Reasons for the Phenomenal Growth of the Informal Economy Essay

1733 Words 7 Pages
In this essay I will endeavour to provide reasons for the phenomenal growth of the informal economy. Firstly, I will provide a brief definition of informal and formal economies. I will also discuss the inequalities and instability of the formal economy environment. Focusing on the manoeuvres which manufacturers and individuals use within the informal economy to alleviate these stresses. I will also put forward a concept of
‘Interactive Distribution’ which combines the best of what informal and formal economies have to offer the economic environment. Creating a powerful system of a informal distribution of goods and services. Thus, it is my opinion that these inequalities within the formal economy, compared to the attractive informal
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As the redistribution of resources and income in our competitive environment have see the polarisation of wealth for the few and the increase poverty around the world.

Majority of businesses around the world are involved in retail sales which have their own problems such as expensive overhead, wages, advertisement, storage facilities and distribution. All adding up to decreasing profits and an increasing cost to consumers. The informal economy gives multinational corporations the opportunity to subcontract assignments to informal organisations.

By making use of informal distribution networks, industries eliminate the substantial cost of maintaining a permanent sales force (Portes, Sassen-Koob 19XX p. 38).

Our capitalist thirst for profit has encouraged exploitation of minorities and underdeveloped countries such as Nike in China and sweatshops in
Mexico.

Individuals also have the opportunity to benefit in this volatile environment. Individuals or groups of individuals from developed countries are able to act as middle men/women. Drawing upon their informal social networks they can create a core group of informal employees utilising skills to complete work. The monetary earnings of these informal ventures may vary, but can be much higher when compared to formal employment (Garcia, Kelly 1985). For the employees who are faced with economic uncertainties informal ventures are a better choice than poverty.