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

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.…