Book Review – Stealth of Nations: The global rise of the informal economy

By | December 2, 2011

The first best thing that I can say, on Robert Neuwirth’s Stealth of Nations, is that I’m grateful to the author for writing the book. I’ve just finished reading it, after purchasing it at a premium from Kinokuniya in downtown Singapore. At least twice while reading I found myself wanting to bake cookies for the author, even as I realized at other points of his sweeping overview of the entrepreneurial spirit – the economy of ingenuity, as he so aptly terms it – that his perspective was a bit naive, or rather, that of an outsider, the natural outcome from a detached observer traveling through all the locales and situations.

His extremely easy to read and engrossing writing style rapidly took me through the stories of the enterprising individuals he met in Paraguay, China and Nigeria as well as covering the reflections of experts such as John Keith Hart, Roberto Unger and Martha Alter Chen. The urge to bake cookies emerged from the way he intertwined snippets from John Adams’ classic Wealth of Nations in and out of his narrative in order to give context to the economic thinking and theory of current day policy and systems.

What he has done with the publication and the subsequent publicity of this book is to shine a bright light on the economic engine that employs billions of people around the world, who aspire to make their dreams come true and create a better life for themselves and their children, in the most challenging circumstances and uncertain environments.

The topic has been covered extensively in such eminent locations as Foreign Policy, the Wall Street Journal and – no small feat for a subject matter traditionally overlooked or considered a blight on the development economics landscape.  Neuwirth covers this aspect in the early chapters of the book and quotes Hart viz.,

Even Keith Hart has come to recognize the shortcomings of the phrase he coined. “The label ‘informal’ may be popular because it is negative,” he wrote in the paper delivered at a conference in 2004. “It says what people are not doing – not wearing conventional dress, not being regulated by the state – but it does not point to any active principles they may have for doing it. It is a passive and conservative concept that acknowledges a world outside the bureaucracy, but endows it with no positive identity.”

He goes on to propose a rebranding – system D – but acknowledges that is a cosmetic change. Words as labels tend to be constricting for this amorphous yet creative liminal space that is such a gray area between structure and chaos –  my own use of the label the prepaid economy has only captured the most popular business model of pay as you within this space but not the inherent potential and value that this activity provides among those conventionally known as the Base or Bottom of the Pyramid.

It is the fact that his book exists – firmly positioned in the context of economics, that too global economics, in this time of transition and upheaval when so called structured systems are themselves suspect of being the perpetrators of the problems facing the financial industry – that offers the greatest value to that which he calls System D. This, to me is the greatest value that his book will bring, if it is able to retain its prominence in the public sphere once the flurry of reviews and coverage is over.

It provides the layman – even economists are laymen, when it comes to the details of the daily grind for the lower income demographic across the developing world – with a glimpse of the why a System D must needs exist – particularly where there is systemic mistrust due to inadequate infrastructure, lack of a safety net and where systems don’t work at all, much less as imagined or  planned.

Neuwirth highlights a key point – this economy provides employment for anyone, with the lowest barriers to entry. Any market woman with enough shillings or rupees to buy one day’s inventory is automatically in business – compare this to a highly structured formal economy like Finland’s, where a recent culinary school graduate manning a coffee and cake kiosk at Katajanokkapuisto tells me that she is unable to offer more than a quesadilla, though there was demand for a wider variety of foodstuffs, simply because of the extensive barriers of rules, regulations and requirements by the city’s authorities.

If it makes the powers-that-be that set policy or make pronouncements on what is the one right way to economic development stop and consider whether a little loosening up might not benefit their own tightly corseted economies a little, then this book, with all its naivete and idealism would have done the job I want for it to do.

So, where do I feel Neuwirth is lacking? An example would be the throwaway line saying that something like a Maker Faire Africa could be done at regional and even global levels, making a difference for the inventors and makers emerging from their environments of scarcity. Oh yes, Mr Neuwirth, we want that to happen so badly, but as those of us who have tried to make this happen elsewhere have found, few organizations want to fund it or see the value in such activities.

Even while seeing the value and potential of this introduction to size, scale and scope – not to mention the sheer motive power – of this economic activity, it has been in these areas – the suggestions for what can be done, where Mr Neuwirth has revealed his lack of experience with the way the world and its decision makers view those at the BoP. A touch more work on the people themselves, their lives and the role that System D plays – with context of their socioeconomic strata, existing opportunities and the challenges posed by well meaning impact investments and NGO foundations would have given the book a grounding it currently lacks.

For these are all factors that influence each other – economic theory and development practice, BoP marketing and poverty alleviation, microfinance and the so called chaos of the bazaar. Still, if the Stealth of Nations paints this economy of ingenuity in a positive light and gives it credibility, it may perhaps begin to change the way these activities are viewed leading to efforts to bridge the deeper and not so digital divide between the developing and the developed world.

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