The informal economy of the developing world is typically composed of very small businesses that are not registered in any way. They are rarely run from business premises. Instead, they are run from homes, street pavements or other informal squatter-like arrangements. They are usually a result of the massive rural-to-urban migration occurring throughout the developing world reflecting a scarcity of undeveloped arable land and divisions of family farms among numerous heirs. They are also a result of "Structural Adjustment Programs" imposed by the World Bank or the IMF or the WTO on most developing nations. The Informal workforce typically survives of barest of subsistence earnings, with few opportunities to accumulate enough capital to move into the stagnant "formal" economy. The informal workforce tends to suffer from oppression at the hands of those in the formal economies via the dominant influence that those in formal economies exert on government policies. For almost all developing nations, the informal economy is the only component of the economy that is growing. This would suggesting that the informal economy will probably grow to something on the order of two thirds of the developing world's economy. The informal economy seems to be blending seamlessly into the caste-, feudal- and slave systems of the developing world. These four systems share a number of key similarities. Analyses here finds that reducing rates of population growth in developing nations could greatly reduce the extreme scarcity of capital. This, in turn, would reduce the relative size of the informal economy. Several technologies developed in the past decade or so offer possibilities for reducing population growth rates inexpensively. The bulk of developing world's governments are now well aware of the economic benefits of reducing population growth. The globalization process appears to be spreading the informal economy into parts of the developed world as well.

Section [A] ~ Some Definitions ~

Since Keith Hart first coined the phrase 'informal economy' in the early 1970s to describe the range of subsistence activities of the urban poor in Ghana, there has been debate about what the term refers to exactly. The South African national statistics agency defines the informal economy as those businesses that are not registered in any way. They are generally small in nature, and are seldom run from business premises. Instead, they are run from homes, street pavements or other informal arrangements (06P1). This is in line with the definition adopted by the International Conference of Labor Statisticians, which uses the term 'informal economy' to refer to employment and production that takes place in small and/ or unregistered enterprises.

Another definition of "informal" economy" is activities involving unreported income from the production of legal goods and services -both monetary and barter transactions - that is, all economic activities which would be taxable if reported to tax authorities (02S1).

Informal employment is generally defined by lack of secure labor contracts, of worker benefits or social protection, both inside and outside informal enterprises (93I1), (02I1). An expanded definition considers informal employment in terms of "all remunerative work - both self-employment and wage employment - that is not recognized, regulated or protected by existing legal or regulatory frameworks as well as non-remunerative work undertaken in an income-producing enterprise" (p.12 of Ref. (93I1)).

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Between 1920 and 2007, the world's urban population increased from 270 million to 3.3 billion, with:

• 1.50 billion urban dwellers added to Asia,
• 0.75 billion added to the more developed regions,
• 0.45 billion added to Latin America and the Caribbean,
• 0.35 billion added to Africa (08U1).

The world's population is expected to be nearly 50% urban around 2025, and 70% urban in 2050. At that time (2050), most of the urban population will be concentrated in Asia (54%) and in Africa (19%) (08U1).

According to UN-Habitat estimates (08U1):

• In 2005, 37% of the urban population of developing countries (840 million people) lived in slums. Asia had 542 million. China had 201 million. India had 113 million. Africa had 179 million. Latin America and the Caribbean had 117 million (07U2).
• In 2004, over 600 million urban dwellers lacked access to improved sanitation.
• In 2004, 180 million urban dwellers lacked access to an improved water source.

In 2007 (08U1):

• Latin America/ Caribbean had an exceptionally high level of urbanization (78% urban) vs. 41% in 1950.
• Europe was 72% urban. Africa was 38% urban. Asia was 41% urban.
• Australia, New Zealand and North America were more than 80% urban.
• About 50% of the world's urban population lived in Asia in 2007.
• Europe had the world's second highest share of urban population at 16% (08U1).
• India had the largest rural population (828 million) and China had 767 million. Together they accounted for 47% of the world's rural population. Bangladesh, Indonesia and Pakistan each had over 100 million rural inhabitants.

Between 2007 and 2050:

• The (developing) world's urban population is expected to increase by 3.1 billion. This includes 1.8 billion in Asia and 0.9 billion in Africa (08U1). (The developed world's urban population is expected to change very little during that same time interval.)
• The world's rural population is expected to peak at 3.5 billion around 2020 and decline thereafter.
• Births will account for 60+% of urban population growth during this period (08U1).

Between about 2007 and about 2025:

• The urban population in the developing world is expected to nearly double in size between 2000-2025 from almost 2 billion to more than 3.5 billion. It is projected to surpass the rural population by 2020. The rural population in developing countries is projected to stop growing after 2020, at about 3.1 billion, while the urban population is expected to continue to grow, causing further increases in the level of urbanization (00B2).
• About 90% of the world's population growth out to 2025 is expected to occur in the urban areas of developing nations (00U1).
• After 2020 a majority of the population of the developing world is expected to live in urban areas (00B2).
• China, with an urban increase of 261 million, and India, with an urban increase of 197 million, is expected to account for 36% of the urban increment. A further increment of 1.8 billion people is expected globally, with India contributing 377 million and China contributing 205 million (08U1).
• By 2025, India's rural population is expected to peak at 909 million and is expected to decrease to 743 million by 2050 (08U1).
• China's rural population is expected to decrease by about 50% to 382 million in 2050 (08U1).

Table 1.0 - Percent of Population living in Urban areas in Major World Regions.
Source: UN, World Urbanization Prospects: The 1999 Revision (2000).(00U1)

Informal employment as a percentage of non-agricultural employment in the four major developing country regions is estimated to be 72% in sub-Saharan Africa, 48% in Northern Africa, 65% in Asia and 51% in Latin America. Wide variations are found among countries in each of these regions (See Table 1.2) (02I1).

This UN study of urbanization (03U1) cites research finding that "informal" economic activity now accounts for 33-40% of urban employment in Asia, 60-75% in Central America and 60% in Africa. In Malawi, only 50,000 people out of a population of 12 million have formal jobs in the private sector (06R1).

Table 1.1 - The Size of the Informal Economy in various major regions of the World in 2000 (06P1)

EIT means Economies In Transition (typically economies that were formerly part of the Soviet Union).

OECD (Organization for Economic Cooperation and Development) refers to a group of nations that are part of the developed (industrialized) world.

Table 1.2 - Informal Employment as a Percent of Non-Agricultural Employment (1995-2000) (06P1)

This global informal working class is now almost one billion strong: It is the fastest growing and most unprecedented social class on earth. According to the UN study of urbanization (03U1), "informal" workers are now about 40% of the economically active population of the developing world.

During 1994-2000 "informal" employment accounted for 72% of nonagricultural employment in Sub-Saharan Africa (84% of female non-agricultural workers) (05A1).

A comprehensive survey of informal economies in 110 developing-, transitional- and industrialized countries estimated that the average size of the informal economy in OECD countries was equivalent to 18% of their Gross National Income (GNI) in 2000 (02S1). The average size of the informal economy in just the developing nations in 2000 ranged from 26% of GNI in Asia to as high as 40% in Africa (See Table 1.1 of Ref. (06P1)).

In 2002 Thailand's informal economy, including agriculture, accounted for 43.8% of GDP (33.8% excluding agriculture.) (05N1)

Over 92% of India's total workforce (or 343 million out of 370 million) is (in 2005) employed in India's informal economy (05G1). In 1993, around 70% of the workers in the formal sector of India's economy were employed in government-, quasi-government- and public-sector enterprises (94P1). India's private sector thus provided employment to only 30% of the labor force employed in the formal economy in 1993 (06P1). If one makes the reasonable assumption that only 30% of India's labor force was employed in the formal economy in 2005, then the private sector of India's formal economy provided employment for only (100%- 92%) x 30% = 2.4% of India's workforce in 2005.

The share of formal employment in Dhaka is much higher than the rest of Bangladesh at 51% including 14% in the public formal sector and 37% in the private formal sector, meaning that 49% of employment in Dhaka is in the informal sector. For Bangladesh as a whole, 80% of employment is in the informal sector (07B1).

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Evidence from many developing countries shows that the majority of new employment - both self-employment and wage employment - is generated within the informal economies of developing nations (06P1).

The UN study of urbanization (03U1) estimates that 90% of urban Africa's new jobs over the next decade will come from the "informal" sector.

It is estimated that the informal economy will account for over 50% of the urban workforce in the developing world by 2010 (06P1).

In Latin America, both state employees and the more formal work force have declined in every country of the region since the 1970s while the "informal" sector of the economy has dramatically expanded (03P1). If someone is looking for a cause of the leftward drift of Latin American politics in recent years, they might want to ponder the effects of the growth of the informal sector there.

The informal economy has been one of the few areas of employment growth in post-apartheid South Africa (06P1). In Durbin (a large urban area in South Africa) the Durban Economic Development Department (2000) found that only 33% of economically active residents are employed in the formal economy. It also found that formal jobs in Durban are being lost at a rate of 1.5%/ year. Particularly hard-hit have been industries like clothing, footwear and textiles in the face of rapid tariff liberalization in the post-apartheid period. Evidence suggests that some of these industries are falling into the informal economy (06P1).

Table 1.3 - Employment in Durbin's Informal Economy (1997-2003) (06P1)

The city of Dhaka in Bangladesh attracts 300,000-400,000 new migrants each year. Population projections indicate that Dhaka is expected to grow to about 20 million in 2020, making it the world's third largest city. Its population is currently around 12 million (07B1). New migrants typically become members of the informal economy. Between 1995 and 2000, Dhaka grew at an average rate of 4.24%/ year. Much of its growth stems from migration, with 46% of its 1991 population born outside the metropolitan area. Rural-to-urban migration is attributed to extreme rural poverty and landlessness, and large urban-rural wage differentials (07B1) (04U1). Much of the urban-rural wage differentials is probably illusory, reflecting the fact that most developing world farmer families grow much of their food and livestock for their own consumption or for barter. Such consumption and barter are not counted as wages. As farm sizes shrink due to continually dividing the farm up among numerous children, an increasing fraction of farm outputs become self-consumption.

It is estimated that the current rate of urbanization, about one-third of the entire population of Bangladesh will move to urban areas by 2010. As Dhaka is one of the main destinations for migrants, the city is projected to grow by 7 million people to 19.5 million by 2017. One of the main reasons for this dramatic growth is the constant influx of rural migrants. Previous estimates show that rural-to-urban migration contributed 60-67% of the urban growth rate in Bangladesh. The rural-to-urban migration rate reached 4.9%/ year during the 1980s and 5.9%/ year during the 1990s (07B1). The bulk of the new arrivals to the urban scene wind up in the informal economy since the formal economy grows very little.

The informal economy in Latin America has undergone steady growth over the past quarter-century. Tokman (Ref. (01T1), p. 20), estimates that over 46% of urban employment in Latin America is now informal, and that, of all new jobs generated since 1990 in the region, 60% were informal. This growth in the informal sector is the likely result of a combination of macro-economic and social conditions in the region, including rapid urbanization, a severe economic crisis in the 1980s, and neo-liberal economic reform in the 1990s. (The severe economic crisis of the late 1980s was a severe currency devaluation that affected most of Latin America including Mexico, Southeast Asia and other regions. It inflicted extreme hardship on the people. It was a result of globalization-related trade agreements allowing external sources of capital to withdraw their investments very rapidly. Countries like Chile avoided the crisis by ignoring the edicts of the trade agreements.)

In Peru, most estimates place the size of Lima's informal economy at 50% or more of the city's workforce. Of the roughly 3.5 million economically active residents in Lima, at least 1.75 million work informally. According to the International Labor Organization in 2000, for example, the percentage of the workforce employed in Lima's informal economy grew from 37.9% in 1984 to 50.8% in 1997 (06P1).

Mexico's informal 'sector' has not been growing at a higher rate than the rest of Mexico's economy over the past decade (06P1). This is one of the few instances in the developing world where those in the formal economy are not being forced into the informal economy. A possible reason for this is US investments in manufacturing facilities in northern Mexico. This may change however, since Mexico is now losing jobs to nations in Eastern and Southeastern Asia where labor is much cheaper. Also, northern Mexico is suffering from increasing scarcities of water as rivers and aquifers are being drained.

The informal economy in Nairobi (in Kenya) expanded considerably in the 1980s and 1990s due to harsh economic circumstances, including a suspension of World Bank loans and assistance. Unemployment and inflation both worsened significantly during that period, leaving as many as 16.8 million Kenyans below the poverty line of US$1/ day. The "structural adjustment policies" (SAPs) imposed by the IMF, the World Bank and the WTO led to massive lay-offs in the formal employment sector. (See Section [D3] ) Rising poverty in rural areas resulted from the agricultural system being forced to become part of the global agricultural marketplace where it had to compete with heavily subsidized developed world agricultural exports. This further exacerbated the problem since it drove migrants from rural areas to cities such as Nairobi, where no employment was readily available. In 1999, it was estimated that street-based workers (invariably in the informal economy) in Kenya numbered more than 415,000. Nairobi accounted for about 200,000 of these (04W1).

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This is not the first time that the developing world's work force was "informalized." During the late Victorian globalization (1870-1900) a huge number of subsistence peasantries of Asia and Africa were forcibly incorporated into the world marketplace. Millions died of famine, and tens of millions more were uprooted from traditional lifestyles. Latin America saw the creation of a huge class of increasingly wretched semi-peasants and farm laborers who lacked any sort of secure means of subsistence (01D1). The previous "Informalization," like the current one, took place during a period of globalization, and could probably be blamed directly on the globalization process. The role of the current globalization on the current "informalization" does not appear to be quite as direct. Pushing developing world farmers into a global agricultural economy dominated by heavily subsidized developed world agribusiness clearly played some role in the current "informalization," but other factors are also playing a significant role.

Incomes generated from informal enterprises in developing countries usually cannot support anything beyond the most minimal standard of living. Informal enterprises involve little capital investment, virtually no skills training, and few opportunities for expansion into a viable business since the needs of bare subsistence require any capital that is created. Economists puzzle over how "informal" workers manage to survive. As the developing world continues to become more urbanized, the "informal" sector of the developing world's economy continually increases in size, as do all the social, economic and political factors associated with the informal sector and the rural-to-urban migration. Almost half of the 750 million sub-Saharan Africans survive on less than $1/ day (06R1). The bulk of the informal workforce in sub-Saharan Africa falls within this category. Many sub-Saharan African cities have fallen into a serious state of disrepair since the 1970s under the strain imposed by rapid population growth, scarce foreign investment, and government mismanagement (97R2). Rapid population growth in largely agricultural economies characterized by a lack of undeveloped arable land is one of several key factors (described in Section [D3] below) that drive the rural-to-urban migration. That creates huge and impossible demands for capital to finance the infrastructure growth that rapid urban population growth demands. This, in turn, creates an extreme scarcity of financial capital that creates social, political and economic instabilities that discourage foreign investment and makes sound government an unaffordable luxury.

A large group of developing nations, from Latin America to Africa to the former Communist countries has experienced a quarter-century of decline or stagnation, punctuated by civil wars and international conflicts. They experienced deterioration in living standards as key social services became privatized and more costly (e. g. water in Cochabamba, Bolivia and Trinidad, and electricity in Argentina and Chad). To add insult to injury, Western pundits often arrived in developing nations by jet, stay in luxury hotels, and hail the obvious worsening of economic and social conditions as a step toward better lives and international integration. For many people in Latin America and Africa, globalization appears to be nothing more than a new and more attractive label for the old imperialism or for re-colonization. The recent leftward tilt of Latin American politics may be one byproduct of this (06M1).

The main feature of being part of the informal economy in a developing nation is the extreme poverty characterizing virtually everyone in the informal economy - earnings typically on the order of $1/ person/ day, barely enough for the essentials needed for survival, and rarely enough to save any money for possibly buying some land or investing in human capital creation (education) or paying the costs or starting up a formal enterprise that are required by government regulations. Table 1.4 below gives some costs of starting up a formal enterprise for various regions of the world. Clearly, for someone earning barely enough to survive, such costs are prohibitive. The origin of these regulations might reflect the desire of businesses in the formal economy to reduce competition. In essence it has all the characteristics of the early stages of a Caste system that creates a permanent under-class from which there is no escape. It has been noted (05L1) that Latin America's economy has always been mainly natural-resource oriented, so there has always been a public policy of keeping public education standards low in order to maintain abundant supplies of low-cost labor (05L1). So Latin America's de facto Caste system probably pre-dated the current explosive growth of their informal economy precipitated in part by "Structural Adjustment Programs" described in Section [D3] below.

Table 1.4 - Cost of Regulation: Requirements to Start a Legal Business (06P1)

** MENA = Middle East - North Africa
* OECD (Organization for Economic Cooperation and Development) refers essentially to the bulk of the countries in the developed ("first") world.

The half of the world's population that works in informal economies generally lack birth certificates, legal addresses or, crucially, deeds to their shacks and market stalls. Without legal documents, they live in constant fear of being evicted by local officials or landlords. As a result, the poor are unable to invest in, or even plan for, the future. In many countries, 80% of homes and businesses are unregistered, while about a third of the developing world's GDP is generated in "informal economies." Would-be entrepreneurs in developing countries often face a tangle of bureaucratic requirements and high fees that discourage them from seeking legal status. As a result, these small-scale business owners can't obtain legal loans, enforce contracts or develop their businesses beyond a narrow sphere (07A1).

National governments and municipal authorities in many countries generally treat the urban informal economy as undesirable. They often target punitive or restrictive policies specifically at informal enterprises. Small and micro-entrepreneurs intent on setting up and operating new businesses are usually subject to complex regulatory barriers. On top of raising production costs and reducing competition in the formal economy, such policies contribute to informal economy growth in developing countries. As Table 1.4 shows, the average cost of regulation as a proportion of Gross National Income (GNI) per capita is considerably higher in developing regions or groupings than in those more developed countries (06P1). In Africa, 83% of countries have/ had policies to reduce rural-to-urban migration, as do 73% of those in Asia and Oceania. The second most common policy aims at reducing migrant flows to large cities. Since 1976, the percentage of developing countries with such policies rose from 44% to 74% in 2007. In Oceania, 83% of countries have such policies, in Africa 78%, in Asia 71% and in Latin America and the Caribbean, 68% do (08U1).

In 2005 Zimbabwe destroyed the informal shacks and markets proliferating in its cities. About 700,000 people had their homes or market stalls destroyed. Most are still waiting for the replacements that they were promised by the government (07U1).

The Zambian government is now threatening to tackle urbanization in much the same way as Zimbabwe. In March of 2007, some illegal houses were razed in Lusaka, Zambia's capital, and officials have threatened to intensify the "cleanup" and extend it nationwide (07U1).

African cities are struggling to cope with an unprecedented influx of people from rural areas. Making a living plowing tiny and shrinking plots of arable land is hard, and cities offer more hope of jobs (07U1).

Luanda (in South Africa) was built for 0.5 million people, but now has at least 4 million. Many of them fled to Luanda during Angola's horrific civil war (07U1).

In Johannesburg, South Africa's business capital, over 20% of Johannesburg's population is thought to live in shacks. Johannesburg cannot build cheap houses fast enough (07U1).

In Alexandra (one of Johannesburg's townships) shacks have been built dangerously close to the river and people drown when it swells (07U1).

In Johannesburg's old central business district, for years the city has been evicting poor people who had moved into the many abandoned buildings, claiming that they are unsafe. Property developers are turning decrepit buildings, abandoned when most businesses fled a crime-wave for the northern suburbs in the early 1990s, into swanky apartment blocks, and property prices have been rocketing. In downtown Johannesburg, those who have lost their homes often move to the next derelict building to stay close to their livelihood. In Luanda (in South Africa?), people are coaxed to leave their shacks and move to new houses, but many move quickly back into town. The new houses are too far out, with no adequate public transport, and they are sometimes built before water, electricity or schools get there (07U1).

About 1/3 of the world's urban dwellers live in slums. The UN estimates that this fraction will double by 2030 as a result of the rural-to-urban migrations that are producing rapid urbanization in developing countries (07R1). Latin America is the most urbanized region in the developing world (07R1). Rural areas of Latin America have long been poor, probably reflecting a combination of the typically low fertility of tropical soils (08S1) and the typically natural-resource basis of Latin America's economy (05L1). This rural poverty has fueled migrations that turned regions that were predominantly rural in 1950 into regions that, today, are about 75% urban (07R1). Latin America hosts a number of economies that are growing and doing well, but the way Latin American economies are growing is generating more shantytowns. According to a senior advisor on Latin America and the Caribbean for the UN Human Settlement Program, this mode of growth "is a growth that is just generating wealth for those who have it (07R1)." Buenos Aires (Argentina's capital) is recovering from a devastating economic crash in 2001, and its economy has grown by more than 8%/ year during the past 4 years. However, population growth in Buenos Aires is fastest in its shantytowns (07R1). City agencies estimate that 300,000 to 500,000 people in Buenos Aires (with a total population of 3 million) live in slums (07R1).

Workers in India's formal sector are engaged in factories, commercial and service establishments and their working conditions, wages and social security status and entitlements are legally protected. The wages of formal sector workers are substantially higher than those in the urban informal sector. Formal sector jobs are protected by a range of labor laws that guarantee permanent employment and provide for retirement benefits. Workers in the informal economy are not entitled to most of the benefits, nor to the degree of job-security enjoyed by formal sector workers. Informal jobs are insecure as most labor legislation gives them no protection. Although labor laws in India are supposed to apply to all sections of industrial labor, some in-built provisions exclude large sections of the labor force (06P1). This situation is not unique to India; it is common throughout the developing world. Thus, not only are members of the informal economy wretchedly poor, but they also suffer from the lack of all sorts of legal protections enjoyed by members of the formal economy.

Life in Dhaka (in Bangladesh) is increasingly characterized by large slums, poor housing, extremely high land prices, traffic congestion, water shortages, poor sanitation and drainage, irregular electric supply, unplanned construction, increasing air pollution and poor urban governance. All this results in growing problems of law and order (07B1).

Close to 80% of Dhaka's slums are located on privately owned land, invariably meaning that residents are neither owners nor renters. They are therefore subject to eviction at any time. Housing structures tend to lack access to basic infrastructure services. For the poorest quintile, only 9% of households have a sewage line, and 27% obtain water through piped supply (compared with 83% of the wealthiest). Spatial mapping shows that only 43 of the 1925 identified slums of Dhaka have a public toilet within 100 meters. An estimated 7600 Dhaka households live in slums that are within 50 meters of the river and are therefore at risk of flooding (07B1).

Under-employment affects 20% of Dhaka's households. Approximately 20% of all children between ages 5-14 work. Most child workers are 10-14 years old. In the poorest households with child workers, earnings from the children represent about one third of total household income (07B1).

Dhaka has emerged as a city of crime, insecurity and political violence...social unrest, violence, theft, robbery, looting, murder, hijacking, arson, throwing of acid on innocent females, raping of minor girls, possession and use of illegal arms, illegal rent/ toll collection, frequent traffic congestion, etc. All this has phenomenally increased over the years and has now become a way of life in Dhaka city, especially for those in the informal economy (00S1) (07B1).

About 93% of respondents in a Dhaka survey report that they had been affected by crime and violence over the last 12 months, with 33 different types of crime identified by the respondents. Among the most commonly reported crime and violence are toll collection, mastaan-induced violence, drug and alcohol business, land grabbing, gambling, violence against women and children, illegal arms businesses, arson in slums, murder and kidnapping, and domestic violence (07B1). (Mastaans are essentially thugs who carry out the orders of landowners against squatters, etc.) About 60% of crime victims state that the incidence of crime and violence is not reported to anyone. When reports are made, it is to community leaders and family members. Only 3% say that they reported the incident to the police, and even fewer incidents get reported to Ward Commissioners. The survey indicated that the police took action against a reported perpetrator in only 1% of all cases (07B1).

About 79% of slum formation in Dhaka takes place by squatters occupying privately owned land (79%), and 18% takes place by squatters occupying government-owned land (07B1). Residential land values in Dhaka make it impossible for the poor to purchase land in the open market within the Dhaka City Corporation area. The smallest lot Dhaka grants building permission for (1050 square feet) would cost US$12,600, which is equivalent to nearly 20 years of income for an average poor household. The cost of housing would be additional to the lot price. Consequently, it is estimated that 97% of the urban poor in Dhaka do not own any land (07B1). Hence they must be squatters on other people's land and be subject to eviction at any time. 70% of urban development in Dhaka is informal. This results in large-scale evictions of slum dwellers with no relocation plans, and building on environmentally sensitive public lands such as flood plains or retention ponds (07B1).

Only 40% of the heads of Dhaka's poor household have achieved more than 5 years of schooling (07B1).

About 70% of Dhaka households under the poverty line ($1/ person/ day) do not have access to piped water, and use tube wells as their main water source. About 90% do not have access to a sewage line. Only 43 of the 1925 identified slums of Dhaka are within 100 meters of a public toilet (07B1). The largest slum, Korali Basti in Banani, with more than 12,000 households, does not have a single public toilet or health clinic. Problems of poor sanitation are made worse by the high population density in slums. This results in transmission of communicable diseases and other problems (07B1). Tube wells are being built by the millions in India and Bangladesh. They are being abandoned almost as quickly due to the aquifers they are tapped into being drained of their water (07S7). Surface waters, too, are being threatened by vanishing glaciers in the Himalayan Mountains, threatening the continuity of the surface water supplies of two billion people (08S1).

Only 7.3% of Dhaka's slums have a public health clinic, and 26% have a government (public) school (07B1).

The World Bank estimated that, in 1985, 330 million urban poor people lived in developing countries, defined by an income cut-off of US$370/ year (about $1/ capita/ day). The World Bank estimates that, in 1994, roughly 450 million urban dwellers (25% of the developing world's 1994 urban population) lacked access even to the simplest latrines. The UN Population Fund concluded in 1996 that 28% of urbanites in developing countries were living in poverty, including 41% in sub-Saharan Africa (96U1). Yet these estimates may be too low. The World Health Organization (WHO) and the UN Center for Human Settlements have endorsed a 1990 estimate based on dozens of national- and city studies that determined that 600 million urban dwellers (42% of the 1990 urban population in developing nations) live in "life- and health-threatening" homes or neighborhoods (90C1).

Urban poverty appears to be increasing in developing countries. In Latin America, urban areas contained 36% of that region's poor in 1970, but 60% in 1990, even though the pace of urbanization was considerably slower during this period. The World Bank estimates that by 2025, the majority of the world's urban population will be living in poverty (96M1) (99W1). (In developing countries, that fraction will, of course, be larger.)

• Globally, there were at least 921 million slum dwellers in 2001 (03U1);
• Slum residents constitute 78.2% of urban populations of the least-developed countries ((03U1), p. 2-3);
• Slum residents constitute a third of urban populations globally ((03U1), p.2-3);
• 85% of urban residents of the developing world occupy property illegally (03K1).

In most countries, the rural population has the highest fertility, the lowest level of contraceptive use and the highest level of unmet need for family planning. Usually, the urban poor (essentially the informal economy) exhibit levels of fertility, use of modern contraceptives and unmet need closer to those of the rural population than to those of the urban population who are better off (07U3).

The urban health advantage, however, masks enormous disparities between the urban poor (typically the members of the informal economy) and their more affluent neighbors. A study in Bangladesh in 1990, for example, found that in three low-income urban areas between 95 and 152 infants per 1000 live births died before the age of 1; in a middle-class area, 32 of 1000 births died. Infant mortality in the urban slums was higher than in rural Bangladesh. In Porto Alegre, Brazil, the infant mortality rate in the early 1990s varied from more than 60 deaths per 1000 live births in the city's poorest districts to less than 5 in the wealthiest. Research in Quito, Ecuador, uncovered infant mortality rates of 129/1000 live births within families of manual workers in squatter settlements vs. 5 in upper-class districts (95H1). All this would suggest that the health benefits of migrating from rural areas to urban areas in developing countries that have been alleged by some sources (08U1) are largely illusory.

Recent studies find that the deterioration of mental health and increased rates of psychiatric disorders and deviant behavior are associated with degraded living conditions, overcrowding, and rapid social and cultural change typical of poorer urban areas in developing countries. Depression is projected (by the WHO) to become the leading disease burden in developing countries by 2020, when more than 50% of that region will be urban (97T1). In rural areas of the developing world, such health effects are not known to exist to any significant degree.

Urban areas of developing countries are also prime locations of HIV/AIDS. In sub-Saharan Africa, where about 80% of all AIDS deaths have occurred, HIV infection is much higher in urban areas than in rural areas, in some places by a factor of four (94U1).

Urban areas also had higher death rates than rural areas during the boom period (1875 to 1900) of urban growth of many countries in Europe and North America. The urban health services and sanitary infrastructure were not able to keep up with the demand generated by rapid in-migration. In the US in 1900, for instance, for every 1000 children born, 177 died before age 5 in rural areas, compared with 215 in urban areas in general, and 237 in New York City in particular (99P1). In Prussia in 1875, the infant mortality rate was 190 in rural areas and 240 in urban areas. High population densities also led to high levels of tuberculosis in urban areas of Europe and the US in the late 19th century (00V1).

In the 1990s, many political scientists grew concerned that rapid urbanization and city growth in developing countries, coupled with its tendency to increase urban poverty, often led to civil violence in cities that threatened national political stability (93H1). Some analysts predict that urban poverty will become the most significant and politically explosive problem in the 21st century. Without policies that redress social inequalities, claim some demographers, urban areas will experience escalating crime and violence punctuated by sporadic riots and increased terrorism (92H1).

The U.S. CIA (00C1) concluded that a key driving trend for the Middle East in the next 15 years will be population pressure. They point out that, even now, in nearly all Middle Eastern countries, over half of the population is under age 20. "In much of the Middle East, populations will be significantly larger, poorer, more urban and more disillusioned" (00C1). The CIA report concludes that "linear trend analysis shows little positive change in the region, raising the prospects for increased demographic pressures, social unrest, religious and ideological extremism and terrorism directed both at the regimes and at their Western supporters" (00C1). It seems unlikely that a military approach is likely to make the youth of the Middle East richer, less urban, less disillusioned, or less hateful of the West (07S6).

The 1979 Islamic Revolution in Iran is frequently cited as an example of how urbanization can generate political turbulence. In the decades preceding this revolution, population growth rates in Iran were several times higher in urban than rural areas, mainly because of rapid rural-to-urban migration. Young migrants became more educated yet remained poor, creating a large population of frustrated urban youth, who mobilized to overthrow the Shah in a dramatic revolution. A similar scenario has been envisioned for African countries (96K1). Part of this problem stems from the fact that people in urban areas are better situated to riot than people in rural areas.

Most urban growth in developing countries in recent decades has been attributed to natural (birth) increase. Nonetheless, the population policies to reduce urban growth in most developing countries have focused almost solely on restricting in-migration and, indirectly, altering the geographic distribution of populations. Such migration-oriented policies have included eligibility requirements that limit people's ability to move (in China and Ethiopia, for example), rural development schemes to encourage people to stay in rural areas (Malaysia and Vietnam), and land colonization schemes meant to attract settlers to newly developed areas (as in Brazil and Indonesia). With rare exceptions, such as South Africa under apartheid, these migration-oriented policies have failed to curb the pace of urban growth. In contrast, policies that accommodate migrants from the countryside and assimilate them to the more modern social norms and behaviors of urban areas have more effectively curbed urban growth by reducing migrant fertility (98B1).

This more optimistic perspective maintains that any urban area with good management capabilities can absorb large population increments without diminishing human welfare or the quality of the environment (94C1). The key to success is a commitment to adopt policies that, among other things, maintain infrastructure, increase productivity of the labor force, and alleviate poverty. A frequently cited example of urban managerial success is Curitiba, in Brazil, which through innovations to encourage use of buses rather than cars, land use regulations that conserve green space, and other measures, has avoided the degradation experienced in most other cities of comparable size in developing countries (92R1). This perspective may be less than realistic. Maintaining infrastructure in situations of rapid population growth creates huge demands on financial capital that are impossible to accommodate in most developing countries (06S1) (07S6). In situations where population growth is driven by wretched rural farmers driven off the land into rural slums and from there into the informal economy, the demands for infrastructure growth needed to meet the needs of population growth are virtually assured to be impossible to meet.

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Informal economies have been around for countless decades. What is different today is the huge scope of the developing world's informal economies. In general terms, roughly half of the world's population works in informal economies. Also, formal economies in developing nations tend to be either stagnant or growing much slower than informal economies. The world's population is expected to increase by roughly 50% by 2050, at which time population growth is expected to slow to near zero. If this situation continues, simple arithmetic suggests that two-thirds of the world's population to be working in informal economies by 2050. Those working in informal economies tend to suffer from a significant amount of deliberate oppression and abuse at the hands of those in the world's formal economies via the dominant influence that those in formal economies exert on government policies. It is thus easy to foresee major increases in social, political and economic instabilities resulting from the evolving world order. It is clearly important, then, to identify and understand the processes that lie behind the growth of the world's informal economies. By doing this we can put ourselves in a better position for developing strategies for reducing the rate of growth and the sheer size of the developing world's informal economies. In this section we attempt to identify and understand the processes behind Informalization. Then we develop strategies for improving on the prognosis for this "disease."

Rural-to-urban migration (also called "urbanization") on a massive scale is now a well-documented global-scale phenomenon (00B2). It is not limited to developing nations. People do not migrate from rural areas to urban areas on a massive scale without a good reason that is broadly applicable to a significant fraction of the population. In the developed world the conversion from labor-intensive agriculture to capital-intensive agriculture has dramatically reduced the amount of agricultural labor required per unit area of land. The "Green Revolution" and the development and rapidly expanding rates of consumption of chemical fertilizers and the expansion of irrigated lands made it possible to satisfy the developed world's food needs without the need to expand agricultural lands areas in parallel with population growth. Only a few percent of the population of the developed world is now needed to produce the food required for consumption within the developed world and for export to developing nations. Thus the number of agricultural jobs available in rural areas of developed nations has fallen (and is falling) accordingly. This explains the rural-to-urban migration in developed nations. The explanation for nations of the developing world is almost totally different.

Hundreds of millions of people in developing nations are hungry and, in many cases, starving to death. But in order for the developed world to produce the surplus (exportable) food required to feed the hungry and starving in developing nations requires capital-intensive and natural-resource-intensive agriculture. It also requires labor inputs that earn at least a factor of ten higher wages that those typical of developing nations. So the capital- and labor inputs required for producing exportable crops and livestock in developed nations requires food prices that the hungry and starving of developing nations cannot afford - even with the huge subsidies that developed nations worldwide bestow on their farmers, or more correctly, on their agri-businesses.

In developing nations the rural-to-urban migration on a massive scale entails typically migration from rural (i.e. agricultural) areas to the wretched slums ringing most of the large urban areas of the developing world -and then becoming part of the informal economy and all the wretchedness, instability and hope-deprivation that entails (See Section [C]). No one is likely to do this unless their rural lifestyle entails an environment that is even worse. Since the scale of the rural-to-urban migration in developing nations has been growing rapidly and is now huge, one must assume that rural (agricultural) life in developing nations has gotten really bad. There seems to be only one possible way this could have happened. The supply of undeveloped arable land has effectively vanished (08S1). If this were not the case, as population growth continued and as family farms kept being subdivided among multiple heirs, farm families would simply meet their growing food needs by expanding their plots of land to take advantage of the increasing amount of labor available and nothing would change. Obviously things are changing. It doesn't have to be just population growth butting up against a finite supply of arable land that is the problem. The capital intensiveness of developing nations' agriculture is also increasing - but more slowly than in developed nations because the low price of labor does not justify high levels of capital intensiveness. The results of increasing capital intensiveness of agriculture in an environment of limited supplies of arable land are much the same as population growth under the same circumstances. Another problem with the same consequences is the conversion of vast areas of arable land in developing nations to grazing lands for raising cattle for developed world consumption (07S5). This is an especially serious problem in the tropical rainforests of Latin America. Adding insult to injury, the labor requirements of a given area of cropland are hundreds of times greater that the labor required by the same area of grazing lands. Thus the conversion of croplands to grazing lands in developing nations reduces the land available for cropland, reducing local food supplies, and pushing more rural people into wretched informal economies that they have no experience in dealing with. That migration often includes a stopover in the form of attempts to farm previously undeveloped steep, rocky hillsides. Unfortunately there is little, if any, hope of conducting agriculture in such an environment in a sustainable fashion. As a result, such stopovers typically last for only a decade or two.

The contention that the supply of undeveloped arable land in developing nations is essentially negligible is controversial (08S1). The FAO and others point to aerial photos and other data suggesting that the supply of undeveloped arable land in developing nations is at least as large as the current area of developed croplands in those nations. This contention seems to be incompatible with numerous on-the-ground observations. The situation for shifting cultivators in the world's tropical rainforests can easily be seen to be a problem of too little arable land relative to the population of shifting cultivators. The result is reductions in fallow periods from around 20 years to 3-10 years - much too short for the land to restore its nutrient levels. (See Section (G) of Chapter 1 in Reference (08S1) for lots of data and analysis relevant to that issue.) Even in the case of developed nations there is much evidence that the supply of undeveloped arable land is extremely limited. Such phenomena as:

• The degradation of the soils of North America's vast grain lands;
• The effects of the US Conservation Reserve Program on reducing soil erosion rates;
• The tendency to develop croplands on semi-arid lands in the US

all offer evidence of a developed world with relatively minor reserves of undeveloped arable land. The issue is examined far more fully in Section (D) of Chapter 1 of Reference (08S1).

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Population growth requires financial capital to pay for the expansion of infrastructure required by the additional people. "Infrastructure" includes the educational-, industrial-, commercial-, and transportation- systems, plus housing, land development, judicial- and other governmental agencies, utilities etc. Economist Lester Thurow (95C1) estimated that each 1%/ year of population growth requires an expenditure of 12.5% of the GDP to pay for the additional infrastructure required. The population growth rate of the developing world is about 1.4%/ year. Their 1997 GDP was $5800 billion (00W2). Extrapolating at a rate of 2%/ year gives a 2007 GDP of $7070 billion. The Thurow correlation thus indicates that about $1240 billion/ year is required for the developing world to pay for the needed additional developing-world-class infrastructure. The median earnings of people in the developing world is less than $2/ person/ day. This is essentially subsistence level. Paying for an additional $1240 billion/ year is thus something that the people of the developing world cannot afford. As a result, much of this infrastructure growth comes in the form of unmet need, meaning an ever-diminishing per-capita infrastructure. This results in an extreme scarcity of financial capital and hence of human capital and other forms of capital. That scarcity produces the bulk of the differences between the developing world and the developed world.

This scarcity has all kinds of ramifications. For example, the cost of imported chemical fertilizer in sub-Saharan Africa is about six times the price in the EU, due largely to the lack of (and the low quality of) transportation systems (02F1). On the basis of the hours of labor required to purchase a ton of imported fertilizer, the cost of chemical fertilizer in sub-Saharan Africa is thus about 60 times that in the EU. The result is a very low level of consumption of chemical fertilizer, meaning that Africans must "mine" the nutrients from their typically low-fertility tropical cropland soils (02F1). This explains why food productivities of sub-Saharan Africa keeps dropping, and why the per-capita food productivity keeps dropping even faster, and why there is so much hunger in sub-Saharan Africa.

With extreme scarcity of financial capital comes increasing desperateness in the pursuit of basic human needs. This translates into escalating competition between national, ethnic, religious, class and racial groups for basic necessities The resultant armed conflicts greatly increases the risks associated with capital investments, and this results in an even greater scarcity of financial capital. This means that the developing world must spend about $273 billion/ year on military expenses for its numerous civil wars (1999 data, CIA World Fact Book, 2000). This amount does not cover losses of capital facilities that occur as a result of war and terrorism. Extreme scarcity of financial capital also translated into huge unmet costs of stemming the degradation of its agricultural systems, fisheries and water supplies (Appendix of Ref. (06S1)). Also external debt, and debt payments thereon, must become even larger and more unmanageable. Also, these social, political, economic and military instabilities diminish the safety of capital investments, and this can only magnify whatever financial capital scarcity problems exist. It is this environment that contributes to the huge and rapidly expanding informal economies that characterize so much of the developing world today.

Recent research (05M2) has examined the more common theories as to why the poorest countries of the third world have been falling further behind the rest of the world economically during 1980-2002. The median per-capita growth of the poorest countries during that 20 years has been zero, but positive everywhere else. The research found that only one theory offered a statistically significant explanation as to the cause of this failure - involvement in wars and civil conflicts. This, of itself, is not a useful conclusion. However the research failed to consider high fertility rates as a possible explanation. Nor did it examine what possible effect high fertility rates may have played in the greater likelihood of poor countries being involved in wars and civil conflicts. Fortunately a later study made the relationship between fertility rates and the probability of civil armed conflict fairly quantitative. The results of this study are summarized below.

The combined results of these two studies show that significant reductions in fertility (an inexpensive process) would greatly decrease the incidence of civil conflict and provide significant economic benefits to the developing world. This, in turn, would greatly reduce another major drain on developing world capital creation. It would also make the developing world a safer place for capital investments. This would reduce, still further, the scarcity and cost of financial capital and generate major improvements in developing world agriculture.

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Part [D3] ~ Context -- False Ideologies on the part of the Developed World's Financial Institutions
The International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) used the leverage they had via their loans to developing nations and globalization trade agreements to impose extreme hardships on deeply indebted developing nations. They forced these nations to devalue currencies, privatize state infrastructure and services, remove import controls and food subsidies, charge consumers the full cost of health- and education services and generally downsize the public sector. They devastated rural smallholders (farmers) by eliminating government agriculture subsidies and pushing them into global commodity markets that were dominated by developed world agribusinesses (that are heavily subsidized by developed-world governments) (00B1). For the typical developing nation with an economy that is 50-70% agriculture-based, this is no small matter. Cambodia and similar developing nations in Southeast Asia illustrate the point. About 80% of Cambodians work in agriculture - typical of poorer developing world countries. Before it joined the WTO in 2004, impoverished Cambodians agreed to expose their farmers to more competition that the wealthy EU and the US were willing to accept for theirs (06W1). Unfortunately the poorer of developing nations lacked both the negotiating skills and political clout to pull this off, and their staggering external debt gave them a weak hand to start with. The Internal Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) have overwhelming influence over countries with large external debts, and these organizations take a dim view of tariffs, thus giving the US and EU the upper hand in any trade negotiations. The results of all this were huge trade deficits that poorer developing nations like Cambodia cannot afford (06W1). (They cannot afford to subsidize their agriculture to anywhere near the extent to which the US and the EU subsidize theirs.)

All this was apparently designed to make developing world economies more "efficient" and thereby enhance the economic well being of the citizenry involved and thereby enhance the prospects that the developing world's several trillion dollars of external debt might some day be repaid. These imposed policies are often collectively termed "Structural Adjustment Programs" - SAPs. The results achieved were the opposite of those apparently intended. Some nations (e.g. Chile, China, Viet Nam) were able to avoid serious economic harm by instituting policies that ran counter to the "free trade" spirit and intent of globalization treaties and to the demands of the IMF et al. Other nations were devastated. (See Section (4-C) of Ref. (07S1).) Note that protectionist tariffs and subsidies were the mechanisms used by today's wealthy nations to climb from agriculture-based economies (typical of today's developing nations) to economies based on urban, high-value goods and services (03C1).

The UN's major study of urbanization (03U1) concluded that the single main cause of increases in poverty and inequality in developing nations during the 1980s and 1990s was the "retreat" of the state (i.e. privatization imposed by SAPs). The middle class disappeared. The brain drain to oil-rich Arab countries and to the West increased dramatically (95B1). In Africa, SAPs resulted in capital flight, collapse of manufactures, marginal or negative increases in export income, drastic cutbacks in public services, soaring prices, and steep declines in real wages (97R1). Developing world economies tend to be predominantly (e.g. 70%) agriculture-based. Hence, during the past few decades, SAPs were one of several key causes of mass migrations to the wretched slums that ring nearly all large urban areas in developing nations. There the ex-farmers found themselves in the informal economy - something they had no experience in dealing with.

In South America during 1970-1990, per-capita food supplies increased by almost 8%; yet the number of hungry people increased by 19%. In South Asia during 1970-1990, per-capita food supplies increased by 9%; yet the number of hungry people increased by 9% (00R1). In contrast, China (which was able to avoid being affected by SAPs), the number of hungry people dropped from 406 million to 189 million during 1970-1990 (00R1). Argentina has always thought of itself as Latin America's model for egalitarianism (08L1). In the 1990s its public sector was privatized (by "Structural Adjustments Programs" (SAPs) imposed by the World Bank, the IMF and the WTO) and the economic situation began to deteriorate. The financial crisis of 2001 (the rapid currency devaluation that also devastated much of southeast Asia and much of Latin America - except Chile that rejected SAPs) pushed 50% of Argentina's population into poverty. Argentina's national currency collapsed; savings accounts were wiped out. All this made Argentina much more like the typically "segmented" (stratified) societies common in the rest of Latin America. Some attribute Argentina's lingering income disparities to a decline in the quality of public education. At the peak of the 2001 crisis, half of all jobs in Argentina wound up in the "informal" sector. As was the case elsewhere in the developing world, few jobs in the informal sector provided benefits, protection, or true prospects for mobility. The situation could be permanent; since privatization of the public sector (imposed by SAPs) in the 1990s usually changes public education to private education. Students' families must therefore pay directly for their children's education or see their children remain uneducated. Today, 25% of Argentina's population lives in poverty - quite a comedown for a nation that once prided itself in an egalitarian ethos (08L1).

The major UN study of urbanization (03U1) concluded that, in modern times, instead of becoming a source for growth and prosperity, SAPs and trade liberalization (globalization) have caused cities of developing nations to become "dumping grounds" for surplus populations working in unskilled, low-wage "informal" service industries and in trades without any protection that labor laws and standards would normally provide. The huge growth of this "informal" labor sector was concluded to be a direct result of trade liberalization (globalization) (p. 40 and 46 of Ref. (03U1)).

It might not have been so bad had some economic efficiencies actually been produced as the World Bank, the IMF and the WTO allegedly intended. But their imposed privatization was frequently accomplished by selling off state-owned industries to people who were well-connected politically. These individuals frequently became billionaires as a result of their ownership of a monopoly. Carlos Slim, owner of Mexico's Telmex, is the world's richest man ($59 billion). Mexicans pay well above average for landline-, cellphone- and Internet-access. Numerous other Mexican industries have also become monopolies, with similar effects on Mexico's consumers (07P1).

One should hasten to note that the developing world's subsidies of food, education, health-care, utilities, etc. had been financed largely by borrowing from external sources. Hence they were not sustainable and were bound to collapse anyway. The real mistake was that the IMF, World Bank and WTO viewed these subsidies as "bad economics" caused by "bad government" (at least according to one author of Reference (03U1)). They therefore concluded that, by removing these subsidies, developing world economies would become more "efficient." This, they allegedly believed, would improve the lives of developing world people. The real cause of the external loans and the subsidies they financed was the extreme capital scarcity cause by the costs of infrastructure growth necessitated by population growth. (See Section [D2] above.) So it would have been just as hard for developing world people to pay the unsubsidized cost of food, health care, education and utilities as to repay their massive external debts. Both options were impossible, so SAPs and trade liberalization simply bought the non-sustainability issue to a head sooner, but otherwise accomplished nothing for those nations having little to offer the global marketplace but unskilled labor earning subsistence wages and agricultural products that cannot compete with heavily subsidized agricultural products from developed nations.

Attributing the developing world's ills to "bad governments" (like the IMF, World Bank and WTO did) is a commonly encountered false ideology. In reality, the developing world's ills are the cause of that world's "bad governments." Cause and effect have been interchanged. Population growth in developing nations produces a need for about $1.2 trillion/ year to finance the infrastructure growth needed to accommodate population growth. This drain on financial capital leads to human capital scarcity, increasingly desperate (and bloody) struggles for basic human needs, political-, social- and economic instabilities, increasingly greater (and more expensive) difficulties in administering basic government functions, and hence brutal leadership and "bad government." (For a far more detailed analysis of this issue see Chapter 4 of Ref. (06S1)) Billions of people have been paying a terrible price over the past two decades for this largely ideology-based error. What is even more tragic is that population growth and the resultant developing world's ills could have been greatly reduced by relatively small investments in contraception, family planning, and the marketing of the virtues of small families etc (07S2). All this would have greatly increased the probability of the external debts of developing nations being paid off. Substitution of ideology for analysis has almost certainly contributed significantly to developing world environments dominated by wretchedness and hope deprivation - environments where terrorists are easy to recruit, and where armed conflicts are more likely to develop (04P1).

The question remains, however, as to whether the SAPs imposed on the developing world by the IMF, the World Bank and the WTO were honest errors that unfortunately needlessly caused hundreds of millions of developing world people to be locked in a wretched existence in informal economies - or was it not a mistake at all, but a successful, deliberate process that resulted in the desired end, perhaps motivated by a desire to maintain ample supplies of cheap labor and/or to maintain ample supplies of natural resources. That question is a difficult one for someone not closely involved with any of these three organizations to answer. However there is some evidence that should be considered by anyone pondering the question. The evidence known to this author is given in the following three paragraphs. Readers can draw their own conclusions.

The increasingly heavy-handedness of developed nations, via the WTO, in imposing their versions of the trade rules defining modern-day globalization on the developing world has been documented in a book by Jawara and Kwa (03J1). These authors compiled interviews with 33 WTO diplomats and 10 organization employees. They claim that industrialized nations (Canada, Japan, Australia, New Zealand, South Africa, and countries in Western Europe) used bribery and dissemination of fear to convince developing countries to make agreements on international trade. The authors said that developing country ministers had been physically barred from participating in negotiations related to their countries, and that developed countries had threatened to stop offering aid to those developing nations if they did not sign the agreements. The book says that six WTO ambassadors from developing countries were removed from their posts in Geneva after disagreeing with diplomats from developed countries on the Doha Round of WTO talks, which were held in 2001. The book presents an official document written by US trade representative Robert Zoellick, demanding that developing countries change their positions regarding some trade negotiations or face inclusion on a US list of "enemy countries." (03J1). It is interesting to note that the developing nations that ignored the globalization rules that the developed world was attempting to impose (e.g. China, Viet Nam and Chile) did quite well in the overall globalization process.

A more recent book by John Perkins (04P2) describes US dealings with developing nations in a similar vein. Perkins, a former chief economist at Boston strategic-consulting firm Charles T. Main, worked for 10 years helping US intelligence agencies and multinationals cajole and blackmail foreign leaders into serving US foreign policy. His economic projections cooked the books to convince foreign governments to accept billions of dollars of loans from the World Bank and other institutions to build dams, airports, electric grids, and other infrastructure he knew they couldn't afford. The deals were smoothed over with bribes for foreign officials, but it was the taxpayers in the foreign countries who had to repay the loans. When their governments couldn't do so, as was often the case, the US or the World Bank or the International Monetary Fund would step in and essentially place the country in trusteeship, dictating everything from its spending budget to security agreements and even its UN votes (04P2).

A similar analysis was written by George Monbiot (05M1). He noted that a past president of the World Bank, Robert McNamara, concentrated almost all the World Bank's lending on vast prestige projects - dams (04I1), highways, ports - while freezing out less glamorous causes such as health, education and sanitation. Most of the major projects he backed have, in economic or social terms or both, failed catastrophically (96C1). (Note: The World Bank is controlled to an overwhelming degree by the US.) McNamara argued that the World Bank should not fund land reform because it "would affect the power base of the traditional elite groups" (96C1). Instead, it should "open new land by cutting down forests, draining wetlands, and building roads into previously isolated areas" (96C1). He bankrolled Mobutu and Suharto (both corrupt, despotic rulers), deforested Nepal, trashed the Amazon and promoted genocide in Indonesia (Recall Indonesia's "transmigration" program, first funded by the World Bank in 1976). The countries in which he worked were left with unpayable debts, wrecked environments, grinding poverty and unshakeable pro-US dictators (05M1). What is so tragic in all of this is that the World Bank was once a leader in bringing family planning and contraception to the developing world. Around 1980 a major political change occurred in Washington and the new powers-that-be had a dim view of contraception and family planning, so the World Bank changed accordingly and adopted the "bad government" theory of the developing world's ills, plus the environmental policies, population policies and foreign policies that came with it, all of which turned out to be disasters.

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Section [E] ~ Some Effects of Informal Economies on Religion and War - And Vice-versa ~

Large-scale informalization of the developing world's labor force and economies is even affecting the religious makeup of much of the developing world. The more established Christian, Muslim and Jewish religions might want to take note of the rapid growth of the "informal" sector of economic activity in developing nations - and of the religion that provides hope, help and strength to these ill-treated people. The three long-established religions got their start by providing "safety nets" where none existed before. Modern-day fundamentalist Christian churches have, to a significant degree, forgotten their early, brother's-keeper-oriented roots, despite the admonitions of over 2000 verses in the bible. Latin America's Catholic church seems more concerned about the welfare of the quasi-feudal landlords than the region's wretched, hope-deprived peasantry and squatters. The more fundamentalist and evangelical churches in the US seem more concerned about issues such as the legitimacy of gays and family planning - issues their Bible scarcely mentions. Perhaps as a result of the tendency of established fundamentalist churches to take leave of their roots, a relatively new Protestant Christian denomination, Pentecostalism, has evolved. Pentecostalism has been growing into the largest self-organized movement of urban poor people on the planet - the "informal" work force of the developing world. Much of Pentecostalism's appeal comes from people helping each other survive in the lowest economic levels of the developing world where even the median income is barely at subsistence level. Some may express repugnance at the blue smoke and mirrors, speaking in tongues and similar avenues of religious expression common among Pentecostalists. But considering the educational level of the bulk of the developing world's "informal" labor, this sort of expression seems appropriate.

According to Wagner (97W1) "In all of human history, no other non-political, non-militaristic, voluntary human movement has grown as rapidly as the Pentecostal-Charismatic movement in the last 20 years." Pentecostalism has grown to include 25% of Christians worldwide - about 0.5 billion people (06G1). "Renewalists" (an umbrella term covering both Pentecostalists and Charismatics) now comprise 49% of the population of Brazil, 30% of Chile, 60% of Guatemala, 56% of Kenya, 26% of Nigeria, 34% of South Africa, 44% of the Philippines, and 5% of India (06G1). The growing popularity of groupings like Pentecostalism is only a reflection of what people do naturally as their situations grow more wretched and more hope-deprived - they seek out groupings of similarly situated people in hopes of bettering their condition by helping each other (e.g. courses in business and managing money) (07L1). They also see Pentecostalism as a means of gaining strength in numbers for use in redressing their real or imagined grievances. In other words, they resort, out of desperation, to a brother's-keeper strategy - an approach that over 2000 verses in the Bible would appear to favor. The ultimate outcome of all this is hard to predict. Informal labor tends to be treated harshly by developing world governments, and needless restrictions are imposed to make sure no one escapes into the formal economy where they might compete for jobs and customers. However the informal work force is projected to become about 2/3 of the developing world's work force. If Pentecostalism provides a mechanism for uniting and organizing these people, this might create serious problems for those in the formal economy as they struggle to keep control of government policies and thereby insure abundant supplies of cheap labor and natural resources.

We might look to the Middle East for hints as to how informalization might play out. The Muslim world's militaristic organizations such as Hamas (one of many spawned over the past several decades by the Muslim Brotherhood) derive much of their rapid growth and popular appeal by providing social services, food etc. where wretchedness and hope-deprivation are extreme, and where "safety nets" don't exist - similar to the strategy that the peaceful Pentecostal Church employs for its growth among the rapidly expanding world of "informal" labor. Palestinians and others join (and vote for) Hamas as a means of gaining the strength in numbers that they need for redressing their real or imagined grievances - like those in the informal economy who join the Pentecostal Church. Western powers-that-be (be they in established governments or established religions) have apparently never considered using "brothers' Keeper" strategies for competing for hearts and minds - whether they are dealing with Hamas or the Pentecostal Church. In the case of militants like Hamas or any number of others, the West seems to favor the more expensive, more risky, strategy of beating wretched and hope-deprived people further into submission through military means in the apparent expectation that they will more passively submit to their ever-worsening condition. This strategy is not likely to work, as the Russians who fought in the battles over Grozny will attest. The West's sophisticated military hardware and expensive lives are ill suited to dealing with the developing world's increasingly urbanized environments (00N1) where life is cheap, lines of sight are short, and differentiating between friend and foe is difficult at best. The U.S. CIA (00C1) concluded that a key driving trend for the Middle East in the next 15 years will be population pressure. They point out that, even now, in nearly all Middle Eastern countries, over half of the population is under age 20. "In much of the Middle East, populations will be significantly larger, poorer, more urban and more disillusioned" (00C1). The CIA report concludes that "linear trend analysis shows little positive change in the region, raising the prospects for increased demographic pressures, social unrest, religious and ideological extremism and terrorism directed both at the regimes and at their Western supporters" (00C1). It seems unlikely that a military approach is likely to make the youth of the Middle East richer, less urban, less disillusioned, or less hateful of the West.

In Ref. (07S6) an analysis of armed conflicts over the past century has found that armed conflicts are almost always initiated in environments of extreme duress. Such environments provide fertile ground for people like Hitler, Lenin, the Taliban and the like who are always in plentiful supply and who just wait in the wings for an opportunity to enhance their wealth and power. As informal economies expand to a large fraction of the developing world's economy, this creates a huge number of people in a state of great duress. As noted in Section [D], the bulk of this duress can be traced to extreme shortages of financial capital bought upon by the needs for infrastructure expansion resulting from population growth. Much of this growth problem, in turn, reflects the views of religious fundamentalist leaders of nearly all the world's major religions who see family planning and contraception as something to oppose. Though justified on religious grounds, these viewpoints probably date back to ancient times when the fortunes of any given religion and its leaders depended on how much cannon fodder or spear power one could field. Such views are obsolete. Today's wars are far more capital-intensive than the wars of old, and population growth creates extreme scarcities of capital as noted above. The inverse relationship between family size and financial wealth has been increasingly evident in the Christian world for nearly half a century. This explains why the developed world's fundamentalist Christians are increasingly ignoring their religious leaders' views on contraception. This same process is beginning in the Muslim world (07S4). This perhaps explains why Christian nations engage in capital-intensive wars while Muslim nations remain mired in low capital-intensity wars, often referred to as "terrorism." Another possible explanation is that Christian nations tend to occupy the lands with newer, more fertile soils, while Muslims occupy the sites of ancient civilizations which have extracted heavy tolls from the land in terms of soil erosion, overgrazing, deforestation, and irrigation-system salinization - processes that have turned vast areas of green into equally vast areas of brown (subsoil) and white (salt flats of abandoned irrigation systems).

Eventually some significant body of government leaders might come to the realization that nipping large environments full of extreme duress in the bud is vastly cheaper than fighting the wars that such environments tend to precipitate. Ref. (07S6) refers to this strategy as "preemptive brothers' keeper." Several thousand verses in the Christian Bible would appear to recommend this approach also. In today's environment in nearly all of the developing world, the cost of the "preemptive brothers' keeper" approach has fallen to extremely low values - just a few dollars to avert a birth, or a few hundred million dollars per year to eliminate all of the population growth in the developing world. The technologies that have precipitated these cost reductions are discussed in detail in References (07S2) and (07S3).

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It is easy to be pessimistic about the future of a developing world where the informal economy is growing so rapidly and to such a large fraction of the overall economy. If one examines the various contexts of the informal economy as described above, one would be inclined to see the underlying causes of informalization in terms of population growth. One might also see a context that apparently arose out of some serious misconceptions, false ideologies or hidden agendas (04P2) (05M1) on the part of the World Bank, the IMF and the WTO. But closer inspection suggests that the World Bank/ IMF/ WTO context is really just one more ramification of population growth. The World Bank, the IMF and the WTO imposed their SAPs in response to the fact that the developing world was financing a large fraction of its subsidies of food, education, health-care, irrigation water, water supplies etc. with money borrowed from external sources, e.g. the IMF. Any banker will tell you that borrowing financial capital to pay for current consumption or operating expenses is the road to disaster. So in a sense, all the SAPs did was to bring the inevitable disaster to a head sooner rather than later. The tragedy is that the disaster could have been avoided by a relatively small investment in contraception and family planning.

The developing world is so financial-capital deprived because people earning $2/ day cannot afford to pay the annual trillion-dollar-plus cost of the infrastructure growth needed to accommodate the yearly 75-million person expansion of that world's population. So a financial-capital-starved developing world must also become human-capital-starved and unable to offer the global economy anything but unskilled labor whose subsistence wages don't earn enough to generate any financial capital. As struggles for basic essentials grows more desperate they also grows bloodier. Social-, political-, and economic instabilities set in, creating an increasingly risky environment for financial capital, making such capital even scarcer. The cost of maintaining law and order escalate even as the money available to pay these costs shrinks. Brutal dictatorships evolve because they can maintain law and order more cheaply if less fairly. Thus the developing world tends to be seen as a world of "bad government." Developed world governments then mistakenly see "bad governments" as the cause of the developing world's ills instead of seeing the developing world's ills as the cause of "bad government."

The net result of all this is that the developing world's population growth produces, by a variety of mechanisms, the process we label "Informalization." The developed world responds, not by addressing population growth directly, but by addressing the symptoms of population growth, e.g. lending financial capital for building huge dams, irrigation systems, etc. The problem is that developing nations subsidize the purchase of irrigation water and the consumption of food produced by these irrigation systems. Thus there is no generation of funds for repaying these external loans, and the developing world winds up several trillion dollars in debt to external sources of financial capital. The developed world supplies roughly $60 billion per year in development- and humanitarian aid to developing world governments. About 97% of this is spent on accommodating population growth and only about 3% is spent on reducing population growth. Then developed world legislators wonder why the developing world doesn't show any significant benefits of such aid. What the developed world's legislators don't realize is that they are throwing 97% of $60 billion/ year at a $1.2 trillion / year problem (the cost of the infrastructure that population growth calls for). No wonder the beneficial effects of development- and humanitarian aid are so hard to identify. Had the developed world spend a small fraction of the $60 billion in development- and humanitarian aid on effectively addressing population growth rather than the symptoms of that growth, developing world population growth could have been largely eliminated, along with most, if not all, of the ills we attribute to "Informalization."

That's not all that could have been accomplished. A large fraction of the developing world's food and natural fiber productions are operating on a highly non-sustainable basis (08S1). Most of this non-sustainability is a result of the developing world's dire shortage of financial capital (at least in theory). Developing world people are, perhaps justifiably, too concerned about the here-and-now to be concerned about the future. For example, the reason why Africans are starving is that their transportation infrastructure is so bad that the price of importing chemical fertilizers is about 60 times greater than in the EU (in terms of the number of hours of labor required to earn enough to purchase a tonne of fertilizer). The result: Africans are mining the nutrients from their soils. Also the organic matter content of their soils is dwindling because manure and crop residues must be used to provide fuel for cooking etc. as the ring of deforested land expands ever outward from urban areas and as the price of charcoal escalates. The financial capital freed up by inexpensively reducing population growth could be spent on making the developing world's systems for producing food-, natural fiber and freshwater far more sustainable, thereby increasing the hope for a better future for the informal economy and the other economies of developing nations.

What most people don't yet realize is that technological advances have reduced the cost of averting a birth in recent decades by about an order of magnitude - to only a few dollars (07S2). Future advances (awaiting Phase III approval) are likely to lower the cost still further and make female sterilization affordable and available to even the poorest and most remote women in the developing world (07S3). (Currently about half the women in the developing world have no access to female sterilization when they no longer want - or can afford - any more children.) Also contraceptives are becoming more reliable and more readily available, and religious taboos against them (and abortion) are being increasingly ignored -even in the Muslim world (07S4) (where population growth rates are among the world's highest). As a result of all this, total fertility rates and population growth rates are falling virtually worldwide except for a few dozen nations. As noted earlier, the probability of civil armed conflict has been shown to be directly proportional to fertility rates (04P1) suggesting a decreasing likelihood of armed conflicts as fertility rates decline worldwide. It has also been shown that the reason why the world's poorest nations keep falling behind the rest of the world economically is because of the higher frequency of wars (05M2). Declining rates of armed conflict are also likely to reduce demands on financial capital in the developing world and decrease the risks associated with financial investments - making financial capital even less scarce. All this would suggest that developing world wretchedness - and the size of its informal economy - might both diminish over time if the developed world can just be made to understand the crucial issues involved.

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You will note from the above that being part of the informal workforce in the developing world is a wretched condition to be in. What you earn is probably close to subsistence level, meaning that accruing some capital to enable you to get into the formal economy is difficult at best. To make matters worse, barriers get put in your way that make it a lot harder or impossible. (See Table 1.4) This is probably to prevent you from competing for the few available jobs with others already in the formal economy - or for their customers. Remember that the formal economies in developing nations are usually stagnant, with little if any job creation. In many urban areas, land prices are at developed world levels, meaning it may take someone in the informal economy 20 years of wages to buy the smallest parcel.

What appears to be happening is that a de facto caste system is being created - not formally as in India but by your being trapped in the informal economy without any realistic hope of accumulating any capital, financial or human, and hence no realistic hope of escape. It could be worse. You could be lured into a situation with a promise of a better job and then find yourself spirited off to some foreign land, e.g. the EU or the US (slave population: 200,000 (07L2)), and be sold into slavery. Women and children are the most likely to encounter this, in part because their incomes are often well under what is required for bare subsistence, making them more desperate. Slavery is a $12 billion/ year "industry." The world's slave population is about 27 million (05A2). In Brazil (slave population: 40,000 (07D1)) what you produce is often sold to large U.S. corporations (06S2) much like the slaves in China's prisons. Working in remote locations means that escape is impossible and not allowed because you allegedly owe your owner some sort of financial debt.

In India's Hindu caste system, more than subsistence earnings limit your options. If you are in the lowest caste but somehow manage to acquire some human capital (education) and earn something beyond subsistence level, a group of people of a higher caste will slaughter you and your family. Their motive is apparently to maintain an abundant supply of extremely cheap labor and/or an abundant supply of natural resources - the usual motive for a caste system or a slave system, or possibly for the informal economy and its workforce. Public (free) primary education in India exists in name only (08S2), so you are liable to remain illiterate unless you can somehow afford a private education. This is essentially impossible for someone on subsistence level earnings that, for the lowest caste, is the only option. You don't even need to be at the bottom of India's caste system to be subject to extreme abuse. The more traditional Indian family farmers must borrow money from private lenders at 130-460% interest and go to jail when they default. Yet corporations getting into agriculture in India receive tax-holidays, cheap credit, highly subsidized land, and excise duty relief. About 200,000 Indian farmers committed suicide in the 12-year period 1995-2006 (08N1). High suicide rates and rural despair helped to topple the Indian government in 2004 (06S3). India has 550 million farmers and another 200 million agricultural workers. Conversions to capital-intensive agriculture typically reduce labor content by on the order of 95%. This implies an eventual mass exodus of roughly 700 million Indians to the rings of slums surrounding India's major urban areas, and from there into India's informal eco