Informal Economy

That part of an economy whose members provide for each other and cooperate on terms which do not involve money.

The informal economy—aka the “core economy”—consists of all the things we do for each other in families: cooking, bringing up children, playing, discussing citizenship, building character and emotional literacy. And it includes the things we do as citizens: serving as school governors, organising societies and sports clubs, voting—the things which, taken together, add up to our “social capital”. It is large; if the value of the informal economy were costed in terms of the wages that would have to be paid for doing all these things, we would get enormous numbers. And yet, it is but a remnant in comparison with the economy of reciprocal obligation in the medieval period. Or even compared with the communitarian social capital that survived into the twentieth century, before the long withdrawal from home and local community—due in part to the developments in domestic equipment—in favour of paid work, which is visible to the calculations of economics.I41

The informal economy makes the community. While money will be used for imports and exports between communities, the Lean Economy will be founded on reciprocal services. There will be a fusion of society and economics, of friendship and service, local self-reliance and presence.

A start-up version of this principle was proposed as “the Big Society”, first introduced by the Conservative Party’s manifesto for the 2010 election, and developed since—“a society where people come together to solve problems and improve life for themselves and their communities . . . redistributing power from the state to society; from the centre to local communities, giving people the opportunity to take more control over their lives . . .”. There is a convergence of thinking on this from the various directions of lean thinking, presence, TEQs, and Transition.

It is there in the principle of “co-production”, where public services such as schools and hospitals build partnership with citizens as volunteers. In its report, Co-production: A Manifesto for Growing the Core Economy, The New Economics Foundation supplies examples of this rediscovery of an old idea, such as the aftercare arrangements at Lehigh Hospital, Philadelphia, where visits to discharged patients in their homes are done substantially by other former patients. The term “co-production” was suggested by Elinor Ostrom in the 1970s, when she argued that police forces should develop more and better routine contact with the public, pointing out that “the police need the community as much as the community need the police”.I42

Rebuilding the informal economy means re-awakening citizenship—doing things because they weave community together, and because in practical terms they provide the necessities that keep them alive.


Related entries:

Reciprocity and Cooperation, Dual Economy, Lean Economics, Lean Household, Compassion, Barter, Growth.

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David Fleming
Dr David Fleming (2 January 1940 – 29 November 2010) was an economist, historian and writer, based in London. He was among the first to reveal the possibility of peak oil's approach and invented the influential TEQs scheme, designed to address this and climate change. He was also a significant figure in the development of the UK Green Party, the Transition Towns movement and the New Economics Foundation, as well as a Chairman of the Soil Association. His wide-ranging independent analysis culminated in two critically acclaimed books, Lean Logic and Surviving the Future. A film about his perspective and legacy - The Sequel: What Will Follow Our Troubled Civilisation? - was released in 2019, directed by BAFTA-winning director Peter Armstrong. For more information, including on Lean Logic, click the little globe below!

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