When we hear the phrase “the economy,” often the first images that pop to mind are crisp bills being printed in a government treasury, or suited traders wheeling and dealing on the floor of a stock exchange, or a mall where suburban shoppers buy T-shirts and sneakers before grabbing a Cinnabon. But as journalist Robert Neuwirth pointed out at TEDGlobal 2012, while the luxury economy is responsible for $1.5 trillion a year, there are currently 1.8 billion people across the globe toiling in the informal, unregulated economy.

“If it were united in a single political system — one country, call it the United Street Sellers Republic, the U.S.S.R., or Bazaaristan — it would be worth $10 trillion every year. That would make it the second largest economy in the world after the United States,” said Neuwirth in his illuminating talk. “All of this is happening openly and aboveboard — there’s nothing underground about it. It’s our pre-judgment that it’s underground.”

For his book Stealth of Nations, Neuwirth spent four years researching what he calls “System D,” spending time with street hawkers, wholesale shopkeepers, smugglers, and sub-rosa import/export firms. To hear the details of what he found, listen to his talk. Below, check out six more talks that explore different corners of the informal economy.

Vinay Venkatraman: “Technology crafts” for the digitally underserved
In most parts of the world, buying the latest iPhone isn’t an option. However, as designer Vinay Venkatraman noted at TEDxSummit, there is a growing economy of salvaged computer and phone parts, as well as tinkerers who know how to work with them, cropping up in markets around the developing world. In this talk, Venkatraman explains his work with “technology crafts,” using the parts and skills available in tinkerers’ stalls to make useful products — like a digital projector for a village school made from a lunchbox, or a medical triage device constructed from an alarm clock.

Robert Neuwirth on our “shadow cities”
In this talk given at TEDGlobal 2005, Robert Neuwirth peeks into the enormous squatter cities growing in Kenya, India, Brazil, Turkey and many other countries around the world. Rather than simply places of squalor, Neuwirth says, these cities are also hotbeds of innovation, where people set up restaurants, markets, salons and clinics, effectively self-organizing without the constraints of government control.

Steven Levitt: The freakonomics of McDonalds vs. drugs
Believe it or not, drug dealers don’t actually make a lot of money. They generally only earn minimum wage, says Freakonomics author Stephen Levitt, who, with the help of a fearless grad student, spent 10 years researching the financials of inner-city gangs. In this fascinating talk from TED2004, Levitt delves into the informal — and illegal — economy of crack cocaine.

George Ayittey on Cheetahs vs. Hippos
In this impassioned talk from TEDGlobal 2007, economist George Ayittey gives a rousing critique of government corruption in Africa, which he says costs the continent $148 billion a year. Ayittey explains that there are three sectors to the African economy — the modern, the informal and the traditional. While aid pours into the modern sector, run by elites, the people of Africa — who overwhelmingly deal in the informal and traditional sectors — are left behind. Ayittey sees the future of Africa in the young movers and shakers who are focusing on improving Africa’s indigenous institutions like farms, markets and the ship-building industry.

Misha Glenny: Hire the hackers!
Journalist Misha Glenny makes a plea at TEDGlobal 2011 for companies and governments to recruit hackers — who are often teenagers developing their moral compass — and guide them toward using their skills for productive ends rather than having to treat them as criminals later. Glenny stresses that the world’s most famous hacker collective, Anonymous, doesn’t mobilize for financial gain. However, he also describes the economy of “carders,” who use illegal online marketplaces to buy and sell credit stolen credit card details.

“In System D, this is a store,” says Robert Neuwirth as he shows a photo of a woman sitting on a plank beside a canal in Makoko in Lagos, a booming shantytown built on stilts over the water. It’s a place where “there are no streets where there are stores to shop, and so the shop comes to you.” Another example of business synergy, global business and a business incubator? A garbage dump where local entrepreneurs congregate and create markets and services around reclaiming materials.

Neuwirth studies the informal economy. Not the illegal economy, but what he calls System D. It’s not a black market, but an open economic arena where anything is available. “There’s nothing underground about it; it’s our prejudgment that it’s underground.”

He shows a picture of Oshodi Market, in Lagos, which he calls the apotheosis of a street market. It’s a highway that is absolutely packed with stalls and vehicles selling everything imaginable. The problem, is that the government thought it was untidy, so it was removed.

The problem, says Neuwirth, is that “we are looking at the economy like we look at dill pickles.” We are looking for perfect ones coming down the conveyor belt, and feel the need to take bad ones off the line. “We’re all focused on the economy of luxury.” That economy is large, but there is a giant footnote by that number – it excludes two-thirds of the workers in the world. Those are the part of System D, the informal economy, which employs 1.8 billion people and is worth $10 trillion/year.

If System D was a country, you could call it the USSR: The United Street Seller’s Republic, it would be the second-largest economy in the world, and it is growing rapidly. It could become the largest in our lifetime.

Major corporations have recognized this. Some companies, such as UAC Foods, have started creating products that are only sold on the street. Western companies have started as well. For Procter & Gamble, Walmart is their biggest single buyer, but as a market segment, the tiny kiosks are bigger, and “it’s the only one that’s growing.” They don’t care about the legal status of the stores that sell their products, they want their products in the store.

In Nigeria, MTM came in with a mobile phone plan similar to those in other countries — sell phones and a subscription plan — which crashed and burned. So they came up with new plan. You get a SIM card and you buy air time — air time that is sold in umbrella stands, in System D. They rode that to a 45% market share. The mobiles themselves come from China — they’re extremely cheap, smuggled in, and sold on the street.

Is there a downside to that kind of piracy? Of course. But there are real benefits too. Neuwirth talks to a sneaker manufacturer who told him he thinks of piracy of market research: If theirs are not pirated, they conclude they’re not making the right sneaker.

Neuwirth closes by wondering what would have happend if Adam Smith had written about the Flea Market instead of the Free Market. He lists three principles of the Flea Market:

• Trade is a form of cooperative. “The market is a simplified form of cooperation among strangers” ~Roberto Mangabeira Unger.
• Facts are relative. “Facts come from negotiations between different parties” ~Paul Feyerabend.
•  There are alternate currencies. “When can i go into the supermarket and buy what i need with my good looks?” Allen Ginsberg.

For more, watch Robert Neuwirth’s previous TEDTalk, on “Shadow Cities” >>

Photo: James Duncan Davidson

On Saturday August 15, a TEDx event was held in Kibera, the largest squatter city in Africa and home to nearly a million Kenyans. Suraj Sudhakar, an Acumen Fellow, hosted the ambitious event. Sudhakar has begun several projects in low-income communities, from improving housing conditions through financial consolidation to sanitation by promotion of the Eco-toilet concept. His vision for the TEDx conference was to spark discussion on subjects other than HIV/AIDS and poverty, which are commonly associated with Kibera.

Speakers included Tonee Ndungu of the Kenya Wazimba Youth Foundation which uses mobile phones for large-scale networking and communication, Otieno Gomba founder of Ghetto Art, a studio for Kibera’s artists, and software developer and tech blogger Wilfred Mworia.

Mworia has an engaging account of the afternoon on his blog, and provides a link to his Flickr account with many photos of this inspirational event. For even more photos, check out Tonee Ndungu’s twitpics.

The event in Mworia’s words:

I attended TEDxNairobi a week earlier which was a much much bigger event at a bigger venue. But the interesting thing is, even being in this smaller event being held in the middle of a slum, in a shanty church building, surrounding by the dirt and grime of Kibera… there was still great inspiration (if not greater) and great ideas! And I think that’s the beauty of TED, the fact that despite where you are, in whatever circumstances, people (if motivated enough) will always come up with great ‘ideas worth sharing’! And that says something very deep about the human spirit and the dignity of human beings. That whether rich or poor we all have that capacity for creativity.

For more insight on squatter cities like Kibera, watch Stewart Brand’s 2006 TED Talk and Robert Neuwirth’s 2005 TED Talk.

Photo: Tonee Ndungu at TEDxKibera August 15, 2009, in Nairobi, Kenya. Credit: Wilfred Mworia

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