The informal economy: killing me softly with its love

I’ve often thought how many Jamaicans survive because of the informal economy. Working with little or no capital; little or no real costs; income that is not often visible to be taxed; operations without rules and regulations, etc. For many, especially those who have few marketable skills (including a good level of education), it’s the only route to survival. So, whether it’s a vendor stall, or selling steering wheel covers, or just hustling with whatever and wherever, it’s what puts bread on the table and food in the mouth for many. Without stereotyping all that is done informally, we know that such an environment has allowed those in a weak economy to do better than would otherwise be the case. So, for instance, the domestic worker who gets a few days work for cash and manages to see children through school and on to university poses a huge conundrum. Should we seek to curb her options and get her into the formal sector and all its constraints, knowing that doing so may be a hinderance to the good that her practices permit for her family?

Measuring economic activity is not just an exercise in getting things right, it’s also about making sure that policies can be directed at the best characterization of the realities of life.

Why am I thinking of this?

I’ve just made some batches of mango jam, that’s why!

One large mango tree is shedding about 20 mangoes a day and as much as I love eating them, it’s hard to keep up with that flow. Bring in the family to help eat. Still behind. Add mangoes donated. Solution? Preserve and protect. In my case, put them into a blend with water and lime juice and make jam. So, pots got boiling and I managed to make four batches, and turned out 15 jars (of different size). 

The benefit of production are that the volume of mangoes goes down dramatically: 15 jars take up barely one shelf in a fridge, while the equivalent of 4 large mangoes per jar would take up much more space.

Now, I have made the jam for fun, but friends soon got word and fun turned into gifts. Two friends have begged me to sell them some. I had not thought about becoming a mango vendor; maybe, next year.

But, my generosity has done what for Jamaica?

Well, nothing, apparently. GDP will not measure my activity at home, unless by some quirk I get caught in a household survey. My mangoes were free inputs, so no sales show up. I give away the output, so no payments are made, no revenue is generated and no income flows to me. I bought limes. I was given ginger. My use of water and gas will show up, as will the extra work of the fridge, so my utility bill will be a bit higher and STATIN may wonder about the utility consumption spike in June. Hi, guys! 🙂

Friends will send bearers to collect their gifts, so we may see some increase in GDP through service activities. I may exchange some jam for chutney, or other fruit, or some other item I want or need and someone has in abundance. Barter is alive and well. But, the big picture of all this is nowhere to be seen.

Jamaica is better off, if I can be so bold. My jam tastes good! Friends are having better breakfasts and lunches, as far as I can see.

But, our economy looks stagnant, as ever.

This scene is one that has been repeated for decades and is why Jamaica is a conundrum. Things may be booming in some clear social and economic senses, but never seen in any significant macroeconomic statistics.

Author: Dennis G Jones (aka 'The Grasshopper')

Retired International Monetary Fund economist. My blog is for organizing my ideas and thoughts about a range of topics. I was born in Jamaica, but spent 30 years being educated, living, and working in the UK. I lived in the USA for two decades, and worked and travelled abroad, extensively, throughout my careers and for pleasure. My views have a wide international perspective. Father of 3 girls. Also, married to an economist. :)