Emile Zola’s novel Au Bonheur Des Dames (The Ladies Paradise) tells the tale of Denise Baudu, a simple girl from the Provinces who moves to late 19th century Paris in search of a better life. This intricate tale is played out against the spectacular backdrop of the sights, smells and sounds of the modern department store. It is emblematic of the consumer culture taking shape at that time and sets strong parallels with the scene in countless big cities today.

 

 

As we look at the informal and formal markets, Zola’s classic reminds us of what it is like to be on the outside looking in. The point is this. The sheer scale of the world’s population that either get by or get on in the informal market is such that we can no longer ignore it or allow it to exist in a vacuum sealed black box. We have to make every effort to explore ways in which it can be integrated and, we have to understand that there is much to learn from the innovative ways of doing business found on the wrong side of the tracks. Above all, logistics can play a major role in transforming the nature of integration between the two.

 

 

Our review of the literature and our work in the field makes clear that any neat “dualism” between the informal and formal economy is misplaced. There is no clear split. It is a continuum. Then, there is the notion of the informal economy as being functionally independent. This isolationism is one of neglect. Few studies, if any, have looked hard at the linkages from a logistics perspective and fewer still acknowledge the exciting synergies that are happening on a daily basis. If we combine the two with incontrovertible evidence of the demographic growth of the informal sector – as opposed to its demise – we will be accused of ignoring an opportunity to make sense of and develop mutually beneficial coherence.  

 

The World Bank Development indicators for 2008 illustrate clearly that we live in a world of highly interdependent markets for goods, services, finance, labour and ideas. For example, 5 of the 12 largest economies were considered emerging when the term was coined. In fact, so successful have they become that there is strong evidence that Sovereign Funds are increasing their positions in them rather than, in the current financial crisis, buying up troubled financial firms in the west. For example, Norway’s nearly $400 billion wealth fund doubled the emerging market weighting to 10%. Financing a dam in Vietnam or infrastructure in India is making more sense than buying into companies selling financial products that simply slice up risk into smaller parcels – as with the sub prime fiasco.

 

We have suggested that the term emerging markets has lost meaning as each of them evolves at their own pace and often with wide regional disparities. The name is now less important than the fact that it is recognised that the emerging market in question is not necessarily an economic backwater. So too with the term informal market which is no longer entirely synonymous with the criminal fringe and can be a place to grow sustainable and profitable business with the added value of providing access to a laboratory capable of significant innovation and fresh business thinking. Such innovation is where Transformational Logistics can deliver. As such, the “more” or “less” informal market debate is not necessarily  for “better” or for “worse”. As indicated above, both the debate and the conclusions are highly nuanced and nothing will be gained from the spirit of Prohibition 1920’s style USA.

 

Given these conclusions we believe that there is much to be gained by adding to the debate on informal and formal markets the role of logistics. Transformational Logistics places great emphasis on adaptability of any product or enabling process to specific local conditions. There is no premium attaching to a straight one for one implementation of established procedures that may have worked elsewhere. Innovation is key but only in so far as it rethinks what is there. And, Transformational Logistics is taking shape more as a function of logistics in the emerging and largely informal world than logistics in those developed markets where growth has slowed. 

 

As indicated above, many studies highlight the fact that, despite the major contribution to the livelihoods of the majority global population the positive economic contribution of the informal economy are underestimated. We would go further and emphasises the major role that a more realistic and inclusive view of the informal market and the wider formal economy has a major role to play in competitiveness and market access into an increasingly integrated globalised world.