Freakonomics: Shadow Economy Is Second Largest in The World

By Freakonomics:

In 2009, the OECD concluded that half the world's workers (almost 1.8 billion people) were employed in the shadow economy. By 2020, the OECD predicts the shadow economy will employ two-thirds of the world's workers. This new economy even has a name: "System D."

In a new article (accompanying photoessay here) for Foreign Policy, Robert Neuwirth explains:

System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people. They call them debrouillards. To say a man is a debrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality.

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Comments

[fistofthejedi]

03:44 AM on 11/16/2011

I would recommend that people go and read James Harvey Stout's free e-books on bartering in order to get through a bad economy. Call it shadow economy or whatever, but bartering has been around forever.

http://www.theorderoftime.com/politics/cemetery/stout/h/cont-ba.htm

[AlanBannacheck]

09:57 PM on 11/09/2011

With jobs so scarce, people are returning to the barter system in order to surprise, all because of the end of cheap oil.

[kokobell616]

07:37 AM on 11/09/2011

When the elected federal government is waving their hands and stamping their feet about cutting the debt by cutting jobs. The resulting elation from crooks and lairs is deafening. Pouncing on the weak, the sick, the elderly, the disabled. In other words they,(crooks and liars) circle the fatted calf that is US social programs. Attempting to feast without penalty or remorse or guilt. Every US tax dollar used as SSI benefits, welfare, disability and so on is at stake. The agents of greed and of commerce will descend as vultures on those less able to defend themselves.

This some say is the American way. Take advantage, devalue property or worth, alter the truth to suit goals, insinuate need and sell, sell, sell. If it were not for the federal social programs many 'job creators' would be working hand to mouth like a large portion of America is doing. There would be countless deaths. Hunger on a massive sovereign scale. Poverty at every turn.

Regulations. The ability to enforce those regulations. The desire to hold those accountable for transgressing the regulations. Providing a check to the disabled and so on is not the only thing our tax dollars do in social programs. We (through our tax dollars) allow for the protection of the defenseless in our country.

Regulate fairly.

Prosecute violators.

Protect the weakest among us.

[leroybrown]

11:49 PM on 11/08/2011

When the shadow economy works itself into the Government it's all over. The current example of this is Greece and it's not the only country. It takes years to right the ship when it comes to corruption in the Government and its politicians.The money that the EU is giving to Greece will turn out to be a waste. I predict Greece will default in the next 6 to 9 month time frame.

[sarabono]

11:12 PM on 11/08/2011

The Fair Tax would eliminate the US Shadow Economy.

[Kenz300]

08:27 PM on 11/08/2011

It is time to tax all the tax cheats of the world. All the people that get paid under the table. All the business that do not report their cash income. All the people that have hidden off shore accounts.
We need a national sales tax with deductions for low and moderate incomes so that al least when the tax cheats buy their car, boat, plane, or homes they will pay some tax on their unreported income.

[ShawnRay]

05:42 AM on 11/09/2011

when I get a car, plane, or boat I can write it off as a tax deduction so it is cheaper for me to buy these things.

[makeck]

12:59 PM on 11/09/2011

You can only write it off from earned income. If your working under the table (whether babysitting, a handyman, or selling drugs), you have no earned income. Therefore Kenx300 is correct, make them pay SOMETHING.

[addisonsteele]

08:24 PM on 11/08/2011

Given that most large corporations and many of the rich do not disclose their actual earnings through accounting trickery and fraud, I would say that most of the American economy is part of the "shadow economy."

[vidtrainer110]

10:35 AM on 11/08/2011

I run a small Internet business. I am a Dem, but definitely don't like some things about being "on the grid" In some ways I make it more difficult on myself as you will see, but if there is one thing government could do to help my business (other than creating a lot more demand) it would be getting me out of the HR business. I spend lots of time dealing with health and workers compensation insurance. I hate the idea that a persons health care is tied to their employment so much. I feel a great obligation to offer health insurance, but it takes a lot of time and its expensive. Why is that my job? Further, I am at a competitive disadvantage vs. those that don't offer health insurance and feel this acutely because my potential competitors are global. Fortunately, I don't have much competition...yet. At least workers comp is properly related to being in business. I believe it is essential and all businesses have to deal with it, but why can't it be less bureaucratic and more competitive? Honestly, Brazils solution that small businesses don't deal with this sounds good to me :)

[Wendy420]

12:17 PM on 11/08/2011

Health insurance being tied to employment is one of the major reasons that wages have been stagnate for so long.

[Repo 105]

12:22 AM on 11/09/2011

So let's go single payer, problem solved.

[Scott Leland]

10:45 AM on 11/09/2011

Yes, you are right. The U.S. has to find a way to provide health insurance that is not linked-to employment. I am concerned about what will happen to our economy when ObamaCare takes effect and 30 million Americans will have to start paying $3,500+ a year for health insurance that they formally spent on cars, clothes and furniture.

[collettethehedgehog]

06:39 AM on 11/08/2011

The shadow economy just exists outside the corporate economy. Give these people a chance and main streets would be lined with small stores again. THEY demonstrate the invisible hand of Adam Smith whereas too big to fail and the lack of jobs just demonstrates a new feudal control over the economy.

[Wendy420]

12:25 PM on 11/08/2011

Exactly! Too much regulation in business prevents Main St from growing, while helping Wall St cash in!

[pbr56]

02:17 PM on 11/08/2011

The problem is we don't have enough regulation as demonstrated by the mortgage bubble.

[image18301]

04:31 PM on 11/08/2011

It's dumb to generalize in such broad strokes. Just because some of the regulation is bad doesn't mean ALL of it is bad or that more isn't needed.

Consider this: Follow those that want to ban certain regulations and see who they represent. In all cases it is a corporation that could be more profitable if it didn't have to worry about pesky things like clean air and clean water. Regulations cannot be set or eliminated based on a corporation's bottom line; the criteria can only be one: a safer living environment for all.

[Scott Leland]

10:48 AM on 11/09/2011

There are 20 miles of Crenshaw Boulevard that are "lined with small stores" in Los Angeles that are now vacant, Target and Walmart replaced them.

[Wendy420]

08:52 AM on 11/10/2011

Exhibit A

[OrlandoGomezT]

04:46 AM on 11/08/2011

Sadly this article does not expand on it, and just places a picture of a drug confiscation, misleading into what the shadow economy really is. It´s actual informal jobs and businesses, and they account for nearly 60% of employment in Latin America, Africa and most of Asia, and just a miniscule part of it is related to drug traffic. And contrary to the sentiment, increased development due to higher commodity prices is pushing the shadow economy numbers down in most of these regions... sady institutional weaknesses and corruption prevent them from going down faster. But who knows... hopefully the examples of the likes of Brazil will inspire some of these countries into some form of reform... although I don´t hold my breath for it. There will be shadow economy, but if things persist as they are now, there should be less in the mid-term.

[PhilipTaylor]

02:50 AM on 11/08/2011

SHADOW BANKING IS THE HIDDEN FRAUD THAT GENERATED $600+ TRILLION IN ENR0N-STYLE DEBT! SHADOW GOVERNMENT IS THE 7O+% TAKEOVER OF OUR GOVERNMENT'S INNER WORKING - Describes by H P Book Prize Winner Janine Wedel.

[David Hundley]

01:37 AM on 11/08/2011

Everybody knows that Cash is King, How do think everybody gets paid, by check? No Paper Trail

[David Hundley]

01:35 AM on 11/08/2011

If you L@@K at your cellphone bill you will see all of the extra taxes and fees that are tacked on, My Question is: who is following the money? The IRS can crawl up any American Taxpayers @SS and demand money..Last I Heard Here IN TEXAS is that the legislator's Now Let Welfare recipients get a free phone with their food stamps, I just can't afford that.

[frank1946]

09:12 PM on 11/07/2011

Legalize Drugs and Black Market Stuff.................tax it and allocate the revenue to DEBT !

Includes cutting DEA and ATF by 50 % also.

Cut Medicare by 40 % and the DEBT BOMB is History !

[PhilipTaylor]

02:48 AM on 11/08/2011

CUT BRIBERY AND FRAUD TO ZERO and the DEBT B0MB IS GONE!

[F7]

10:03 AM on 11/08/2011

Make Medicare the primary insurance for ever American and fund it from payroll taxes and you won't need to 'cut' it.

Then fully fund a fraud enforcement unit and cut the abuse by 80%, and we're in the black on that score.

[makeck]

01:03 PM on 11/09/2011

Not from payroll taxes, from a national sales tax. Why should workers be taxed to provied benefits to everyone else? Let everyone who spends a dollar pay their portion of everyone's medical care. That's that way they do it in Europe.

[parrotfish]

09:05 PM on 11/07/2011

Honest hardworking people in the visible economy are toast. The banks, wall street and ultra wealthy all work in the shawdow economy as we know why they have offshore accounts,