o r l a r g e r c i t i e s . However having s t a t e d that the s t r a t e g i e s were more humane, i t must be s a i d t h a t these s t r a t e g i e s were not without reproach. The most important c r i t i c i s m a g a i n s t the urban l e v e l s t r a t e g i e s was p a t e r n a l i s m (Skinner, 1980; Angel and Benjamin, 1976). The p a r t i c i p a n t s i n the i n f o r m a l s e c t o r were c h a r i t a b l y p r o v i d e d f o r as i f they were inc a p a b l e of c o n t r i b u t i n g to the d e c i s i o n making p r o c e s s . T h e i r o p i n i o n was u n s o l i c i t e d i n matters p e r t a i n i n g to t h e i r w e l f a r e and there was, t h e r e f o r e , no check on whether the needs of the p a r t i c i p a n t s i n the i n f o r m a l s e c t o r were p r o p e r l y c o n s i d e r e d . The p a r t i c i p a n t s i n the i n f o r m a l s e c t o r were o f t e n viewed to be c i t i z e n s without a v o i c e , and without p o l i t i c a l w i l l . There was a l s o the tendency of p l a n n e r s to dwell upon design s o l u t i o n s (Angel and Benjamin, 1976). Thus, even though the p o s i t i v e measures were a st e p i n the r i g h t d i r e c t i o n they were not f r e e from c r i t i c i s m s . R e g i o n a l plans were not c r i t i c i s e d as q u i c k l y as the urban p l a n s , mostly because i t takes a longer time to implement such p l a n s , and a longer time to see r e s u l t s . By the mid-seventies t h e r e f o r e , while the p o s i t i v e s t r a t e g i e s were being implemented there was a l r e a d y the r i s e of a more r a d i c a l view of development. But, i n s p i t e of c r i t i c i s m s and other a l t e r n a t i v e s , the p o s i t i v e measures i n p l a n n i n g were the most widely implemented i n the s e v e n t i e s and continue to dominate today. The R a d i c a l phase; l a t e s e v e n t i e s onwards Dependency theory, the ' m a r g i n a l i s a t i o n ' concept, and the 1 72 'bottom-up' approach are major c o n t r i b u t o r s to the e v o l u t i o n of s t r a t e g i e s i n t h i s phase (Quijano, 1973;. Perlman 1976; B r o o k f i e l d , 1973). B a s i c a l l y , the s t r a t e g i e s stemmed from the r a d i c a l changes that were proposed f o r T h i r d World development. The l a c k of success of the growth p o l e s t r a t e g y (Friedmann and Weaver, 1979; C o r r a g i o , 1975; Kongstad, 1974), had l e f t the f i e l d open f o r other p r o p o s a l s to achieve development. The dependency theory, a c r i t i q u e of T h i r d World development, o f f e r e d no a l t e r n a t i v e course of development but i t i n c r e a s e d the awareness of the p e r s i s t e n c e , of underdevelopment, poverty and unemployment. Consequently, however, new ways of a c h i e v i n g development were proposed (Ghai, 1979; S i n g e r , 1977). The r a d i c a l phase i n c l u d e s a number of changes that are b a s i c a l l y a r e v e r s a l of the o l d e r s t r a t e g y to development. I t i n c l u d e s de-emphasising the r o l e of urban areas i n the development process, promoting r u r a l development with g r e a t e r autonomy and a more e q u i t a b l e d i s t r i b u t i o n of n a t i o n a l wealth amongst the p o p u l a t i o n (Weaver, 1981; Turner, 1980; Mabogunje 1980; Friedmann and Weaver, 1979; P i o r o , 1975; T a y l o r , 1975; Johnson, 1975). In essence, promoting development t h a t s t a r t e d at the g r a s s r o o t s l e v e l ( B r o o k f i e l d , 1973) or as McGee (1978, p.98) s t a t e d " d i r t y boots beget wisdom". The r a d i c a l phase was c l e a r l y more humanistic as i t s t r o v e f o r e q u a l i t y amongst people not j u s t e c o n o m i c a l l y but s o c i a l l y as w e l l . With regard to p l a n n i n g f o r the i n f o r m a l s e c t o r , the main d i f f e r e n c e of the r a d i c a l phase from the other phases i s that i t promoted the s e l f r e s p e c t and d i g n i t y of the poor and the s t r a t e g i e s were to be 173 l e s s p a t e r n a l i s t i c . I t a l s o r e c o g n i s e d the p o l i t i c a l s t r e n g t h of the poor. Pl a n n i n g e f f o r t s i n t h i s phase i n c l u d e : 1. L e g i t i m i s i o n of the i n f o r m a l s e c t o r . 2. Educ a t i o n of the p u b l i c i n t o an acceptance of the i n f o r m a l s e c t o r , and the sq u a t t e r c o l o n i e s as an i n t e g r a l p a r t of the c i t y s t r u c t u r e (McGee, 1976). 3. P r o v i s i o n of s e l f - h e l p housing eg. Peru (Skinner, 1980), Mexico (Ward, 1976), Ahmedabad, I n d i a (Shah, 1976), B r a z i l and Tanzania (Vernes, 1976). 4. Formation of c o - o p e r a t i v e housing s o c i e t i e s eg. Lima, Peru (P o e t h i g , 1971) 5. I n c o r p o r a t i o n of community p a r t i c i p a t i o n i n the p r e p a r a t i o n of s t r a t e g i e s f o r the i n f o r m a l s e c t o r (Skinner, 1980). 6. R e c o g n i t i o n that the poor are a p o l i t i c a l body whose a c t i o n s (eg. v o t i n g ) can c o n t r i b u t e to the making of a government. To implement these s t r a t e g i e s r e q u i r e s some s a c r i f i c e s i n r a p i d economic development which many n a t i o n s were u n w i l l i n g to acc e p t . For example, r u r a l development was p e r c e i v e d to not pr o v i d e the quick economic r e t u r n s t h a t came with urban-i n d u s t r i a l development. As a r e s u l t , s t r a t e g i e s i n the r a d i c a l phase were combined with the s t r a t e g i e s of the negative and p o s i t i v e phases. T h e r e f o r e , a l t h o u g h the r a d i c a l phase i s d i s t i n g u i s a b l e i n theory i t i s l e s s c l e a r i n i t s a p p l i c a t i o n . For example, r u r a l development and growth c e n t r e s t r a t e g i e s c o u l d very w e l l be p a r t of the same development s t r a t e g y , or p r o v i s i o n of s e l f - h e l p housing and s i t e s and s e r v i c e s c o u l d both be p a r t of a housing program f o r the poor. As a r e s u l t , t h i s 174 fragmented approach has not l e d to a c l e a r success of the s t r a t e g i e s of the r a d i c a l phase (Skinner, 1980). 3. EFFECTIVENESS OF PAST PLANNING EFFORTS Current p l a n n i n g e f f o r t s with regard to the poverty-bound p e t t y c a p i t a l i s t s e c t o r have not met with great success. In the d i s c u s s i o n below, i t w i l l be e v i d e n t that the poverty-bound p e t t y c a p i t a l i s t s e c t o r i s s t i l l p resent i n l a r g e numbers. In t h i s c o n t e x t , t h i s s e c t i o n w i l l p resent some suggestions f o r p l a n n i n g a r i s i n g from the a l t e r n a t i v e a n a l y s i s . The best i n d i c a t o r s of the success of p l a n n i n g f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r , whether i n d i r e c t l y at the n a t i o n a l or the r e g i o n a l l e v e l , or d i r e c t l y at the urban l e v e l , s hould be i n the reduced s i z e of the poverty-bound p e t t y c a p i t a l i s t s e c t o r , and the extent of poverty and unemployment, but t h e r e i s l i t t l e evidence to i n d i c a t e t h i s . "In a p o l i c y view, the p r e s c r i p t i o n s emanating from the i n f o r m a l s e c t o r approach have borne l i t t l e f r u i t " (Rogerson, 1985 p.19). I t i s d i f f i c u l t to g e n e r a l i s e about the success of p l a n n i n g , or the l a c k of i t , f o r s e v e r a l reasons. F i r s t , T h i r d World n a t i o n s have d i f f e r e n t l e v e l s of poverty and unemployment and i t i s d i f f i c u l t to make comp a r i s i o n s . Obviously the economies of Bangladesh and the newly i n d u s t r i a l i s i n g n a t i o n s such as Taiwan or South Korea are very d i f f e r e n t , the former s u f f e r s from acute poverty and unemployment while the l a t t e r have had a d e c l i n i n g unemployment r a t e i n the l a s t decade 175 (I.L.O. Yearbook of Labour S t a t i s t i c s , 1984). Second, there are a l s o problems i n the d e f i n i t i o n of poverty because poverty l e v e l s are dependent on the g e n e r a l economic l e v e l of a n a t i o n . T h i r d , the d e f i n i t i o n of the i n f o r m a l s e c t o r i s a l s o not c l e a r . At times i t i s equated with the urban poor, and at other times with the m a n i f e s t a t i o n s of p o v e r t y such as s q u a t t e r c o l o n i e s . To i l l u s t r a t e the problem, take the case of I n d i a . An estimate of s q u a t t e r s i n 1978 i n d i c a t e d t h a t one f i f t h of the urban p o p u l a t i o n i n I n d i a were s q u a t t e r s (D'Souza, 1978), but the urban p o p u l a t i o n under the p o v e r t y l i n e of Rs. 3 0 , 2 1 i . e . C$.4, per month, was as h i g h as 51.3 percent (Government of I n d i a , M i n i s t r y of P l a n n i n g , 1973). I t i s d i f f i c u l t to choose whether the f i g u r e f o r poverty or the f i g u r e f o r s q u a t t e r s i s more r e p r e s e n t a t i v e of the i n f o r m a l s e c t o r . There are d i f f i c u l t i e s , t h e r e f o r e , i n p r e s e n t i n g an a c c u r a t e p i c t u r e of p o v e r t y , unemployment and the i n f o r m a l s e c t o r and consequently the d i s c u s s i o n presented here about the e f f e c t i v e n e s s of the p l a n n i n g s t r a t e g i e s has to be based on g e n e r a l i s e d c o n c l u s i o n s . At the n a t i o n a l l e v e l , t h e r e i s l i t t l e i n d i c a t i o n of a r e d u c t i o n i n poverty and unemployment. Accor d i n g to the I.L.O. Yearbook of Labour S t a t i s t i c s 1984, and the U n i t e d Nations S t a t i s t i c s Yearbook 1982, i t appears that with the e x c e p t i o n of the newly i n d u s t r i a l i s i n g n a t i o n s i n the T h i r d World, most d e v e l o p i n g n a t i o n s face a h i g h unemployment r a t e . Although unemployment i n c r e a s e d f o r most n a t i o n s i n the developed as w e l l Poverty l i n e of Rs.30 per month i s based on 1963 p r i c e s . 1 76 as the d e v e l o p i n g world as a r e s u l t of the world r e c e s s i o n , i t can be expected that any i n c r e a s e i n unemployment i n the T h i r d World w i l l add to the s i z e of the i n f o r m a l s e c t o r . Richardson (1984) s t a t e s that not o n l y does the i n f o r m a l s e c t o r grow at a f a s t e r rate, than the formal s e c t o r but that t h i s pace i s l i k e l y t o i n c r e a s e . Along with i n d i c a t i o n s of unemployment, there are i n d i c a t i o n s of poverty. For i n s t a n c e , i n I n d i a the estimate f o r urban poverty was 51.3 percent i n 1973, and the estimate of urban p o p u l a t i o n l i v i n g i n one roomed tenements was 66 percent i n 1971 (Census of I n d i a , 1971). At the n a t i o n a l l e v e l , the o v e r a l l p i c t u r e i s one of deep pover t y , unemployment and a l a r g e i n f o r m a l s e c t o r . Another i n d i c a t i o n of the l i m i t e d success of p l a n n i n g i s t h a t s c h o l a r s have continued to study the i n f o r m a l s e c t o r over the l a s t two decades, because of the p e r s i s t e n c e of the phenomenon. Development t h e o r i s t s have t r i e d to f i n d e x p l a n a t i o n s f o r t h i s p e r s i s t e n c e . One may r e c a l l from chapter two that proponents of the u n i l i n e a r development th e o r y expressed the o p i n i o n that poverty, and t h e r e f o r e the i n f o r m a l s e c t o r , p e r s i s t s because the n a t i o n s had not yet modernised. In r e b u t t a l , the dependency t h e o r i s t s argued that poverty and underdevelopment p e r s i s t because the modernisation p r o c e s s c r e a t e s a dependent r e l a t i o n s h i p between the T h i r d World and the d e v e l o p i n g n a t i o n s . C l e a r l y then, the p e r s i s t e n c e of underdevelopment and f e a t u r e s t h e r e o f are w e l l documented. At the town l e v e l , there are a l s o i n d i c a t i o n s that p l a n n i n g has not been very s u c c e s s f u l . The poverty-bound p e t t y 1 77 c a p i t a l i s t s e c t o r , whether i t i s equated with the urban poor, i n f o r m a l a c t i v i t y or s q u a t t e r s , i s s t i l l v i s i b l e i n c i t i e s of the T h i r d World. There are both p e r s o n a l impressions and s t a t i s t i c a l i n d i c a t i o n s of t h i s . As a r e s e a r c h e r on the i n f o r m a l s e c t o r i n s e l e c t e d l a r g e c i t i e s i n I n d i a , the author has found l i t t l e v i s i b l e change i n the a b s o l u t e s i z e of the i n f o r m a l s e c t o r . Although ' s i t e s and s e r v i c e s ' were p r o v i d e d to some of the urban poor, these have d e t e r i o r a t e d i n t o 'planned slums', and many s q u a t t e r s never b e n e f i t t e d from any p l a n n i n g s t r a t e g i e s . 2 2 Estimates made by s c h o l a r s of the s i z e of the i n f o r m a l s e c t o r suggests that p l a n n i n g has not had much su c c e s s . The a b s o l u t e s i z e of the i n f o r m a l s e c t o r remains high as i n d i c a t e d by Sethuraman (1981) i n t a b l e 3. In C a l c u t t a , f o r i n s t a n c e , the estimate of the i n f o r m a l s e c t o r was 45 percent of the labour f o r c e i n 1974 ( L u b e l l , 1974; Bose, 1977) and 40-50 percent i n the Sethuraman's (1981) t a b l e . There i s l i t t l e s t a t i s t i c a l evidence, t h e r e f o r e , to suggest a d e c l i n i n g i n f o r m a l s e c t o r . F i n a l l y , the study of i n f o r m a l a c t i v i t i e s c o n t i n u e s to be of i n t e r e s t to s c h o l a r s eg. Lucknow r i c k s h a w a l l a s (Gould, 1965); Ma n i l a Jeepney d r i v e r s (Pendakur, 1975); Hawkers and vendors i n South East A s i a n c o u n t r i e s (McGee and Yeung, 1977); Shoe manufacturers i n Colombia ( P e a t t i e , 1978); and S t r e e t occupations of C a l i (Bromley and Birkbeck, 1984). The 2 2 Opinion i s based on r e s e a r c h work done on the i n f o r m a l s e c t o r i n D e l h i , R a i k o t , Ludhiana, Sambalpur and Rourkela as w e l l as c a s u a l o b s e r v a t i o n 178 Table I I I - Estimates of the i n f o r m a l s e c t o r i n s e l e c t e d d e v e l o p i n g n a t i o n s TABLE 1: ESTIMATED SHARE OF URBAN LABOUR FORCE IN THE INFORMAL SECTOR IN SELECTED DEVELOPING COUNTRIES Area Per Cent i A f r i c a Abidjan (Ivory Coast) 31 Lagos(Nigeria) 50 Kumasi (Ghana) 6 0 / 7 0 Nairobi (Kenya) 44 Urban areas (Senegal) 50 Urban areas (Tunisia) 34 Asia C a l c u t t a (India) 4 0 / 5 0 Ahmedabad (India) 47 ' Jakarta (Indonesia) 45 Colombo ( S r i Lanka) 19 Urban areas i n West Malaysia (Malaysia) 35 Singapore 23 Urban areas (Thailand) 26 Urban areas (Pakistan) 69 L a t i n America Cordoba (Argentina) 38 Sao Paulo ( B r a z i l ) 43 Urban areas ( B r a z i l ) 30 Rio de Janeiro ( B r a z i l ) 24 Belo Horizonte ( B r a z i l ) 31 Urban areas (Chile) 39 Bogota (Colombia) 43 Santo Domingo (Dominican Republic) 50 Guayaquil (Ecuador) 48 Quito (Ecuador) 48 San Salvador ( E l Salvador) 41 Federal D i s t r i c t and State of Mexico 27 Mexico D.F., Guadalajara and Monterey 42 Asuncion (Paraguay) 57 Urban areas (Peru) 60 Urban areas (Venezuela) 44 Caracas (Venezuela) 40 Kingston (Jamaica) 33 Source: S. U. Sethuraman, The Urban Informal Sector .in Developing Countries (Ceneva: ILO, 1 9 8 1 ) . p e r s i s t e n c e of such s t u d i e s not only i n d i c a t e a p e r s i s t e n c e of the phenomenon, but more im p o r t a n t l y , there i s no i n d i c a t i o n i n them that the i n f o r m a l s e c t o r has d e c l i n e d . The o v e r a l l i n d i c a t i o n i s that the i n f o r m a l s e c t o r p e r s i s t s d e s p i t e p l a n n i n g e f f o r t s . I t i s because the i n f o r m a l s e c t o r i s 1 79 l a r g e , p e r s i s t a n t and c l o s e l y t i e d to poverty and unemployment  that the need f o r p l a n n i n g cannot be ignored. 4 . PROPOSED ROLE OF THE STATE From the d i s c u s s i o n of the three phases of p l a n n i n g e f f o r t s i t can be seen t h a t not only was p l a n n i n g deemed necessary i n one form or another but that the e f f o r t s were guided by the view that the i n f o r m a l s e c t o r i s a temporary phase i n the T h i r d World and w i l l no longer be present' when and i f the T h i r d World n a t i o n s developed. In c o n t r a s t to t h i s view, the a l t e r n a t i v e a n a l y s i s s t a t e s t h a t the p e t t y c a p i t a l i s t s e c t o r i s a f l u c t u a t i n g but permanent f e a t u r e i n any type of economy. The small s c a l e , low p r o f i t a c t i v i t i e s that are being d i s c u s s e d here are not a f e a t u r e of the T h i r d World alon e . Even the Western c a p i t a l i s t n a t i o n s have low p r o f i t p e t t y c a p i t a l i s t a c t i v i t i e s a lthough i n l e s s e r numbers. But, the d i f f e r e n c e between the two i s t h a t i n the T h i r d World the small s c a l e , low p r o f i t a c t i v i t i e s are poverty-bound while i n the developed world i t i s not n e c e s s a r i l y so. T h e r e f o r e , s i n c e the poverty-bound p e t t y c a p i t a l i s t a c t i v i t i e s are not a temporary phase, government i s faced with the need to decide how to best u t i l i s e i t s resources to b e n e f i t the poverty-bound s e c t o r , so that the p e t t y c a p i t a l i s m t hat e x i s t s i n the T h i r d World can be a s e c t o r of c h o i c e not compulsion. So f a r , T h i r d World governments have i n t e r v e n e d i n the workings of the s e c t o r e i t h e r p o s i t i v e l y or n e g a t i v e l y , u s u a l l y because the i l l e g a l nature of the a c t i v i t y v i o l a t e s s e v e r a l government r u l e s and r e g u l a t i o n s . I t i s 180 p e r t i n e n t to c o n s i d e r whether t h i s s o r t of i n t e r v e n t i o n i s necessary. In c o n t r a s t to p r e v i o u s views, i t i s suggested that  i l l e g a l i t y of the p e t t y c a p i t a l i s t a c t i v i t y i n i t s e l f should not  be the b a s i s f o r s t a t e i n t e r v e n t i o n . Instead, the c o s t s and  b e n e f i t s of the a c t i v i t y to the s t a t e should be a n a l y s e d and the  d e c i s i o n to i n t e r v e n e and i n what ways should be based on t h i s  a n a l y s i s . In some cases, i f the b e n e f i t s of r e t a i n i n g the p e t t y c a p i t a l i s t a c t i v i t y outwiegh the c o s t s then i t may be necessary to f a c i l i t a t e the a c t i v i t y even i f i t were i l l e g a l . For any category of p e t t y c a p i t a l i s t a c t i v i t i e s whether they be low p r o f i t or high p r o f i t , s t a t e i n t e r v e n t i o n seems j u s t i f i a b l e i f the a c t i v i t i e s c r e a t e s o c i a l and economic c o s t s to the s t a t e . For example, tax e v a s i v e a c t i v i t i e s c r e a t e a c o n s i d e r a b l e l o s s of revenue to the s t a t e , and hawkers and vendors i n c r e a s e the c o s t s of maintenance of c i t y i n f r a s t r u c t u r e such as p u b l i c water taps, s a n i t a t i o n , p u b l i c t r a n s p o r t a t i o n . However, these c o s t s to the s t a t e should be weighed a g a i n s t the b e n e f i t s r e c e i v e d by the presence of the p e t t y c a p i t a l i s t a c t i v i t i e s , and how much i t would c o s t the s t a t e to p r o v i d e the same or s i m i l a r goods and s e r v i c e s . I f the c o s t s to the s t a t e exceed the b e n e f i t s , a more negative i n t e r v e n t i o n may be necessary. For example, the s t a t e may i n t e r v e n e to r e s t r i c t i l l e g a l c r i m i n a l a c t i v i t i e s , such as drug p e d d l i n g , because the s o c i a l and economic c o s t s of the a c t i v i t y , such as treatment of drug a d d i c t s and i n c r e a s e i n crimes, outwiegh the b e n e f i t s i t p r o v i d e s to drug u s e r s . On the other hand, the poverty-bound 181 p e t t y c a p i t a l i s t a c t i v i t i e s i n the T h i r d World, which i s the focus of d i s c u s s i o n here, r e q u i r e l e s s n e gative i n t e r v e n t i o n . Consider the b e n e f i t s from the poverty-bound p e t t y c a p i t a l i s t s e c t o r . 1. P r o v i d e r of cheap goods and s e r v i c e s . 2. P r o v i d e r of convenience i n shopping. 3. A source of employment of the poor. 4. A source of income f o r the poor. 5. R e c y c l e r of re s o u r c e s 6. A source f o r the p r e s e r v a t i o n of t r a d i t i o n a l s k i l l s . The c o s t to the s t a t e to provide or extend i t s s e r v i c e s to t h i s p o p u l a t i o n , to cope with the i l l e g a l o c c u p a t i o n of government l a n d and p r o p e r t y , and the h e a l t h and s a f e t y hazards c r e a t e d by the a c t i v i t i e s are high, but the c o s t of p r o v i d i n g employment or w e l f a r e to the poor would be a no l e s s e r task. I t i s , t h e r e f o r e , necessary i n t h i s case that the r o l e of  the government should be more p o s i t i v e . Some p o s i t i v e p l a n n i n g measures a l r e a d y ex.ist, as reviewed e a r l i e r , but the a l t e r n a t i v e a n a l y s i s suggests other p o s i t i v e measures t h a t would be more e f f e c t i v e . T h i s i s d i s c u s s e d i n the next s e c t i o n . 5. SUGGESTIONS FOR PLANNING FOR THE POVERTY-BOUND PETTY  CAPITALIST SECTOR IN INDIA There are s e r i o u s and important i m p l i c a t i o n s of the a l t e r n a t i v e a n a l y s i s to plann i n g f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r . To d i s c u s s these i m p l i c a t i o n s , some of the main c o n c l u s i o n s of the a l t e r n a t i v e a n a l y s i s are repeated here: 1 82 1. R u r a l migrants are not the only source of labour f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r . 2. Demand f o r p e t t y c a p i t a l i s m i s as necessary to the c r e a t i o n of the s e c t o r as labour supply. 3. The type of demand present i n an urban economy, i . e . o p t i o n a l or cost-based, w i l l a f f e c t the e n t r y of labour i n t o t h a t s e c t o r . 4. The poverty-bound p e t t y c a p i t a l i s t s e c t o r c a t e r s to both the urban poor as w e l l as the w e l l to do, and l a b o u r , c a p i t a l and resources flow back and f o r t h between the poverty-bound p e t t y c a p i t a l i s t s e c t o r and the formal s e c t o r . These c o n c l u s i o n s can be used to improve the p l a n n i n g process f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r . However, i t i s not f e a s i b l e to d i s c u s s the i m p l i c a t i o n s f o r p l a n n i n g i n the T h i r d World without o v e r - g e n e r a l i s i n g and, t h e r e f o r e the d i s c u s s i o n here i s only i n the context of I n d i a . The suggestions that are presented are made w i t h i n the c o n s t r a i n t s of the Indian p l a n n i n g system. The i n s t i t u t i o n a l s t r u c t u r e of p l a n n i n g i n I n d i a i s top-down and p l a n n i n g permeates every aspect of development, i . e . economic, s o c i a l , and p h y s i c a l (Wishwakarma, 1981; Poulose,1979; Bhattacharya, 1979). I t i s , t h e r e f o r e , necessary to p r e s e n t the context w i t h i n which the suggestions are posed. 183 5. 1 The I n s t i t u t i o n a l Framework For Planning In Ind i a There are three l e v e l s of p l a n n i n g i n I n d i a that a f f e c t the poverty-bound p e t t y c a p i t a l i s t s e c t o r (Poulose, 1979). See appendix F. These a r e : 1. The P l a n n i n g Commission: T h i s i n s t i t u t i o n i s r e s p o n s i b l e f o r making the f i v e year plans that guide economic development i n I n d i a . The f i v e year plans are s e c t o r a l l y d i v i d e d such that development of each s e c t o r becomes the r e s p o n s i b l i t y of a p a r t i c u l a r M i n i s t r y . The Pl a n n i n g Commission i s r e s p o n s i b l e f o r the s e c t o r a l a l l o c a t i o n of funds f o r f e d e r a l and s t a t e l e v e l development. I t does not prepare or implement urban and r e g i o n a l development p l a n s . 2. The Town and Country Planning O r g a n i s a t i o n . T h i s i s a p u b l i c s e c t o r undertaking that i s s t a f f e d with t r a i n e d p r o f e s s i o n a l s to d e a l with problems of urban and r e g i o n a l development. I t i s d i r e c t l y under the M i n i s t r y of Works and Housing. I t has two major r o l e s . F i r s t l y , the T.C.P.O. ad v i s e s the M i n i s t r i e s concerned with urban and r e g i o n a l development on the s e t t i n g of g o a l s . Secondly, i t s t u d i e s the urban and r e g i o n a l problems i d e n t i f i e d by the M i n i s t r y of Works and Housing and prepares plans a c c o r d i n g l y . The T.C.P.O. has r e g i o n a l o f f i c e s i n the s t a t e s of I n d i a , that are under the s t a t e M i n i s t r i e s of P l a n n i n g . The a c t u a l development of the urban areas and re g i o n s i n a s t a t e are the r e s p o n s i b i l i t y of the s t a t e M i n i s t r y of Planning and plans are prepared by the s t a t e T.C.P.O.'s. The T.C.P.O., however, whether at the n a t i o n a l or s t a t e l e v e l , i s not r e s p o n s i b l e f o r 1 84 the implementation of urban p l a n s . 3. The urban development a u t h o r i t i e s : These are o r g a n i s a t i o n s that prepare and implement plans f o r urban development under the a d v i c e of the s t a t e M i n i s t r y of P l a n n i n g but a l s o implement the plans prepared by the s t a t e T.C.P.O.. I t can be seen that the p l a n n i n g s t r u c t u r e i n I n d i a i s h i g h l y c e n t r a l i s e d but r e s p o n s i b i l i t i e s f o r urban and r e g i o n a l development are d e l e g a t e d to r e g i o n a l o f f i c e s . T h i s has not changed much i n s p i t e of the l i t e r a t u r e on the b e n e f i t s of a bottom-up approach. By examining the p l a n n i n g s t r u c t u r e (Wishwakarma, 1981) and the l i t e r a t u r e on p l a n n i n g s t r a t e g i e s i n I n d i a , as w e l l as the T h i r d World, c e r t a i n l i m i t a t i o n s i n the approach to the poverty-bound p e t t y c a p i t a l i s t s e c t o r i n I n d i a become e v i d e n t : 1. At the n a t i o n a l l e v e l , the p l a n n i n g approach i s uncoordinated and i n d i r e c t due to the s e c t o r a l b a s i s of economic p l a n n i n g . 2. At the urban l e v e l , the s t r a t e g i e s are a p p l i e d i n a piecemeal manner and are l i m i t e d i n scope. For example, there i s no uniform a p p l i c a t i o n of the s i t e s and s e r v i c e s programme to cover a l l the s q u a t t e r s i n D e l h i (Ghosh, 1979). 3. The m a j o r i t y of the d i r e c t p l a n n i n g e f f o r t s are 'cosmetic' and i n c a p a b l e of reducing the number of urban poor (Ghosh, 1979) . 4. Some of the 'cosmetic' approaches are i n a p p r o p r i a t e l y designed (Angel and Benjamin, 1976). For example, while housing may have been p r o v i d e d , i t f r e q u e n t l y d i d not meet the s o c i o -185 economic needs of the urban poor. In the next s e c t i o n , suggestions are made f o r p l a n n i n g at the n a t i o n a l and urban l e v e l s , i n the context of the Indian s i t u a t i o n , u s ing the a l t e r n a t i v e a n a l y s i s . I t should be c l a r i f i e d t h a t these suggestions are not t r a n s f e r a b l e to other c a t e g o r i e s of p e t t y c a p i t a l i s t a c t i v i t i e s . 5.2 Suggestions For Planning At The N a t i o n a l L e v e l A. Planning f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r  at the n a t i o n a l l e v e l should be c o o r d i n a t e d under a u n i f i e d  n a t i o n a l p o l i c y . The need f o r c o o r d i n a t i o n and u n i f i c a t i o n of the p l a n n i n g approach at the n a t i o n a l l e v e l cannot be overemphasised, because the problems of poverty and unemployment are the r e s u l t of the e n t i r e process of development, and not s e c t o r a l development. The a l t e r n a t i v e a n a l y s i s showed that the source of labour supply f o r poverty-bound p e t t y c a p i t a l i s m i s not o n l y through m i g r a t i o n of the r u r a l poor and that the demand f o r the goods and s e r v i c e s of the s e c t o r are c r e a t e d by a l l income groups. The r e l a t i o n s h i p i s , t h e r e f o r e , not a s t r a i g h t f o r w a r d c o r r e l a t i o n to p o v e r t y and r u r a l m i g r a t i o n . A n a t i o n a l l e v e l a n a l y s i s i s r e q u i r e d and t h i s w i l l f a c i l i t a t e c o o r d i n a t i o n of p l a n n i n g e f f o r t s . There are three reasons f o r a c o o r d i n a t e d approach. C o o r d i n a t e d p l a n n i n g and i n c r e a s e d e f f e c t i v e n e s s . C o o r d i n a t e d p l a n n i n g and implementation w i l l i n c r e a s e the e f f e c t i v e n e s s of p l a n n i n g by e n s u r i n g that the plans r e f l e c t a n a t i o n a l l e v e l a n a l y s i s of the i s s u e s and that separate 186 s t r a t e g i e s do not work a g a i n s t each other. Although p l a n n i n g f o r poverty and unemployment i s a p r i o r i t y i n I n d i a , the approach has been uncoordinated. T h i s i s because economic p l a n n i n g i n I n d i a i s d i v i d e d by economic s e c t o r s . S t r a t e g i e s to reduce poverty and unemployment are then f i t t e d i n t o s e c t o r a l development p l a n s . For example, the a g r i c u l t u r a l development s e c t o r may c r e a t e jobs i n the r u r a l areas while the i n d u s t r i a l development s e c t o r c o n s t r u c t s i n d u s t r i a l e s t a t e s to p r o v i d e i n d u s t r i a l employment f o r the poor. On t h e i r own, each s t r a t e g y may be a w e l l i n t e n t i o n e d e f f o r t but the drawback of the s e c t o r a l approach i s that the s t r a t e g y i n one s e c t o r can a d v e r s e l y a f f e c t the s t r a t e g y i n another s e c t o r . T h i s was the case i n Punjab where the small towns were developed i n t o a g r i c u l t u r a l market c e n t r e s to absorb some of the r u r a l migrants, as a p a r t of the s t a t e ' s a g r i c u l t u r a l and r u r a l development p l a n . See appendix D. However, the i n d u s t r i a l development s e c t o r c r e a t e d i n d u s t r i e s and jobs i n the l a r g e towns and p r o v i d e d a higher wages than that i n a g r i c u l t u r a l markets. As a r e s u l t , m i g r a t i o n has continued towards l a r g e c i t i e s and the s m a l l town development s t r a t e g y has been u n s u c c e s s f u l (Das, 1984B). Coo r d i n a t e d p l a n n i n g and b e t t e r r e g i o n a l coverage of  s t r a t e g i e s . A c o o r d i n a t e d approach w i l l ensure that no regions are n e g l e c t e d i n the development pr o c e s s by o v e r s i g h t . S e c t o r a l p o l i c i e s can o v e r l a p i n some r e g i o n s , while other regions are t o t a l l y n e g l e c t e d . T h i s makes i t d i f f i c u l t to p r e d i c t the 187 r e s u l t s of a development p o l i c y i n a p a r t i c u l a r r e g i o n . For example, the development of Rourkela , I n d i a , as an i n d u s t r i a l town i n 1951 was expected to provide employment to the p o p u l a t i o n of that r e g i o n . However, by 1971, demographic s t u d i e s showed that the p o p u l a t i o n from the surrounding l e s s developed regions took g r e a t e r advantage of employment i n Rourkela than the l o c a l p o p u l a t i o n . Rourkela was a l s o the o n l y source of demand f o r poverty-bound p e t t y c a p i t a l i s t a c t i v i t i e s , whereas labour supply was a v a i l a b l e from many of the surrounding r e g i o n s . Consequently, unemployment amongst the l o c a l p o p u l a t i o n had not decreased s i g n i f i c a n t l y (Das,- 1977). C o o r d i n a t i o n w i l l not only improve e f f e c t i v e n e s s of p o l i c i e s but a l s o ensure that the p o l i c i e s reach a l l r e g i o n s . Coordinated p l a n n i n g and improved i n f o r m a t i o n base. A c o o r d i n a t e d approach can be used to improve the i n f o r m a t i o n base on the poverty-bound p e t t y c a p i t a l i s t s e c t o r . C u r r e n t l y , i n f o r m a t i o n c o l l e c t i o n i s r e s t r i c t e d to l a r g e towns because the problem has been viewed i n that c o n t e x t . However, as the a l t e r n a t i v e a n a l y s i s shows, the poverty-bound p e t t y c a p i t a l i s t s e c t o r i s a l s o present i n s m a l l e r towns. Furthermore, the consumer demand f o r the s e c t o r ' s goods and s e r v i c e s are n e g l e c t e d i n the study of the s e c t o r at both the l a r g e and the small town l e v e l . The study of the poverty-bound p e t t y c a p i t a l i s t s e c t o r i s necessary not only f o r a l l urban areas but a l s o f o r l i n k a g e s between them. S e c t o r a l p o l i c y data do not p r o v i d e the i n f o r m a t i o n base on the poverty-bound p e t t y c a p i t a l i s t s e c t o r that i s e s s e n t i a l f o r p l a n n i n g . S e c t o r a l 188 p l a n n i n g i s more concerned with the development of the p a r t i c u l a r s e c t o r , and data on poverty i s c o l l e c t e d only as i t a f f e c t s t h at s e c t o r . But, the poverty-bound p e t t y c a p i t a l i s t s e c t o r i n v o l v e s d i r e c t l y and i n d i r e c t l y as much of the p o p u l a t i o n , i f not more, than the formal s e c t o r . Yet, while the i n f o r m a t i o n base f o r the formal s e c t o r i s ex t e n s i v e the same i s not t r u e f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r . Data i s c o l l e c t e d p e r i o d i c a l l y f o r the formal s e c t o r through N a t i o n a l Census c o l l e c t i o n , and c o o r d i n a t e d s t u d i e s a l s o e x i s t f o r formal s e c t o r p r o d u c t i o n u n i t s such as s t e e l m i l l s . But these do not i n c l u d e the p a r t i c i p a n t s i n the p e t t y c a p i t a l i s t a c t i v i t i e s even though these a c t i v i t i e s o f t e n p r o v i d e the needs of the formal s e c t o r . For i n s t a n c e , labour was h i r e d on a c a s u a l b a s i s , unrecorded i n employment documents, i n the s t e e l m i l l s of Rourkela. T h i s l a b o u r , t h a t i s p a r t of the p e t t y c a p i t a l i s t s e c t o r , a s s i s t s the p r o d u c t i o n of the s t e e l m i l l but i s n e i t h e r recorded nor an a l y s e d i n the s t e e l m i l l p r o j e c t . A c o o r d i n a t e d approach w i l l f a c i l i t a t e the c o l l e c t i o n of i n f o r m a t i o n i n a u n i f i e d manner and thereby enhance the i n f o r m a t i o n base. In summary, the f i r s t s u g g e s t i o n at the n a t i o n a l l e v e l i s to c o o r d i n a t e the s t r a t e g i e s i n the d i f f e r e n t economic s e c t o r s under a n a t i o n a l approach to the problem, to i n c r e a s e e f f e c t i v e n e s s of p l a n n i n g , cover a l l r e g i o n s , and improve the i n f o r m a t i o n base. B. Demand f o r p e t t y c a p i t a l i s m and s p a t i a l l i n k a g e s  p l a n n i n g . The a l t e r n a t i v e a n a l y s i s proposed that demands are 189 e s s e n t i a l to the c r e a t i o n of poverty-bound p e t t y c a p i t a l i s m and that two types of demands are p r e s e n t , the o p t i o n a l and the cost-based. These demands are p r e s e n t , to some degree, i n a l l urban areas. Consequently, any development s t r a t e g i e s designed  to cope with poverty and unemployment must analyse the s p a t i a l  d i s t r i b u t i o n of demand along with the a n a l y s i s of labour supply. C u r r e n t l y , much thought i s given to the labour supply f o r p e t t y c a p i t a l i s t a c t i v i t i e s and e f f o r t s are made to r e d i r e c t or reduce i t . T h i s amounts to reducing or r e d i r e c t i n g the r u r a l migrants by the c r e a t i o n of jobs i n the r u r a l areas or s m a l l e r towns. But, l i t t l e thought i s given to the f a c t t h a t t h i s labour c a t e r s to p a r t i c u l a r demands which have to be c r e a t e d i f labour i s to be a t t r a c t e d . To r e c a p i t u l a t e the arguments of the a l t e r n a t i v e a n a l y s i s i n t h i s r egard, i t was s t a t e d t h a t o p t i o n a l demands c r e a t e d by the upper income groups have a h i g h e r c a p a c i t y to absorb labour than the cost-based demands c r e a t e d by the poorer p o p u l a t i o n . I t was a l s o s t a t e d that the development p a t t e r n s i n the T h i r d World have l e d to the c o n c e n t r a t i o n of the formal s e c t o r u n i t s and consequently the upper income groups i n the l a r g e towns (Mathur and Kundu, 1984; Santos, 1979), thereby c r e a t i n g more o p t i o n a l demands t h e r e . Current s t r a t e g i e s t h a t focus on the c r e a t i o n of jobs do not c o n s i d e r the a s p e c t s of demand. In I n d i a , a g r i c u l t u r a l markets are developed i n the s m a l l towns to a t t r a c t r u r a l m igrants. These markets c r e a t e o p p o r t u n i t i e s f o r p e t t y c a p i t a l i s t goods and s e r v i c e s but are few i n number. The c r e a t i o n of a few job o p p o r t u n i t i e s i n the 190 p e t t y c a p i t a l i s t s e c t o r n e i t h e r leads to an i n c r e a s e i n demand s u f f i c i e n t to a t t r a c t labour to that s e c t o r , nor to the c r e a t i o n of o p t i o n a l demands t h a t a l l o w e a s i e r entry of l a b o u r . T h i s i s i l l u s t r a t e d again by the case study of the Punjab sma l l town development s t r a t e g y c i t e d e a r l i e r . F i e l d study i n Punjab showed that the jobs c r e a t e d i n the a g r i c u l t u r a l markets were too few to a t t r a c t r u r a l migrants (Das 1984B). There were no jobs c r e a t e d to a t t r a c t the upper or middle income groups. Without these groups, and consequently o p t i o n a l demands c r e a t e d by them, the scope f o r a t t r a c t i o n of r u r a l migrants was l i m i t e d to the few jobs i n the market. In c o n t r a s t , the l a r g e r towns o f f e r e d g r e a t e r number of jobs i n i n d u s t r y , and there was a l r e a d y a s i z e a b l e upper and middle income group to c r e a t e o p t i o n a l demands. As a r e s u l t , the r u r a l migrant was a t t r a c t e d not only to the jobs i n i n d u s t r y but a l s o because t h e r e was a wide range of demands t h a t they c o u l d c a t e r to (Das, 1984B). In the Punjab case study, small towns might have a t t r a c t e d r u r a l labour i f the i n d u s t r i a l development had been p l a c e d there ( B h a l l a , 1977; J o h l , 1975). If t h i s was not f e a s i b l e due to a l a c k of s u p p o r t i n g i n f r a s t r u c t u r e f o r i n d u s t r i a l development, there should have been no need to c r e a t e a g r i c u l t u r a l markets f o r the purpose of a t t r a c t i n g migrants. That i s , i t would be more r e a l i s t i c to accept t h a t the demand for p e t t y c a p i t a l i s m i s l a r g e r and more dynamic i n the l a r g e towns and c o n c e n t r a t e on d e a l i n g with the problems of the s e c t o r at the l a r g e town l e v e l , p r o v i d e d that the c r e a t i o n of g r e a t e r demands, i n c l u d i n g the o p t i o n a l demand, i s not p o s s i b l e at the small town l e v e l . The 191 location and d i s t r i b u t i o n of the types of demand i s , therefore,  a necessary consideration in regional development strategies  that seek to r e d i s t r i b u t e labour. This brings the discussion to planning at the urban l e v e l and how the a l t e r n a t i v e analysis a f f e c t s i t . . 5.3 Suggestions For Planning At The Town Level The discussion here w i l l be based on the view proposed e a r l i e r that the role of the government should be p o s i t i v e . However, the suggestions for government intervention range from minimal to more di r e c t and intensive, depending on the si t u a t i o n . A l l the suggestions proposed can be the r e s p o n s i b i l i t y of the Town and Country Planning Organisation and implemented by the urban a u t h o r i t i e s . A. demand for petty capitalism in urban areas and s p a t i a l  linkages planning. It i s necessary to include the demand aspect in s p a t i a l planning whether t h i s i s planning for the poverty-bound sector in an ex i s t i n g town or in a new town. This necessitates a recognition that the location of the petty c a p i t a l i s t a c t i v i t i e s in a c i t y i s c l o s e l y t i e d to the location of i t s demand. Most poor people make the right choices for their location within exi s t i n g constraints, with regard to the demand for the i r goods and services, even though these choices may not be acceptable to c i t y a u t h o r i t i e s for economic, p o l i t i c a l or aesthetic reasons. However, i f such linkages exist between demand and supply these linkages should be put into the a n a l y t i c a l framework for 192 p l a n n i n g . In some i n s t a n c e s , the i n t e r v e n t i o n can be minimal and the poor can be allowed to remain i n t h e i r o r i g i n a l s i t e s but i n other i n s t a n c e s more i n t e r v e n t i o n may be necessary as i n r e l o c a t i o n of a c t i v i t i e s or p l a n n i n g f o r the s e c t o r i n new towns. But, the aim should be to allow the poor to maximise t h e i r b e n e f i t s and minimise t h e i r c o s t s . R e l a t e d to the s e l e c t i o n of optimum l o c a t i o n f o r the poor i s p r o v i s i o n of s e c u r i t y of tenure at the s e l e c t e d s i t e . Some system of land tenure i s necessary so th a t r e l o c a t i o n of the same p o p u l a t i o n does not occur s e v e r a l times. T h i s was the case i n Bombay where 72,000 s q u a t t e r s were e v i c t e d from t h e i r r e l o c a t e d s i t e s because the Bhabha Atomic Research Centre r e q u i r e d the l a n d (Deshpande, 1976) C o n s i d e r a t i o n of the l o c a t i o n of consumer demands f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r i n s p a t i a l p l a n n i n g can cope with urban po v e r t y as w e l l as maintain a o r d e r l y image of the c i t y . S p a t i a l l i n k a g e s p l a n n i n g i n an e x i s t i n g town. In an e x i s t i n g town where the poverty bound p e t t y c a p i t a l i s t s e c t o r i s a l r e a d y m a n i f e s t , the l i n k a g e s between consumer demand and labour supply f o r the se c t o r can be planned f o r i n two ways, r e l o c a t i o n of the a c t i v i t i e s and r e t a i n i n g the a c t i v i t i e s i n t h e i r o r i g i n a l l o c a t i o n s . When the a c t i v i t y i s r e t a i n e d i n the o r i g i n a l l o c a t i o n , the l i n k a g e s are l e a s t d i s r u p t e d . However, r e l o c a t i o n may be necessary where the a c t i v i t i e s pose a h e a l t h or s a f e t y problem. In such i n s t a n c e s , the r e l o c a t e d s i t e should be p r o v i d e d as c l o s e to the o r i g i n a l s i t e as p o s s i b l e or at an a l t e r n a t i v e source of demand f o r the a c t i v i t i e s . C u r r e n t l y , 193 r e l o c a t i o n s t r a t e g i e s , which are common i n I n d i a as w e l l as other d e v e l o p i n g n a t i o n s , do not c o n s i d e r the l i n k a g e s of the s e c t o r . A c t i v i t i e s are r e l o c a t e d on the b a s i s of c i t y image, and space a v a i l a b i t y . In the m i d - s e v e n t i e s , ' s i t e s and s e r v i c e s ' were p r o v i d e d on the o u t s k i r t s of D e l h i to some of the urban poor without any a n a l y s i s of t h e i r r o l e i n the economy and the s i g n i f i c a n c e of t h e i r s e l e c t e d o r i g i n a l s i t e s (Ghosh, 1979). T h i s s o r t of r e l o c a t i o n n e i t h e r improves the c i t y image nor does i t cope with problems of the urban poor. F i r s t l y , as long as demand e x i s t s i n the c i t y f o r poverty-bound p e t t y c a p i t a l i s m , labour w i l l respond to meet the demands. The r e l o c a t e d p o p u l a t i o n w i l l e i t h e r r e t u r n to i t s o r i g i n a l s i t e or new migrants to the c i t y w i l l occupy i t . Take the case study of Rourkela, an i n d u s t r i a l town i n O r i s s a , I n d i a . F i e l d study conducted i n 1977 i n d i c a t e d that s q u a t t e r s who were r e s e t t l e d on the p e r i p h e r y of the c i t y r e t u r n e d to t h e i r o r i g i n a l s i t e s (Das, 1978). Ghosh (1979) speaking of the r e s e t t l e m e n t schemes i n D e l h i argued that r e s e t t l e m e n t was c o s t l y to the people and the a u t h o r i t i e s , and was unnecessary when there was an adequate area w i t h i n the c i t y to c o n t a i n them. Furthermore, removal or r e l o c a t i o n of the i n f o r m a l s e c t o r or s q u a t t e r s without c o n s i d e r a t i o n of demands onl y perpetuates poverty. During the years 1973-1977, f o r i n s t a n c e , 150,105 squa t t e r f a m i l i e s were removed from Jama M a s j i d area i n o l d D e l h i to the p e r i p h e r y of the c i t y by the D e l h i Development A u t h o r i t y , as a p a r t of the ' c i t y b e a u t i f i c a t i o n movement' i n t i a t e d by p o l i t i c i a n Sanjay Gandhi (Government of I n d i a , 194 1978). T h i s move severed the economic and and s o c i a l t i e s of the people and thereby removed t h e i r means of l i v e l i h o o d , i n c r e a s e d t h e i r c o s t s of t r a v e l to p l a c e s of work, and decreased t h e i r access to cheap goods w i t h i n the c i t y . In sum, r e l o c a t i o n i n c r e a s e d the poverty of the poor, a r a t h e r c o n t r a d i c t o r y r e s u l t to the one intended (Ghosh, 1979). In e x i s t i n g towns, t h e r e f o r e , i f the s p a t i a l l i n k a g e s are f i t t e d i n t o the a n a l y t i c framework f o r p l a n n i n g , the optimum l o c a t i o n s can be d e r i v e d not only to cope with the p e t t y c a p i t a l i s t s e c t o r that i s present i n the c i t y , but to make p r o v i s i o n s f o r the growth of the s e c t o r as the c i t y expands i n p o p u l a t i o n and area. S p a t i a l l i n k a g e s p l a n n i n g i n new towns. In new planned towns, there i s no p r o v i s i o n made f o r accomodating the poverty-bound p e t t y c a p i t a l i s t s e c t o r that i s sure to develop due to the demands p r e s e n t . In Chandigarh, I n d i a , a new town planned by Le C o r b u s i e r , hawkers vendors, and s q u a t t e r s crowded the c i t y v i o l a t i n g some of the o r i g i n a l p l a n design i n a very s h o r t time ( S a r i n , 1982). Planners have s i n c e been cop i n g with the problems by r e l o c a t i o n , removal and the l i k e . T h i s c o u l d have been avoided i f areas had been a l l o t e d w i t h i n the c i t y , c l o s e to the expected sources of demand, such as upper income r e s i d e n t i a l areas, market p l a c e s and t r a n s p o r t nodes. B. P l a n n i n g f o r i n f r a s t r u c t u r e and housing. While the s e l e c t i o n of the optimum l o c a t i o n a l l o w s the poor to maximise t h e i r b e n e f i t s i n the long run, c e r t a i n immediate needs of the poverty-bound p e t t y c a p i t a l i s t s e c t o r a l s o r e q u i r e 195 the a t t e n t i o n of urban p l a n n e r s . These are mostly i n the p r o v i s i o n or improvement of s h e l t e r , s e r v i c e s and f a c i l i t i e s . Although the p r o v i s i o n of housing i s an enormous task, the government can undertake the r e s p o n s i b i l i t y of s u p p l y i n g b u i l d i n g m a t e r i a l s at a s u b s i d i s e d r a t e , p r o v i d i n g a p p r o p r i a t e housing d e signs and p r o v i d i n g t e c h n i c a l knowhow f o r c o n s t r u c t i o n i f necessary. I t becomes necessary f o r the government to pr o v i d e the i n f r a s t r u c t u r a l needs because the present unequal d i s t r i b u t i o n does not meet the needs of the poor, s t r a i n s the urban i n f r a s t r u c t u r e that was not equiped to handle the e x t r a l o a d , and u l t i m a t e l y a f f e c t s other users of the s e r v i c e s . In t h i s l i g h t , t h e r e are two s u g g e s t i o n s . D i s t r i b u t i o n of i n f r a s t u c t u r e . I t i s suggested that e f f o r t s be made to improve the s e r v i c e s , working equipment and f a c i l i t i e s to the poor at t h e i r optimum l o c a t i o n . C u r r e n t l y , the poor l i v e and work i n substandard s t r u c t u r e s and do not have access to p u b l i c t r a n s p o r t a t i o n , water, e l e c t r i c i t y or garbage d i s p o s a l except by usi n g or p i l f e r i n g from nearby s o u r c e s . Since the c o s t s of removal and r e l o c a t i o n w i l l be reduced i f the a c t i v i t i e s are allowed to remain i n t h e i r o r i g i n a l s i t e s or c l o s e by, resources can be put towards upgrading t h e i r l i v i n g and working c o n d i t i o n s i n a uniform manner, not piecemeal as has been the case i n the p a s t . In I n d i a , there i s a programme f o r the p r o v i s i o n of minimum b a s i c needs but implementation has been slow. In new towns i n f r a s t r u c t u r e can be prepared f o r the poverty-bound p e t t y c a p i t a l i s t s e c t o r i n advance and i n e x i s t i n g towns some advance 196 p r e p a r a t i o n can a l s o be made to allow f o r c i t y expansion. Design of housing. Improvement of housing, by the design of housing u n i t s or ' s i t e s and s e r v i c e s ' , w i l l be i n e f f e c t i v e i f i t does not meet the needs . of the poor. I t has o f t e n been the case t h a t the socio-economic needs of the poor are not adequately i n c o r p o r a t e d i n the d e s i g n of r e l o c a t i o n schemes (Das, 1978; Payne, 1974). S i n c e , i t was s t a t e d e a r l i e r t h a t i t may be necessary f o r the s t a t e t o i n t e r v e n e and r e l o c a t e a c t i v i t i e s when they pose h e a l t h and s a f e t y problems, i t i s suggested that socio-economic p r o f i l e  be g i v e n g r e a t e r a t t e n t i o n , p a r t i c u l a r l y i n the design of  housing. The design of low c o s t housing may not be cheap enough fo r the poor. According to Mazumdar (1975), 71 percent of s q u a t t e r s i n D e l h i earn l e s s than Rs. 250 per month and yet the Housing and Urban Development C o r p o r a t i o n i n I n d i a has c o n s t r u c t e d low c o s t housing i n D e l h i that r e q u i r e s a monthly payment of Rs. 115 per month (Mulk Raj, 1977). In Madras, I n d i a , h i g h r i s e apartments were p r o v i d e d to the fishermen who o r i g i n a l l y squatted on the beaches. The fishermen r e t u r n e d to t h e i r o r i g i n a l s i t e s because there was no space i n the apartments to hang t h e i r n e t s . I t i s , t h e r e f o r e , suggested that the l i n k s between s o c i a l and economic as p e c t s of poverty be a n a l y s e d b e f o r e the design of s t r a t e g i e s at the n a t i o n a l and urban l e v e l . 1 97 5.4 D i f f e r e n c e s Between Proposed S t r a t e g i e s And Others The suggestions presented here may appear to be s i m i l a r to those i n the p o s i t i v e and r a d i c a l phases of p l a n n i n g d e s c r i b e d e a r l i e r . However, p r e v i o u s s t r a t e g i e s were not based on an a n a l y s i s of the s p a t i a l l i n k a g e s between consumer demand and labour supply of the poverty-bound p e t t y c a p i t a l i s t s e c t o r . In the p o s i t i v e phase, s t r a t e g i e s were designed to compensate the i n f o r m a l s e c t o r because i t complemented the formal s e c t o r , but not with a view to maximise i t s b e n e f i t s . R e l o c a t i o n of the s e c t o r was f r e q u e n t l y not to an optimum l o c a t i o n . S i m i l a r l y , the suggestions i n the r a d i c a l phase were made in the context of the development approach of the time which was to r e v e r s e the top-down approach to one with g r e a t e r autonomy fo r the l o c a l governments; a bottom-up approach with emphasis on r u r a l development, and a g r o p o l i t a n growth (Friedmann and Weaver, 1979). S e l f - h e l p f o r the urban poor, i n that c o n t e x t , meant r e p l a c i n g the p a t e r n a l i s t i c approach of p r o v i d i n g f o r the poor with a more d i g n i f i e d way of l e t t i n g the poor h e l p themselves, with some government a s s i s t a n c e . For example, i n s t e a d of p r o v i d i n g housing to the poor, p r o v i d e m a t e r i a l s so that the poor can c o n s t r u c t t h e i r own. But t h i s s e l f - h e l p housing was o f t e n i n r e l o c a t e d s i t e s , removed from the demand ar e a s . Skinner (1980) i s c r i t i c a l of the approach because of i t s dismal f a i l u r e i n Lima, Peru. The term s e l f - h e l p i t s e l f a l s o appears to be i n a p p r o p r i a t e , because the poor have a l r e a d y helped themselves by engaging i n p e t t y c a p i t a l i s t a c t i v i t i e s to cope with t h e i r poverty and 1 98 unemployment. Whatever e l s e i s done by the government to cope wit h poverty, whether p a t e r n a l i s t i c or more humane, i s some a c t of p r o v i s i o n or compensation to the poor who c o u l d not b e n e f i t more d i r e c t l y by the development process of the n a t i o n . The s u g g e s t i o n s a r i s i n g out of the a l t e r n a t i v e a n a l y s i s a l s o f i t i n t o t h i s c o n t e x t . One suggestion that i s sometimes made i s to o r g a n i s e the poverty-bound p e t t y c a p i t a l i s t a c t i v i t i e s i n t o c o o p e r a t i v e s . There are s e v e r a l a s p e c t s to t h i s approach that makes i t u n f e a s i b l e under c u r r e n t s i t u a t i o n s i n the T h i r d World. F i r s t l y , given the magnitude of the i n f o r m a l s e c t o r which v a r i e s from twenty to s i x t y percent of the p o p u l a t i o n the task i s enormous i n many i n s t a n c e s . C a l c u t t a i s a c i t y over 9 m i l l i o n (1980, Census of India) where 40-50 percent has been estimated as belonging to the i n f o r m a l s e c t o r (Sethuraman, 1981). I t would be d i f f c u l t . to attempt o r g a n i s i n g c o o p e r a t i v e s f o r such numbers and i f a piecemeal approach i s taken, then the s t r a t e g y cannot be c o n s i d e r e d as one t h a t i s t o t a l l y e f f e c t i v e because many w i l l not b e n e f i t from i t . Secondly, o r g a n i s i n g the a c t i v i t i e s i n t o c o o p e r a t i v e s may r e s u l t i n l o s s of c l i e n t a l e . In I n d i a , many of the hawkers who s e l l food items s u r v i v e not o n l y because the items are cheap but a l s o because they are c o n v e n i e n t l y l o c a t e d and p r o v i d e v a r i e t y . O r g a n i s i n g these a c t i v i t i e s can l e a d to i n c r e a s e i n c o s t s and t h e r e f o r e p r i c e s , and may even a f f e c t the l o c a t i o n of the a c t i v i t y . F i n a l l y , o r g a n i s i n g the i n f o r m a l a c t i v i t i e s i n t o c o o p e r a t i v e s leads to some degree of f o r m a l i s a t i o n i n marketing and d i s t r i b u t i o n of 199 the goods. T h i s r a i s e s the p r i c e of the product and although those i n the c o o p e r a t i v e may u l t i m a t e l y enjoy higher incomes, the government must then cope with p r o v i d i n g the poor who have not b e n e f i t t e d by the c o o p e r a t i v e system, with cheap goods. Many of the needs of the poor are met by the poor, and c o o p e r a t i v e s may a f f e c t the supply of cheap goods to the poor. D a i r y farmers i n K a i r a d i s t r i c t of G u j a r a t , I n d i a , were o r g a n i s e d i n t o a c o o p e r a t i v e by the i n i t i a t i v e of a p r i v a t e i n d i v i d u a l . Today the c o o p e r a t i v e p r o v i d e s many of the d a i r y product needs of the upper income groups but the poor continue to buy milk from the 'gwala' or the milkman. As a f i n a l note on t h i s e n t i r e s e c t i o n on suggestions f o r p l a n n i n g , i t can be s a i d t h a t s i n c e the f i n a n c i a l r e s o u r c e s i n most T h i r d World n a t i o n s are l i m i t e d i n what can be done f o r the poor, i t would be i n the i n t e r e s t of the poor and the government to h e l p the poverty-bound p e t t y c a p i t a l i s t s e c t o r i n the c i t i e s to maximise t h e i r b e n e f i t s and minimise t h e i r c o s t s , r a t h e r than d i s r u p t t h e i r a c t i v i t i e s . The D e l h i Development A u t h o r i t y has a l r e a d y taken t h i s p o s i t i o n , as the f o l l o w i n g quote i n d i c a t e s , but only out of f r u s t r a t i o n of c o p i n g e n d l e s s l y with a problem that does not l e s s e n . "We r e a l i s e d we c o u l d n ' t beat the s q u a t t e r s . Instead we've j o i n e d them by p r o v i d i n g the minimum s a n i t a t i o n and s e r v i c e s and r e g i s t e r i n g the squatter c o l o n i e s as a l e g a l p a r t of our housing s t o c k . " Rebiero, P l a n n i n g Commissioner f o r D e l h i Development A u t h o r i t y , i n Hodgson, 1985. However, e f f o r t s should be i n c r e a s e d at the n a t i o n a l l e v e l 2 0 0 to absorb the s u r p l u s labour i n r u r a l and urban areas i n t o higher paying a c t i v i t i e s i n e i t h e r the r u r a l s e c t o r or i n i n d u s t r i a l development for t h i s i s where s o l u t i o n s to poverty and unemployment l i e . The Government i n I n d i a needs to a l s o c o n s i d e r p o p u l a t i o n c o n t r o l , c o n s o l i d a t i o n and r e d i s t r i b u t i o n of a g r i c u l t u r a l land, c o n t r o l of absentee l a n d l o r d i s m i n r u r a l areas e t c . a l l of which are known to have c o n t r i b u t e d to the s u r p l u s labour supply. U l t i m a t e l y , the p o l i c y o b j e c t i v e should be to reduce the poverty-bound a c t i v i t i e s i n the p e t t y c a p i t a l i s t s e c t o r and to make the s e c t o r more a s e c t o r of c h o i c e . For t h i s purpose, a macro l e v e l approach to the problem i s important. To summarize the suggestions made i n t h i s c h a p t e r , a diagram i s presented ( f i g u r e 14), that b r i e f l y d e s c r i b e s the i m p l i c a t i o n s of the a l t e r n a t i v e a n a l y s i s to f o r m u l a t i o n of g o a l s , the r o l e of the s t a t e , and suggestions f o r p l a n n i n g . In c o n c l u d i n g t h i s c h a p t e r , i t should be r e i t r a t e d t h a t the focus of t h i s chapter has been mostly on poverty-bound p e t t y c a p i t a l i s t a c t i v i t i e s . Other types of a c t i v i t i e s , such as the t h r i v i n g , small s c a l e s e c t o r w i l l need a separate a n a l y s i s of the problem and a d i f f e r e n t p l a n n i n g approach. While p o v e r t y -bound p e t t y c a p i t a l i s t a c t i v i t i e s i n the T h i r d World were s e l e c t e d f o r d i s c u s s i o n here, i t does not mean th a t other c a t e g o r i e s of a c t i v i t i e s are l e s s important i n these or i n other n a t i o n s . 201 F i g u r e 14 - The i m p l i c a t i o n s of the a l t e r n a t i v e a n a l y s i s to pl a n n i n g OOAI, OF PLANNING HOLE OF THE STATE SUGGESTIONS FOII PLANNING ALL TYPES Ot PETTY CAPITALIST ACTIVITIES POVERTY-BOUND PETTY CAPITALISM Diveroified-depends on , nature of — 'problem' Vo decrease poverty & •unemployment• Depends on costs Is. benefits to — the state not legal status of a c t i v i t y Positive role but minimal . intervention . Separate analysis and separate planning approach for each category of a c t i v i t y N A T I O N A L L E V E L : 1. Coordinated approach _ to increase e f f e c t -iveness of plans tl improve data base for planning. 2 . Inclusion of 'demand' aepect i n s p a t i a l planning. TOWN LEVEL: 1. Inclusion of 'demand' aspect i n s p a t i a l planning i n ex i s t i n g towns and planned new towns. 2. Planning for minimum basic needs f o r the poor. 3. Consideration of so c i a l aspects of the poor in planning. 6. CONCLUSION The a l t e r n a t i v e a n a l y s i s has been presented i n t h i s r e s e a r c h as a means to understand the p e t t y c a p i t a l i s t s e c t o r i n the l i g h t of recent knowledge on the s u b j e c t . I t has been necessary to draw . g e n e r a l i s e d c o n c l u s i o n s about the p e t t y c a p i t a l i s t s e c t o r i n the dominant types of economies to cover i t s g l o b a l occurrence. 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E x p o r t T r a d i ng r i i E x p o r t I n d u s t r y Non c a p i t a l i s t m a n u f a c t u r i ng N o n - m o d e r n T r a d i n g H i e r a r c h i c a l r e l a t i o n s R e l a t i o n s o f R e l a t i o n s o f s i m p l e r e c i p r o c a l c o m p l e m e n t a r i t y c o m p l e m e n t a r i t y S o u r c e : S a n t o s , 1 9 7 7 . 232 APPENDIX B ~ DUALISM MODEL OF URBAN ECONOMY BASED ON INCOME OPPORTUNITIES: HART 1973 FORMAL INCOME OPPORTUNITIES (a) P u b l i c s e c t o r wages . (b) P r i v a t e s e c t o r wages . (c ) T r a n s f e r payments - p e n s i o n s , unemployment b e n e f i t s . INFORMAL INCOME OPPORTUNITIES: LEGITIMATE (a) P r i m a r y and s e c o n d a r y a c t i v i t i e s - - f a r m i n g , market g a r d e n i n g , b u i l d i n g c o n t r a c t o r s , and a s s o c i a t e d a c t i v i t i e s , s e l f - e m p l o y e d a r t i s a n s , shoemake rs , t a i l o r s , m a n u f a c t u r e r s o f b e e r s and s p i r i t s . (b) . T e r t i a r y e n t e r p r i s e s w i t h r e l a t i v e l y l a r g e c a p i t a l i n p u t s - - h o u s i n g , t r a n s p o r t , u t i l i t i e s , commodity s p e c u l a t i o n , r e n t i e r a c t i v i t i es . (c) S m a l l - s c a l e d i s t r i b u t i o n - - market o p e r a t i v e s , p e t t y t r a d e r s , s t r e e t h a w k e r s , c a t e r e r s i n f o o d and d r i n k , b a r a t t e n d a n t s , c a r r i e r s ( k a y a k a y a ) , commiss ion a g e n t s , and d e a l e r s . (d) O the r s e r v i c e s - - m u s i c i a n s , l a u n d e r e r s , s h o e -s h i n e r s , b a r b e r s , n i g h t - s o i l r e m o v e r s , photo-g r a p h e r s , v e h i c l e r e p a i r and o t h e r ma in tenance w o r k e r s ; b r o k e r a g e and middleman-s h i p ( t he m a i g i d a sys tem i n m a r k e t s , law c o u r t s , e t c ) ; r i t u a l s e r v i c e s , m a g i c , and m e d i c i n e . (e) P r i v a t e t r a n s e r payments - - g i f t s and s i m i l a r f l o w s o f money and goods .between p e r s o n s ; b o r r o w i n g ; b e g g i n g . INFORMAL INCOME OPPORTUNITIES: ILLEGITIMATE (a ) S e r v i c e s - - h u s t l e r s and s p i v s i n g e n e r a l ; r e c e i v e r s of s t o l e n goods ; u s u r y , and pawn-b r o k i n g (a t i l l e g a l i n t e r e s t r a t e s ) ; d r u g -p u s h i n g , p r o s t i t u t i o n , ponc ing ( ' p i l o t boy s m u g g l i n g , b r i b e r y , p o l i t i c a l c o r r u p t i o n Tammany H a l l - s t y l e , p r o t e c t i o n r a c k e s . (b) T r a n s f e r s - - p e t t y t h e f t ( e . g . p i c k p o c k e t s ) , l a r c e n y ( e . g . b u r g l a r y and armed r o b b e r y ) , s p e c u l a t i o n and embezz lemen t , c o n f i d e n c e t r i c k s t e r s ( e . g . money d o u b l e r s ) , gamb l ing (Har t 1973 : p 69) 233 A P P E N D I X C ~ A S I M P L I S T I C CHART ON T H E FLOW OF IDEAS ON ECONOMIC D U A L I S M AND D E V E L O P M E N T Mid . 18C. 1 9C. Late 19C. E a r l y 20C. 1950 1960 ' s RISE OF ECONOMIC LIBERALISM ( C l a s s i c a l Economics) Adam Smith J . J . Rousseau Ricardo LIMITS GROWTH Ricardo Mai thus Schumpeter :MENTv p o l i - \ : r n r ^ Keynes Harrod Domar ETHICAL 4-MOVE  New c i e s f odependent people in t h i r d world CLASSIC DUALISM^ Marx EXPLOITATION THEORIES 'Hob son Boeke ECONOMICS Perroux LABOUR UTILITY STUOIES REGIONAL SCIENCE Myrdal Hi rschman How to induce growth spa t i a l l y UNILINEAR DEVELOPMENT THEORY • URBAN DUALISM UNDERDEVELOPMENT/ DEPENDENCY THEORY 234 APPENDIX D - A STUDY OF SMALL TOWN DEVELOPMENT STRATEGY IN PUNJAB, INDIA I n d i a , a l o n g w i t h o t h e r d e v e l o p i n g c o u n t r i e s , has made p o l i c y d e c i s i o n s i n c o r p o r a t i n g the s m a l l town deve lopment i d e a . Whereas t h e r e i s no agreement on t he p o p u l a t i o n l i m i t s o f a s m a l l t own , t h e r e i s a consensus t h a t i t l i e s a t t h e l ower end o f the urban h i e r a r c h y . By I n d i a n Census c l a s s i f i c a t i o n , s m a l l towns l i e i n the p o p u l a t i o n range o f 5 ,000 t o 2 0 , 0 0 0 . I n d i a has s t r e s s e d " i n t e r m e d i a t e " u r b a n i s a t i o n t o r e l i e v e p o p u l a t i o n c o n g e s -t i o n i n l a r g e c i t i e s s i n c e the f i f t h f i v e - y e a r p l a n (1974-1 9 7 8 ) . However , d u r i n g t he s i x t h f i v e - y e a r p l a n (1979-1983) t he emphas is changed t o s m a l l town d e v e l o p m e n t . The f i n d i n g s o f a "Task F o r c e on Sma l l and Medium Towns i n I n d i a " s e t up by t he Government o f I n d i a i n 1975 e n c o u r -aged the c r e a t i o n o f programme "