In two previous posts I have reported on my evolving study of the idea of an informal economy. This third post ruminates about the extension of the idea to rural life. Keith Hart's original work in Ghana (in the years up to 1973) had an almost exclusively urban focus, though he did not explicitly exclude the possibility of informality in the rural 'sector'. Indeed a UNDP Mission to Papua New Guinea in 1972-73 (of which Keith was a member) produced a report (the 'Faber Report') which appeared to endorse the idea. That's when I met Keith (at the time still optimistic about the value of his ideas for orthodox development planning). I intend at some future date to write about the Faber Mission's treatment of informality in late-colonial PNG, which had Keith's fingerprints all over it.
But most recently I've been thinking about the application of 'informality' to the world of contemporary small farmers, remembering that some 500 million small farm households today are working holdings of 2 hectares or less, and that these holdings are getting smaller and more numerous over time. It's been noted that small farms have proved remarkably persistent, and that while the importance of farming in household incomes may have declined, the number of rural households using farming as a platform for their livelihood strategies continues to grow. In other words, the world's small farmers are moving more and more to multi-activity modes of livelihood, with combinations of off-farm self-employment (value-adding, services, petty manufactures), cash- and subsistence agriculture, migration and remittances, and agricultural wage labour, all contributing to household incomes.In this mix of activity it seems obvious to me that rural informality is a useful concept for analysing contemporary rural economies in low-income countries. In arriving at this conclusion I've been stimulated by contact with colleagues from IIED (London) and Hivos (The Hague) and by reading their joint study of small farmer households and informality in the rural market economy (see Vorley et al. 2012 http://pubs.iied.org/16521IIED.html).
In the 'small farmer' setting, a relatively new economic orthodoxy has been brought to bear by international agencies and national authorities. This 'value chain' orthodoxy is promoted by the World Bank and the World Economic Forum under the rubric of 'inclusive business'. In this view, the private sector is seen as crucial in integrating smallholder producers into corporate supply chains, thus opening up markets for small farmers. The World Economic Forum's New Vision for Agriculture initiative has enlisted multinational agribusiness companies and other entities to 'develop a shared agenda for action ... to achieve sustainable agricultural growth through market-based solutions'. But a sober assessment of the prospects for such a strategy leads to the conclusion that no more that 7-10 per cent of small farmers can benefit from such a strategy, even in the medium term.
We see here a case of what Hart calls the 'discrepancies' between economic orthodoxy and the 'concrete realities' of economic life. A mode of operation is prescribed to which the great majority of small farmers is not -- perhaps cannot ever be -- institutionalized. I find the approach of the IIED/Hivos group more appealing, since it is based on recognizing the capacity of small farmers to exercise independent agency. In Vorley's terms, smallholders display agency by 'working and trading outside or at the edges of formal economic and political institutions', that is, by resorting to informal economic activity. In fact, as Lynn Bennett has noted, 'informality is the space of human agency. It is the realm of practice where individuals and groups playing the “game” use the inevitable space around the rules to make them work in their favor'. We need to reconsider the potential for constructive change among the majority of middle-level smallholders unlikely to benefit any time soon from the extension of formal value chains.
I've explored these ideas in my most recent paper, 'The idea of a rural informal economy' (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2294764) . In that paper, exploring Hart's notion of discrepancies between economic reality and prevailing economic orthodoxy, I also took a look at the evolving situation in two extant 'socialist' economies -- Cuba and North Korea. Both appear to be accommodating themselves to the need for informal economic activity in the face of a 'concrete reality' in which orthodox processes of production and distribution are failing demonstrably to meet the basic needs (North Korea) or the aspirations (Cuba) of citizens. A shorter and perhaps more digestible account of these situations is found in my recent blog post on the subject (http://www.eastasiaforum.org/2013/07/27/economic-informality-the-ca...). Incidentally, all of the materials I've put out to date in connection with my informal economy project are now gathered in one place at (http://www.fdc.org.au/the-informal-economy-resources.html).