Cornell, Populism and the Informal Economy


 New Orleans  Rushing to get ready to be on the road to India and Bangladesh for a couple of weeks, it there are signs of creative ferment everywhere. 

      Last night eating dinner at Mandina’s with 15 or more Cornell University graduate students in planning, architecture, and art with Professor George Frantz who were in New Orleans again to help in the rebuilding, it was great to feel the energy — and love — for the city and commitment of our old friends to continue to help.  An article in the front page of the Times said there is a push of high skilled folks in volunteering.  This is a good thing!  We are seeing such help in all of the ACORN International offices, especially in Latin America, and it’s very exciting.
Robert Reich seems to recognize the voice of “angry populism” now, that’s progress!
“Never underestimate the capacity of angry populism in times of economic stress,” said Robert Reich, a professor of public policy at the University of California, Berkeley, and labor secretary under President Bill Clinton. “A big challenge for President Obama will be to maintain a rational and tactical public discussion in the midst of this severe downturn. The desire for culprits at times like this is strong.”  NYT, March 16, 2009.
     The Wall Street Journal is starting to understand that the informal economy may be as important to many as their daily stories of life in the shadows of the big board.  Something’s happening here!
Here’s a piece of the article from the “Rise of the Underground,” by Patrick Barta in Wall Street Journal March 16, 2009. – The Rise of the Underground*
As a result, much of India is now embracing the underground economy. That includes Ahmedabad, where informal jobs have played a crucial role in keeping the economy afloat in recent years.
     For decades, this city of roughly five million people, where camels still amble down city streets, was known as the "Manchester of India," after the city in England famous for textiles. In the early 1980s, it had more than 60 giant mills employing 150,000 people or more, most of them with generous pension packages and other benefits. The industry trade union, started by Mahatma Gandhi himself (he kept an ashram by the city), was one of the most powerful institutions around and even ran a bank and hospital.
     Then the mills entered a long and disastrous decline. More efficient operations were opening in other places, including China, and most of Ahmedabad’s factory owners refused to make investments to become more efficient.
     The mills became uncompetitive and shut down, dumping their workers and leaving scores of rotting mills and smokestacks that still loom ominously over the city. Today there are only about 10 mills left in operation. Membership in the trade union has fallen to about 9,000 people, and its bank and hospital have closed.
In many American or European cities where major industries died, like Buffalo, N.Y., urban centers fell into decay because there was nothing left to replace them. But Ahmedabad remains a thriving city. Most of the laid-off employees were able to find work in street vending, rickshaw driving, day-wage construction or other informal jobs, and as a result, the percentage of people employed in the underground economy increased. Today, Ahmedabad has some 55,000 rickshaw drivers, 70,000 street vendors, 70,000 construction workers and 45,000 roving trash collectors and recyclers.
      As the sector has boomed, it also has become more sophisticated. It spawned its own trade unions, including one called the Self-Employed Women’s Association, which began in Ahmedabad in the 1970s and has grown to a million members across India. The group provides training to teach women how to lay bricks and even started its own bank.
      It also has a research staff of 22 women who study the underground economy and compile data to bolster the group’s advocacy efforts, which include filing court cases to prevent government officials from kicking street vendors out of public areas. "The reality is that this sector is there and it’s going to grow, so you have to deal with it," says Reema Nanavaty, director of economic and rural development at the group.
      Despite the long demise of its signature industry, Ahmedabad today "is vibrant, it has life," says Martha Chen, a lecturer at Harvard’s Kennedy School of Government who has studied the city. Based on Ahmedabad’s experience, "I think we should see the informal economy as the solution" to urban decay and unemployment, she says, "not the problem."
       The jobs aren’t pretty. The trash collectors, known as rag pickers, live in squalid slums amid rotting piles of garbage. Street vendors have endured beatings by police who don’t want them to clog thoroughfares; in some cases, they say, corrupt officers demand bribes to let them stay.
The workers aren’t immune to the global economic slowdown, either. At one rag-pickers’ slum by an abandoned mill, residents say traders are now paying as little as half what they shelled out a few months ago for plastic bags, steel scraps and animal bones. Some residents have started stockpiling waste in the hopes prices will recover, adding to the stench.
       Another problem is that with more people losing their formal jobs, the informal sector is getting more competitive. At the Manek market, for instance, there are now about 500 vendors, from 325 six months ago. More informal jobs also means more lost tax revenues. I.P. Gautam, the local municipal commissioner, says 30% of the city’s residents pay no taxes at all, a figure that could rise further if the informal sector keeps growing.
      Yet Mr. Gautam believes the underground economy is essential to Ahmedabad’s future. He says that while Ahmedabad has attracted a smattering of good jobs in financial services and the chemical trade in recent years, they weren’t nearly enough to meet the overall labor needs in the city. Worse, big companies are quick to ditch workers when business slows, he says.
In cities like Ahmedabad with lots of informal jobs, "per capita income is less, and growth is slow, but you get your bread and butter," he says. The existence of a big underground economy is "why we are going to survive" the downturn. He says the city is now shifting to try to create more informal jobs, including setting aside new space for public markets at bus stops.
       In the streets, many workers say they’re just happy to have work. Ms. Patni, the tomato vendor at Manek market, says she would be happy to have a better job with a real salary, but finding one would be impossible. With little education, and few solid jobs to go around, "we can’t get something like that," she says.
Kavitaben Uttambhai Parmar, 25, says she had one of the better jobs in the city until recently, stitching pants and other clothes in one of the few remaining major textile factories. During her five years there, her salary more than tripled to 115 rupees per day; she recently dreamed of buying a refrigerator. Then one day in November, she was laid off with one of her best friends, 30-year-old Jayshree Kantilal Makvana.
"That was a bad day for us," says Ms. Parmar, whose income helped support a household of five, including her mother, brother, sister and grandfather. "I went home crying."
Both later found informal work, doing stitching for a smaller textile company that pays only by the piece, allowing each woman to earn about 50 rupees per day. They also are making bracelets in their spare time to sell at festivals for about five rupees per 12 dozen.
Ms. Parmar says she is cutting back on electricity. Ms. Makvana says she’s using city buses to get around instead of more expensive rickshaws. But they’re happy they’re still earning something.
"At least we’re surviving," Ms. Makvana says.
–Wilawan Watcharasakwet and Vibhuti Agarwal contributed to this article.
Write to Patrick Barta at