Does green growth miss the majority?

Blogs, 18 February 2016

On 25 February IIED is hosting an event on the informal sector – we want to better understand how it can contribute to creating a greener and more inclusive economy.

The sale of matoke in a market near Fort Portal, Uganda: green growth planning must take account of the informal economy (Photo: Matt Wright/IIED)

In the last five years 'inclusive green growth' has risen to the top of international agendas. At the World Economic Forum (WEF) last month, business leaders focused on how greener growth could deliver for people as well as the planet.

The Global Green Growth Institute (GGGI), the OECD, the World Bank and the UN Partnership Action for a Green Economy (UN PAGE) are all supporting governments with their green growth strategies. Over 40 countries have developed green growth plans and green investment is now flowing.

'Inclusive green growth' sets out to answer two pressing global imperatives of reducing poverty and protecting the environment. While definitions differ, the underlying logic promoted by institutions such as the World Bank and the OECD (PDF) is that a more resource-efficient model of development will help the poorest by safeguarding the local environment, stabilising the climate and increasing their access to affordable and renewable energy, clean water sources, clean air and fertile soils.

Yet, in all of the enthusiasm for inclusive green growth there is little or no mention of the informal sector. From food sellers on the streets of Cairo and networks of waste workers in India, to artisanal miners in Peru and charcoal producers in Kenya, the informal economy makes up a staggering 80 per cent of the workforce in many poor countries, and in many cases is expanding despite economic growth.

In a conference on 25 February, the Green Economy Coalition (GEC) and partners are gathering policymakers and civil society to ask why. The gallery at the bottom of this blog shows elements of an infographic on the missing majority in the transition to green economies that will be shared at the conference. 

Grey, black, green?

By definition the informal economy is difficult to measure, engage with or tax. Informal work is often dangerous or poorly paid, it can be exploitative and illegal. For these reasons informal markets have been cast variously as the 'shadow', 'grey', 'black', 'underground' or 'hidden economy.

Conversely, recent research has shown that the informal economy is a space for innovation and experimentation; free from regulation, it is 'creative', 'entrepreneurial' and 'makeshift' in the face of extreme resource constraints. It is flexible and can provide protection from an increasingly volatile formal economic system.

In real terms the informal economy is all of the above. It is multi-coloured and multi-dimensional, and woven into the very fabric of our economic system.

It is where the poorest live, trade and derive their livelihoods. So, for green growth planning to say nothing of informal markets is to leave out the majority of the world's poorest. 

If the informal economy is largely unaccounted for in green economy models, policy approaches and analysis, then do green economy policy approaches require 'formalisation'?

Are informal economies always detrimental to the environment? How have the greening efforts led by governments, authorities or international institutions impacted informal markets in the past? These are some of the questions we will be asking at the meeting on 25 February.

Real inclusive green growth?

Global institutions are now calling for evidence and case studies of more inclusive models of green growth. Rather than always turning to macro-economic policy interventions, such as fiscal reform, we also need to learn from much smaller stories of change.

Consider, for example, the Zabaleen – a Christian community who migrated to the outskirts of Cairo, Egypt, in the 1940s. In the 1980s they turned to recycling waste in the city by acquiring facilities for recycling plastic, paper and metal, and feeding organic waste to their animals. In 2003, in a bid to "clean up" the city, the government contracted international corporations to handle waste disposal.

The Zabaleen communities were rehoused in settlements in the suburbs. But the new corporate waste collection systems proved poorly matched to the city's needs and the recovery rate of recycled materials went down.

By 2012 rubbish in the city had become a political issue and the Egyptian government turned back to the Zabaleen for help. Under the joint management of the ministry of the environment and the Zabaleen union, the government started to recognise the Zabaleen cooperatives in the urban waste management system.

Though not a smooth or easy transition, small and informal waste businesses have begun to work directly with the local authorities. Workers are benefitting from higher wages at the same time as having safer working conditions.

The story has much to teach us. Informal economies are in many cases more resource efficient than their formal counterparts, and the services they offer can be better matched to local needs than larger formal businesses. Greener policy frameworks need to find ways of engaging with informality and creating safe spaces for more networks of all shapes and sizes to emerge, evolve and provide income, work and security.

A new policy agenda

The drive for greener, more inclusive growth provides an opportunity to rethink our approach to business and recognise the need for economic reform. It's a chance to rewrite the rules governing our economies – from fiscal restructuring to financial system reform –and a chance to introduce alternative ways of measuring progress.

But, if policymakers do not consider the fate or the role of the informal sector, then they risk leaving behind majority of the world's poorest in the transition to greener economies.

Together, with our partners – IIED, Centre for International Forestry (CIFOR) and Women in Informal Employment: Globalizing and Organizing (WIEGO) – the GEC is calling for a new policy agenda on informal economies in a green economy.

If you are working on informality, then we want to hear from you. Come and join the debate.

Emily Benson (emily.benson@greeneconomycoalition.org) is a programme manager for the Green Economy Coalition.

A chart showing the difference between informal and formal employment worldwide and in emerging markets (Image: GEC)A chart illustrating the value of the informal economy (Image: GEC)There is little mention of the informal economy in economy plans showing an estimated $385 billion is going towards the green economy (Image: GEC)A chart asks the question 'How will people who don't have a voice in the 'brown' economy have one in a green economy?'