A Theoretical Review of the Urban Informal Sector or Informal Economy in Developing Countries and Its Future Directions in an Era of Globalisation 

Lalesh Nand


Department of Humanities (Geography), Western Sydney Institute of TAFENepean College, Sydney, Australia

E-mail: laleshwar nand@tafensw.edu.au




Abstract: This paper is a theoretical review of the urban informal sector or ¡®informal economy¡¯ in developing countries. It reviews various literature on Market –Place studies done since 1970¡¯s in different countries and studies of contemporary Small and Medium Enterprises to review the informal sector theory. Although there are many theories on urban economic activities in developing countries; dualistic, structuralist and legalistic, this paper, first, examines the different traditional dualistic paradigms used in the analysis of urban economic activities in developing countries to provide the theoretical background. Secondly, an analysis of functions and characteristics of market-places and their participants is done from diverse literature to illustrate how the market activity and its participants fit into the dualistic theoretical paradigms. Finally, the Informal Sector theory is examined in the context of a more contemporary theme of globalisation to provide a greater reality of the analysis of the Informal Sector enterprises. Here focus is on Small and Medium Enterprises. It is concluded that the dualistic models are fundamental but not ideal in the study of urban economic activities. Non-dualistic models such as ¡°Petty Commodity Production¡±, Globalisation and the legalistic paradigms provide a greater reality in the analysis of Informal Sector enterprises. In an era of globalization the urban ¡¯Informal Sector¡¯, now conceptualised as the ¡°Informal Economy¡± occupies a substantial position and it is integrated with the ¡®formal¡¯ sector and the global economy with development of a heterogenous mix of  Small and Medium Enterprises.  Thus, the use of dualistic paradigms in an analysis of informality is inappropriate. The informal economy is better addressed with the use of the globalisation and in a legalistic framework.


Keywords: informal sector, market-place trade, Small and Medium Enterprises produce, peasant economy, women, Asia-Pacific, Globalisation.





The Third World urban systems exhibit contrasting systems of production and distribution. Most researchers have conceptualised these differences in terms of a duality. Geertz (1963) conceptualised the urban economy of Third World countries in terms of a `bazaar' sector and a`firm-centred' sector. The International Labour Organisation (1972) and Hart (1973)  conceptualised in terms of `formal' and `informal' sectors. Santos (1979) introduced the concept of different `circuits' of production and distribution. Santos divided Third World employment into upper and lower circuits. Dependency theorists and Marxists, such as Gerry (1979) and Gerry and Birkbeck (1981), used the concept of `mode of production' where they refer to the informal sector as `petty commodity production'.





Geertz (1963), in observing dualism in Indonesia, conceptualized Indonesian town economic activities in terms of a `bazaar' sector and a `firm-centred' sector. Geertz examined Modjokuto, a small market town in East Central Java and argued that it had a `bazaar' economy.    The `bazaar' type economy is explained by using the traditional `pasar' or `market' . The pasar is an economic institution, a pattern of life and type of commercial activity common to all parts of Modjokuto society. People meet at the pasar for commercial purposes and also to defraud each other. Small-scale hawking and processing activities are also centred in the small market-place. In the bazaar trading system, the total flow of commerce is broken down into a large number of unrelated person-to-person transactions. According to Geertz the bazaar type of economy can employ a large number of people on marginal levels of living. However, the disadvantage of the bazaar economy is that it allows only small-profits and no significant capital accumulation (Geertz, 1963: 28-30). (See Geertz,1963:30-47 on the characteristics of the bazaar trading system).  




On the other hand, in Modjokuto, Geertz (1963:29) observed a progress towards more effective patterns of economic activity. This took the form of a movement away from the bazaar type of economy towards a firm-type economy, consisting of `firm economy or firm-like distributive institutions of small stores, shops and factories'. He observed that from a difficult, individualistic and confused market-place, a few of the more interested members of the town's trading class were trying to organise their activities in a more systematic manner, and conduct them on a larger scale.


To portray the firm-type activities in Modjokuto, Geertz examined retail stores (Toko) and factories (Perushan), the two commercial features showing a movement away from a `bazaar' economy towards a `firm-centred' economy in Modjokuto.(See Geertz, 1963: 55-63 on the transition of retail stores from bazaar economy towards a firm-centred economy in Modjokuto. 

Geertz's conceptualization of Third World urban economic activities into a `bazaar' and a `firm-centred' sector is quite adequate in understanding urban systems in developing countries. However, Geertz did not look further at the dynamism within the bazaar, that is, how people moved away from the bazaar towards the firm type of economy. He did not look at the transitions but simply mentioned that the process takes place.


The concept of dual economy has been further developed by other institutions and authors.




The International Labour Office (ILO) (1972) and Hart (1973) conceptualized the same duality of urban organisation in terms of `formal' and `informal' sectors. The ILO (1972) outlined its first formal, informal sector definitions in its Kenya Report. It used the characteristics of the enterprise to derive its two sector dichotomy (formal and informal) (See Kenya Report, 1972:6).


Since its inception, the informal sector has been adopted for studies of Third World economies by two groups of writers with different perspectives. According to one perspective, informal sector activities are sluggish, dependent and do not generate any significant income for their participants and the economy. Petty activities in Third World cities are also attacked and accused of being exploitative at individual levels, providing only low earning opportunities, creating intensive competition, being discriminatory in terms of gender, depending on foreign technology and resources and giving rise to a petite-bourgeoisie with links with the formal sector. Such enterprises are also viewed as a nuisance to the public, obstructing development and wasting public fund (see Mazumdar, 1976; Dannhaeuser, 1977; Longdon, 1975; Kaplinsky, 1979; Bromley, 1978; Bromley and Rusque-Alcaino, 1979; Birkbeck, 1979; Gerry and Birkbeck, 1981, Bannerjee, 1981; Moser, 1981, Norcliffe, 1983 and Bolnick, 1992). These writers argue that the informal sector does not possess dynamic characteristics of its own and outside forces, such as raw materials, finance, markets and technology, hinder the accumulation of capital by those involved in the sector.


On the other side of the continuum is a group of writers who emphasize the positive aspects of the informal sector in terms of individual success and stimulating economic development. The main argument of these researchers is that the informal sector provides employment and income opportunities, develops skills, uses local and appropriate technology, and assists in the redistribution of wealth. It is also seen as giving a sense of achievement and progress to its numerous participants (ILO, 1972; King, 1974; Merrick, 1976; Jellenik, 1978; Nihan and Joundain, 1978; Nihan, Demol and Jondoh, 1979; Hau'ofa, 1979; Baxter, 1980; McGee, at.al., 1980; Walsh, 1982; Roger and Beavon, 1982; Waldorf and Waldorf, 1983). Writers have also emphasized on ways of improving the welfare of informal sector activities and its participants (Tokman, 1989; Khundker, 1988 and Chandavarkar, 1988; Maloney, 1998 and Dasgupta, 2003).




The Third World urban system study has been further conceptualized by Santos (1977). Santos developed a dualistic model which is applicable to Third World urban production and distribution systems. He divided Third World employment into two circuits: `upper' and `lower' circuits. Santos argued that "every place is the field of co-existence of two polarizations, two concrete modes of production" (Santos, 1977:50). This is true for both means of production and distribution. Thus, according to him, two circuits of the economy (upper and lower) emerge in the Third World and both stand side by side in the urban system.


Each of the circuits in the urban system has the same set of variables whose characteristics, however, differ. Both circuits work as a system and the two have a dialectical or logical relationship in which the upper circuit is dominant (Santos, 1977:50). Each circuit consists of its own distinctive characteristics. (See Santos, 1977:53-59 for the distinctive characteristics, roles and spatial organization of the two circuits of production and distribution). 


Like the former distinctive conceptualizations such as `bazaar' and `firm-centred' sector, `formal' and `informal' sector, Santos concept of `upper' and `lower' circuits is also an important contribution to the study of Third World urban economic activities.


However, the most important contribution made by Santos to the conceptualization of Third World urban economic activities is the identification of the dynamic relationship between the two systems of production. He clarified that the two circuits exist side by side in the urban economy and are spatially and economically linked. The linkage is shown in the reciprocal relationship in terms of distribution of goods in the region by the two circuits. This linkage of the two circuits makes Santos' conceptualization distinct from other dualistic concepts which do not show relationships. Thus, Santos, to some extent, helped bridge the gap in the academic thought which conceptualized Third World economic activities in terms of a duality. 


Dependency theorists and Marxist have conceptualized Third World urban economic activities but not in terms of a duality. This is examined next.




Dependency theorists and Marxists, such as Gerry (1979) and Gerry and Birkbeck (1981), have conceptualized urban economic activities of the Third World using the concept, `mode of production' where they prefer to view the informal sector as "petty commodity production." They use the term petty commodity production to refer to those activities which clearly fall "outside the major axis of capitalist production and/or market relations" (Gerry and Birkbeck, 1981:123).


According to these writers, petty commodity production is defined "as a distinct economic form, found in the context of several modes of production (feudal, capitalist or socialist).   Petty commodity production is normally subordinate, dependent and transitional." (See Gary and Birckbeck, 1981 for the characteristics and complex relations between the petty commodity producers).


The link between certain petty commodity producers and large capitalist enterprises gives rise to what Dependency and Marxist writers have called "Petty Commodity Bourgeoisie." The provision of raw materials, finance and markets by the national bourgeoisie enables the petty commodity bourgeoisie to accumulate wealth for investment, expand further and become dominant petty commodity enterprises. Thus, generated wealth is in the hands of only a few and there is unequal distribution of resources and wealth.


Although petty commodity production may grow in importance, the income remains stagnant or declines. This process only strengthens the position of a group of local, small-scale entrepreneurs who preserve the existing political and economic structure. It is these complex relations or modes of production which limit the growth of petty enterprises. The smaller petty commodity producers' activities yield income which provides a subsistence living. Most petty commodity enterprises remain static or do not survive (Gerry, 1979; Birkbeck and Gerry, 1981; Forbes, 1981; Norcliffe, 1981). All these analysis add up to the argument that petty commodity production was, and remains closely linked to the development of capitalism (Gerry and Birkbeck, 1981:152). If petty enterprises become viable they are no longer petty. This is similar to Geertz's notion of movement of entrepreneurs from the bazaar economy to the firm economy with accumulation of wealth and resources.


Thus, it must be recognised that most petty producers are not petty commodity bourgeoisie. The petty commodity production model is not dualistic. In other words, petty commodity enterprises do not form distinct groups and operate at two extremes like a `bazaar' and `firm-centred' sector, `upper' and `lower' circuits or `formal' and `informal' sector. There is more uniform distribution of enterprises, workers and owners of means of production operating in different modes of production. The Marxist perspective pays greater attention to the linkages of the various modes of production.


Finally, petty commodity production model is well contrasted to other dualistic models used to conceptualize Third World urban economies. It can also be argued that petty commodity enterprises are dynamic. There is competition, exploitation and progress of petty commodity enterprises and entrepreneurs.


Following the foundation laid by Marxist and Dependency theorists, the transition and linkage of petty commodity enterprises with the organised formal sector has been well interpreted by writers (see Natress 1987:864 and Jaganathan 1987:3-14;Maloney, 1998: 1-25 among others). With the use of an "integrative approach" to explain the insights of petty commodity enterprises in the informal sector, they have corrected some misconceptions and generalizations in theorizing Third World urban systems.


In an analysis of street traders in Transkei, Natress examined the transition of petty commodity enterprises into the formal sector of the economy. The main argument of the integrative approach, according to Natress, is that the informal sector enterprises operate together and their characteristics also overlap. Most informal sector enterprises are labour intensive, small-scale and unrecognised and unregulated. Within the informal sector, there are a few enterprises which are large-scale, labour-intensive and officially unrecognised and unregulated. These enterprises have an expanding production but since they operate outside the zone of official recognition and regulation their capital accumulation possibilities are restricted.    


Further, other small-scale businesses in the informal sector with sufficient money to purchase machinery are likely to abide by the official regulations. This allows capital accumulation and gradually a transition from the informal sector.


In a nutshell, the main argument of the integrative approach as interpreted by Natress is that the informal sector operator, with limited capital, will be labour intensive. His micro operation is outside official recognition due to licensing costs and lower standards of production. Nevertheless, if the standards are low and the costs of the license reasonable, the petty operator will probably work within the zone of official recognition.


The integrative approach indicates that the informal sector is not homogeneous but incorporates many activities carried out under different conditions.


Jaganathan (1987:3-14) in an analysis of informal markets in developing countries argued on similar lines to Natress. He looked at behavioural relations in unorganised markets. The creation and use of informal property rights in production and market exchange made up his study. Jaganathan, in criticising the ideology that the very poor in Asia and Africa are propertyless individuals who constitute an ignorant proletariat, argued that most of the wealth of these individuals exists in the form of regular behavioural relations that acquire the characteristics of intangible property rights. Although the rights may not amount to much in economic terms equivalent to income levels in developed countries, they do constitute important sources of income and purchasing power.


Jaganathan's main argument is that through certain behavioural relations, participants in unorganised markets have access to property rights in the organised sector through informal contracts. This shows the dynamism of the petty enterprises in the informal sector and the linkage with the formal sector.


More recently, Maloney (1998,2004 ) in his study of various enterprises in Mexico and Latin America confirms that traditional dualistic paradigm is inappropriate to view informality. Like others, he also uses interactions, linkages and transition of entrepreneurs and enterprises in the formal and informal sector. His Mexico study based on different income levels and mobility of workers between sectors shows that the informal sector is a desirable destination and the various modalilities of informal work such as; the self employed, owners of informal firms with or without additional employees, informal salary workers, the contract workers, those who are paid as a percentage, on commission or fixed contact etc  are often connected to larger firms (see Maloney, 1998:1-22). Maloney (2004) further reinforces that there is a greater heterogeneity in the informal sector and those who join this sector do it more by choice and not a result of segmented labour markets.


However, in spite of the successful dynamic linkage between the two sectors, the relationship is problematic. The various linkages such as informal credit, subcontracting and marketing informal sector finished products through formal sector outlets are seen as barriers to economic progress of the informal sector. This is seen, for instance, in the high interest rates (500%) per year on credit which allows only present level of production and consumption and thus no development of the informal sector. Further, the differences in wages and capital costs between the two sectors prevent the informal sector enterprises from penetrating the formal sector (see Hemmer and Mannel, 1989 and Chaudhuri 1989  and Dasgupta, 2003).


International Labour Organisation and the Informal Sector.


The ILO originally introduced the concept of the IS in the 1970¡¯s has now broadened the concept of the IS by substantiating the different and greater complexity of enterprises and entrepreneurs involved.  There is a conceptual change to the whole ¡°Informal economy¡± to clarify various types of old and new informality involved based on production and employment relationships. The General Conference of  ILO meeting in its 90th Sessions, 2002 concentrated on the theme ¡°Decent Work and the Informal Economy¡± where calls has been made to integrate the Informal economy into formal economy with strategies from Governments, Trade Unions and NGO¡¯s. It is anticipated that with this greater conceptual and definitional clarity there will be sounder policies and actions by governments and authorities to sustain informal economy enterprises and greater implications for the urgent linkage of the Informal economy with the formal and world economy (ILO Gen Conference, 2002, 90th Session).




Markets are important urban informal sector enterprises  in developing countries. The market places and market traders are integrated with the formal sector and with the wider national and global economy. It is imperative to examine this significant role of market –places and its participants as a substantial informal sector activity. An analysis of the functions and characteristics of market-places and market traders by various studies on markets illustrates this importance. This is discussed below


Market  - Definition(s)


The term "market" refers to trade, or place of trade. A market is a place where traders either wait for buyers everyday in shops or stalls or proceed on specific days at more or less frequent regular intervals at a place to do business under certain rules and regulations, in certain kinds of goods. As specialisation in production and trade grew it became necessary for buyers and sellers to meet together and thus markets became the nuclei around which towns developed.  (Hodder, 1965: 57; Mintz, 1959: 20; Good, 1970: v; Meillassoux, 1971: 80; Hill, 1966: 295;The New Encyclopaedia Britannica, 1993(7): 858). " The market is as much a part of the social and economic routine of the peasants as is their farming and that the very multitude of people gathered at a market attests to its importance" (Bromley (1971:125).


These are traditional definitions of ¡®markets¡¯ based on Centre-Periphery paradigms. Although markets formed the nuclei around which towns developed, the centre-periphery metaphor is disputed strongly by writers. Perry (2000) argues that markets are not spatially distinct but dispersed in nature. Markets are distributed across community and brings business and trade from the town (centre) to the rural regions (periphery). The market is a social process put in motion by farmers themselves in ways suitable to their lifestyles. Markets enhance community life and even create community. This is in contrast to Meillassoux who defined markets as existing in metropolitan centres where rural producers or domestic producers sold their produce from rural hinterlands. Perry is closer to ¡°mode of production theory¡± in the context that the market enterprises and its participants are closely related to ¡®capitalist mode of production¡¯ in terms of contributing to the formation of global economy. Bromley¡¯s definition is more realistic showing the reciprocity between markets and their participants.   


The Origin of Markets


There are two theories on the origin of markets (Hodder, 1965:97; Bromley, et.al., 1975:533-534).


According to the `endogenous' theory markets originated from a tendency among individuals to barter. This necessitates local small-scale exchange, division of labour, specialisation and market places. The scale of local trading activity accelerates and its influence increases to external relations and long distance trade. Thus, markets originate from local exchange and demands.


A competing "exogenous" theory is the opposite. Trade and markets can never arise within a community and cannot originate from local demands, but are oriented from external relations with different communities.


Exogenous¡± theorists (Pirenne, 1956:75-91; Weber, 1927:202-222 and Polyani, et.al.,1957) argue that local markets originate from the response of outside traders and foreign goods. Hodder (1965) stated that markets are not the starting points but the result of long distance trade, division of labour and the geographic location of goods. Meillassoux (1971:82-83) argued that there is a lack of markets in areas where economic relations are largely person-to-person and where foreign traders are not active.


Some writers use the notions of both theories. As the traditional economy develops through increased specialisation of labour, simple exchange is modified into specialised trading journeys and organised trading institutions; markets. Thus, external links and influences and the role of external trading and foreign goods stimulate local market foundations (Perry, 2000:461-486;Bromley, et.al. 1975:530-553).   


Classification of markets


Markets are classified according to their temporal specialisation. This gives a particular market its unique characteristics. Thus, markets are divided into: daily, periodic and special markets (Bromley, 1971: 126).


Daily markets form part of major market centres. Periodic markets are held regularly on one or more fixed days each week or month in smaller market centres. Daily markets have a large volume of trade once or twice a week and share some characteristics of periodic markets. Special markets are often held at annual fairs and may be held from one day to one week to three months.


Fairs represent the total economic, social and political life of the whole region. Fairs have religious significance and are places of trade, marketing agricultural produce and venues for popular culture, entertainment and political organisation. The daily or periodic market is a normal trading institution in the town serving the local population. The fair is abnormal; serves people from a wider surrounding country ( Allix, 1922: 532, 546-548; Sit,1987:306-318;Yang, 1998: 17-20, 113-159, Cronin, Gilligan and Holton, 2001:13-17). 


The Functions of  Markets


Markets play an important function in the urban economies This is seen in the socio-economic and political organization of market participants  with one another and with the larger national and global economy Among others, Mintz (1969,1985,1996); Yang (1998); Nand (1992); Perry (2000) and Michaud and Turner (2000) have examined this important role of markets. 


Markets allow import and export of goods to and from a local region and the exchange of goods within the local region. It provides for indigenous and non-indigenous exchange, the initial stage of traditional commercialisation. Market-place trade is the backbone of commercial infrastructure; the centre where concrete exchange of indigenous and imported goods and services take place (Bromley,1971:130; Harts-Broekhvis and O Verkoren, 1987:214).


The market supplies fresh food to urban dwellers and imported goods desired by rural villagers. It  provides cash income and livelihood for numerous villagers, poor, old and sick, orphans, elderly women and divorcees (Brookfield, 1969:1-32;  Mintz, 1969:20; Bromley, 1974:63; Yang, 1998: 161-219; Michaud and Turner, 2000: 89-94; Seligman, 2001:2-24).


Urban dwellers who cannot buy from supermarkets obtain identical services from the market. At Ba  market, Fiji, the majority of vendors have customers from urban areas: 16 percent have rural customers and 84 percent urban customers. Income for vendors is significant; 51 percent completely depend on vending, another 24 percent depend on vending for more than 50 percent of  household income, and the remaining 25 percent depend on vending at varying levels. Stall are handed from one generation to another (see Nand, 1992:139-159,160-189; 203-208).


Markets help prevent a rapid increase in food imports and improve nutrition with a wider range of fresh protein-rich and protective foods (fruits and vegetables). Local agricultural produce is traded at Ba market. Imported products, consisting of (groceries, imported vegetables and fruits), and local yaqona (kava) and tobacco are the other major commodities sold. Indian spices, pulses and poultry feed are sold by some grocery traders. Some vendors specialise in goods, especially root crops, tree staples and fruits, grocery, pulses, coconuts, eggs and Indian spices. Sea food: shellfish, crabs, fish, prawns and sea cucumber is mostly sold by Fijian women vendors (Nand, 1992: 122, 173-174; Chandra, 1980:32-33).


Within the prime function of trading unprocessed indigenous and imported goods, handicrafts and local folkart, markets are places for sale of cooked foods, snacks, soft drinks, kava drinking and other goodies (Hau'ofa, 1979; Baxter, 1980:61; Nand, 1992: 13-14;Turner and Michaud, 2000: 90-91, Yang, 1998:236).


Markets have various  non-economic functions. They are places for indigenous social activity; centres of life, innovation of ideas, news, and entertainment. It is an important daily social focus where people meet, exchange gossip, look for others, and pass time (McGee, et.al, 1980:145; Brookfield, 1969:138). Markets are also places where friendship is made, love affairs begin, and prospective partners and marriages are arranged. In many societies drinking, dancing and fighting marks the end of market day. (Anderson, 1980:753; Porter, 1988:88; Plattner, 1975:66; Yang, 1998:1-2; Perry, 2000: 402; Michaud and Turner, 2000: 88).


A Saturday market at Ba is marked with feasting, and yaqoona (kava) drinking on the open ground market in the afternoon. Fijian women vendors greet friends and relatives, talk share jokes and catch up with the latest gossip in town (Nand, 1992:111,125).


Pacific market-places gives village women an opportunity to shop and enjoy urban attractions and services (restaurants and hospitals). Markets bring business to the formal sector. (McGee et.al, 1980:145; Brookfield, 1969:138-140)


The Ba market benefits from a large patronage; traders, suppliers and consumers. The growth of the market has fostered exchange in the formal sector of the town's retail system. It draws a large number of the rural dwellers, especially as traders who later turn out to be buyers in the town shops. The  market links and merges the two sectors of the urban economy. The grocery traders in the market  have various links with town shops and supermarkets for the supply of goods. (Nand,1992:281).


Markets help in the growth and development of towns due to their central location and nodality, the development of Loumas (markets) in Senegal, Africa, play a key role in the hinterland economic activity. The rural based Loumas have allowed independence of movement from urban to rural. This enables countryside opportunities in jobs and minimises migration to urban centres (Perry, 2000: 461-485).

Characteristics of Markets


The market has most characteristics of the informal sector identified by Kenya Report (1972). It is easy to enter. It is open to people of either sex and any age. It can be undertaken full-time or part-time and requires little capital, education and training. Income from vending is not the sole income and traders look for other sources of income. For most sellers vending is a part-time occupation. All transactions involve local currency, local goods dominate with incorporation of some imported items and women are the major traders. (Belshaw, 1965:54-56; McGee, et.al., 1980:48; Brookfield, 1969: 20; Mintz, 1959:21).


At Ba, an equal number of vendors operate business part-time and full-time. Part-time vendors  have other occupations. Vendors are classified into three distinct age groups. Young age group (15-30) years, middle-aged group (31-54) years and older age group (55-78) years. The average age of all vendors is 42.3 years. Thus, the majority of the vendors are middle-aged. The vendor population at Ba has a high literacy rate (see Nand, 1992: 130-147).


The vendor households had an average of two income earners and vending is a significant activity for most. Although the majority of the vendors are petty traders with low income, market enterprise have potentialities of profit maximization and capital accumulation (see Nand, 1992:258-282).


Most markets have role differentiation; gender specialization and spatial mobility. Women trade in local agricultural produce and handicraft and control horizontal trade, especially at local markets. They have more marginal, fewer capitalized operations. Men control vertical trade, deal with imported goods and  wholesale trade, have larger capital-intensive operations and patronize distant markets.


Gender specialisation is an advantage. Women's involvement in horizontal trade protects the local markets with daily trade. Men's involvement in vertical trade enables constant flow of produce into the local and regional markets. Although women traders generally dominate, their participation is controlled by cultural constraints in some societies. Women dominate as traders only where tradition gives them freedom of movement. In the Middle East women live a secluded life and their movement is restricted (Porter, 1988:84-86; Moyer, 1965:25).


In Fiji, older women mostly trade at markets (see Nand, 1992:133-134,266-267). 


Apart from cultural constraints, men dominate women when there is less work on the farm, to do other business in town or supply produce from distant hinterland or when trade becomes specialised and develops into a full-time occupation. Domestic life is also a constraint for some women. Women are further secluded due  to commercial activity. In Hausaland, Africa women's role in trade is minimized with the development of export groundnut production which needs large amounts of labour to shell nuts (Moyer, 1965:25-27; Porter, 1988:84-86; Harts-Broekhvis and O Verkoren, 1987:214-220).


Seligman (ed., 2001) disputes the theory on women¡¯s inferior role in markets. Women participate in market trade in Philippines, Mexico, Bolivia, Ecuador and in many markets as intelligent and shrewd traders. They influence the laws of supply and demand with reciprocity and social network and participate effectively as retailers, wholesales and political decision makers. This disputes the conventional theoretical approach that focus narrowly on market women¡¯s activity in the informal sector. At Ba, Fijian women vendors are involved at various levels in market trade (See Nand,1992:105-125).


Role specialisation and division of labour in the marketing chain consists of bulkers, brokers, wholesalers and retailers. In Pacific markets - Fiji, Tahiti and Vanuatu, the role of middlemen is increasing. A full range of intermediaries has developed who also serve as credit sources or bankers. Intermediaries and customers have reciprocity through credit extension and other services. Thus, marketeers have fully commercial relationships. In some markets, North East Brazil and Tonga, the role of middlemen is decreasing. Ill feeling exists towards middlemen (Mintz, 1959:24-25; Anderson, 1980:774; Hau'ofa, 1979:90; Nand, 1992:215-219; Perry, 2000: 462-464; Yang, 1998: 221- 259).  


Market trade involves small-scale operation. Minimal quantities of goods are purchased and sold with low capital accumulation Although market operations yield slender profit margins and low capital accumulation they have a lower operating cost than formal establishments (Dewey, 1962:5, 9; Belshaw,1965:56-57; McGee, et.al.1980:48; Anderson, 1980:755-756; Porter, 1988:86; Nand,1992:180-189; Perry, 2000: 465-473).


Market trader¡¯s distribution margins are low and profits even lower. Even if margins are high, turnover is so low that profits are minimal. In most markets competition is modified to increase capital accumulation, for example, role specialisation. Personalism and social relations also help make profits and capital accumulation. (Belshaw, 1965:57; Moyer 1965:21-22; Nand,1992: 180-189, 207-219; Michaud and Turner, 2000:96-97; Seligmann, 2001:6-9).


At Ba Market profits accrued by imported grocery vendors and farmers is high. The two grocer vendors have accumulated and graduated into the formal sector with food imports, exports and wholesale to other retailers in the market and the town. (Nand, 1992: 183-186).


Most markets generally lack standard weights and measures. Sales are mostly by quantities and lots of goods are sold for a particular price or its multiples. Transactions may consists of `piles', `arm' lengths, `handfuls', `slices', `bunches', and `pieces', `bundles' and `baskets'. Units of commodities rather than their weights prevail as standards. (Moyer,1965:27; Mittendorf,1974:60). At Ba  market standard weights and measures are used in sale of all imported and some local goods (Nand,1992: 217-218)..


Markets have characteristics of an economist's pure market. Tax (1963:15-16) stated that the market-place is characterized as perfectly competitive as far as it is atomistic, open, free and based on rational behaviour. Atomistic implies a large number of small buyers and sellers who operate independently with no monopolistic associations. The market place is `free'; price is determined by supply and demand. Rational behaviour increases behaviour of market participants which is advantageous to all; for the seller, it is profit maximization, the buyer, the satisfaction in return for the price he paid for a  purchase.


At Ba, there is intense competition among vendors making the market perfect. Although the market is atomistic, the two larger grocery traders monopolise imported goods trade (Nand, 1992: 216).


Market perfection is also at the Loumas (rural weekly markets) in Senegal providing economic security to local villagers by reciprocal exchange. The local small farmers interact at the markets with extra local merchants but do not allow the outside traders to settle in the region and operate permanently at the Loumas. The outside traders visit the Loumas as itinerant  traders(Perry, 2000:461-486).


Bargaining is necessary if market exchange is to have an integrative effect. "In order for exchange to be integrative the behaviour of the participants must be oriented to producing a price that is as favourable to each partner as he can make it." (Lockwood 1965:52)


In most markets price fixing is fixed through bargaining according to the merchant's financial needs and ways of the market. In most Pacific markets, haggling, especially on local produce is strong (Hau'ofa, 1979:123; Brookfield, 1969:2). Haggling is widespread although it does not extend to every transaction. At Ba, bargaining is limited to commodities, which vary in product quality, size, seasonal availability, and the distance from production. Haggling is seen mostly between buyers and producer vendors (Nand, 1992:208-215).


Markets include the existence of clientele relationship between buyers and sellers in both vertical and horizontal trade. Within the clientele relationship are seen economic forces; credit in terms of cash and goods. Intermediaries and customers are tied together through forms of credit extension (see Nand, 1992:212-215; Perry,2000:463-464).


Finally, most Pacific markets have spatial trade organization (Lockwood, 1965:51). Sellers arrive as a group (villagers) but sell individually. At Ba, customarily sellers from one village sell on the same spot; the informal sitting arrangement facilitates social intercourse. There is spatial mobility by ethnic groups and product specialization by area. (Nand, 1992:106-125).


Market-Place  - An Integrative Device in Peasant Economy


The function of markets is integrative in peasant economy. The entire pattern of life is associated with the market where the peasant broadens his knowledge of life, exchanges ideas and defines his place in the world outside the local environment. The market provides a social network and integration of peasants in the national and international culture.  This function of the market shows the economics of the activity and its integration with world economy.


Forman and Riegelhaupt (1970: 189-212) examined how peasants in North East Brazil are integrated into the national and international economy as commodity producers and consumers of manufactured goods. " The Brazilian peasant is not an" economic zero " (ibid,189) who buys little and sells little but is an integral part of national patterns of food production, distribution and consumption. He is deeply involved in regional and national marketing systems and reacts to changes in the systems.(see Forman and Riegelhaupt, 1970:189-210). 


Mintz (1959: 20-21) argued that where the market system is dominated by custom, ritual, hereditary personnel status and fixed price regulations, it may play an important part in articulating different social and economic groups. Mintz stated that a market system with its traditional characteristics cannot change quickly or serve different forms of articulation, until it begins to be loosen from its traditional context; any new articulations an internal market system may serve cannot emerge until the market is partly free from the traditional social, religious and other restrictions.


Perry, (2000: 461-486) supports Mintz first argument. Wolof farmers in Senegal, Africa, use reciprocity and social process that is preferred to their lifestyles. Rural non-capitalist relations are used and domestic concepts is based on reciprocity and non-monetised control of labour. With these marketing principles, the town brings business to rural areas ¡® it allows trade and family, community life and marketing to take place on home turf¡¯ (ibid, 466).


The later argument of Mintz is in contrast to Perry. The Wolof farmers reorganise their activity with interaction with extra local merchants from outside the region but still conduct their market affairs on their own social, traditional principles. With this they work out a niche in market trade in a competitive free market economy. 


Mintz further postulated that the internal market systems are more than mechanisms of exchange, and a part of the national institutional structure. Where state control markets, the state protects its own interest by licensing and permits restricting number of intermediaries and by channelling amount of goods outside internal markets. The internal markets continue to be means by which the peasantry supplements its cash income from wage labour from the production of staples for the world market. The internal markets are peasantry¡¯s first line of defence against a deeper commitment, the production of world market staples (Mintz 1959: 25-26).


In Senegal, Loumas are seen as a first line of defence of Wolof farmers against state control free market policies and pre-colonial cash crop development and post colonial cooperative expansion which have now greatly moved away. The Loumas play a role for the peasantry in breaking out of the exploitative debt ties with elite patrons (Perry, 2000:465).


In the commercial production of sugar in Jamaica where the slaves grew sugarcane for the production of commercial sugar for the global market, they produced their own traditional sugar and traded in the markets to the poor and mostly rural Jamaicans. The involvement of slaves with food production, distribution and processing legitimised their freedom. Trading own produce at the internal markets gives slaves an achievement of their own, a legitimised freedom of movement, a commercial endeavour and association and accumulation. The market gives them a place of their own in slave society. The market is their jurisdiction, a sense of security, a training ground for freedom and a mode of production. (Mintz, 1985,1996: 38-49)


At Ba, Fiji, during colonial days as batches of Indian indentured labourers completed their five year contracts, they acquired 12 acre blocks from the Colonial Sugar Company Limited (CSR) to cultivate sugarcane, rice, vegetables and other crops. All sugarcane was marketed to the CSR but farmers had to find an outlet for other agricultural produce. The company allowed produce trade near the sugarmill area. An Indian‑Bazaar emerged on the open ground and  was  patronized by farmers and mill workers. The Indian‑Bazaar formed the pioneer avenue for exchange giving the ethnic Indians a chance to accumulate, freedom and a movement to commercialisation. As the Indian-Bazaar turned into a modern market, the traders became more diversified, permanent and enterprising (Nand, 1992:92-104). Today many businesses operating in the formal sector graduated from the early bazaar.


The market provides a meeting point of the interests of social and economic classes. It offers upward economic mobility for members of different groups. Markets offer the best opportunity for indigenous involvement and advancement in commerce. (Chandra, 1980: 32-33) At Ba, the involvement of the indigenous group (The Dua Tale) is a unique example of indigenous trade and economic mobility and advancement in commerce ( Nand, 1992:322-325).


At the Sa Pa marketplace, Lao Cai Province, Vietnam, the montagnards use their old social process in market trade in an environment of economic transformations and challenges of the booming economy. The montagnards market trade was seen as backward by authorities and their economic activity was controlled by the colonial state. With economic change such as tourism, montagnards re-oriented their activities and play an important role in market trade. They responded to national economic change and found their own place in the marketing system (Michaud and Turner, 2000: 85-100). In the fairs and markets in Gangetic India the peasantry has achieved a place in the economic system from oppression of Colonial State powers. The market in Gangetic India during colonial days brought the peasants together to trade and exchange and for political organization (Yang, 1998:161-220 ).


Markets provide a dual exchange process, the vertical and horizontal trade and patronage to various participants. There is horizontal flow of goods among class equals. More than 50% of the produce is consumed by members of the same class as producers. Representatives of middleclass and servants of upper class are among the buyers, which indicates upward movement of goods. With horizontal flow of goods there is vertical and downward flow of manufactured goods and imports purchased by peasants from market middleman. This vertical trade is the channel through which the peasant sector is linked to other sectors of  these economies. The other linkage is the chain of shopkeepers and the itinerant traders. (Anderson, 1980: 754; Mintz, 1959: 23-24; Dannhaueseur, 1977: 477; Lockwood, 1965: 22; Dewey, 1962: 4; Epstein, 1969; Nand, 1992: Perry, 2000:465, Michaud and Turner, 2000:85-100 and Alexander, J and P. Alexander, 2001: 47-69).




In the new millennium globalisation and environmental sustainability is used to evaluate the urban economic activities in developing countries. With increased globalisation, activities in urban and rural areas of developing countries are in transition and merged with global economy at various stages of  globalisation. Some writers argue that globalisation has created the gap of dualism in developing economies while others see the urban economic activities are environmentally and economically sustainable, in transition, merging with and contributing to the growing global economy. The later associate more with dependency writers rather than writers on urban economic dualism. See ( Jeffery James (2002); Yaw A Debrah and Ian G. Smith (2002); Hoa, T. Van (2003); Waters, M (2001); Pieterse, J.N (2004); Broad, R (2002); Eaton, H and Lorentzen, L.A. (eds), (2003), Xiolin and Balasubramaniam, (2003); Samuel, et.al, (2003), Elyachar, (2003), Harvie, C and Boon, C.L. (eds), (2002), Norberg- Hodge, H et.al., (2002), Bernholdt-Thomson, V, et.al. (eds) (2001), Andretsch, D.B., (2003), ILO (2002), and Carr and Chen (2001).


The theme of globalisation and the development of the informal sector and its transition into the formal sector and the global economy with the development of Small and Medium Enterprises are discussed next.


Globalisation is the shift towards a more integrated and interdependent world economy (Debrah and Smith eds, 2002:2). Globalisation has increased international trade and investment and has brought an increase in the available modes of organization: transnational, international, macro-regional, national, micro-regional, municipal, local (Broad, 2002:65-66). Globalization is a macro-economic phenomenon that is also driven by micro-economic forces, that is, on the level of firms. The opportunities that new technologies provide apply not only to TNCs but also to small and medium size firms. Globalization is not merely driven by major corporations, international institutions and governments but also by social forces, including consumers and social movements.¡±(Pieterse, 2004:10)


 There are impacts of economic globalisation on workplace and employment. Globalisation  presents radical changes in the local labour market and further polarises the urban economies. It leads to segmentation, casualization and informalization of the labour market (Tabak and Crichlow (eds), 2000).


The informalization of the labour markets is increasing informal sector employment in developing regions of Asia, Latin America and Africa. The informal sector in these transition economies is integrating with global economy though in the lower levels with supply of goods, services and cheap labour. This is termed  ¡°localization of the global¡± or ¡°globalisation from below¡± ( Global Report, 2001:72-73).Thus, the Informal sector is the shock absorber of globalisation providing the safety net and a source of income for those made unemployed by the formal sector. (see also Carr and Chen, 2001:1-24) 


Globalisation based on technological advances in information technology is creating dualism in the world economy. However, technological advances is playing a crucial role in the integration of the informal sector into global economy. The poor need to be more clearly integrated and technological innovation, for example, in rural India and Bangladesh in form of Village Pay Phone Shops (VPP) and Telecentres has given a better access to information to the poor. Much trade in goods and services crucially depends on technological advances. (James, 2002: 3, 71- 94 )


Telephones on bazaar tables and street corners help in communication and link people in trade and provide income to families. Telecentres have diverse technology; phone, fax, e-mail etc. This electronic commerce links people eg rural artisans and other producer groups to market their products directly on the internet, eliminating the numerous middlemen and raising the profits to the producers (ibid, 80-81).


In Bangladesh, the Village Pay Phones (VPP) are used by the poor for economic reasons such as sale of goods, price competition and study the market price of commodities.The Village Pay Phones have increased price of agricultural commodities. The places with no Village Pay Phones have experienced a decrease in price. (ibid 91-94).


In sub-Saharan Africa, labour intensive technology has introduced the idea of sustainability. Decentralisation of economic activities outside the public sector has resulted in small-scale labour intensive enterprises in the private sector such as bakeries. (Jaffery, 2002: 126-138).


In China, the fundamental change in economic reform is the development of the non-state sector. There is a substantial development of private SMEs (Small and Medium Enterprises) and TVEs (Township and Village Enterprises) as forms of sustainable economic growth and to increase the GDP at both local and national level.


Among the TVEs are numerous individuals who are self-employed both in urban and rural areas. The individual enterprises increased from 5.4 million in 1990 to 17.1 million in 1998. There was a 2.5% growth in employment of the same group in this period. The number of individual self-employed  increase from 810,000 in 1980 to 61 140 000 in 1998. ( Hoa ed, 2003: 45-88)  The development and assistance of TVEs is a great economic reform in China in its integration to global economy.  ( Xiaolin and Balasubramanyam, 2003:27-46 ; Samuel, et.al., 2003: 1-26).                      


The Asia Financial crisis had significant effect on labour markets in SE Asia. The movement of labour market has been from corporate to Small and Medium enterprises which involves downward shift in size and informality (self-employment). The SMEs has been the key in absorbing labour. This is effective in many Asia economies: Indonesia, Malaysia, Thailand and the Phillipines (see Diermen, 2003:209-224; Nugent, J.B and Seung- Jae, Y, 2002: 346-429).                 


With less state support than in China, small and medium enterprises (SME¡¯s) in Vietnam are encouraged and nurtured for employment and sustainable economic development. Among the relatively large foreign-invested enterprises, farmers, household micro-enterprises and private SME¡¯s comprise the private sector in Vietnam. SME¡¯s contribution to international trade is increasing. Domestic private SME¡¯s share of exports rose from 12% in 1997 to 22% in mid 2000. (Hoa, ed, 2003:188).


While registered private firms can export or import more easily, registration of private business remain difficult. Private SME¡¯s ( registered corporate firms) have played a minor role in industrial production and have very slow growth. Household enterprises play a much larger role (ibid,190). In Vietnam there are legal constraints in access to credit and loans. SMEs¡¯ rely on informal credit from friends and relatives.The government is slowly recognising the need to encourage the establishment of new SME¡¯s and is making administrative procedures simpler and more transparent with legislative change and enhancing the legal environment for SME¡¯s. Government priority to enterprise support is in traditional trades, handicraft, consumer goods, exports and hi- tech products.


Like China, SMEs¡¯ in Vietnam can make a major contribution to the economy. In China there is clear commitment from the government for structural transformation, while in Vietnam the authorities are slow (ibid, 205).


In an analysis of small enterprises and cross border trade between South Africa and Mozambique, (Peberdy 2000: 361-378) establishes, that Informal sector enterprises operate as small, medium and micro enterprises(SMMEs) are seen in the context of the development of transnational trade and relationships. These SMMEs serve as significant suppliers to the formal sector in Mozambique. There is a two way relationship between SMMEs and the formal sector retailers. The Informal sector traders are seen as involved  in small and medium enterprises. Their enterprises are intrinsically transnational.


Globalisation has direct implications on employment in some regions such as LA countries. In Quito, Ecuador, the growth in the service sector of the Informal sector has been substantial. Here the Informal sector is seen as autonomous.(Jackiewicz, 2002:437 -448).


In Latin America employment has accelerated in the Informal sector with 1% increase per year since 1990. (Debrah, Y.A. and I.G. Smith, (eds), 2002 : 130-150). The formal employment (private/ public sector) rate decreased from an average of 48.4%in 1990 to 41.3% in 1998. (ibid,133). Although the informal sector employment has expanded, the average labour productivity has declined in the sector. The bulk of the small and medium –sized enterprises are destined to the domestic market. This is in contrast to Asia (China, Vietnam) where micro-enterprises are given strategic support to expand and contribute to national and international economy.


Globalisation has increased international tourism. A new and more globalized form of tourism has emerged. Along with ecotourism, travellers are seeking out authentic and exotic culture in the periphery. Globalisation exposes tourists to cultural variation confirming the validity of local cultures and their differences. Ethnic economies and ethno marketing is in increase. ( Waters, 2001:192.208; Pieterse, 2004:33-34). This led to an increase in the IS enterprises with sale of handicrafts, local artefacts and cultural exhibition. Women who play a substantial role in the informal sector have now taken a more dynamic role as agents of cultural preserves, essential to international tourism. Indigenous women are seen as bearers of traditional culture given their role as in weaving, pottery making and collecting fruits. In the highlands of Chiapas, in Southern Mexico, women, through textile and artisan cooperatives, through selling in the markets have been able to bring in needed income to households while at the same time practicing their traditional skills. Certain level of tourism in Chiapas actually serves to preserve indigenous culture. Globalization as represented through information technology has actually aided this cause. Here indigenous peoples use e-mail to protect their traditional ways of life. (see Carr and Chen, 2001:14-21 on women who work from their homes from remote areas under informal arrangements for global commodity chains).

Non-Government Organisation¡¯s (NGO¡¯s) and the Informal Sector


NGOs or Non - government organisations are playing a crucial role. In integrating the Informal sector into national and global economy. NGO support is especially in finances and arranging loans and credit facilities and legal assistance. For example, in India, NGO¡¯s among many types of support make  provision to individual water supply to urban poor. Parivartan is a city wide Slum Networking Project initiated by Ahmedabad Municipal Corporation (AMC). ¡°Fruit and vegetable vendors are able to wash their produce at home and do not have to wait in long queues at public water points. This allows them to get to the market at 6 am and spend more time selling produce¡± (Global Report, 2001:157). A similar movement is SEWA ( Self-Employed Women¡¯s Association) of India, the oldest trade union of women who work in the informal sector which not only supports women working in the informal sector in India but has influenced global commodity chains (see Carr and Chen, 2001:22-24).


In Cairo, Egypt, the International organizations and the World bank help the Informal sector being reabsorbed via micro- enterprise into the state. The informal sector is becoming the micro-enterprise and start of the private sector in the global age. The World Bank discovered that the informal economy that included small workshops employing small numbers of people and not always complying with the law constituted the bulk of the productive private economy in Egypt.  The informal sector has become a state agenda in Egypt ( Elyachar, 2003:571-605).


Local governments and municipal authorities support the IS realising that investing in the poor is to target human capital resources to generate  wealth and maintaining competitiveness. Under investment in this strategic asset is an inefficient use of an important source of potential future wealth and international competitiveness (Global Report, 2001: 214-215).


Although globalisation increases dualism in the urban labour market and enhances and integrates the Informal Sector into world economy, critics of globalisation support the IS as an entity on it is own. Informal sector is seen as essential and productive without being merged into the global economy. ¡°More and more of the labour force is joining the informal sector and globalisation has done nothing to reduce the gap between the formal and informal sectors (Global Report  2001: 86).


Globalisation is inevitable and no country can nor should remain isolated from the global economy, however, free market approach to globalization is not the only or the best form of economic integration (Broad, 2002: 51, 244). Globalisation disempowers communities and local economies, a high percentage of people still survive through local, community-based activities: small scale farming, local markets, local production for local consumption. They directly control their economic and food security while maintaining local communities and cultures¡± (ibid, 44).


During globalisation there is an increasing trend in effective transformation to sustainable local food economies. This will bring the food economy back to the local area and further support informal sector.


For an effective transformation to sustainable local food economies, change is need at the international, national and community levels.


At local level, ¡®Buy-local¡¯ campaigns help local businesses survive, even when competing against heavily sibsidised corporate competitors. As the local economy increases, infrastructure is required to reduce the distance between producers and consumers (ibid, 265) (also see Norberg-Hodges, et.al., (eds), (2002): 65-87)


The communities are using strategies to shorten the link between producer and consumer:


Farmers¡¯ markets benefit local economies and the environment by connecting farmers directly with urban consumers. These markets offer fresher foods to consumers and lower prices, while increasing the farmers¡¯ income¡±. (Broad, 2002: 262-268 ).


Box schemes - customers order regular boxes of in-season vegetables( and often eggs, meat and dairy products) from local farms, can give farmers more security with a guaranteed and stable market¡±.


Local food co-ops are small retail outlets that bring together local farmers, producers and consumers seeking to revive the local food economy. These are much preferable to conventional producer co-operatives, which have the narrower goal of giving small farmers more leverage in the global marketplace¡±(ibid,265) (also see Norberg-Hodges, et.al., (eds), (2002): 107-108).


Alternative to the local economy and supporting the local subsidiarity is ecologically sustainable. The alternatives will protect millions globally who are displaced from work due to corporate-led globalization and these masses join informal sector workers. Economic alternatives are needed to accommodate the millions in the informal sector.


Incentives and support needs to be provided to small producers. In many developed countries ¡° Retail and wholesale groups called alternative trade organizations (ATOs) and fair trade organizations (FTOs) provide support. They work with disadvantaged artisans and farmers to market their wares directly to first world consumers, minimizing the often-exploitative middlemen and returning substantial payments to the producers. They work with producers to provide markets for farm products, textiles and handicrafts in developed nations.


Equally important are a variety of newer , smaller organizations in developing regions like dZi – The Tibet Collection, African Market and MarketPlace- Handwork of India, which provide new direction to the Fair Trade movement¡± (Broad, 2002:191).


PEOPLink, is an innovative organization which trains artisans from developing countries to use the internet to market their products.




This paper set to examine and review the urban informal sector or informal economy using market-place studies and small and medium enterprises to illustrate the significance of the Informal Sector in urban economies of developing countries. The market activity and its participants as an informal sector economy fits into the dualistic theoretical framework discussed in the paper.


Although the markets can be conceptualized as belonging to one sector of the dualistic model, the functions and characteristics of market activities shows that they share most features of the non-dualistic model of "petty commodity production." The dualistic models are significant and useful, the dependency school model and the current themes of globalisation and environmental sustainability are the most appropriate in understanding and analysing the informal economy activities.


The characteristics identified for dualistic models are observed and applicable to most market places and small and medium enterprises. The characteristics of the Modjokuto `bazaar' `lower' circuit and  characteristics of the ¡®informal sector¡¯ are present at many markets.


Although the theoretical frameworks are useful in the study of urban economic organisation, the actual reality of the urban systems in developing countries is far more dynamic. Instead of a distinct dual economic organisation, the market has a more uniform distribution of different scales of economic activities. Enterprises range from petty traders to large-scale commercial traders. The later have relations with the formal sector. Dependency and Marxists theory of "petty commodity production" reflects reality and this approach can be utilized to study  markets. The market possess most of the characteristics of petty commodity production.


The market vendors' activity is a petty commodity enterprise distributed in the market. Like petty commodity producers, market vendors have a hierarchy of their own.


The concept of petite-bourgeois is also seen at markets. Among the petty traders, there are others with large-scale businesses with more investments and higher returns, especially those dealing with imported goods. The two importer/wholesaler grocery traders at Ba, Fiji have links with capitalist enterprises and formal sector entrepreneurs for the purchase and distribution of goods. The enterprises occupy a dominant position within the hierarchy of market traders and thus, constitute the group of petite-bourgeoisie. They started business in the market as petty traders and slowly extended business into the formal sector with the operation of supermarkets and wholesale distribution.


According to the Dependency theorists, market participants do not segregate and work at two extremes but operate together in one urban economic institution, the market. Traders who accumulate enough capital diversify business and enter the formal sector. Others establish a firm position in the market and operate in relations with the formal sector. All these reinforce the argument that dependency and Marxists theory of "petty commodity production" is  most appropriate in helping to understand market places.


In an era of globalisation there will be greater disparity in the international labour market with increased casualisation and informalisation. This is a challenge to individuals, entrepreneurs and governments. This is accelerating the growth of varied Small and Medium Enterprises which are being linked to the global economy. However, Small and Medium Enterprises need government and non-government support to become linked to the global economy. Thus, there is development of the ¡®informal economy¡¯ as argued by ILO. The Informal economy is the product of globalisation, it is inherent and integratd into it. Informal economy activities such as market – place enterprises and entrepreneurs though a unit of the greater Informal economy but like many small enterprises in the Informal economy are in transition and part of the global economy. Markets of ancient times are symbols of globalisation. Early markets during colonization were global exchange institutions. Trade routes were meeting points of cultures and the intercultural contacts at markets were seen as an engine of economic growth and it is still continuing today. The current theme of globalisation provides a greater reality to the analysis and understanding of small enterprises such as market trade and various Small and Medium Enterprises operating  in the ¡®informal economy¡±.


However, globalisation is imperative and it is an attempt to integrate macro and micro economies and people into the global economy, it is not being achieved everywhere, especially in developing countries. Globalisation has many definitions but it is simply a legal framework and it is this legal framework that is lagging in developing countries that can connect the small entrepreneurs and the poor with the global economy. Thus, in a more contemporary context, the concept of legality or legalistic theory is the most appropriate in conceptualising the urban economies of developing countries. The legalistic theory argued by Hernando De Soto in many developing countries ( De Soto, 1989, 2000) , including his major work in Peru is the answer to integrate the informal economy into the world economy and it is the most applicable model. De Soto looks at the informal economy as an extra-legal sector and not as informal in nature. He proposes encouraging growth in developing economies by granting property rights to the disenfranchised poor.  Many new small entrepreneurs with their own legal arrangements operate outside the official legal framework. They cannot capitalise on their assets which is worth billions of dollars on the urban and rural landscapes of developing countries and are seen as ¡°dead capital¡¯ due to lack of appropriate legal framework. This lack of the legal framework does not give them property ownership so they cannot get formalised and turn their assets into capital and operate in the legal sector and global economy. They poor and numerous small entrepreneurs need the legally integrated property system that can convert their work and savings into capital as it historically happened in the advanced industrial economies of United Sates and Europe. This is beginning to happen in many Latin American and Asian countries but rather slowly by governments.


Finally, globalisation will benefit if focus on development is at a micro-level with efficient legal systems. This is capitalism from below or ¡®globalisation from the bottom¡¯. This is where the legalistic theory plays a central role in developing countries. There is no urban economic dualism in developing countries rather urban activities are in transition and structural. It is the legalistic theory that can be applied the best to integrate the activities in the extralegal sector in their transition and integration to global economy. The governments and development agencies in developing countries need to focus on the legal framework to help the poor and the very  enterprising entrepreneurs.




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