The Informal Financial Sector in Bangladesh: An Appraisal of its Role in Development

Informal financial markets in developing countries, and their role in the development process itself, form a relatively neglected area when it comes to research and policy planning. It seems, however, that this may be due to inaccurate perceptions of the value and effectiveness of this sector, and of its relationship to formal sector financial institutions. This paper uses data from an extensive research project on informal financial markets in Bangladesh to examine the size of the informal market, its relationship to the formal financial sector and the part it plays in the process of development. The paper concludes that, in all these aspects, the informal financial markets are more important, more efficient and more equitable than is generally supposed.     

Politics,Society and Financial Liberalization: Turkey in the 1990s

This article focuses on the political economy of Turkey in the 1990s to illustrate the importance of analysing economic variables that intersect with the quality of political democracy. In 1989, the debt‐ridden state moved to systematically and completely deregulate Turkey’s financial markets. Together with the ongoing processes of liberalizing commodity markets and integrating with global capital markets, financial liberalization was expected to achieve fiscal and monetary stability, stimulate business confidence to invest in productive sectors, produce stable growth, encourage privatization and control inflation. However, the new hegemony of the capital markets has gone hand‐in‐hand with deteriorating macroeconomic performance, a worsening income distribution, the discrediting of politics and its isolation from society. The authors examine several key dynamics which are helping to legitimate the neoliberal agenda of the 1990s. These include the distribution of state largesse to manipulate electoral capitalism; the rise of an informal sector in the ‘Anatolian Tigers’; promotion of the seductive attractions of the market; and an antipolitical reform populism adopted by political actors to exploit popular disillusionment with the political system.     

‘Life is War’: Informal Transport Workers and Neoliberalism in Tanzania 1998–2009

This article analyses how informal labourers fare under flexible labour markets and economic liberalization, through a case study of transport workers in Dar es Salaam, Tanzania. It highlights the mainstream conceptualization of urban informality as self‐employment and its influence on policy. The article stresses the importance of class differentiation in the Dar es Salaam transport sector and the predominance of informal wage employment, the uneven degree of power commanded by bus owners vis‐à‐vis informal unskilled wage workers and the pernicious consequences of the lack of regulation of the employment relationship on the workforce itself and on society. It then interrogates the criminalization of the workforce and shows how labour over‐supply, its fragmentation and geographical dispersion explain workers’ lack of response to their plight. The longitudinal study of the rise and fall (1998–2005) of a labour association within the sector further highlights the tensions among the workforce and the forms and limits of their solidarity. The conclusion of this study suggests some policy implications.     

Crisis,Informalization and the Urban Informal Sector in Sub-Saharan Africa

Neo-liberal theories of informality have emphasized the potential of the informal sector for independent employment creation and growth. An alternative perspective is provided by the structuralist ‘informalization’ approach which regards the expansion of informal activity as part of the restructuring strategy of the formal sector in the face of economic recession. The informalization perspective challenges the traditional notions of the informal sector by focusing on such issues as differentiation, social networks, subcontracting and supply linkages with the formal sector, and the role of the state in informal sector expansion. Despite its First World and Latin American focus, the informalization approach offers important insights for the study of urban informal sectors in Africa.     

The Informal Economy as a Site of Liquidity: Pakistan's Land Market

Based on extensive fieldwork, this article examines new informality in Pakistan's land market by which vacant plots of land are transacted informally between market actors in rapidly reversed short‐term holdings. The analysis pivots around the changing economic environment in Pakistan with the shift from heavy regulation of money and controlled pricing, to the liberalization of money and markets. The author explores how liquidity is taken up as a microeconomic strategy to protect against new financial risk in this environment, and how this is played out as a preference for informal transactions. These practices inform a case study that contributes to the established literature on the links between globalization and the informal economy by articulating a driver of growing informal transactions that is novel to the literature.     

The Great Russian Depression of the 1990s: Observations on Causes and Implications

A senior Japanese economist briefly examines the causes of Russia's great economic depression of the 1990s, highlighting the important role of the ruble exchange rate. The author argues that “liberalization” of exchange markets contributed substantially to the depression, because of the “dual” nature of the Russian economy (strong energy sector and weak manufacturing sector). Journal of Economic Literature, Classification Numbers: E50, E58, F31. 7 tables, 22 references.     

Formalizing the Informal Sector: Barriers and Costs

This article uses material from a series of case studies conducted in Latin America to analyse various aspects of the formalization of the informal sector. In particular, it examines the legal and bureaucratic barriers confronting informal sector micro-enterprises which seek to become part of the formal, legal circuit, and assesses the costs in time and money which are involved in the formalization process. The process itself is seen as consisting of two elements — achieving legality and retaining that status over time — each of which involves certain bureaucratic and financial demands. While recognizing that the requirements for formalization can represent a burden in some cases, the main finding of the article is that the procedures and related costs vary between countries to such a degree that it is impossible to claim, as some earlier studies have done, that disproportionate regulation and bureaucracy constitute an insurmountable obstacle to the legalization of informal sector enterprises.     

The Emergence of a Working Poor: Labour Markets,Neoliberalisation and Diverse Economies in Post‐Socialist Cities

Abstract: This paper examines the transformations of urban labour markets in two central European cities: Bratislava, Slovakia and Kraków, Poland. It highlights the emergence of in‐work poverty and labour market segmentation, which together are leading to a reconfiguration of the livelihoods and economic practices of urban households. The focus of the paper is on the growing phenomenon of insecure, poor‐quality, contingent labour. It examines the ways in which those who find themselves in, or on the margins of, contingent and insecure labour markets sustain their livelihoods. We ask how such workers and their households negotiate the segmentation of the labour market, the erosion of employment security and the emergence of in‐work poverty and explore the diverse economic practices of those who cannot rely solely on formal employment to ensure social reproduction. Further, we assess the articulations between labour market participation and exclusion, and other spheres of economic life, including informal and illegal labour, household social networks, state benefits and the use of material assets. We argue that post‐socialist cities are seeing a reconfiguration of class processes, as the materialities and subjectivities of class are remade and as the meaning of work and the livelihoods different forms of labour can sustain are changing.     

Finance and Industrial Policy in Unsuccessful Developmental States: The Case of Pakistan

While a large body of research indicates that state‐directed finance worked for successful East Asian developers, the dominant assumption remains that countries with a weak state capacity, where corruption is rife, should not ‘try this at home’. In this article, that narrative is questioned through a case study of the role of the financial sector in Pakistan, which is widely considered to be a successful case of financial liberalization, contrasting the role of the publicly controlled financial system in the 1970s and 1980s with that of the liberalized financial system in the 2000s. Utilizing archival firm‐level and aggregate data, historic government documents, and interviews with policy makers, financial sector employees and industrialists, it is argued that in the Pakistani case, the withdrawal of state control over the financial sector led to a deterioration of outcomes. This resulted in the allocation of credit away from the productive sectors, namely industry and agriculture, towards unproductive sectors, for speculative purposes; and in the health of the financial sector not improving as expected, with non‐performing loans and corruption remaining a problem, and banks actually becoming a greater burden on government finances. This indicates that even states with weak capacity and flawed industrial policy may be better off with some degree of public control over finance.     

Global Liquidity,the Private Sector and Debt Sustainability in Sub‐Saharan Africa

This article analyses the effect of changes in international financial markets on the debt dynamics in sub‐Saharan Africa in recent years. A key development is the rise of the private sector as both a lender and a borrower in African debt markets, a process that is associated with the growing integration of the region into global financial markets. The article argues that the Debt Sustainability Framework of the International Monetary Fund and World Bank has taken some steps to account for this growth of private sector, cross‐border debt, but such steps still fall short of what is needed. A full appreciation of the importance of private debt implies, first, that debt sustainability in sub‐Saharan Africa be understood in the context of countries’ integration in global financial markets and the global liquidity cycles that characterize those markets and, second, that the interplay between private and public debt be monitored in order to provide a fuller picture of the impact of private sector debt on fiscal sustainability.     

Rude Accountability: Informal Pressures on Frontline Bureaucrats in Bangladesh

This article is about ‘rude’ forms of accountability — the informal pressures used by citizens to claim public services and to sanction service failures. Rude accountability is characterized by a lack of official rules or formal basis and a reliance on the power of social norms and rules to influence and sanction official performance. The article draws on evidence from Bangladesh, a state which has not reformed its social sector governance, to explore when and why poor citizens resort to ‘rude’ accountability, whether they have a comparative advantage in the use of informal mechanisms, and whether these work, in terms of gaining better service. It asks what informal accountability mechanisms imply for governance reform in social services, and discusses lessons for other ‘unreformed’ states like Bangladesh.     

How China Navigated the Dilemma of Trade Liberalization and Government Revenues

Many economists believe that in the long run, the aggregate performance of open economies is better than that of closed ones, and that open policies contribute significantly to economic development. At the same time, many political scientists and policy makers fear that, in the short run, one of the steps towards openness — trade liberalization — may harm government revenues. However, in the 1990s, China successfully navigated the dilemma of trade liberalization and government revenues. In this period, China decreased tariff and non‐tariff barriers for WTO accession, but has achieved dramatically increased tariff revenues since 1999. This study explores how China implemented trade liberalization and simultaneously increased tariff revenues in the 1990s. It demonstrates that a series of institutional arrangements, including a reform of Criminal Law, rigorous anti‐smuggling activities and a de facto tax imposed on the export sector, successfully curbed smuggling activities through the processing trade, and made foreign‐invested manufacturing enterprises the major contributors to the stability of customs revenue. China's case shows that a prosperous, export‐oriented and foreign‐invested manufacturing sector could potentially provide a developing country with a source of customs revenue.     

Renegotiating the Reproductive Bargain: Gender Analysis of Economic Transition in Cuba in the 1990s

This article argues that Cuba's economic demise following the collapse of the former Soviet Union should be seen as a crisis in reproduction as well as a crisis in consumption and production. Using qualitative field research carried out in 1994 and 1995 in Havana and in the province of Matanzas, the author shows that the commodities and services required for reproduction could no longer be guaranteed through the distribution system of the Cuban state. Consequently, people began to devise a range of survival strategies in order to ensure the reproduction of their households, including trading in unofficial markets, leaving formal employment and engaging in a portfolio of income-generating activities in the informal sector. Such strategies were patterned by the existing sexual division of labour and show a reinforcement of traditional gender roles. The article argues that these changes will have important political as well as economic consequences for Cuba's future.     

Manufacturing Disorder: Liberalization,Informal Enterprise and Economic ‘Ungovernance’ in African Small Firm Clusters

Small enterprise clusters are viewed as an important means of promoting competitive small‐firm development even in contexts of unstable markets and weak states. Yet the emergence of successful enterprise clusters in developing regions of Southern Europe, Asia and Latin America contrasts with their conspicuous absence in Africa. This article challenges ahistorical and culturalist explanations regarding the lack of successful enterprise clusters in Africa through a comparative analysis of three dynamic and increasingly globalized informal manufacturing clusters in two different regions of Nigeria. Focusing on a Muslim Yoruba weaving cluster in the town of Ilorin in south‐western Nigeria, and two Christian Igbo shoe and garment clusters in the town of Aba in south‐eastern Nigeria, this article explores the role of culture, religion and the state in shaping informal economic governance in an African context. An account of the varied and complex history of these Nigerian enterprise networks reveals both their capacity for institutional innovation and economic linkages across ethnic, religious and gender boundaries, as well as their vulnerability to fragmentation and involution in the context of liberalization, state neglect and political opportunism. Far from demonstrating the inadequacies of African cultural institutions, the slide of African entrepreneurial networks into social disorder and economic ‘ungovernance’¹ is traced to the destructive impact of neoliberal reforms in a context of poverty and formal institutional exclusion.     

Setting the rules: private power,political underpinnings,and legitimacy in global monetary and financial governance

The role of private market agents in global monetary and financial governance has increased as globalization has proceeded. This shift in both markets and patterns of governance has often been encouraged by states themselves in pursuit of liberalization policies. Much of the literature views these developments in a positive light, yet there are other aspects of these developments that also merit attention. This article supports its central propositions with two cases of emerging global financial governance processes: the Basel II capital adequacy standards for international banking supervision and the International Organization of Securities Commissions‐based transnational regulatory processes underpinning the functioning of cross‐border securities markets. Based on the case findings, the article argues first that private sector self‐regulation and/or public‐private partnership in governance processes can leave public authorities vulnerable to dependence on the information and expertise provided by private agents in a fast‐moving market environment. Policy in the vital domain of financial regulation has been increasingly aligned to private sector preferences to a degree that should raise fears of bureaucratic capture. Second, the article contends that the overall outcome in terms of global financial system efficiency and stability has been mixed, bringing a range of important benefits but also instability and crisis for many societies to a degree that has led to challenges to global governance itself. The case material indicates that the input, output and accountability phases of legitimacy in global monetary and financial governance are highly problematic, and much of the problem relates to the way in which private market agents are integrated into the decision‐making process. Third, the article posits that a better consideration of these three ‘phases’ of legitimacy and their interrelationships is likely to enhance the political underpinnings and legitimacy of global financial and monetary order.     

赣南农村市场中的非正式制度与近代社会变迁

客家文化背景下的赣南农村市场的发展历史,既是经济发展的过程,又是社会发展的过程。从其建立到运作都深深地打上了宗族、宗教信仰、风俗习惯等非正式制度的烙印,体现了典型的客家传统社会结构的双层架构特点。赣南农村墟市中的非正式制度在近代社会变迁中,有的遭淘汰或受限制,有的则演变或延伸。但闭塞与顽固的非正式制度也是制约赣南农村市场近代化的一个重要因素,近代赣南农村市场的发展走入了后续中的困境,表现出滞后的特点,因而难以实现社会转型。     

A state of suspended animation: Urban sanitation and water access in Nogales,Sonora

With its hilly terrain and fast-paced growth, Nogales, Sonora, located on the US-Mexico border, is an extremely challenging place for sanitation and potable water provision wherein access to basic services is highly uneven. The labor demands of maquiladoras (typically, foreign-owned assembly plants) draw a steady influx of newcomers to the city, many of whom must turn to land “invasion” to create spaces for affordable housing. With tacit government approval, invasions occur on inexpensive, often topographically precarious land. Officials tend to frame these spaces as “illegal,” and, by extension, those who inhabit them, as existing outside the realm of formal governance. Despite such views, in this paper we understand the distinctions drawn between so-called formal and informal urban governance to unfold along two key axes: regularization of informal land titles and piped water and sanitation. We show how colonia residents feel caught in a state of suspended animation between hope for full urban service provision and trepidation that it will ever reach them. This ambiguity is visible in residents' and government officials' interactions with each other and the public services landscape, and in the unevenness of services provision. We critique the claim that such ambiguousness reflects an instrumental approach within official planning. Instead, we draw from state theory within political geography and political ecology to show how ‘the state’ is an emergent effect of the processes of inclusion and exclusion, an effect constantly destabilized by Nogales's precarious physical geography and uneven urban services grid. Reconceptualizing authority and ambiguity holds quite different implications for the struggle for urban services provision.     

Sustaining Livelihoods on Mongolia's Pastoral Commons: Insights from a Participatory Poverty Assessment

Under the socialist regime that prevailed until the start of the 1990s, Mongolia made great progress in improving human development indicators, and poverty was virtually unknown. Political and economic transition in the 1990s ushered in a rapid rise in asset and income inequality, and at least a third of the population has been living in poverty since 1995. Many workers made redundant from uneconomic state‐owned enterprises were absorbed into the extensive livestock sector in rural areas and by the growing informal economy in urban areas. The livestock sector grew dramatically, with herders accounting for over a third of the total population and half of the active labour force by the late 1990s. Three consecutive years of drought and harsh winters in 1999–2002 then drastically reduced the national herd. These trends are viewed against a backdrop of relative neglect of the livestock sector in development priorities and a concomitant decline in agricultural productivity. Pressures on common pasture have mounted, and conflict over grazing is becoming endemic. In such a context, sustainable management of Mongolia's pastoral commons should be central to the country's economic development agenda in general, and to its poverty reduction strategy in particular. This article draws on the findings of a country‐wide participatory poverty assessment conducted in 2000. Blending quantitative and qualitative data, these findings help to bring into sharper relief the broad outlines of an integrated approach to building secure and sustainable livelihoods both on and off the pastoral commons.     

The Eurozone crisis and Italian corporate governance: the end of blockholding?

This article explains the process of change in domestic corporate governance. An actor-centred coalitional approach is applied to the Italian case to show how the main features of domestic corporate governance are a product of behavioural patterns (i.e. informal institutions), rather than formal legislation. Leveraging their superior financial means, business elites act as institutional incumbents shaping these informal institutions according to their preferences. It is argued that a change in corporate practices is more likely to be triggered by a socio-economic crisis, which weakens the domestic elite’s influence, rather than a legal reform. These findings call into question the excessively formalistic approach of many corporate governance scholars, and are confirmed by the Italian trajectory. After having resisted 20 years of liberalising legal reforms aimed at eroding their power, Italian blockholders are now being forced, as a consequence of the Eurozone sovereign debt crisis, to dismantle their cross-shareholding networks.     

The Neoliberal Seduction: Governing‐at‐a‐Distance,Community Development and the Battle over Financial Services Provision in Australia

This paper is concerned with understanding the reasons for the apparent success of neoliberalism: why the model of the ‘entrepreneurial, self‐reliant community’ has been adopted so widely and readily across Australia. It does this through an analysis of two events in the restructuring of financial services provision in regional Australia during the 1990s and 2000s: the John Laws/Australian Bankers’ Association ‘cash for comment’ affair, and the rise of ‘alternative’ financial service providers in the wake of the major trading banks’ financial service withdrawal programmes of the 1990s. This analysis is conducted using the conceptual toolkit of the governmentality literature. In this context, the paper explores the notion of translation — how authorities, agencies, etc., exert control over distant entities, whether these entities be branch staff or a far‐flung consumer market. In examining the often fragile character of ‘governing‐at‐a‐distance’ in modern forms of rule, it is argued that some recent advances in the ‘geography of power’ have much to offer in highlighting both the important roles played by space and scale in the execution of power in its various guises and the ways in which resistance to the more regressive features of neoliberal philosophy and policy may best focus.