Stealth of Nations

August 22, 2011
Neuwirth (Shadow Cities) explores the global significance of the “informal economy,” those small transactions of incremental profits eked out in city dumps, outdoor markets, and unlicensed bazaars that employ roughly half of the global work force. The author takes his cue (and title) from Adam Smith and links such activity to a fuller conception of economic development, offering the alternative term “System D” (borrowed from an Afro-Caribbean slang term for the unofficial economy). As Neuwirth’s roving narrative shows—in case study chapters on Lagos, Nigeria (where System D has provided potable drinking water and public transit); São Paulo, Brazil; San Francisco, California; and Guangzhou, China—this “unregulated economic activity” is indeed a system, relying on individual and group organization, social solidarity, and surprisingly universal sets of unwritten rules. It also captures much more than the microprofits of the roadside sale: in the U.S., for instance, (where System D is on the rise amid a larger economic downturn), there are the unlicensed mobile kitchens of San Francisco’s Mission District that can mature into full-blown companies feeding chains like Whole Foods. In many cases, System D and the formal economy are directly intertwined, and Neuwirth makes a striking case for both the influence of System D and the need to engage it as a partner in economic development.

August 15, 2011

A close-up look at the world of unlicensed and unregulated trade, which, in many developing countries, is the fastest growing part of the economy.

Neuwirth (Shadow Cities: A Billion Squatters, a New Urban World, 2004), who prefaces every chapter with a relevant quote from Adam Smith's The Wealth of Nations, takes readers inside what he calls System D, from the French word débrouillardise, meaning resourceful and inventive. His first stopping place is Sao Paulo, Brazil, where a vibrant street market draws more than 400,000 people on an average weekday. Then comes Lagos, Nigeria, a fast-growing DIY city of more than nine million people, many living in shantytowns, where scavengers glean recyclable goods from the dump and where System D provides not just goods but water, electricity and public transportation. Using his personal contacts with merchants, Neuwirth describes the underground trade links between Nigeria and China, including an enormous business in the piracy of electronic goods, and the smuggling industry that brings goods across the border from Brazil to Paraguay. He also details the links between major U.S. corporations and System D; how the system operates today in Brooklyn, San Francisco and other American cities; and what measures governments have taken to regulate it. Throughout, Neuwirth cites other sources to demonstrate that aspects of System D have an ancient history. He is clearly an admirer of System D, seeing in it not chaos and confusion, but communities marked by cooperation and their own codes of conduct. He argues that governments need System D markets because they are creative and provide jobs, and that System D needs governments because governments can provide infrastructure, organized ports and currency with a stable rate of exchange. Developing a space where System D can thrive offers "a vision of empowerment, employment, and global equity based, not on the abstraction of the free market, but on the concrete principles of the flea market."

A vibrant picture of a growing sphere of trade that already employs half the workers of the world.

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