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30 September 2016

The Informal Economy of Mexico

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The informal economy: in Mexico, it’s one of those things so ubiquitous, you don’t notice it until someone points it out. All the people selling things on the streets, in the metro, under the tarps and in stalls, from house windows and front yard sheds, they’re all running their own tiny businesses, and they’re all totally off the books, just like when you sold lemonade on the sidewalk as a kid. Of course, the informal economy here extends beyond street vendors to farming and even building trades. It’s estimated that the informal economy makes up a quarter of Mexico’s GDP and employs over half its workforce. A staggering number of quesadilla ladies, candy sellers, and vegetable vendors are operating on an extremely informal basis. They’re buying supplies and charging people on resale. Nobody in the transaction pays any taxes.

With this expansive informal economy comes obvious economic and social problems: the biggest of which being that when 25% of your economy isn’t generating revenue for the government, essential social services are bound to be underfunded. On top of that, informal workers are not afforded labor protections that exist for official employees. As a result, workers in the informal economy work for the bare cash they need to survive, and they’re vulnerable to all manner of abuse, manipulation, and ruin because they exist outside of the underfunded and under-enforced mechanisms erected to protect people.

The Informal Mexican Economy

These arguments are difficult to refute; I’m not saying that a robust informal economy, especially on this scale, is a good thing. These discussions are best left to economists and sociologists, but my casual impressions, formed by my wanderings around Mexico, don’t quite jive with an economic doom and gloom scenario. In fact, it’s difficult to square the need to register, regulate, and tax every last taco stand with the entrepreneurial spirit so lauded in virtually every free market economy on earth. A difficult but undeniable line lies between lemonade stand and exploitive business. So, what’s happening here? Why am I talking about this on a culture site?

Because an informal economy is a product of culture. The United States has a relatively small informal economy but has a highly organized culture that prizes order over almost everything else, and just as importantly (and consequently), it has the financial resources to institute and maintain that order. Mexico, on the other hand, doesn’t have the same systemic tradition. From Aztec to Spanish colonial times and through a host of constitutions, the Mexican government has often operated as a largely separate entity from the average Mexican life. The average Mexican has been on their own for centuries and is resourceful and hard working. These people have been finding ways to make do and keep going for generations. The huge informal economy of Mexico is an outgrowth of this resilience. But now, it’s in the way. Now, as Mexico rises among world economies and confronts systemic problems laid bare by that success, the longstanding culture of improvisation is causing problems.

The Informal Mexican Economy

I’m not an expert in Mexican history, and I’m just beginning to learn about the culture here. From my limited experience, the informal economy of Mexico seems to be both its strength and its weakness. There’s something admirable in the fact that in the neighborhood I live in right now, I can buy nearly everything I need from other residents, but there’s also something troubling in the fact that they need to sell quesadillas from their kitchen window to make ends meet. It’s a double-edged sword, and for every story about missing tax revenue, there’s a corresponding story about how women are organizing and running informal business guilds in Mexico City.

Economies take the identity of the cultures who give them life. Modern market economies run on high regulation, they produce high volumes at high efficiency, and if someone falls behind, there are safety nets to catch them. Yet much of the world has yet to reach this level of organization. In a place like Mexico, the safety net is one’s own labor, and you can see that on every street corner under a tarp, surrounded by plastic chairs. The difficulty is transitioning to a different kind of economy, a different kind of society, while respecting the traits of the culture. The difficulty is figuring out how to work within the culture to collect the funds needed to maintain a high standard of living in the community without dis-incentivizing the community’s tradition of personal independence. Actually, the closer you look at the implications of political philosophies regarding the informal economy, the more the debate echoes the terrain of American politics: the appropriate division between personal and communal.

The Informal Mexican Economy

There are, I’m sure, unique solutions for both the Mexican and the American versions of this debate. As far as the Mexican solutions go, as merely a visitor here, it’s not my place to venture to guess what they are. It’s just fascinating to me to observe the different ways that human beings organize and work to survive along with their definitions of, and requirements for, survival. I find both the differences and synchronicity between cultures and countries like Mexico and America quite informative. In its huge informal economy, Mexico is actually practicing the kind of personal independence that Americans so vocally espouse. On the other side of the border, America’s tax supported social systems provide the protections that Mexicans desire from their government. Informal business is a part of every economy. As a result of the country’s unique history, the informal Mexican economy is huge, and while that scale has consequences, both good and bad, the bustling informal economy is a product of both Mexican history and Mexican culture, therefore it offers a great opportunity to learn about and understand another way that things can be.

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