During the 14th century Gutenberg’s printing press was given a major boost from a sudden surplus of rags that could be re-cycled and used to make cheaper paper to meet the growing demand for knowledge from Renaissance man. The Black Death (1348-50) had swept through Europe leaving between 25 to 40 million dead and, with their passing, heaps of unwanted clothes. Rag paper was cheaper than vellum or parchment; both of which were made from even rarer animal skins. Innovation comes from many sources and so too in Haiti after the earthquake where a whole host of markets have opened up to answer basic needs and, give hope to survivors.

Trawling the web; listening to the media and speaking to those on the ground the theme of the informal response comes over as a hugely important and much misunderstood component of the recovery effort. The response of twenty eight year old Sauveur Celestine is a case in point. Sauveur is now an unemployed accountant sleeping rough in the camps in the destroyed Presidential Palace. He lost his 3 year old son in the disaster and, these days, is re-building his life by recharging cellphones in the road using batteries from wrecked cars. He earns a few dollars a day; just enough to pay for food but, more importantly, the job keeps him focussed on his own life ahead rather than slump in despair. And yet, this job did not come from a headhunter or, from any government employment agency. It comes from a spirit of survival, vitality and ingenuity that more often than not in these situations comes from the informal economy – without which this situation would be far worse.  

Blanket media coverage has been huge on the airport and the various bottlenecks to emerge as Aid has flooded in. And yet, for the ordinary man and woman in the street, assistance remains scarce and so they are resorting to jobs in the informal economy to make ends meet. What else can you do when the Government itself is paralysed?

Within a couple of weeks of the disaster, all sorts of jobs have sprung up on the street. Mobile barbers are working on streets everywhere; improvised telephone booths have emerged built from scrap materials to offer vital access to International calls; people are selling furniture that they may have collected from the wreckage but which is needed as people try to piece life back together; women offer to wash clothes for under a dollar in local currency and, hot dog stalls.

CNN covered the story of Francaise Etienne:  “Every person has to find a way to keep his chin up’. Francaise, 39, lost her husband and 9 year old son when their house collapsed leaving herself and three daughters to eak out a living as best they can. Now, she sells fried chicken and hot dogs right in the middle of  piles of waste and debris with people living wherever they can find space and a makeshift shelter. They have to eat and so there is business to be done. Francaise puts it bluntly: “You have to get moving”. Others earn $2 a day clearing rubble.

Even before the earthquake, it was estimated that 80% of the workforce worked in the informal economy in Port-au-Prince. This is high but the proportion of informal workers all over the world is higher than is generally accepted and, this figure is climbing as the recession – despite figures to suggest that the tide has turned – bites. This shift to the informal economy is accelerated as other alternatives dry up. There are many who depend on remittances for survival. For example, Haitians living overseas send about $1.6 billion to Haiti annually. This money comes from jobs in the developed world or, on infrastructure projects elsewhere that have stalled. Take the example of Kerala after the collapse in Dubai or, worse still, in the Philippines after the flooding fall-out was compounded by a collapse of money sent home. There is no fall back position when the remittances dry up or, when thes funds that have been sent cannot be accessed – because their are no banks to distribute the funds. Catch 22.  So, some people have opened up with basic lending and currency exchange agencies to fill the void.

The Haiti economy has been jolted and losses will go well north of the Chamber of Commerce’s estimated $1 billion. And yet, this is not about getting Haiti back on its feet. As Paul Collier emphasised on the BBC recently, “Haiti has never been on its feet in the first place.” This fact makes it all the more crucial that attitudes to the informal economy are examined and dealt with. Leaving them at the margins of recovery is to turn a blind eye to one of the few elements of sustainability that are in place. The competition in this informal sector proves the point. It grows every day and can at times take a violent turn. Meanwhile, authorities and local businesses are taking timid steps to reactivate the economic market.

Here’s the point. The earthquake has forced into the street other business operators who’ve never imagined themselves as street vendors. The informal economy has become a rapid response system in itself  – without which efforts to go beyond Humanitarian Aid will flounder.

Far too often in the developed world the informal economy is dismissed as a criminal activity when the truth is somewhat nuanced. The dependence on the informal economy goes well beyond disaster areas. Witness the way in which the informal economy provided the sole way to move goods about effectively and efficiently in the Post Soviet economies after the fall of the Berlin Wall.  All too few studies have explored both the vacuum that the total collapse of the command economy generated and, the crucial role played by the informal economy first to survive then to build a sustainable recovery. Witness the work of WIEGO and ways in which the informal economy all over the world can all too often be the only way out for women.

Even the developed world moonlights or, mixes formal with informal jobs outside the regulated economy. Ironically, and many will baulk at the notion, even Hedge Funds are unregulated! And as Hernando de Soto has highlighted so well, the Legal system itself is so slow in many countries that legal process and title is a far off dream. Without it you cannot access the formal banking system but the process to secure it can take so long and be strewn with corruption that it is not worth the effort. How do you survive in the meantime?

As has been covered many times on this Transformational Logistics Blog, there is a real need to rise above the hypocrisy of attitudes to the informal market and accept that it can and does support survival and, sustainable growth. Haiti is yet another example where the enterprise and ingenuity of the informal economy has come to the rescue of failing Institutions that are simply not fit for purpose. Let’s get real. What can be done?