“ From the hawkers, rickshaw drivers and shoe shiners on the streets of downtown Jakarta to the cash-in-hand car mechanics, cleaners and nannies in the smart neighbourhoods of London, the underground economy is booming”, said the Times (24 April) commenting on a report that the Organisation for Economic Co-operation and Development (OECD) had just published. Entitled Is Informal Normal?, the report estimated, according the Times, that in the world “a record 1.8 billion workers are employed in underground activities, compared with 1.2 billion in the formal sector”.
Actually, “underground activities” is inaccurate. The term preferred by the OECD is “informal” by which they mean buying and selling activities that are not declared to the tax or social security authorities. In developed capitalists such undeclared economic activities are “underground” but are only marginal. In other parts of the world, however, – India, Indonesia, most of Latin America, Asia and Africa in fact – they amount to over 50 percent. This is mainly because they don’t have to be declared. In a chapter on “Informal Employment and Promoting the Transition to a Salaried Economy” an earlier OECD report explained:
“In less-developed non-OECD countries, statistical estimates usually include purely informal work, which is unregistered but not hidden because there is no effective requirement for it to be declared. Formal employment with payment of tax and social security contributions becomes an ‘island’ in a large ‘sea’ of informal work. The formal sector may still account for over 50% of GDP – due to its higher relative productivity – suggesting that the benefits from a longer-term transition to a salaried economy through progressive expansion of the sector can be large” (Link).
A “salaried economy”? As one where most paid work is done by people paid a wage by an employer to do it, it’s another name for a capitalist economy since capitalism is based, precisely, on waged labour. The rickshaw drivers and shoe-shiners of Jakarta are not wage-workers. They are workers in that they work and provide a use-value, for which they are paid. But what they get from selling their service is only enough to allow them to cover the costs of being able to keep on working. They don’t produce a surplus over and above this and so don’t contribute anything towards economic development, i.e. capital accumulation.
What difference would it make if instead of selling their service directly to the customers, they were to become employees of a rickshaw or a shoe shining company? They would still be doing exactly the same work as before and getting more or less the same money. The difference is that employers are not philanthropists. They only employ someone if there’s something in it for them – if they can end up with more money than they had invested in buying the materials and hiring workers. In other words, if they made a profit on their capital.
Marx explained that the source of this profit is the unpaid labour of the employees; they not only transfer the value of their own upkeep to the product but also a further amount for which they are not paid and which belongs to the employer. This extra value is new value, most of which is accumulated as new capital. The OECD wants to turn rickshaw drivers, shoe shiners and the like in countries where informal work is currently high into salaried wage-slaves because this is what the capitalist development they favour involves. As socialists, we stand for the “Abolition of the Salaried Economy”.
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