Social Capital and the Informal Sector

Estimated read time 3 min read

Henry Veltmeyer, Saint Mary’s University, Halifax, Nova Scotia

In the mainstream, “development” has most generally been conceived of in terms of economic growth (increases in the gross national product — the total output of a national economy) and the transformation of the structure of national production; the first based on a process of capital accumulation (increases in the rate of savings and investment), the second based on a process of industrialization and modernization in the “formal sector” of the economy. However, since the mid-1970s there has emerged a new paradigm in which development has been conceived of in very different terms. Since then, it has been widely recognized that the major dynamics of development unfolded not as much in the formal economy of large, medium, and small capitalist and state enterprises, but more in a burgeoning informal economy constituted by micro-enterprises and irregular, unstructured economic activities.

In the 1970s and 1980s there emerged a voluminous literature on this “informal sector” based on extensive research into its diverse dynamics in different contexts.However, for some reason this literature virtually disappeared in the 1990s, with relatively few contributions to additional research and conceptualization of the issues involved, particularly those of micro-enterprise and entrepreneurial development. The paper by Narumol Nirathron revives this issue with a re-examination of the informal sector in the specific context of food street vendors in Bangkok. In the earlier literature, informal economic activities and micro-enterprises for the most part were conceived of as marginal and economically unproductive, not viable in commercial terms.Nirathron, however, views the Bangkok street vendors somewhat differently, focusing on the objective and subjective conditions of their economic “success.” The author addresses the policy implications of these conditions.

Economic development is often conceived of in terms of the accumulation of capital — physical, financial, and natural — at the national level. But the dynamics of this development process have proven to be fraught with structural and political obstacles, giving rise to an interest in alternative community-based approaches predicated on the accumulation not of physical or natural forms of capital but rather “social capital”: a productive resource embodied in economic activities based on relations of solidarity and trust, and reciprocal exchange. Over the past decade an interest in the development outcomes of social capital has become widespread in the development community. The interest of development economists in the concept of social capital is in its link to local development based on the initiatives of grassroots organizations formed within the community. The paper by Charles Fonchingong and Canute Ngwa picks up on this interest by exploring the role of village development associations in northwest Cameroon. The authors are primarily concerned with the issue of whether, in the context of a retreating state, these associations can constitute themselves as agents of local and community-based development. In exploring the gender dimensions of this issue, the authors conclude that the village development associations (VDAs) by no means constitute a panacea. Nevertheless, the paper concludes that although not the cure-all, if revitalized, grassroots organizations can determine the local development agenda and become conduits for direct efforts at poverty reduction.

This conclusion is highly relevant to the development efforts of diverse development agencies, such as the World Bank (or the Canadian International Development Agency, for that matter). There are also considerable theoretical implications. It is anticipated that in publishing this article, CJDS will contribute to a growing body of scholarly literature on the dynamics of local development: development that is participatory as well as sustainable.

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