jan breman- a dualistic labour system?

8/18/2019 Jan Breman- A Dualistic Labour System?

1/8

Economic and Political Weekly is collaborating with JSTOR to digitize, preserve and extend access to Economic and Political

Weekly.

http://www.jstor.org

A Dualistic Labour System? A Critique of the 'Informal Sector' Concept: I: The Informal SectorAuthor(s): Jan BremanSource: Economic and Political Weekly, Vol. 11, No. 48 (Nov. 27, 1976), pp. 1870-1876Published by: Economic and Political WeeklyStable URL: http://www.jstor.org/stable/4365139Accessed: 09-02-2016 03:19 UTC

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/ info/about/policies/terms.jsp

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of contentin a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship.For more information about JSTOR, please contact [email protected].

This content downloaded from 128.220.8.15 on Tue, 09 Feb 2016 03:19:23 UTCAll use subject to JSTOR Terms and Conditions

http://www.jstor.org/http://www.jstor.org/publisher/epwhttp://www.jstor.org/stable/4365139http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/stable/4365139http://www.jstor.org/publisher/epwhttp://www.jstor.org/


2/8

SPECIAL

ARTICLE

Dualistic a b o u r

Syst em

A

Critique of

the 'Informal Sector'

Concept

I: The Informal Sector

Jan

Breman

This paper examines the utility of

the concept of the 'informal

sector'.

The author argues, partly

on the basis of research into labour

relations in a small

town in western

India,

that the concept of the

informal sector is analytically

inadequate.

The informal sector, he

suggests,

cannot

be demarcated as a separate

economic compartment

and/or labour

situation.

In Part

I

of the article

it is argued that any

attempt

to

demarcate the informal

sector will give

rise

to numerous inconsistencies

and difficulties.

Moreover, by interpreting

the relationship of the

informal

sector to the formal

sector in

a

dualistic framework

and

by focusing

on the

mutually excluisive

charac-

teristics,

we lose sight of the unity and totality

of the productive

system.

In Part

II of the article, the author

suggests that

rather than divide the urban system

into two

segments, it is preferable to emphasise the fragmented nature of the entire labour market.

Finally,

in

Part IlI,

the

author considers the social classes which are usually

associated with the

urban

labour

force.

[Part

I

of

the

article

appears

this

week.

Parts 11

and Ill will

be puiblished

in the

following weeks.]

INTRODUCTION'

SOCIAL

orders which are

based on agri-

culture

are generally

known in the

social

sciences as peasant systems.

This

signifies not only a particular type

of

society

but

also

the nature

of

the

developmnent

problem;

much

of the

literature on

the subject is rightly

devoted

to the

rural setting

and

tci

agrarian production. Nevertheless, a

considerable percentage

of the popula-

tions

of what are optimistically

knowr*

as developing

countries

live in towns

and

cities. The share

of

the

urban

population

varies from country

to

countrv,

but for the

third world as

a

whole

it amounts to roughly

25 per

cent.

In the rural areas the

greater majority

of the population works

in agriculture;

similarly, urban living

is usually

con-

sidered to

be

associated

with an indus-

trial way of

life. But the

lattei

assumption

is

in

no

vay

related to

reality. Only half and somnetimes ess

of

the urban

population

usually

finds

employment

in factories

and other

establishments

in

the so-called

modern

sector. No one who is

at all familiar

wvith the socio-economic

situation

in

the cities of the third

world will be

surprised by

this fact. But

for

a

long

time

little

if

any

attention was

given

to

the economic

activities and

the

incomes

derived therefrom

with which

the

other part,

often the majority,

of

the urban population has

to try to make

ends meet. This

limbo continued

until

the concept 'informal sector' appeared on

the scene a few

years ago, since

when

it

has

steadily gained

in popularity.

The term

was first launched

by Hart

[1971]

wtho

described

the

informal

sector

as that part of

the

urban

labou?

force

which falls outside the

organised

labour

market.' The informal sector

has

since been

greeted as a

promising con-

cept

and

has been

further refined

by

a mission

of

the

International Labour

Office (ILO)

which

studied the

employ-

ment situation in Kenya within the

framewvork f

the

World

Employment

Programme.2

The aim of

this paper

is

partly

to

establish

the

utility of the

concept.

Most

discussions of

the

informal sector

take

as their

point of

departure the

dualistic character

that is

ascribed

to

the

urban

economy of

the

non-socialist

countries

of

the third

vorld.

This

implies that

the term

informal

sector

refers

to a

dichotomy in which

the

characteristics of the two

parts

form

each

other's

contrasts. The

formal

sector is taken to mean wage labour in

permaneent

employment,

such as

that

which

is

characteristic

of industrial

enterprises,

governrment offices

and

other

large-scale

establishments.

This

implies

(a) a set

number of

inter-related

jobs which

are

part of

a

composite,

internally

well-organised

labour struc-,

ture; (b)

work

situations

which are

officially

registered in

economic statis-

tics; and (c)

working

conditions

which

are

protected by

law.

Some

authors

therefore

speak

of the

organised,

registered

or

protected

sector.

Econo-

mic activities which do not meet these

criteria

are

then

bundled

under the

term

informal

sector, a

catchword

covering a considerable

range

of

econo-

mic-activities

which

are

frequently mar-

shalled

under

the

all

inclusive

term

of

'self-employment'. This

is employment of

a sort that is

very

little

organised

if

at

all, 'vhich is

difficult to enumerate and is

therefore often

ignored by

official

cen-

suses and,

finally, employment in

wvhich

wNorking

onditions are rarely covered

by legal statutes. As this description

of the

informal sector

is rather

imade-

quate,

the lack of a

proper definition is

very often,

although not

satisfactorily,

compensated by a

somewhat arbitrary

listing of

those

activities which meet

the

eye of

anyone who strolls

through

the

streets of a city in

the third world:

street

vendors, newspaper

sellers,

shoeshine

boys,

stall

keepers, prostitutes,

porters,

beggars, hawkers,

rickshaw

drivers,

etc.

In

other

words,

the

exten-

sive

collection

of

small

tradesmen, the

loose and

unskilled

workers and other

categories wvith low and irregular in-

comes

who

lead a

laborious,

semi-

criminal

existence

on

the

margins

of

the

urban economy.

ORIGIN

OF

THE

CONTCEPT

From the content

which is

given to

the

informal sector

concept

it

is

clear

that it

should be

regarded as a iiew

variant of the

dualism

theories which

earlier

gained

popularity.

In

Boeke's

classical

explanation

the

phenomenon

of

dualism refers

on

the

one

hand

to

an

urban

market

economy, usually

of

a capitalistic nature, and on the other

hand

to

a rural subsistence

economy

mainly

characterised

by

a

static

agri-

1

O"7Yn


http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsp


3/8

ECONOMIC AND

POLITICAL

WEEKLY

November

27, 1976

cultural

system

of

production.

Boeke's

reasoning that this

type

of

segmented

society,

which

originated

in

a

colonial

situation,

can

be

explained

by

funda-.

mental

and

permanent

differences

in

economic

behaviour, has

long

been

dis-

missed

as

untenable

by

many critics.3

Less

controversial

is the

assumption

of a certain socio-economic

duality

which

originates

in

a

different

phasing

of

development,

a

process

that

evokes,

or

at

any

rate

strengthens,

the

contrast

between

i

modern and

traditional,

capitalistic

versus

non-capitalistic, in-

dustrial-urban

as

against

agrarian-rural

modes

of

production.

Arthur

Lewis

and

later

Fei-Ranis have

used

the

con-

cept

of

dualism

in this

sense to

investi-

gate

how

surplus

labour

can

be

transferred

from

the rural

subsistence

sector in

order to

help

increase

non-

agricultural

production.

These

econo-

mists see the cities with their modern

industries as

dynamic

centres

from

which the

static

character of

the

rural

order,

characterised

by

stagnating

agri-

culture

with

very low

labour

producti-

vity,

can

gradually

be

overcome.

But

the

assum-ption

hat the

surplus labour

that

thus

becomes

available

will

be

absorbed

in

the

modern

sector

is

not

proven.

During

the

last

few

decades

we

have

seen

that

expansion

of

indus-

trial

employment

opportunities

lags

far

behind

the

growth

of the

urban

labour

force.

The

urban

dualism

that

is

nowadays apparent in many deveIoping

countries

is

not

due

to

any

gradually

disappearing

contrast

between

a

modern-dynamic

growth

pole

anxl

a

traditional-static

sector

which

has

tena-

ciously

survived

in

an

urban

environ.

ment,

but

rather

to

structural

distur-

bances

within

the

entire

econ'omy

and

society.

The

lowv

rate

of

industrialisa-

tion

and

the

presence

of

surplus

labour

are

listed

as

principal

reasons

why

a

dualistic

system

has

sprung

up

in

the

cities

of

the

third

world.4

The

informal

sector

contains

the

mass

of

the

working

poor whose productivity is much lower

than in

the

modem

urban

sector

from

which

most

of

them

are

excluded.

DIFFERENCES

IN

INTFRPRETATION

The

over-stereotyped

image

of

the

onerous

existence

led

by

sizeable

groups

in

the

lower

echelons

of

the

urban

economy is

undoubtedly due

partly

to

processes

of

stagnation

or

involution

which

are

the

root

cause

of the

rapid

growth

of the

informal

sector.

How-

ever,

the

idea

that

this is a

source

of

unproductive

labour

and

loafers,

of

social

isolation

if

not

dislocation

and

other evils which stress

its

residual

character,

doehs

not

sufficiently

depict

reality.

In

contrast

to this

negative

evaluas

tion, recent

literature shows

that acti-

vities

in the informal sector can

be

economically quite efficient and

profit-

able.

The

emphasis

is then less

on

actual labour

performance

and more

on the

context within which

people

workc.

This is an

amplification

of

an

urban dualism

in

which

stress

is

placed

not

on the

nature of the

employment

but on

the

mode of

production.5

According to

this more

positive

ap-

proach,

the distinction

formal-informal

refers to

two

economic sectors,

each

with

its own

structural

consistency and

dynamics.

Activity

in

the

informtial

sector

is

characterised,

for

instance,

by

low

capital

intensity, a low level

of

productivity,

a

small and

usually

poor

clientele, a low

level of

formal

schooling,

intermediate

technology,

preponderance of family labour and

ownership, ease

of

entrance

and,

last

but

not

least,

lack

of

support

and

recognition

on the

part of the

govern-

ment.

In

brief,

according

to

a recent

survey by

the

World

Employment

Pro-

gramme, the

informal

sector

consists

of

many

small-scale

enterprises

whose

labour

input is

predominantly provided

bv

relatives of

the

owner.6

It cannot

be denied

that the

itntro-

cluction of

the

concept

informal

sector

has

drawn

attention

to the

nebulous

complexity of

activities,

unorganised

fragmented and

divergeht

in

character,

with

which

a large

proportion

of the

population,

both urban

and

rural,

has

to

earn

its

daily bread. Until

recently,

research into

non-agragrian

employ-

ment

was

almost

entirely

confined

to

labour in

industries

and other

eniter-

prises

with, as

ever-recurring

themes,

the

social

background of

the

labour

force, their

adaptation to the

urban

and

more

particularly to the

industrial

way

of

life

and, of

course,

work

conditions

and

circumstances

in

these

large-scale

economic

establishments. The

recent

shift in focus from the formal to the

informal sector,

strongly

encouraged

by

the ILO,

has

brought an end

to the.

obstinately-held

belief

that

those

who

do

not

acquire

their

incomes in

a

regular

and

standardised

manner, as is

customary

in

the

modern

economic

sector,

have to

be

regarded as

under

or

unemployed.

On

the other

hand, discussion

of

the

informal sector

seems to give

rise to

more

questions

than

it

has

solved.

This

is due

primarily to the

lack of

precise

definition.

The

concept

-

is

taken to cover everything that

does

not belong

to the formal

sector,

and

it has rightly been pointed out that

this gives

the

distinction a tautologi-

cal character.7

The

notion of dualism

refers sometimes to distinctive em-

polyment situations, sometimes to sepa-

rate economic circuits, and frequently

to

a

combination of

the

two.

To

illustrate the latter alternative

Jet

me

cite Oteiza, who finds it conceivable

that

the end of the

century

will see, to

an even more

pronounced

degree,

the existence of two labour markets

with two very different

occupational

structures and

levels of inome, cor-

responding to two clearly distinctive

sectors of the economy

-

the mod-

ern and the traditional sector.8

But Oteiza's hypothesis, which is im-

plicitly also to be found in many other

essays, that the dichotomy in the two

meanings runs parallel, has yet to be

proven and can therefore not be taken

as a point of departure for empirical

analysis.

The

vagueness

and

iniconsistency

of

the definition

is

said

to

be due to

the

fact

that the

informal sector

has

only

recently

become

a

subject

of

study.

On the

other

hand,

it could

be

posited

that

the lack

of a

hard

empirical

basis

was perhaps

the reason

for

the cele-

rity

with which

the

concept

has

foundi

acceptance. It

is

noticeable

that

reports

which are based on

factual

research

are

often

particularly

critical

of the

conceptualisation.

At

any rate,

I have

come to the conclusion, partly on the

basis of

research

into labour

relations

in

a

small

town

in

western India,

that

the

concept

is

analytically inadequate.

In

my opinion,

the

informal sectou

cannot

be

demarcated

as a

separate

economic

dompartmnent

nd/or labour

situation. Any attempt to do so will

give

rise

to numerous inconsistencies

and

difficulties,

such as will

be

shown by

even a

sketchy discussion

of

social

background,

size and

compo-

sition. Moreover, by interpreting the

relationship to the formal sector in a

dualistic framework and in focusing

on the

mutually exclusive characteri-

stics,

we

lose

sight of

the

unity and

totality

of.

the

productive system.

Rather

than dividing the urban systeni

into

two segments, I prefer to empha-

sise

the

fragmented nature of the

entire

labour market (Part II). Finally,

I

shall

consider

the

social classes which

are

usually associated with the *urban

labour

force (Part III).

SOCIAL BACKGROUND AND SIZE OF

INFORMAL SECTOR

Social Background

Surprisingly little is

knownl

about

the relationship

betw-een

the informal

1871-




4/8

November 27,

1976

ECONOMIC AND

POLITICAL

WEEKLY

sector

and

social

stratification.

It

seems

reasonable

to

assume

that

workers

in

the

formal

sector are

mostly

recruited

from the

higher

social

strata

whose

edtucational level

is

also much

higher;

conversely,

low

social

positions

and

informal sector

activities are also

like-

ly

to

go

hand in

hand.

This

is

not

much

more

than an

assumption, how-

ever. The

question

of

how

this

social

distribution

originates

is

usually

left

unanswered.

On

the other

hand,

the

infonnal sector is

inevitably

seen

as

connected

to urban

poverty

and

to

its

social

determinants,

e

g,

low

incomes,

irregular

work,

inadequate

educatioin,

a

low

degree

of

organisation,

and

other elements from

which

a lack

of

security

and

protection

can

be

inferred.

Various

authors

have drawn

attention

to the fact that

non-economic

aspects

have

been

insufficiently considered

in

the

conceptualisation

of

the

informaI

sector. It is

remarkable,

for

instance,

that

many

discussions make little

or

no

mention

of

the

extensive

social

research

that

during

the

last few

years

has

been

carried

out

in

neighbourhoods

where

the

urban

poor

congregate.

Thig

shows

once

again

that a

thorough in-

ventorisation

of

existing

knowledge

based on

interdisciplinary

research

is

of

more

benefit

than a

proliferation of

studies

that do

not

cross

narrowly-

defined

professional

borders.

Receni

sociological and

geographical

investi-

gations of urban slums in third world

countries

have

shown

that

their

popu-

lations

are

extremely

heterogeneouE.

Apart

from

the fact

that

here is

no

evidence

of an

amorphous

and

disin-

tegrated

multitude, it

appears

repeated-

ly

that

the

inhabitants of

low-income

pockets

and

of

shanty towns in

the

ur-

ban

periphery

do

not form

a

separate

and

distinctive

social order.

Studies of

slums show

a

varied

composition

and

strong

and

close

ties

with

institutions

of the

general

urban

system

rather

than

any

deviating pattern

of

norms and

values.9 The

objections made in

many

recent

publications

against the

defini-

tion of

slums as

locations

with

specific

characteristics

and

problems are

irr

effect

also

addressed

to

attempts to

represent

the

informal

sector

as

a

clearly

distinguishable

circuit

of

the

urban

economy.

The

tendency

to

consider the in-

formal sector

as a

residue

primarily

of

rural

migrants

helps to

strengthen

tho

image

of

marginal

labour.

This em-

phasis

on

the

rural

background

is

hardly

surprising

when

we

consider

that

the origins

of the

informnal

ector

are

attributed

to a

continuing

process

of

urbanisation,

i e,

the massive

out-

flow of

surplus

labour

from the

country-

side. And

although

these rural

ini-

grants indeed

forn

a

substantial

part

of the urban

poor,

studies

based

on

empirical

research

have

shown

in

the

first place,

that

in the formal

sector

this percentage is not

necessarily

much

lower,'0

and

in the

second

place

that

a

great many of those

who

earn

their

living

in

the informal sector were either

born in urban

areas or have

long

re-

sided there.11 There

are

indications

that the rate

of

urbanisation

might

be

gradually

declining,

particularly in

heavily

populated countries

where the

large cities have

for

many decades

been

subjected

to conditions

of extreme

scarcity.

In a

study

of

Calcutta,

Lubell

concludes

that

population

growth in

the

surrounding

districts

is

much

higher

than

in

the

urban

agglomeration.

In his

opinion, migration

from

the

rural areas to the cities has

decreased

during

the last

quarter of

a

century,

not

only in

West Bengal

but in India

as

a whole.

This

decline

is certainly

not

due

to a massive

and

pronounced

improvement in

employment

opportu-

nities

and incomes at the

bottom of

the

agricultural

production

system.

However meagre

the income

eamed

by labour

in the

urban

informal sec-

tor,

the

chances

of

employment

in the

city

are

always greater

than

in

the

rural

areas and

the

minimum standard

of

urban

living is

also

considerably

higher. Even the

poorest people

in a

city such

as

Jakarta

are

probably

much better off

than the

low-income

strata in

the

villages of

Java.12 The

reason for

a

declining rate of

urbani-

sation should

therefore be

sought

rather

in the

tendency to

seal-off

the,

urban

sector.

Saturation is

also given

as a

reason

for

official

attempts too

check

a

continuing

inflow

and to

make

domicile

in

the

major cities de-

pendent

on

sparingly

distributed per-

mits.

But

there

seems to

be a ten-

dency

to define

the cities as

closed

areas even

without

government

inter-

vention. The

absorptive

capacity

of

the lower

levels of

the

urban

economy

is

anything but

unlimited

and cliches

regarding shared

poverty

and employ-

ment

opportunities

notwithstanding,

the

inhabitants show

growing disincli-

nation to take

relatives

with a rural

background

into

their

homes and to

help

them

find their

place

in the

urban

economy.

The

discharge

from

agri-

culture

continues,

but is no

longer

automatically

converted into

definitive

departure to the

cities. Large

groups

of

seasonal migrants

wvander

wretched-

ly to

and

fro

between

town and

coun-

try, recruited

or

rejected

as need

arises.13

In

addition

to

this rural-urban

circulation,

the seasonal

movement

of

labour within rural

areas has lately

gained

in

significance.

So

far,

the lite-

rature has shown

little interest

in these

issues, which are also ignored in dis-

cussions

of the

informal sector.

Size of Informal Sector

Estimates of

the size

of

the

informal

sector are

varied.

Moreover,

the

data

supplied for various countries or

cities

show considerable

disparity

which

cannot

be

ascribed

to

actual differences

in

economic

structure. Most authors

seem to

hold the opinion that

half

or

even more of the

populations of the

large cities of the

third world should

be

included in the informal sector, but

the

varying criteria on which their

studies are based preclude any accu-

rate comparison of their percentages.

A

major conceptual

problem is

caused

by

the fact that

the

labour

forces

of

the

formal

and informal

sectors

of the

economy

have different

compositions.

The use of

the

term

labour

force

for

the informal

sector

may even be misplaced.

Not

only

women,

but the

old, the young and

the

maimed are found in this sector,

although

their

working capacity

cannot

always

or

sufficiently

be

put to use.

It

certainly would

be

misleading to look

upon them as non-working dependents.

An

analysis at the family level is essen-

tial

for

a proper understanding of the

living conditi;ons of

the

urbai

poor.

Only by assuming that most if

not all

household members

are

partially

if

not

entirely absorbed

in the

labour force

can

we

realise

the

comparative

elasti-

city

with which

unemployment, the

considerable

fluctuations

in

income and

other

vicissitudes

of daily existence

can

be absorbed.'4

The

specific char-

acter

of

the

informal

sector, typified

by fluctuating and discontinuous

em-

ployment and a gradual transition from

employment

to

unemployment, makes

any categorisation

of

labour

relationi

according

to current

terminology a

dubious

endeavour. By definition,

it

seems

only possible

to

measure

and

enumerate

employment

in

the

formal

sector. The

complaints

made

by

many

researchers

that

the

infonmal

sector is

disorderly

and elusive

have

to

be

seen

in

this

light.

Attempts

to reduce to the

usual

variables

and components

any employ-

ment which

is

non-standardised and

non-organised from the point of view

of the formal sector are mere statis-

tical exercises which

cannot do justice

1872




5/8

ECONOMIC AND

POLITICAL

WEEKLY

November

27, 197E1

to the

actual situation.

All this

may

explain

w-hy sociological and

economic

analyses of the

labour

market are

principally

if

not solely

concerned with

the formal

sector of

economic

activity,

but this

preference

can in no

way

be

justified.

NVhether

our margins are

broad

or

narrow,

we must

accept

that

a

very

large part

of

the

urban

multi-

tudes

are

dependent

for their

very

existence on

employment

in

the infor-

mal

sector.

If

roughly

half the

popu-

lations

of the

large metropolitan

centres

where

the

modern

enclaves

can be

found are

employed

in

this

sector,

it

may

safely

be assumed that

the

per-

centage

will be even

higher

in

the

smaller

towns.

If,

in

addition, part

of the

rural

population

can be

includ-

ed in the informal

sector,

it

might

well

be asked what

significanoe can be

attached to a

concept that

covers

such

a large and so little homogeneous sec-

tion

of

the

labour

force.

COMPOSInON

Informal

Sector

as an U'rban

Segment

By definition,, most economic

acti-

vities

in

the

rural areas fall under the

informal

sector.

This

applies

not

only

to tradle

and handicrafts

but also

and

above

all to

agriculture.

Nevertheless,

very

few

publications, for

example

the

ILO

report on Kenya, give

this

broader

tenor

to the

distinction

formal-infor-

mal.'5 The concepts are usually ap-

plied

solely to

the

urban

systemn, gnor-

ing

rural labour and

production'

relations.

However,

there

is

much

to

be

said

for

including

certain

agricul-

tural

activities under

the

formal sector

and not

only

the

large

estates

in;

tropical

countries

which

have

long

grown

commercial

crops

for

the

world

market.

It can be

posited that the

new

agricultural

strategy which form-

ed the

basis of the

so-called green re-

volution has

strengthened the

dualistic

tendencies

within

peasant

economy in

various Asian countries. On the larger

farms

capital

intensity has been

in-

creased, more

complicated

technology

has

been

applied, and

modern

methods

of

management

have been

introduced.

DiscuLssions

of

the

informal sector

are too often

based on the

idea that

urban

production is a

more

tor

less

independent

segment

of the national

economy,

probably

due

to

the

fact

that

most

reports are

concerned with

large

cities

and national

capitals.

But

although

it

is

easier to show

that at

the

lower

levels

the urban

and rural

lal)our

markets

gradually

merge into

each other,

thus making a

regional;

analysis

essential, it is doubtful

whe-

ther the situation

is any different in

the metropoles.

The almost exclusive

linkage of the informal

sector to an

urban

environment entails that

the

considerable

seasonal migration

from

rural areas

to the major cities

is under-

estimated.

In discussions of

the infor-

mnal sector, the

significance of this

phenomnenon

of circulating

labour is

neglected

and it

will.

only

come to its

right if

emphasis is transferred

to the

interchangeability

of, rather

than

the

division between,

town and country

and the concomitant

modes of produc-

tion.

Services

One

opinion

that is

given fairly ge-

neral

credence

holds

that the

informal

sector

is

a

collection

of

petty

trades

and

services

which, although

thev

provide a meagre

existence for

poverty-

stricken people, are of doubtful eco-

nomic benefit

in tenns

of actual

pro-

duetion.

This

is

typically

an

{nter-

pretation

that

is based on

the

formal

sector,

and

the

activities

which

are

almost automatically

listed

-

street

hawkers,

becak-riders,

food

sellers,

shoeshines,

household

servants, beggars,

porters,

etc

-

are

also

recognisable

as

those which,

seen from the

vantage

point

of the

formal

sector,

are

to be

found

in

city

streets.

The attention

wvhich

ILO in particular

has given

to

the informal sector

has

caused

this

somewhat negative image to be revis4

ed, andl various

publications have flatly

contradicted

the sector's

asserted

parasitical

character.

A

shift

in

research

from services

and

distribution to proj

ductive activities has encouraged

a

more differentiated

view and

has

moreover

stressed

that the dichotomy

formal-informal cuts

right

across

all

sectors of the economy.

If

the

formalb

informal division

is accepted as validi hen

it has

to be

applied

not

only to per-

sonal services,

but also

to

building,

trade,

manufacture

and

transport.

LI

other words, if the distinction is at

all tenable

it

cannot

logically

be con-

fined to certain sectors

of the economy

or

to certain activities. It

is concern-

ed much

more with the context in

which

these economic activities

orgi-

nate, with the

manner in which they

are

carried out.

Self-Employment

Versus

Wage

Employment

Since

the

original

conceptualisation

by

Hart,

the

informal sector

has been

seen

as almost synonymous

for cate-

gories of small self-employed who,

independently or by enlisting

the

serE

vices of

householdl

or family

members,

try to keep their heads

above

water.

Wage-earning emiployment,

on the

other hand, is considered

characteris-

tic of the formal sector.16

It is

pro-

hablv not coincidental that

this con.

trast is particularly

emphasised in

studies of African

countries.

But even

if allowances are made

for the

differences

which

exist per

country

in the nature of economic productiory

and the composition of the

labout

force, the operationalisation of the

concepts formal-informal in this way

remains open to dispute.

On the basis of my

Gwn

research in

western

India

I have

ascertained

that

numerotus

small shops and one-man

firms

-

the latter particularly

in

the

self-employment sphere, such as those

of

the free professions

-

typically

bear

the

stamp

of formal sector activities.

On the other handl

it

is

quite common

for

small-scale enterprises

in the in-

formal sphere to employ

non-household

members. Besides, the

content given

to

the concept

of

self-employment is

somewhat pretentious.

It seems

rather

exaggerated to include,

in addition to

the owners of small workshops,

the

shoeshiner,

the

street

barber,

the

gar-

bage collector or casual labourers as

one-man

firms

in

the

sense

of small

entrepreneurs.

The peasant society has long been

identified with self-employment of the

m.ultitude of small producers,

the pea-

sant cultivators

thereby

overlooldng the

various classes in which the agrariain

population is divided.

Similarly, the

fiction

has now

been

introduced

of

ai-,

urban informal sector consisting of

self-employed who at the

most utilise

their household members as labour

force.

Ileterogenteitty

The informal

sector

is seen alter-

nately

as a

form

of

economic

activity

or as a

reservoir

of

labour.

In

both

cases, the discrimination from the

formal sector is

emphasised:

in

the

first case the

mode of

production

is

stressed,

and

in

the second the charac-

teristics

of

labour

per

se.

But

pre-

occupation

with

the

refinement of this

dichotomy has

distracted

attention

from the

great variety

of

activities

which make up

the infornal sector.

Fuirther considerationi shows

that

sys-

tematic

classifieation

of these

activi-

ties

into

one sector

is

not

feasible.

The

problem

is

solved

to some

extent

by

further subdivision

of the

urban

labour'

market,

while

differentiation

into threi

sections is notnfreq&uent.'7

However,

this can only be effective if the dua-

1873




6/8

November

27.

1976

ECONOMIC

AND

POLITICAL

WVEEKLY

lism concept

is abandoned. There is

no question

of a rift in production

oir

lal)our relations on the basis of which

the

urban

svstem can be

broken

down

into two sectors. It is rather

a con-

tinuum in which border-lines

between

the

composite

parts are drawn almost

arbitrarily and are also

difficult

to

locate in the actvtal

situLation.

RELATIONSHIP TO FORML

SECTOR

There are

two entirely different views

with regard to the relationship

between

the informal and the formal

sector.

The existenoe and continuing

expan-

sion

of

the informal sector is accept-

ed

in

some circles as an inevitable

phase

in

the

development process. Em-

phasis

is

then placed on

the function

of the informal sector as

a buffer zone.

Marginal productivity perpetuates

the

poverty of the urban masses in third

world countries, but economic activi-

ties

in

the

informal sector provide at

least some

income and employment.

however

meagre

and irregular, to peo-

ple for whom

even a

subsistence

level

would otherwise be hardly conceiva-

ble. But

it

is

not feasible

to expect

that

policies

should be oriented

to-

wards

maintaining

inefficient

and

small-scale

economic

activities

which

make use

of retrogressive technology.

Raising

the standard of

living

of

the

population demands the

fastest possi-

ble expansion of the formal sector.1s

This can

be contrasted by

the

ap-

proach,

stongly encouraged by

the

ILO and

at present

also

by the

World

Bank,

which

sees

the

relationship bet-

ween

the formal

and

informal

sectors

as one of structural inequality.

Accord-

ing

to

this

view,

the

much

praised

flexibility, viability

and

adapted

tech-

nology

of

productive

activities

in

the

informal

sector

are

hamstrung by

the

much

more

favourable

market condi-

tions

which

are

available

to

the mo-

dern

economic

sector, advantages

which are reinforced by political pat-

ronage

and

government

protection.

The

defenders

of

this

view

advocate

better

attunement

and

increased

com-

plementarity

of

the two

sections

of

the

urban

economy.

This would

necessitate

putting

an end

to

the discrimination

against

the activities of

the informal

sector

which

this

approach

sees as

the

mnostpromising

source of

development.

At

present

it

sometimes

seems

that it

is

an

offence

to

earn

a

living

in this

sector.'9

Apart

from

the

repeal

of

discrimi-

natory

regulations

and various

other

restrictive and

oibstrulctive

measures, it

is suggested that the government will

have

to

adopt

a

policy

of

active

sti-

mulation

by

providing

facilities

such

as

credits,

managerial

know-how,

up-

grading

of

skills, marketing

promotion,

supplies

of

raw material,

etc,

in

order

to

improve

the

competitiveness

of

labour-intensive.

small-scale

activities.

Support for entrepreneurial capabilities

can

be justified

by the

fact

that

the

informal

sector's

contribution

to

the

national

product

is

much

greater

than

had

originally

been

envisaged

and

moreover

indicates

possibilities

for

accumulation

of

capital

that

will

allow

small

enterprises

to

expand.20

Such

re-

commendations

form

part

of

a

policy

that

a ttempts

to

replace

the

present

hypothetical

distiniction

between

formal

and

informal

sectors

by a

strong

link-

age

intended

to bring

about

harmo-

nious

co-operation

on

the

basis

of

mu-

tual advantage.

According

to

this

rea-

soning.,

structural

inequality

can

be

strongly

mitigated

if not entirely

abo-

lished,

with

the

aid

of

especially

de-

signed

compensatory

programmes.

Emp-

loyment

for

the poor

is

the

motto

of

this

new

strategy,

which

-u

s

a

cen-

tral

theme

of

the recent

World

Emp-

loyment

Conferencec

of

the

ILO.

The

resolute

tone

is reminiscent

of

the

many

programmes

which

were

drawn

up,

not

very

eagerly

executed,

on behalf

of

the

small

cultivatots

in third

world

countries

when,

it

became

evident

that

the

agrarian

strategy

which

was

in-

troduced at the beginning of the

1970s

had

almost

exclusively

benefit-

ed the

larger,

financially

better-off

far-

mers.

The

ILO

report

on Kenya,

in

particular,

is

written

in

this spirit

and

has

been

strongjy

and

extensively

cri-

ticised

by

Leys.2'

In Ley's

opinion,

the

points

of

de-

parture

and

policy

lines

of

the

ILO

report

are

intended

to

encourage

an

autonomous

local

capitalisin,

divested

of

the

most

extreme

contrasts

but

still

based

on cheap

and exploited

labour.

Research

has

shown

that

offi-

cial programmes and plans which aim

at

stimulating

industry

in

the

infor-

mal

sector

are

of

little

practical

use.22

Neither

can

increased

aid

by

the

state

be

expected

as

long

as

the political

system

is

dominated

by

interests

which

are

linked

to the

formal

sector.

The

paradox

of

the

situation

is that

the

recormImended

piolicy

change

will in-

evitably

be

detrimental

to

an

elite

which

is

responsible

for

its

execution.

By

ignoring

this

fact,

says

Leys,

the

ILO

mission

in

Kenya

was

guilty

of

naivety.

As

is evident

from

a later

ar-

ticle the

compilers

of

the

ILO

report

seem

to have

been

aware

of

this

problem,23

but

they

sufficed

by

saying

that

the government

of

Kenya

had

publicly

committed

itself

to

a strategy

under

which

the

results

of

economic

growth

were

to

be

equally

distributed.

The

reference

to

this statement,

which

can

hiardly

be taken seriously,

illus-

trates

the

mixture

of optimism.

nai-

vety

and

reservation

that

is

inherent

to

most reports produced by inter-

national

bureaucracieS2'

or

their

con-

sultants.

Is

the

point

of

departure

tenable

that

there

are

separate

sectors,

each

of

which

has

its

institutional

facilities

and

rationale?

This

is

the

most

fundamental

diffe-

rence

of

opinion

in the

discussion

over

the

interpretation

of

structural

inequa-

lity.

Leys

is

not alone

in

giving

a

ne-

gative

answer.

Various

other

authors

have

come

to

the

same

conclusion

on

the

basis of

empirical

research.

I

be-

long to those who are sceptical of an

urban

dualism

in

which

emphasis

is

placed

on

the

nature

of activities

in

each

individual

sector

rather

than

on

the

relations

between

the

components

of

the system2.9

According

to

these

critics,

the

backwardness

and

impo-

tence

of

the

informal

sector

is

pre-

conditional

for

the

development

and

progress

of

the

formal

sector,

while

the

relationship

between

the

two

sec-

tors

is

expressed

in

the

dependence

and

subordination

of the former

on

the

latter.

Research

among

petty

pro-

ducers in Diakar has caused Gerry to

conclude

that

these

are exploited

un-

der

the

present

economic

system.

Bose

cormes

to the

same

conclusion

after

studying

small-scale

industries

in

Cal-

cutta,

stating

that

smallness

of

scale

or

inefficient

management

is

not

the

principal

cause

of the

poverty

of

those

who

are

employed

in

the

workshops

but

rather the

application

of

surplus

from above.26

The

inequality

between

the

twvo

sectors

of

the urban

economny,

according

to

Bose,

is

not

very

diffe-

rent

from

the

unequal

exchange

of

goods

during

the

colonial

period,

when not only the economic surplus

but

also part

of

what

otherwise

would

have

beenl

used

for subsistence

in

the

colony

was

withdrawn

for the

develop-

ment

of

the

mother

country."'

If

the

distinctionl

formal-informal

cannot

be

seen

as

a

duality,

and

there

is

no

question

of

individual

markets

in

terms

of production,

distribution

and

consumption,

how is the

charac-

ter

of

the

urban

system

to

be

defined?

In

particular,

are

some

modes

of

pro-

duction,

if

not

autonomous,

at

least

to

some

degree

exclusive

of

each

other?

This

issue

has been discussed in an-

other

framework.

Wallerstein

is

*of

1874




7/8

ECONOMIC

AND

POLITICAL

WEEKLY

November

27,

1976

the

opinion

that

there

is

no

question

of different

production

systems.

Like

Frank,

although

in

a

more

detailed

reasoning on

the

basis of

historical

data,

he

considers that

there

is only

one

capitalist

system

which

originated

in

Europe

and

centuries ago

permeat-

ed

and

transformed

the world

peri-

phery.28 But to submit that a system

of

international

division

of

labour

exists

does not

necessarily

imply

agreement

that

this

is

based

on

a

single mode

of

production.

To

regard

this

almost

solely

as

a

phase

in

world

history

-

at

present

with

almost

uni-

versal

validity

-

gives

rise to the

danger

that

widely

divergent social

configurations,

particularly

labour rela-

tions,

which

are found

in

the

third

world

are

brought

under

one

common

denominator. I

favour

an

approach

such

as

that

outlined,

e

g,

Bienefeld

who distinguishes between a capitalist

sector

which

is

narrowly

linked

with

the

international

economy,

and a

sec-

tor

consisting

of

pre-

or

non-capitalist

modes of

production.

The

component

parts

influence

each

other

and

gradual-

ly lose their

individual

identity

and

independence,

so

that we are

faced

with

one

coherent

whole, a

systerm

with its

own

character

and

dynamics.a9

For the

sake

of

clarity, let

me

reiterate

briefly

that in

my

viewv

the thesis of

an

urban

dualism is

untenable; instead

of

applying

the

concepts

formal-infor-

mal, we should distinguish in terms of

different articulated

production

rela-

tions

which can

be

found

within

the

economic

system

of

third

world

coun-

tries in

varying

degrees

and

gradations.30

To

return

to the

literature

over

the

informal

sector, it is

noticeable

that

predictions

with regard

to

the future

are

rarely

optimistic.

The

dismal

pros-

pect is

caused

by

a

variety

of

factors

of

which

the

most

important are:

as

yet

the

population

increase

shows

no

sign

of

decreasing

its

present high

level;

employment

in the

formal

sector

shows little if any expansion, govern-

ments show

little

inclination

to give

effective

aid

to

small-scale

labour-in-

tensive

industries,

and

finally, the

competitiveness

of

the

latter shows

continuous

deterioration

resulting

in

their being

ousted from

activities

whenever

these

appear

profitable

for

the

larger

enterprises.

Seen

from

the

viewpoint that

the in-

formal

sector only

exists

by the

grace of

the

formal

sector, the

under-

development

and

backwardness

of the

former

can

only

be brought

to an

end

by drastic

change of

the

entire

eco-

nomy, including agricultural

production.

The

likelihood

of such

fundamental

change,

which

would

in

fact incur the

transformation

of the

whole,

is diffi-

cult to

ascertain and would not be the

same for each country, but

for

the

short term at

any

rate it

does

not

seem

very feasible. On the other hand,

the involutionary trend of continued

expansion within an inelastic

frame-

work is not coming to an end.

How

long

and how far can those

activities

which are listed under the

informal

sector

continue?

The

rift between

the

extremes is becoming greater,31

and

various authors mention the growing

inequality in income and opportunity

within the lower regions of the urban

economy.32

In most

third world countries,

parti-

cularly those of Asia, it is

probably

too

late

for marginal corrections and the

populist climate no longer

exists with-

in

which such a policy would fit. Where

the capitalist development strategy is

still

maintained there is little latitude

for

effective support of small-scale and

labour-intensive activities.

Moreover,

measures which have so far

been taken

do not appear to be oriented

primarily

towards structural improvement,

but

rather to have originated in the fear

that

the

growing tension among

the

urban

poor might get out of hand. In

addition to attempts to control the in-

flow of new migrants by sealing-off the

major cities, forced outflow is becom-

ing more frequent.

Groups

which are

poorly

housed

and

without steady employment

-

usually

called beggars so as to imply that they

are

'unproductive'

-

are

rounded-up

and deported. The 'hard state'

which

has come into being, as shown

in

many

countries of the third world

during

the

last decade,

indicates

a

policy

under

which at least 30 per cent of the

popu-

lation

will be declared

socially

and

economically superfluous; redundant

also in

the sense that no measures

are

taken which

would allow them

to

lead

a

life of human dignity. The

leaders

of these countries, according to a re-

cent article, have

to face the

follow-

ing choice: to take the part

of

those

who own

the instruments

of eco-

nomic power and to maintain political

stability by repressing the poor

and

their

spokesmen, or to take the

side

of

these rural and urban

population

groups and to bring about an

econo-

mic

system that couples growth with

increasing equality.33 Verbal promises

are

generous, but

when it

comes

to

actual

policy implementation

it

does

not

seem that this second option

is

much favoured.

(To be continued)

Notes

1

For

a

brief

description,

see

Hart

(1973).

2

See,

in

particular,

the

Introduction,

Chapter

13

and

Technical

Paper

No

22

of

this

report:

"Employ-

ment,

Incomes

and

Equality".

3

The

volume

"Indonesian

Econo-

mics"

provides a systematic ela-

boration

of

Boeke's

theory

toge-

ther

with

the

most

important

cri-

tical

comments.

For

a

critical

ap-

praisal,

see

also

Higgins

(1955).

4

Prior

to

this,

dual

labour

market

theories

were

formulated

with

re-

gard

to

major

cities

of

the

USA.

See

Piore

(1973)

and

particularly

Gordon

(1972);

Mok

(1975)

has

examined

the

applicability

of

this

concept

to

the

situation

in

the

Netherlands.

5

Geertz

was

probably

the

first

to

make a

distinction

within

the

ur-

ban

system

subdivided

between

the

firm-oriented

sector

and

the

pa-

sar economy. See also Santos

(1971),

McGee

(1973)

and

Coutsinas

(1975).

6

ILO:

"World

Employment

Pro-

gramme;

Research

in

Retrospect

and

Prospect"

(Geneva,

1976).

7

Gerry

(1974),

1.

8

Oteiza

(1971),

196.

NVithout

using

the

terms

modem

and

traditional,

Sethuraman

gives

a

similar

dis-

tinction

(1976),

10-12.

9

Cf

Leeds

(1969);

Mangin

(1967);

Portes

(1972);

Brett

(1974);

MacEwen

(1964).

10

Bienefeld

(1974),

18-19.

11

Gerry,

90-91.

12

Papanek

(1975),

8-9;

see

also

Friedmann and Sullivan (1974),

398,

note

28;

Papola

(1974),

8;

and

Temple

(1975),

80.

13

Van

den

Muijzenberg

(1973),

Chapter

8

and

Appendix

A;

Bre-

man

(1974),

103-106.

14

Cf

also

Bienefeld

(1975),

20.

A

complicating

factor

is

that

all

members

of

a

household

are

not

necessarily

employed

in

the

same

sector.

In

effect,

this

necessitates

a

choice

in

terms

of

income

levels

or

of

economic

activities

when

elaborating

the

distinction

formal-

informal.

A

combination

of

income

level and

activity

can

cause

con-

tradictions

in

the

operationalisa-

tion of the concept informal sec-

tor.

15

"Employment,

Incomes

and

Equa-

lity",

504.

16

Hart,

66;

McGee,

33;

Bienefeld

(1974),

Introduction,

iii.

17

See

the

papers

by

Pang

Eng

Fong,

Papola

and

Standing

pre-

senting to

the

conference

on

the

urban

labour

market

held in

Ge-

neva

in

1974.

The

more

detail-

ed

outline

given

by

Friedmann

and

Sullivan

(p

388)

seems

to

me

to

be

the

most

successful.

18

McGee

(p

37) refers

to

a

sector

working

paper

of

the

World

Bank:

"Urbanisation"

(1972). Until

re-

cently this used to be the appraisal

of

the

Bank.

XVith

McNamara's

speech

for

the

Board

of

Gover-

1875




8/8

November

27, 1976

ECONOMIC

AND

POLITICAL WEEKLY

nors

(1975)

this negative

approach

seems

to have

been

left. The

new

position

which the

Bank has

taken

during the

last few

years

with

regard to

the problems

of

rural and

urban poverty

is

evi-

dence

of a significant

change

of

the Bank's

policy and indicates

an

approach

to the

informal

sector

which at present differs little if

at

all to that of

the

1LO.

See

in

particular

Emmerij

(1974)

for

an

elaboration

of

this

inherent

dis-

advantage approach

as

against

the

structural

disadvantage

concept.

19 See in particular

Inukai (no

date);

also, e g,

McGee (29-30)

and

Pa-

panek,

10.

20

In

addition

to suggestions

in

this

respect made

in the

ILO study on

Kenya, see

the similar

report

ma(le

on the

Philippines,

"Sharing in

Development",

180; also

Weeks

(1975),

'8.

Entrepreneurial

talent,

the

lack

of which

has for

so long

been

seen as one of the most importanit

institutional

obstacles

in a large

part

of economic literature

on

de-

velopment

problems,

suddenlx

seems

to be plentiful.

21 For a

more

detailed analysis,

see

his recent

book

"Underdevelop-

ment

in

Kenya:

The

Political Eco-

nomy

of Neo-Colonialismn"

(Lon-

(Ion,

1975).

22 Gerry,

Chapter VII,

74

ff;

Bose

(1974),

3.33-3.35.

23 Singer and Jolly (1973), 115.

24 Weeks (1975,

100) finishes a cri-

tical reaction to this as follows:

"Such a fundamental shift is un-

likely,

and

it

is

open

to serious

question whether an international

mlission, made up primarily of non-

Kenyans, is at

liberty to sugges'

it, even by

implication."

25 Gerry (p 5)

".. .

it is the rela-

tions between

these different

sys-

tems or

sub-systems of

production

which

determine those phenomena

which will

characterise each of

the

elements of the ensemble, an(d

will lay the

foundations for the

functioning of the whole."

26

Bose,

4.23-4.24:

".....

the

dominat-

in(g

large-scale

oligopolistic sector

compels the small units in the

informal sector to operate in a

different

market where the input

price is

higher and the output

price is lower,

and the main bene-

fit of

the price differential is re-

aped by the

large-scale sector.

It also confirms that those whonm

we often

call

large industrial

houses are, in

effect, commercial

in

nature

and

earn a major part of

their

profit by trading goods pro-

duced by

smaller units. But

des-

pite this

relationship of what

may

be

called exploitation

be-

tween

the

large

and

the

small

units, the latter

can exist,

given

the

present

socio-economic struc-

ture, only when

they can get

the

opportunity of offering

themselves

to

be 'exploited' by the

larger

units."

27 Ibidem, 5.2.

28

For those who,

with me, have

not yet had

the

opportunity

to

read

Wallerstein's recent study:

"The Modern

World-System; Ca-

pitalist Agriculture and the

Ori

gins of the European World-Eco-

nomy in the

Sixteenth

Century",

I recommend his

article in Com-

parative Studies

in Society and

History (1974).

29 Bienefeld

(1975), 54. Alavi, who

holds a similar

position, has deve-

loped this in the concept colonial

mode of

production.

30

In

an

article

regarding

the

rural

system

of

Peru,

Long differen-

tiates between a number of modes

of

production, usinig

as

criteria

the

difference in access to land

for

varying categories

in

the agrarian

structure (see in

particular

pp

265-272). In similar fashion,

but

without here going into further

detail, I would draw a distinction

for

the urban

system

on

grounds

of

difference in access to capital

and

to

the institutions which

are

instrumental in

the use of capital.

31 Miller

(1971), 221;

Mazumdar

(1974), 10; "Sharing in

Deve-

lopment",

177.

32 Friedmann and Sullivan,

401;

Papanek,

14;

Standing,

4.

33 Friedmann

and

Sullivan,

405.

FOREVER

TTHE

SERVICE

f

Services:

OUROUNTR

INDIA-W;

K.

&

TH

CONTINENT

AT

HOME

ABROAD

It.

MDITE-tBACEA

FOAST

INDIA-POLAND

AND INDIANCOS

INDIA

STEAMSHIP

CO.,

LTD.

"INDJA

STEAMSHIP

OUSE",

21, OLD

COURT

HOUSE

ST.,

CALCUTTA1I.

1876

This content downloaded from 128 220 8 15 on Tue 09 Feb 2016 03:19:23 UTC

jan breman- a dualistic labour system?

Documents