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What 1.8 Billion People Do

What 1.8 Billion People Do

My friend Zach linked to this amazing article this morning: The Shadow Superpower.

In many countries — particularly in the developing world — System D [the black market] is growing faster than any other part of the economy, and it is an increasing force in world trade. But even in developed countries, after the financial crisis of 2008-09, System D was revealed to be an important financial coping mechanism. A 2009 study by Deutsche Bank, the huge German commercial lender, suggested that people in the European countries with the largest portions of their economies that were unlicensed and unregulated — in other words, citizens of the countries with the most robust System D — fared better in the economic meltdown of 2008 than folks living in centrally planned and tightly regulated nations. Studies of countries throughout Latin America have shown that desperate people turned to System D to survive during the most recent financial crisis.

This spontaneous system, ruled by the spirit of organized improvisation, will be crucial for the development of cities in the 21st century. The 20th-century norm — the factory worker who nests at the same firm for his or her entire productive life — has become an endangered species. In China, the world’s current industrial behemoth, workers in the massive factories have low salaries and little job security. Even in Japan, where major corporations have long guaranteed lifetime employment to full-time workers, a consensus is emerging that this system is no longer sustainable in an increasingly mobile and entrepreneurial world.

Incredible. And it’s not because these people “enjoy” having to evade the law, it’s just that the only ways to legally conduct business in places like the Congo (where it takes 18 forms to import an item) is to either bribe or circumvent the bureaucracy. Africa is the most regulated continent in the world, which is a handsome part of the reason that commerce does not move there readily. The only woman I know with the bravery and strength to deal with these laws is my friend Magatte. Her first company, Adina, is African-produced.


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I don’t think you mean that Africa is the most regulated nation in the world. Region maybe, continent, okay, but nation? Need more caffeine.

Typo alert: “Africa is the most regulated nation in the world,…”

Africa is a continent and not a nation.

Try doing business in the Philippines or Russia. The systems are quite literally “Byzantine.”

Russian customs wanted to charge me, the potential exporter, a fee to export locally produced souvenirs! In several cases, the fee was nearly 50% of the price I paid of an item. The paperwork was voluminous and approached the size of “War and Peace” for simple items.

In the end, I simply said “no thanks” and stopped attempting to export from local artists and craftsmen when I lived in Russia. Government at work…

    Owen J in reply to WarEagle82. | November 4, 2011 at 4:40 pm

    My company tried to do some busines with Russia in the mid-90s, with Lavoshkin (sort of the Russian analog of Lockheed). it was very eye opening.

    I heard some amazing stories — the one about the truckers who struck because they had not been paid took the cake. The Russian manager of the US concern that had contracted with the truckers suggested — in all seriousness — that he be allowed to kill the truckers and steal their trucks.
    His reasoning was:

    1) They would save money by not having to pay the truckers and get their shipment delivered for free.

    2) They’d get a whole new fleet of trucks!

    The American boss talked the Russian out of it with great difficulty. The Russian was thoroughly disgusted with this evidence of pathetic weakness and unbelievable stupidity.

      Liberty in reply to Owen J. | November 5, 2011 at 12:23 pm

      I don’t have any reason not to believe your comment Owen J, and just thinking about it twice scares the hell out of me. How does anyone gather the courage to go into business in Russia today knowing that business the mob way – is the way – and condoned from the top? The more one reads and witnesses what is happening in Russia today, it becomes harder to escape the realization that Russia is being run as a criminal enterprise. And the reward for speaking out against the corruption is a classical mob rub out and an unsolved case file that will join the other forgotten ones that tried to call out the bad guys and who also paid with their lives.

Midwest Rhino (not RINO) | November 4, 2011 at 11:43 am

Obama is trying to keep the US ahead … in terms of funneling bribes through a centralized collection agency. Only union companies can get most government work already. Private company Boeing goes to right to work SC, and they get attacked by their government for going non-union.

Look at the efficiency that’s been wrought … no union thug protests or knee-capping needed. Obama made a very public warning to what happens to those that resist “His Boyz”.

Hey Prof… Do you think that Africa which was largely colonized by European nations that in turn taught them about bureaucratic procedures?

I’m relating to India which was a British colony and how bureaucratic that nation was until only recently when some controls were relaxed. I remember a piece on ABC where John Stossoels, (sp?), went to India and attempted to start a small ABC kiosk for novelty items. I don’t think that he succeeded but when attempting to do the same thing in Hong Kong, he has able to set up shop in a half day.

And… You’re right, it takes a great deal of fortitude and patience to get a business going in some locations…

    Owen J in reply to GrumpyOne. | November 4, 2011 at 4:30 pm

    India has always been pretty bureaucratic, I think. I recall reading back in the 70s about the oldest case still in litigation. It was (as I recall) in India and had been going on since the 14th Century.

    I also just saw something recently about how the civil service there had expanded since the Brits left from some thousands to a couple of million.

System D – For all my Canadian friends who pay cash to avoid getting raped by the GST, PST, HST you’re part of it. I vividly remember there being two prices in Canada for pretty much everything if you asked. The higher taxed price for something if you pay via a traceable financial instrument and then a lower “off the books” cash price. Of course System D really flourishes in places where the regulatory burden is impossible. So for my American friends – Welcome to the future! (That is one of my biggest chuckles when I hear about the 9-9-9 plan. The whole VAT part of it will cause the underground economy in the US to explode)

Africa is dead. In 50 years it will be a wasteland run by complete despots. It can not be saved. The USA needs to cut foreign aid to Africa by 100%.

The African continent is endowed with some of the richest treasures, including minerals and arable land, in this world. If not for authoritarian distress, including rebels with a cause and without a clue, they could easily have an economy which could serve the whole continent.

    Owen J in reply to n.n. | November 4, 2011 at 4:56 pm

    Yes, they could — if they could overcome their dysfunctionality which unfortunately hs not looked likely.

    Years ago I read some conference proceedings relating to how to help Africa. One guy (or group) presented a convincing argument that lack of basic infrastructure — roads, rail, enough trucking, adequate fuel distribution, etc — prevented the efficient distribution of goods (esp food) and crippled the emerging economies.

    It sounded really good until a co-worker pointed out that the Africans had no trouble at all moving armies of men in 100-CWT trucks over these self-same roads that were deemed inadequate to transport food and durable goods.

    It’s all a matter of priorities.

BannedbytheGuardian | November 4, 2011 at 5:55 pm

I have to commend you Kathleen . You at least attempt to grasp things outside of the USA.

Everywhere every era is different. Not sure that it can be rolled up into a theory. Where would you place The Opium Wars for example ?

Seems to me everyone has to pay someone for the right to even exist for existing does not come free. If it is not Caesar then it is a Warlord of God or a Warlord of Just General Stuff( like breathing eating commerce etc )

3 memos ‘

Jesus -Give unto Caesar what is Caesar’s..

Dylan – Everybody got to serve somebody…

Beatles ..The Taxman

Me .. I go by the notion that a stationary thief is better than a mobile thief.

Me – A stationary Thief is better than a mobile thief.

BannedbytheGuardian | November 4, 2011 at 6:15 pm

I should edit better but I am laying on the couch looking out the window & thinking -ought I go for a swim in the sea or to the pool. The sea is free but I just splash around.

The pool costs $4.20 but I like to get my money’s worth & calculate how much per 50mtr lap. My minimum standard is 10 cents per lap (42) or good 84 laps (5 cents ) & 84 + is premium.

There is a compromise -a 50 mtr sea pool which is free . Here I do a little bit of work & a lot of contemplating the beauty of it all.

Hey hey its summer !!!

    I guess you are Down Under the equator somewhere in the world after being banned by The Guardian since you are enjoying summer type weather. Oh, why choose — just enjoy them both…..the salt water is good for your skin and cardio exercise is good.