Stealth of Nations

Robert Neuwirth is the author of the recently published Stealth of Nations: The Global Rise of the Informal Economy. We’ve read some excerpts and excellent reviews, including this one from the Wall Street Journal. We also blogged last week about his Foreign Policy article, in which he discusses “System D”, a concept developed from his research that describes “the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy”. But being curious still, we wanted to get to Robert one on one. Myles caught up with Mr. Neuwirth between a busy schedule of conferences, articles and publicizing this new, fascinating book.

Myles Estey (ME): Where did researching Stealth of Nations take you, and how long were you working on it?

Robert Neuwirth (RN): I started in Lagos, Nigeria, and also went to Sao Paulo, Brazil, to Cuidad del Este, Paraguay and its sister city across the border, Foz do Iguacu, Brazil, and to Hong Kong, Shenzhen and Guangzhou, China. I also did reporting in the U.S., in New York and San Francisco. In addition, I spent quite a bit of time in libraries and archives, looking at the history of mercantile law, medieval disputes between buyers and sellers, the history of peddling, and, of course, reading books on economics. It took almost five years to go from conceiving the project to having the book in the bookstores.

ME: What what surprised or inspired you the most in this process?

RN: One amazing transformation in my own thought: I came to understand the entrepreneurial attitude as an expression of creativity. I had previously tended to dismiss the zeal for trade as motivated purely by the pursuit of profit. But from the moment I started rummaging around the street markets of Lagos, learning from garbage scavengers and motorcycle taxi operators and transnational merchants whose stores were simply stick-built kiosks in a dense roadside market, I came to a new appreciation of entrepreneurial efforts as creative enterprises. Truly, as the poet Muriel Rukeyser put it in an entirely different context, “Exchange is creation.”

Also, I was awed by the bravery of many traders—venturing to new lands, where they didn’t speak the language and had to go underground because their trading activities took them beyond the time period allowed by their visas, and where most of their purchases had to be arranged in the shadows so as not to be caught by the foreign governments as well as their own governments. I learned to give these bottom-up global traders great respect for their intrepid and courageous actions.

ME: How would you summarize the role informal economies play in the developing world?

RN: Informality truly is the dominant way the majority of the world (aka the developing world) operates. And in many ways it is far more democratic, open, and egalitarian than the ‘legal’ economy. It is informal business that is really keeping people employed and offering people the ability to survive and thrive. Sadly, governments don’t recognize this. Instead, they paint System D/informal operators as unruly, thuggish, dirty and criminal. This hugely unfortunate attitude is holding back the self-development of their countries.

ME: What kind of business or technological innovation did you encounter at street level?

RN: Lots and lots and lots of commercial ingenuity: figuring out how to get products across borders, or across town. How to travel to a country you don’t know and get business done. How to import and export at the lowest cost possible. Technologically, there have also been huge System D innovations: how do you recharge mobile phones in a city that has no electrical system? By hooking a generator or battery to a line filter/surge protector, and then connecting it to an array of plugs. You charge people per charge. How to offer pay phones in a city that doesn’t have fixed-wire phones: you buy a cheap mobile phone with an unlimited contract, and set yourself up at the side of the road offering calls at a cheap price. How to deal with the fact that many people want access to several different mobile services at the same time? Either import cheap phones, so people can afford to have more than one, or work with manufacturers to create a phone that can use two different SIM cards simultaneously. How to bring water to a city that doesn’t have a water system or to neighborhoods that are not yet hooked up to the water system: import machines that will fill and heat seal nylon baggies full of water, for resale on the streets. System D is expert at figuring out how to meet local demands in a cost-effective way.

ME: What aspects of “System D” and the dynamics of underground economies hold valuable lessons for either the formal economy or the policies of the international development community?

RN: The most important thing would be for governments and formal businesses to understand that informal operations are not their enemies. Rather, they are the way forward—as they bring economic opportunity to a much wider array of people. Informality is an opportunity, not a problem. Indeed, it is through the entrepreneurial efforts of their own people that the majority world will grow.

So: majority world countries should be looking at System D as a growth arena—and this has implications for economic policy and city planning. Vital street markets are essential for urban development. And while this may mean that Lagos will not look like London anytime soon, that can be a good thing. Lagos can develop with a more inclusive, more street-oriented, more entrepreneurial approach and plan—if it has the wisdom to do so.

The international development community should be recognizing that System D markets are exactly where they should be partnering. Bringing aid to countries through sclerotic political structures only alienates people—because often the money gets boodled or siphoned away. Rich firms benefit; regular people don’t. Informal markets may be rough-hewn, but they are excellent places to focus financing for better infrastructure like roads and streetlights and electricity.

At the same time, System D merchants and markets themselves have to focus on self-development, on joining in cooperative and associations in order to push forward their own self-development agenda. I see partnerships between these System D groups and local governments, or between System D groups and development agencies, as a particularly fruitful way forward in the quest for more egalitarian growth.

(Photo: ‘Christmas Shopping in Waterside Market. Monrovia, Liberia.’  By: Myles Estey.  Published in Makeshift Issue One: Re-culture)