An eye-opening book about the informal economy and its power to provide much-needed jobs and sustain economies. Full review coming soon!
Full review on my blog guiltlessreading
My thoughts: The title is an extremely witty take on Adam Smith's Wealth of Nations the commonly accepted Economics 101 textbook espousing free market economies. Each chapter opens with an excerpt from Wealth of Nations and is expounded on in throughout the chapter (with rather amusing titles, like "The Global Rummage Sale," "The Culture of the Copy" or "The Honest Con Men").
A few intriguing tidbits that I thoroughly enjoyed, and which got me thinking. And the book is loaded with these:
The resurgence of an interest in Shakespeare in the 1700s ... because copies of his plays were pirated and sold for a penny a piece.
"A century after the playwright's death, piracy helped make William Shakespeare a household name, helped promote literacy across the social classes (because even poor people consider coughing up a penny a play) and helped install Shakespeare's writing as the pinnacle of English usage."
- p. 103-104, Stealth of Nations
Retail giant Proctor and Gamble has adapted their marketing strategy to cater to System D in developing countries, which makes up over 20% of their market base.
"Yes, our biggest customer is Walmart [...] But in reality our largest customer is what we refer to as HFS--high-frequency stores." Indeed more than 20% of the company's business now comes from these tiny, less-than-three-cash-register stores in the developing world. "It is our fastest-growing customer and, in terms of volume, it's our number one customer" [...]
- p. 132, Stealth of Nations
After having viewed Christiane Amanpour's interview with the author (see end of post), I knew I had to read this. Coming to a "developed" country like Canada, "informal economy" carries with it a stigma: "When we think of the informal economy, we tend to think of crime: prostitution, gun running, drug trafficking." This is why I feel this book is so important, if but to correct this misconception. While Neuwirth describes the informal economy as an "underground realm," he is clearly coming from a "developed country" perspective.
The stories told here are not uncommon to me. While Neuwirth's encounters hailed from South America, Africa, and China, these could as easily have been transplanted to my homeland, the Philippines. Or anywhere else in Asia for that matter.
Back home, I used to interact with this economy on a daily basis. There's the women who sell clothing at the office during downtime. There's the old lady who comes by during snacktime with her bilao of merienda like pansit, kakanin and other local fare (basically a basket of snacks like home-cooked noodles and coconut-rice cakes etc.). If I want a snack or I've run out of cell phone minutes, I ran over to the guy over at the corner of the street selling balut and phone cards and a hodgepodge under his umbrella. I have been to malls with full floors of branded electronics selling both legit and very good knock offs (your choice), bootleg copies of newly released DVDs, and designer-branded counterfeit bags and clothing.
This is the informal economy. I grew up with it and I never questioned it. It is systemic, it is commonplace. It met people's needs. Receipts? Don't ask. But if the DVD doesn't work, you can definitely come back and return it. But I am rambling ...
The book tackles the rather controversial subject of the “informal economy," an economy untaxed, largely undocumented, and in the strictest definitions of the global economy - illegal. But it not only exists, it is proliferating. And it not only happening in developing nations, but also in so-called developed countries. Going by many other names - including the gray market, the underground economy, the shadow economy - Neuwirth rebrands it lovingly throughout the book as System D, shortened from l'economie de la debrouillardise which is slang from French-speaking Africa which roughly means ingenuity or DIY economy.
And ingenious it is. Neuwirth presents very compelling evidence of the existence of System D, told through his own meetings with the many resourceful and hardworking entrepreneurs who has come to depend upon the system for their survival. Neuwirth comes across as an investigative journalist with a heart, taking the time to live among them and they in turn have made him privy to details of their lives, many of which would be quite damning - including bribing and smuggling out as a matter of course. The book is as much about as these people's lives as it is of Neuwirth's insights.
While I enjoyed the travelogue style which takes up much of this book, it turns partially academic towards the middle. Some out-of-the-box thinking by big multinational in order to gain a slice of the burgeoning market that is System D. It looks at the history and the opposing economic thoughts towards System D (see chapter "Against Efficiency"). It examines the rather loaded question "Why Not Formalize the Informal?" It provides some great material worthy of debate, and some thought-provoking fodder.
All this material in this rather slim book of less then 300 pages. This will put you on a merry little path if you want to delve into the topic further. You can check out pages upon pages of references at the back of the book. Or check out Neuwirth's Stealth of Nations blog.
Extremely readable and engaging, this book reminds me how authors like Stephen Hawking, Malcolm Gladwell and Steven Dubner & Steven Levitt have successfully laymanized academic topics. That being said, don't expect the book to answer all your questions but rather to just get you started asking the questions. It's an eye-opener, not a full-blown economics course.
First line: These are the products of some people's lives.
Verdict: And engaging, thought-provoking insider look at the informal economy, this book will get you wondering, observing, and asking questions you never thought to ask.