Developing Economies and the Informal Sector in Historical Perspective

In the 1970s, social scientists used the term “informal economy” to describe the economic survival strategies of many of the working poor in Third World cities. Now, both terminology and analysis are applied in the advanced, industrialized countries to the often proliferating variations in nonwage employment that have emerged during the world recession of the late 1970s and 1980s. In this article, social science's understanding of the relationship between the informal economy and socioeconomic development is traced back to the early nineteenth century. It is argued that this interest has tended to wax and wane according to the cycle of boom and slump in national and international economy alike. It is in this broader historical context that the policies and reality of small-scale informal economic activity in the Third World can best be elucidated.