Reference no: EM133021821

Our textbook rightly focuses on market strategies and the formal economy. But we have to be aware of non-market strategies and the informal economy as well, especially in Latin America. As we have seen, the reliance on personal relationships is very important in Latin American culture. Historically, many political regimes have been tied in with businesses that amounted to elite or oligopoly control of the two spheres operating together. What is a non-market strategy?

Basically, this category includes two important elements--government elements (at all levels--local, province or district or state, and national [often called "state" in the international context]). Nowadays, environmental groups, citizen groups lobbying for various groups, and of course organizations that lobby for particular business or industry interests--all of these are included, too. Often these groups try to work "behind the scenes" to influence policy without all of the public necesssarily "in the know." The informal economy is also important and largely unmeasured, so we don''t really know just how important it is. We do know it is very significant and represents a lot of resiliency and entrepreneurship that is not represented much in conventional textbooks.

What is the informal economy? Examples are the street vendors, the large service sector of household workers, the people performing small tasks in return for semi-voluntary handouts. For example, I remember potholes in the street in Peru being filled by a man with a wheelbarrow of asphalt in return for voluntary donations from motorists passing by. No income reported to the state, no taxes collected, hardly any way to for economists to measure--these are key features of the informal economy. Think of some economic activity that might fit into any of these categories--formal, market-oriented or non-market, or informal.

It can be from a Latin American example (like my pothole filler) or from your current environment or something you have experienced in the past, and actually from another region of the world if it relates to the discussion. There is a case we sometimes use about the thousands of lunch deliverers in India that supply massive numbers of workers with lunches taken from homes to the workplace via bicycle, and just how efficient they are--and how hard to incorporate into any statistical model!