Tuesday, January 24, 2012

Monetizing the informal economy in developing countries

The challenge is integrating the informal economy with the formal economy without disrupting the sustainability that the informal economy has attained. This conflicts, however, with monetizing the informal economy, which is how the formal economy has consistently grown since tribal times by privatizing the commons and monetizing relationships by converting them to monetary exchanges.

Read it at IPS
Informal Economy Ensures Equitable Development
By Catherine Wilson


Matt Franko said...


I can see the point here.

This is how I see the Roman Empire running for 200 years or so that I had a post on here that really seemed to work well for them for this time.


You establish is very "payable" head or poll tax on the population so the central govt can get provisioned. This "provision" would include the development of hgih quality public infrastructure like they talk about in the article.

And have a relatively high value minimum denomination state currency. And dont run the govt sector to "nickel and dime" the nongovt sector (this comes from "taxpayer on the hook" anyway). Like it looks like the Romans did in this interval with the denarius as the smallest denomination. Small poll tax, high min. currency value, let the population "do their own thing" outside of the "formal" economy (maybe to even include use of non-govt forms of "money").

Eliminate all transaction taxes in the state currency (again these today come from "taxpayer on the hook"). Eliminate all income taxes in the state currency (again "T O T H"). Go back to a head/poll tax only.

This would let the barter and gift transactions flourish in the "informal" economy that would operate "under" the "formal" economy.

And if other people wanted to be "workaholics" they probably would still be able to do that too and perhaps make a lot more "money" than others in the "informal" economy, but that would be their choice; and would occur not at the expense of those who wanted to remain mostly in the "informal" economy.

Brainstorming.... it would be like a hybrid system that would operate at two levels instead of a "one system for everybody" type of thing...


Tom Hickey said...

Agree, Matt. I would add that there is always going to be an informal economy one way or another, Why replace a working system with one that is relative dysfunctional just so a few people can do really, really well while the most of the rest sink?

geerussell said...

This might be of some related interest.


It has lots to say on how to gear down from the big, outsider development efforts to something that can interface with existing institutions as well as on the role of taxation as not just a fiscal tool but as a matter of governance in the creation of a "social fiscal contract".

Tom Hickey said...

Looks interesting, geerussell. Here's a clickable link to it.

An Upside Down View of Governance