The development of capitalism

No-one can deny that the human presence on our planet has undergone remarkable development in the last two centuries. In 1800 the world’s population was around one billion. It had grown slowly over the previous 10,000 years since the invention of agriculture. Cipolla (1968) estimates that births regularly exceeded deaths by 1% during that period. If that had been the only story, the planet’s surface would now be entirely covered with bodies thousands of miles deep and expanding into space at exponential speed. The reason it didn’t happen was that the agricultural regime was visited by periodic gluts of death, by famine, war and disease, wiping out that excess fertility and allowing for only a slow increment in the world’s population. Around 1800 only 1 in 40 people lived in towns and cities (the largest, London and Beijing, having populations of around one million). The rest lived by extracting a livelihood from the land. Animals and plants were responsible for almost all the energy produced and consumed by human beings: wind, water and fossil fuels contributed negligible amounts to the energy economy.

By 2000, world population had reached six billions, half of which was added since 1960. The proportion living in cities, many of them 10-20 millions in size, was close to 50%. Inanimate energy sources (mainly fossil fuels), converted by machines, now accounted for the bulk of production and consumption; animate sources, including animal and plant energy stored in human beings, contributed a fast-diminishing share. Over two centuries, the human population has been growing at an annual rate of 1.5%; and continuing demographic disasters have not done much to check this growth. Cities have been growing at an average rate of 2% a year. This apparently small difference accounts for the huge rise in the urban share of the world’s population. Energy production has been growing at around 3% a year since the mid-nineteenth century. This figure is double the rate of population increase, a powerful index of the economic expansion of the last 200 years. Many people live longer, work less and spend more than they did in the millennia of agrarian civilization. But the distribution of all this extra energy has been grossly unequal. A third of humanity still works in the fields with their hands and a similar number have never made a telephone call. American citizens, for example, consume on average 400 times more energy than their counterparts in Uganda.

What then are the forms of society and technology organizing our hectic march from the village to the city and the possibility of a world economy that for many is already real enough? The favourite name for this economic dynamism, at once a description and an explanation invented by Werner Sombart (1902) a century ago, is ‘capitalism’. This combination of money and machines is often taken to underlie the polarizing tendencies of our world. Here we first examine the meaning of the term capital; then we turn to the two greatest commentators on capitalism as a general system, Karl Marx and Max Weber; finally we show how universal social processes are modified by the concrete conditions of their formation in particular places.

Capital is wealth used to make more wealth. Wealth is all resources having economic value. Value is worth in general, but it tends to be measured in a universal equivalent, that is, money. So the essence of capital is that it is wealth (usually money in some form) capable of increasing its value. In both popular and scientific usage, the meaning of capital shifts uneasily between a material or technical emphasis on stock (produced means of production, physical equipment, nowadays notably machines) and identification with the kind of money prevailing in the modern economy. The analogy between capital increase and the natural reproduction of livestock is reinforced by the etymology of cattle which suggests an ancient link between the two terms (Menger 1976 [1871]: 312-14). Capitalis (of the head) meant important, chief, primary and, in the neuter form (capitale), referred to significant property, such as chattels and cattle. In this broad sense then, capital, like the head, is most important to sustaining life. The modern term capital, however, derives more specifically from a medieval banking expression (similar to the notion of ‘principal’) implying an amount of money which grows through accumulating interest.

There are thus two opposing camps, one of whom would assimilate capitalism into a wide, natural category implying its technical basis in the domestication of plants and animals, while the other sees capitalism as a more ephemeral social arrangement devoted to making money with money. As a keyword of our civilization, capital reflects the contrasting ideologies which have arisen to represent it. Marx and his followers consistently restrict the definition of capital to its form as money. Most economists, however, equate capital with ‘the stock of goods which are used in production and which are themselves produced’ (Bannock, Baxter and Davies 1984:63).

Marx viewed the piling up of riches by businessmen as a social relationship of exploitation which was mystified by equating capital with physical plant and profit with the reasonable income of its owners. For him, as for Locke (1690), human labour was the source of wealth and the addition of machines to that labour only made it more productive. Economists, however, tend to stress the notion of sacrifice, the withdrawal of goods from immediate consumption, and the enhanced productivity of factors other than labour in which the capitalist has invested. So that increase constitutes the reward for making the sacrifice. This argument makes sense in an industrial economy where money wealth comes most reliably from investment in mechanizing production. But many forms of capital accumulation do not necessarily involve physical plant (banking and trade, for example) and the broader usage tends to confuse money with machines by representing capital as a thing (that is, as real) and mystifying the social relations involved. The problem with the economists’ definition is that it cannot deal with historical change in the relationship between production and the circuit of money, as Marx’s dialectic can. Certainly it cannot cope with the financial crisis of our day.

We take capitalism to be that form of market economy in which the owners of large amounts of money get to direct the most significant sectors of production with a view to increasing the money they already have. For a time and perhaps still, the most reliable way of making money with money was to raise the productivity of labour through investment in machines. This is, roughly speaking, Marx’s position, as we saw in Chapter 2. For him, modern capitalism was that form of making money with money in which free capital was exchanged with free wage labour. He sought to account for, therefore, the process whereby people’s capacity to work was freed from the legal encumbrances of feudal agriculture and the release of funds for investment in new forms of production. He discusses this process of ‘primitive accumulation’ at the end of Capital Volume 1. Adam Smith (1776) had related profit levels to reduced costs achieved through raising the efficiency of workers; and he identified specialization and division of labour as the best way of doing this. Marx’s great discovery was that this logic led to the introduction of more and better machines to the production process. It was one of Marx’s aims to demonstrate that wage slavery under capitalism was fundamentally similar to feudal serfdom. The most primitive type of industrial capitalism, therefore, is one in which the feudal approach is transferred to the industrial system of wage labour. We might call this ‘sweatshop capitalism’.

Max Weber (1981 [1922]) did not disagree with Marx’s account, although for him property relations were less important than most Marxists believed; he just felt that it did not go far enough. Agrarian societies and their urban enclaves had always relied on traditional certainties when organizing their economies; that is, they tended to repeat what they had done in the past. Hence society and technology were relatively stagnant during the agricultural phase of human history. He surmised that a massive cultural revolution must have been necessary to persuade people to place their economic lives in the hands of capitalists whose principal orientation was to uncertain future profits. It followed that capitalism should be conceived of in terms that were not just narrowly economic, but political, even religious as well. For Weber, capitalism was an economic system based on rational enterprise. Both of these words were carefully chosen. Enterprise is something undertaken with a view to future profit. How could whole societies commit their livelihood to the uncertainties of enterprise?

Enterprise commonly takes two forms. The first is speculative and involves people gambling on a hunch that they will win. Keynes saw these ‘animal spirits’ as central to the dynamism of capitalist markets, leading to a cycle of booms and busts as herds of investors chase the latest chance for windfall profit. Weber was interested in the second form of enterprise, one driven by the compulsion to eliminate the risks entailed in relying on uncertain futures. Rationality is the calculated pursuit of explicit ends by chosen means. Rational enterprise, according to Weber, rests above all on the entrepreneur’s ability to calculate outcomes. For capitalism to take root, uncertainty has to be replaced, if not with certain knowledge, then with reliable calculation of the probabilities.

This explains the paradox that, while capitalists celebrate the risks of competition in their self-promoting ideologies, they will do everything in their power to avoid it in practice. Weber shows how the fledgling capitalist economy progressed by instituting the means of more reliable calculation. This meant improvements in book-keeping, working practices and technology. Above all the state had to be alert to the needs of enterprises, securing their property and profits in law and stabilizing the conditions of market economy. Weber did not think that mercantile colonialism was a sufficient explanation for the accumulation of a European capitalist fund, since several commercial empires (such as the Phoenicians) had developed similar systems of extraction without spawning modern industrial capitalism. Rather, as everyone knows, he believed that capitalist culture owed its specificity to developments in the sphere of religion. In The Protestant Ethic and the Spirit of Capitalism (1904) he addresses this ‘elective affinity’ (Goethe’s phrase) between protestant religion and rational enterprise. If Marx successfully linked capital accumulation to machines and the wage-labour system, Weber’s emphasis on rationality and religion helps us to see developments in the system of money and markets as a cultural revolution.

The ethnography of capitalist development

Capitalism is always modified by the specific conditions in which it grows. Thus Italian capitalism is not Japanese capitalism is not Brazilian capitalism and so on. The particular social realities revealed by ethnography can and should inform the search for general principles of economic organization in our world. For we need to explain not only the common form, but also its infinite variation. Modern anthropologists have recorded a decisive moment in history, when non-western peoples began to participate in the world economy on their own terms. The most distinguished of them was Polly Hill.  But first an East African case study may serve to introduce the genre.

The Giriama are a people living on the east coast of Kenya who were studied by David Parkin (1972). They once kept cattle and, during the colonial period, often worked as migrant labourers. Now an export market for copra (coconuts) had arisen which attracted a new class of entrepreneurs. Palm trees had been used principally to make wine and this was drunk on many social occasions, especially at marriages and funerals. People worked for each other on the basis of reciprocity and need, paying close attention to the kinship ties between them. Extraction of copra required the acquisition of property in coconut trees and control of an adequate labour supply. For the first, entrepreneurs had to win the support of elders as witnesses to the land transactions involved. Traditional sources of authority had to support this incipient process of capital accumulation. Labour was problematic, since kin relations did not usually involve handing over profits to an owner; and the community expected such profits to be spent on public ceremony, involving much consumption of palm wine, of course.

So far the story upholds Marx’s focus on the exchange of money for land and labour. But there is a Weberian element too. Some entrepreneurs sought to extricate themselves from the entanglements of traditional institutions by embracing a new religion, often after consulting a diviner about dreams that revealed a calling to join Islam. This prohibited drinking at marriages and funerals. Such an analysis may not have the force of the protestant ethic thesis; but emancipation from diffuse community ties in this way was compatible with more reliable calculation of capitalist profit. Parkin’s Giriama ethnography belongs to a period when Kenya sought to establish itself as one of Africa’s leading capitalist economies. For a time, redistribution of wealth and power towards some Africans induced an atmosphere of commercial prosperity (Leys 1972). The world economy in the 1960s and early 1970s was also favourable. This climate did not last, however, and for some decades now economic conditions have deteriorated in Kenya. For the Giriama, the forces of nascent capitalism could not yet be said to have triumphed at the expense of traditional norms of rural self-sufficiency.

West Africa offers one of the most striking histories of indigenous capitalism in modern economy, one moreover which had to wait a long time for its ethnographer. The period from the 1880s to the First World War saw an explosion in the mass production and consumption of commodities, much of it based on raw materials located in territories that were rapidly being acquired as colonies. This usually meant European-owned mines (gold, copper, bauxite) and plantations (tea, rubber, oil palm) employing a mixture of local and indentured Asian labour. The cocoa industry was an exception. It arose in the rainforests of the Gold Coast (now Ghana) without the benefit or knowledge of the colonial regime. Although many other countries joined in later, Ghana still supplied almost half of the world market at the time of independence. In 1960 its economy was larger than Indonesia’s and national income per capita on a par with South Korea’s.

Despite this, little was known about the indigenous producers. They were assumed to be African ‘peasants’ earning a little extra by adding cocoa to their subsistence farms. Polly Hill (1963), Maynard Keynes’s niece, traced the industry to its origins at the turn of the century. She was able to show that the cocoa farmers were an authentic modern class, migrant entrepreneurs opening up virgin forest in companies capable of hiring Swiss construction firms to develop the infrastructure that they needed and the colonial authorities could not provide. Her study, combining historical records with fieldwork, documented the complexity of the social organization involved. All of the new farmers were migrants; most of them came from families that had accumulated wealth from earlier export trades, such as slavery and rubber; their level of education was often high. Some of them drew on existing matrilineal kinship to organize the collective appropriation of the rainforest; others, especially from patrilineal areas, formed companies to allocate land rights among members. They invented a new institution, abusua, a means of recruiting migrant labourers to work on a one-third, two-thirds division of the crop (Robertson 1987). Hill is sure that Ghana’s cocoa industry was capitalist from the beginning; but this capitalist class did not capture the state. The first post-independence government, led by Kwame Nkrumah, was based on a coalition of interests opposed to the Ashanti region where the majority of cocoa farmers lived. Their wealth was squandered by this new ruling class, the industry declined and Ghana’s economy suffered a reverse from which it only now re-emerging (Hart 1982).

It would be hard to exaggerate the contrast between Hill’s discovery and the conventional thinking of development economists and administrators at the time (and since). She summed this up in Development Economics on Trial (1986). Her work has barely been absorbed by anthropologists because it contradicts deep-seated convictions about western economic leadership and African backwardness. But more is at stake than revising racist perspectives on Africa. The core history of capitalism may have to be modified in the light of such ethnographic examples. Pierre-Philippe Rey (1973; see Chapter 5) sought to bring the West African colonial experience of capitalism and the original British case within the scope of a single theory. He argued that, wherever capitalism developed, the new class was forced to make compromises with the old property-owning classes in ways that made the resulting hybrid something specific to that society. Thus the British industrialists had to make an alliance with the landowning aristocracy in order for the factory system to flourish at the expense of feudal agriculture. Similarly, in West Africa the indigenous lineage elders made an alliance with the colonial authorities to supply the labour of young men to plantations and mines. This kind of class alliance is depressingly familiar in the transition to capitalism. It is an example of the institutional complexity that more abstract economic theories tend to ignore.

World society as an Old Regime

Since the formation of the United Nations in 1948, it has become normal to collect statistics on the world population; but thinking about humanity as a single entity has not yet taken hold. It is about time that it did. World society today is like the advanced centres of agrarian civilization before the modern revolutions swept them away. More than two centuries of political struggle and economic development have left the world in a condition similar to France’s Old Regime when Rousseau wrote his discourse on inequality. How else can one describe a situation where a socially exclusive minority holds so much power over an impoverished mass whose powerlessness is now measured by how little money they have to spend? The latest wave of the machine revolution granted one man disposal of $60 billion and control of the global information industry, while billions of people lack material essentials, including access to the internet.

There are two pressing features of our world: the unprecedented integration of markets since the Second World War and polarization between rich and poor nations that has been extended to massive economic inequality between continental regions. Becoming closer and more unequal at the same time is an explosive combination. According to the United Nations Human Development Report (UNDP 1998: UPDATE), the world’s 225 richest men (and they are men) own more than one trillion dollars, the equivalent of the annual income of the world’s 47% poorest people. Three of them have assets worth more than the Gross Domestic Product of the 48 least developed countries. The West spends $37 billion a year on pet food, perfumes and cosmetics, the estimated cost of providing basic education, health, nutrition, water and sanitation for those deprived of them. The rate of car ownership in industrial countries is 400 per thousand, 16 in all developing countries. The rich pollute the world fifty times more than the poor; but the latter are more likely to die from the pollution. World consumption has increased six times in the last two decades; but the richest 20% account for more than 80% of it. Africa, with a seventh of the world’s population (and rising), accounts for 2% of global purchasing power.

The world’s poor are concentrated in what came to be called the Third World and latterly the South, as a result of western expansion over five centuries and particularly of colonial empires established in the nineteenth century. The world’s young people are to be found predominantly in the South owing to a lag in the fall of birth rates there. The age distributions of rich and poor countries are skewed heavily towards the old and young respectively. There are tremendous inequalities within countries and regions; but a two-class model fits the above description quite closely. A rich, mainly white, ageing minority (about 15%, if we take North America, Western Europe and Japan together) is surrounded by a majority (five-sixths of the total) that is a lot poorer, darker in colour and much younger. From the perspective of human reproduction as a whole, a stagnant western elite will soon be replaced by non-westerners from whom they is separated by a tradition of cultural arrogance and ingrained practices of social exclusion.

Small urban elites once sought to maintain control over rural masses condemned to drudgery and political impotence. The main difference between now and then is that modern world society is supposed to be organized by an ideology of human freedom and equality. This is the legacy of a democratic revolution that aimed to install rule by the people in general as the only legitimate form of government. The industrial revolution likewise implied that humanity might now be released from material as well as social constraints on its development. But world inequality today poses a radical challenge to that such rhetoric. This society is unsustainable, in that most of its members are exposed to conditions of poverty and violence that are humanly unacceptable, while a few enjoy the benefits of wealth in forms that were unimaginable before the industrial revolution. Moreover, a society so cruel and indifferent to the general human interest is heading for ecological disaster. Ours is a corrupt ancien régime that must soon find a new democratic revolution, if human intervention in the life of this planet is not to end in catastrophe.

So, if the primary sense of ‘development’ refers to the extraordinary economic growth generated by capitalism in some places over the last two centuries, an urgent priority for just as long has been to make good the damage that capitalism causes in repeated cycles of creation and destruction. (The Austrian economist, Joseph Schumpeter, popularized this perception of capitalism as a process of ‘creative destruction’.)  ‘Development’ today normally refers to both of these aspects of the postcolonial residue of European empire (Cowen and Shenton 1996). The enormous economic disparities of our world were supposed to be addressed though both helping the poor countries to enrich themselves and applying sticking plaster to their wounds. Development thus became a name for the new political relationship between the rich and poor countries after the anti-colonial revolution. It was a social contract, sometimes called ‘modernization’, to use the former’s abundance to enhance the economic prospects of those in want. A number of Asian countries did indeed install successful capitalist economies, with and without western help, causing the balance of economic power in the world now to shift perceptibly eastwards. But since the1970s other regions, especially Africa and parts of Latin America, have stagnated or declined and development there has come to focus on its second meaning — palliative redress of poverty and malfunction.

After the second world war there were two decades of general economic growth and relatively strong states (50s and 60s), followed later by two decades of economic stagnation and weakened states (80s and 90s) with the 70s as the hinge between them. The first period saw a genuine concern to reduce the gap between rich and poor countries, even if the methods chosen were often inappropriate. It soon became apparent that development in this sense was failing and critical perspectives coming out of the other side in the Cold War became ascendant. By the beginning of the 80s, in the aftermath of the oil shocks and inflation of the 70s and with neo-liberal conservatives coming to power, development was no longer seriously on the agenda. Instead the drive was to open up the world’s economies to capital flows (‘structural adjustment’), if necessary at the expense of states’ ability to govern, and the consequence was a huge income drain from the poor countries in the form of debt interest payments. Under these circumstances, a ‘post-development’ critique suggesting that development was a sham discourse with no real achievements to its credit was understandable (Rahnema and Bawtree 1996).

Anthropologists and development

When we look at how most anthropologists related to all this, this historical sequence is important, since their role changed as the world changed. In the 50s, development was still largely in the hands of engineers. The question was how big a hole to blow in the rock to make a suitable dam. Then the economists made inroads in the 60s, largely as accountants pointing out that we can’t afford to be indifferent to the costs of all this. They soon took over the development business and have never lost their grip since, even defining the ideology of development itself as an exercise in free market economics. Others, including anthropologists, have subsequently entered the social process of development under the hegemony of economists. Anthropologists were introduced to the development business because it became increasingly apparent that the human dimensions of the unfolding disaster needed to be redressed.

The contradiction of development was between bureaucracy and the people. Human lives were being overridden by bureaucratic planning recipes that could not accommodate the real interests and practices of people on the ground. In a neo-liberal climate this observation could be assimilated to the critique of the state, the core of bureaucratic order. Consequently states were by-passed as corrupt and ineffective, their place taken by NGOs. But NGOs are not just Not Governments, they are Organizations, that is, bureaucracies. In many ways NGOs are driven by even stronger bureaucratic imperatives, more alien to the people concerned than many government agencies, because they depend on the image they can project to western donors. The multilateral agencies too, who took it on themselves to co-ordinate development, have constantly struggled with the contradiction between their bureaucratic nature and the desire to stimulate self-organized human initiatives on the ground that are inevitably stifled by rational controls.

The anthropologists entered this scene in the 60s and after. They brought with them a method of long-term immersion in fieldwork, an ideology of joining the people where they live, concepts drawn from ethnographies around the world and a general indifference or hostility to numeracy, literate records and all the techniques of bureaucracy. They were asked to fill in the human dimension of development as a complement to the dominant work of the economists and the engineers, usually at short notice, for curtailed periods and with the expectation of fulfilling standards of presentation they had never known. But they had the people card to play and that was the Achilles heel of the bureaucracy. They could always claim the authenticity of proximity to the people on the ground. (Í have been there and you haven’t). Sometimes they were able to make short visits to places they already knew well, which softened the pressures of short-term fieldwork methods. This has become more commonplace in time, as senior academics with a long record of involvement in a region have been drawn upon for their accumulated expertise rather than for some quick fieldwork exercise.

If they did not know before, the anthropologists soon found out that they were in the middle of a class war. They could take up one of three positions. They could inform on the people for the benefit of the bureaucracy. They could take the people’s side as advocates for their interests (Paine 1985). Or they could try to sit on the fence as mediators, offering interpretations of the people to the bureaucracy and of the bureaucracy to the people. No prizes for guessing which of these options was most frequently chosen: the one most compatible with the discipline’s romantic penchant for the role of lone ranger with a pith helmet. As individualists, their natural position was in the gaps between all and sundry.

Apart from this political bind, there was the sheer contradiction between the ethnographic paradigm of twentieth century anthropology and the development process itself. Development was after all a revival of that Victorian evolutionism which ethnographers had flatly rejected at the turn of the century. It is not easy to devise a way of studying the world that might help people to realise new possibilities out of actual social conditions. In the 60s and 70s, many anthropologists struggled with trying to incorporate the history of nation-states and capitalism into their local inquiries; they dabbled with Marxism and other promising intellectual approaches. But this encouraged a critical perspective on contemporary society that made the world of development institutions seem even more alien. The reactionaries didn’t know how to think about development and those who could didn’t want to join.

The situation from the 80s onward was different again. Anthropologists with experience of doing fieldwork in exotic places (or just trained for that possibility) were seen as suitable personnel for the administration of development worldwide. This went along with a reduction in the scale of development programmes to quite specialised local projects, since serious commitment to reducing the gap between rich and poor had by then been long abandoned. A subdiscipline, the anthropology of development, arose seeking to formalise the involvement of anthropologists in development bureaucracies (Gardner and Lewis 1996). Techniques like Rapid Rural Appraisal were embraced as inevitable, whatever violence they did to fieldwork traditions. At the same time some anthropologists were prominent in advancing a post-structuralist critique of development (Escobar 1995, Ferguson 1994), claiming that it was just a way of talking without any real impact on actual societies, beyond cynical manipulation in the interest of a status quo where some of the rich were getting very much richer, while the poor were definitely not getting any less poor.

The informal economy

If anthropologists’ engagement with development has been an uneasy compromise between bureaucracy, ethnography and critique, on one issue at least the profession may be said to have contributed to the theory and practice of development studies well beyond the limits of the discipline: the idea of an informal economy. Most readers of this book live substantially inside what we may call the formal economy. This is a world of salaries or grants, payments of rent or a mortgage, clean credit ratings, fear of the tax authorities, regular meals, moderate use of stimulants, good health cover and so on. Of course households suffer economic crises from time to time and some people feel permanently vulnerable, not least many students. But what makes this lifestyle ‘formal’ is the regularity of its order, a predictable rhythm and sense of control that we often take for granted. Hart only discovered how much of this had become natural when he went to live in a West African city slum forty years ago.

He would ask questions that just didn’t make sense to his informants, for example concerning household budgets. How much do you spend on food a week? Households were in any case often unbounded and transient. Assuming that someone had a regular wage (which many didn’t), it was pitifully small; the wage-earner might live it up for a day or two and then was broke, relying on credit and help from family and friends or not eating at all. A married man might use his wage to buy a sack of rice and pay the rent, knowing that he would have to hustle outside work until the next paycheck. In the street economy people were moving everything from marijuana to refrigerators in deals marked more by flux than stable income. After completing a doctorate, Hart went to work in a development studies institute, where he tried to get this ethnographic experience across to development economists. The conceptual pair formal/informal came out of those conversations. The formal and informal aspects of society are already linked of course, since the idea of an ‘informal economy’ is entailed by the institutional effort to organize society along formal lines. ‘Form’ is the rule, an idea of what ought to be universal in social life; and for most of the twentieth century the dominant forms have been those of bureaucracy, particularly of national bureaucracy, since society has become identified to a large extent with nation-states.

The idea first saw light in a development context during the world crisis of the early 70s – a sequence of events that took in America’s losing war in Vietnam, the dollar’s detachment from gold in 1971 and the subsequent dismantling of the Bretton Woods regime of fixed parity exchange rates. This was soon followed by a world depression induced by the oil price hike of 1973, then the invention of money market futures in 1975 and finally by a glut of petrodollar loans that ended up as the Third World debt crisis of the 80s. ‘Stagflation’ in the West (high unemployment and inflation) prepared the ground for Reagan, Thatcher and their imitators from 1979-80 onwards.

After the ‘modernization’ boom of the 60s, the notion that poor countries could become rich by emulating ‘us’ gave way to gloomier scenarios around 1970, fed by zero-sum theories of ‘underdevelopment’, ‘dependency’ and ‘the world system’, not to mention French structuralist Marxism (Chapter 5). In development policy-making circles, this trend manifested itself as fear of ‘Third World urban unemployment’. It had been noted that cities there were growing rapidly, but without comparable growth in ‘jobs’, conceived of as regular employment by government and the corporations. At this time, it was universally held by Keynesians and Marxists alike that only the state could lead an economy towards development and growth. There were a few maverick liberal economists around, but none of them influenced policy. The question was therefore: how are ‘we’ (the bureaucracy and its academic advisors) going to provide the people with the jobs, health, housing etc that they need? And what will happen if we don’t? The spectre of urban riots and even revolution raised its head. Some advocated forcibly returning the urban mob to peasant agriculture where they would be likely to do less damage. ‘Unemployment’ evoked images of the Great Depression, of broken men huddling on street corners.

This whole story didn’t square with Hart’s fieldwork experience over two years in the slums of Accra. The result was a paper, ‘Informal income opportunities and urban employment in Ghana’ (Hart 1973) and a semi-independent report that launched the idea of an ‘informal sector’ in Kenya (ILO 1972). He wanted to persuade development economists to abandon the ‘unemployment’ model and embrace the idea that there was more going on in the grassroots economy than their bureaucratic imagination allowed for. He had no ambition to coin a concept, just to insert a particular ethnographic vision of irregular economic activity into the ongoing debates in the development industry. The ILO Kenya report, on the other hand, did want to coin a concept and that is what it has subsequently become, a keyword helping to organize a segment of the academic and policy-making bureaucracy. So it would be fair to say that the idea of an ‘informal economy’ has a double provenance reflecting the two sides of development, bureaucracy (the ILO) and the people (Hart’s ethnography).

No-one could have anticipated what happened next: under a neoliberal imperative to reduce the state’s grip on ‘the free market’, national economies and the world economy itself were radically informalized. Not only did the management of money go offshore, but corporations outsourced, downsized and casualized their labour forces, public functions were privatized often corruptly, the drugs and illicit arms trades took off, the global war over ‘intellectual property’ assumed central place in the drive for profit, and whole countries, such as Mobutu’s Zaire, abandoned any pretence of formality in their economic affairs. Here was no ‘hole-in-the-wall’ operation living in the cracks of the law. The market frenzy led to the ‘commanding heights’ of the informal economy taking over the state-made bureaucracy. What is the difference between a Wall Street bank laundering gangsters’ money through the Cayman Islands and the mafias running opium out of Afghanistan with the support of several national governments?

Formal and informal appear to be separate entities because of the use of the term ‘sector’. This gives the impression that the two are located in different places, like agriculture and manufacturing, whereas both the bureaucracy and its antithesis contain the formal/informal dialectic within themselves as well as between them. The need to link them arises from a widespread perception that their relationship has descended to the level of classwar. It was not supposed to be like this. Modern bureaucracy was invented as part of a democratic political project to give citizens equal access to what was theirs as a right. It still has the ability to co-ordinate public services on a scale that is beyond the reach of individuals and most groups. So it is disheartening that bureaucracy (‘the power of public office’) should normally be seen now as the negation of democracy (‘the power of the people’) rather than as its natural ally.

Anyone who visits the sprawling cities of the ‘Third World’ (which account for the bulk of global urbanization since 1945) will get a vivid impression of what Mike Davies calls ‘a planet of slums’. Their streets are teeming with life, a constantly shifting crowd of hawkers, porters, taxi-drivers, beggars, pimps, pickpockets, hustlers – all of them getting by without the benefit of a ‘real job’. There was no shortage of names for this kind of early-modern street economy. Terms like ‘underground’, ‘unregulated’, ‘hidden’, ‘black’ and ‘second’ economies abounded. Perhaps the best account came from another anthropologist. Before he launched the ‘cultural turn’ in anthropology (Chapter 8), Clifford Geertz wrote four books in the 50s and 60s on economic development, the most important of them an examination of two faces of Indonesian entrepreneurship that serves as a subversive parable of the Cold War, Peddlers and Princes (1963).

The majority of a Javanese town’s inhabitants were occupied in a street economy that he labeled ‘bazaar-type’ after the dominant local economic institution, the suq. The ‘firm-type’ economy consisted largely of western corporations who benefited from the protection of state law. These had form in Weber’s sense of ‘rational enterprise’, being based on calculation and the avoidance of risk. National bureaucracy lent these firms a measure of protection from competition, thereby allowing the systematic accumulation of capital. The ‘bazaar’ on the other hand was individualistic and competitive, so that accumulation was well-nigh impossible. Geertz identified a group of Reform Moslem entrepreneurs who were rational and calculating enough to satisfy Max Weber on ideological grounds; but they were denied the institutional protection of state bureaucracy granted to the existing corporations and so their version of capitalism remained stunted at birth. Here and in his later work on the Moroccan suq, Geertz pointed out that modern economics uses the bazaar model to study the decisions of individuals in competitive markets, while treating as anomalous the dominant monopolies protected by state bureaucracy. The discipline found this model in the late nineteenth century, just when a bureaucratic revolution was transforming mass production and consumption along corporate lines. At the same time the more powerful states awarded new privileges to capitalist corporations and society took its centralized form as national bureaucracy. Perhaps because he was poking fun at the economists, Geertz’s analytical vocabulary was not taken up by them. The antithesis of the state-made modern economy found its name a decade later.

On a final note, Geertz’s Javanese bazaar essay was twinned with another on Bali. There, some members of a caste of royal princes had taken up owning factories, the main point of which was to keep an army of political supporters employed. Their management of these enterprises owed little or nothing to the principles of economics. They kept their workers on under all circumstances, regardless of profit, since what mattered was maintaining followers. It is not hard to see in this story too an ironic commentary on the other side in the Cold War, the subject of the next chapter. No wonder Geertz later confessed that anthropology for him was an opportunity to become a writer.

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