Kelly and her boyfriend Mike* traveled several states away to purchase a new-to-them RV, and took the scenic route home. Their drive back included a stay at an RV park where other friendly RVers struck up a get-to-know-you conversation.
When other park guests discovered Kelly was a professional dog groomer, she said “they all lined up asking me to help them.” Over the course of a few days, Kelly wound up making a couple hundred dollars. She also scored a free night in the park from its owners, whose elderly dogs needed nail trims.
Kelly only included her grooming gear when she packed for the trip because one of their stopovers included a visit with Mike’s sister, who’d asked for dog grooming help. Kelly hadn’t planned to set up shop on the road, but she was thrilled to have stumbled into a group of eager paying customers.
Now that she’s had a taste of the informal economy, Kelly hopes to find similar opportunities when she and Mike become full-time RVers and need to earn an income from the road.
Depending upon where she travels, though, that could be a more or less difficult proposition.
What exactly is the ‘informal economy’?
The “experts” who watch this sort of thing tend to throw anyone and everyone operating without official permission into the same category; from undocumented workers to drug dealers to renegade RVers trimming dog toenails. Goodness.
Just to be clear, while I do believe many laws around actually-bad behavior cause more harm than good, that’s not what I’m talking about here. I don’t think people ought to make counterfeit goods, or sell drugs or become hit men. Or hit women :O
It’s the greyer areas I’m interested in; things that are “bad” not because of actual harm as much as because someone made a law against doing them a certain way. Or not doing them a certain way.
This part of the economy that intrigues me is something journalist Robert Neuwirth calls System D. That’s shorthand for l’economie de la débrouillardise, or the economy of the resourceful.
All over the world — from San Francisco to São Paulo, from New York City to Lagos — people engaged in street selling and other forms of unlicensed trade told me that they could never have established their businesses in the legal economy. “I’m totally off the grid,” one unlicensed jewelry designer told me. “It was never an option to do it any other way. It never even crossed my mind. It was financially absolutely impossible.”
Kelly may not have intended to become a “débrouillard,” but when the opportunity presented itself, she ran with it.
Instead of worrying that she was away from her designated place of business, perhaps in an area where zoning ordinances would have prohibited grooming and almost certainly where one municipality or another would have insisted she obtain a business license and pay a fee, Kelly delighted her new customers and was rewarded for it.
If she’d waited for official permission, she’d no doubt still be waiting.
Vive la débrouillard!
The letter of the law might insist that you request and pay for a license, not operate in certain areas, rent commercial space, or prevent you from providing a product or service at all. Once you comply with all of that red tape and are are granted permission to earn money, the law demands a share.
I may or may not have had my hair done by more than one hairdresser operating out of a home salon. I’ve spoken with one of these débrouillards – let’s call her Missy* – at length about business. She asked me what the point of my LLC was, and what the county did for me in exchange for my business license fees.
“Ummm…nothing, really,” I said. “I have to fill out paperwork and give them money every year.”
“Well why do it?,” she persisted. She was right.
At the time I felt it was an important step in being seen as legit. Despite a solid portfolio and over a decade of experience. Why, I don’t know.
No one ever saw my business license hanging on my office wall. That’s due in part to the fact that the county issued the license with a stipulation that I could not have clients in my office (because I do not live in an area they’ve deemed acceptable for business use). You try to do the right thing…
Before opening her home salon, Missy visited her neighbors, told them what she was planning, and asked if they had any concerns. The most negative response she received was from a neighbor who asked her to make sure her customers didn’t block his mailbox if they parked on the street.
Missy has operated her home salon for several years now, and loves being able to schedule around her family. Instead of watching a significant portion of her earnings go to a salon with high costs, her smaller overhead enables her to keep more of her earnings. She does maintain a state license and file tax returns, so it’s just the zoning that puts her in that grey area.
That’s enough for me to appreciate her, never mind the mad hairdresser skills 🙂
Sometimes breaking the rules is the right thing to do
Especially in the U.S., most of us who have a choice tend to fall in line and submit the required paperwork, fees and taxes. These expenses add to our overhead, and in turn what we must charge others for products or services.
Does the micromanagement of business with laws hurt or help people overall? In my experience it deters all but the most resourceful, and actually protects none of us. Despite the plethora of rules and regulations businesses must follow, people still routinely get the short end of the stick from bad actors.
Those of us that seldom feel cheated more often than not have the internet and product/service/business research and reviews to thank – not laws (which tend to only help after the fact…sometimes…but not usually). Isn’t it nice, though, that when a business breaks a rule the people who make the rules can easily demand a fine?
The reality is that plenty of us participate in System D, though, even if we’re not sellers. It’s estimated that something like 10-12% of the US’s $18.5+ trillion dollar (2016) GDP is transacted via the informal economy. I’ve no doubt that where it’s easier to avoid the red tape (not to mention escaping punishment for that avoidance), far more than 10% of us become resourceful, shall we say.
So is this really a bad thing, overall? I don’t think so. Honestly, I don’t have a problem with someone like Kelly pocketing a few hundred a month off the books even if I and others are paying regular taxes. On the contrary – if our paths ever cross I’ll be banging on her RV door and begging her to trim Laurie the Greyhound’s hellacious nails.
I never asked Kelly what she charges, but I bet you it’s not more than what I regularly pay. Probably less. And, instead of having to load my poor old girl in the car for an anxiety-inducing ride to a place she does not want to be, she’d be at our campsite or just a short walk away.
Missy charges the same as my previous salon, but does better work, in a nicer environment and with higher-quality products.
Price and convenience are two things that factor heavily into the choice for me. A third benefit is that instead of expecting someone else to pay Kelly’s or Missy’s expenses, I’d directly contribute to their bottom line.
I don’t mean to imply either woman is struggling – I have no idea about their personal circumstances. I’m just saying I think it’s better to support someone’s “System D” hustle than suggest they do without, or go sign up for food stamps and/or forget about repairing their broken-down car.
When you’re a resourceful person with expenses to cover, you do what it takes to meet your responsibilities first, and worry about the red tape last. Or not at all. I respect that.
Food for thought
The informal economy offers more and often better options to both buyers and sellers. The downside, of course, is that in order to benefit we have to be willing to accept the risk of participating. That risk made me somewhat hesitant to publicly broach this subject since, according to the rule makers, much of the opportunity I’m giddy over is bad or wrong.
When you make the rules, it’s easy enough to end an argument about what’s right or wrong by simply declaring that cutting hair at home, grooming dogs in an RV park or selling items from a travel trailer are illegal.
It requires a thoughtful, deliberative approach, however, to break from the masses and realize that dismissing something merely because it’s been labeled as illegal is disingenuous. At best. Sometimes even nefarious.
Before I go quiet on the topic, I’d like to say that I really hope that once we get on the road we’ll find many opportunities to be a part of l’economie de la débrouillardise.
The more resourceful we average folk are, the less sway the unaccountable rule-making class has over our lives.
*Names changed to protect the resourceful 🙂
Interesting quotes & further reading/viewing
A 2009 study by Deutsche Bank, the huge German commercial lender, suggested that people in the European countries with the largest portions of their economies that were unlicensed and unregulated — in other words, citizens of the countries with the most robust System D — fared better in the economic meltdown of 2008 than folks living in centrally planned and tightly regulated nations.
As a government needlessly intervenes in an economy with asinine regulations and bureaucracy, it makes sense that the populace should embrace the shadow economy. Far from flaws and frailties in the capitalist system or the marketplace, the shadow economy tells us more about the futility and asininity of bureaucracy and red tape.
Nobel Prize-winning economist Milton Friedman once commented, “The black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people.” Friedman criticized government intervention, price-controls, and occupational licensure. Such government involvement in the market is what creates the black market in the first place. In some ways, the black market is the free market.
As the official economy deteriorates and unemployment continues to be high, some individuals will naturally seek opportunities in the shadow economy. And the shadow economy goes beyond reflecting the fact that asinine bureaucracy does not work; rather, the shadow economy reflects the fact that the bureaucracy is decaying as citizens reject bureaucratic requisites and processes. This is akin to the “great refusal” discussed by philosopher Herbert Marcuse.