Entrepremenurism ; “Système D is growing faster than any other part of the world economy… an increasing force in world trade… wave of the future for the global economy… crucial for the development of cities in the 21st century”~ Robert Neuwirth
Entrepremenurism: Système D’ (System D) is planetary unregulated shadow economy/informal economy/black market economy… concentrated in the developing countries and expanding rapidly; it’s a global phenomenon that has an estimated total value close to $10 trillion. Steven Levitt and Stephen Dubner’s Freakonomics blog discussed the growth of the shadow economy across the world.
The post claims that the shadow economy is the second largest in the world. “In 2009, the OECD concluded that half the world’s workers (almost 1.8 billion people) were employed in the shadow economy. By 2020, the OECD predicts the shadow economy will employ two-thirds of the world’s workers”.
If ‘Système D’ were an independent nation, united in a single political structure it would be an economic superpower, the second-largest economy in the world just behind the United States. ‘Système D’ is a shorthand term that refers back to the French word débrouillard or démerder.
The verb ‘se débrouiller’ means ‘to untangle’. The verb ‘se démerder’ means to literally to remove oneself from ‘the shit’. The basic theory of System D is that it is a manner of responding to challenges that requires one to have the ability to think fast, to adapt, and to improvise when getting the job done.
It has the connotation of getting around the system, managing to accomplish, or breaking the rules. Likens the use of System D to being a modern-day ‘MacGyver’ (popular television character) … getting the job done with a mix of whatever resources are available and a great deal of personal innovation. Practitioners of System D are known as ‘débrouillards’, which in French means ‘guy who gets you out of trouble’.
In the article “System D” by Charlie Stross writes: System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards. To say a man is a débrouillard is to tell people how resourceful and ingenious he is.
The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of l’economie de la débrouillardise. Or, sweetened for street use, it’s ‘Systeme D’.
This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself (DIY) economy. Without doubt, the internet has done much to potentate its growth. As is the case in conventional markets, internet makes communication easier; this in turn tends to disinter mediate supply chains, choking off rent-seeking and arbitrage except where local monopolies emerge. It’s a useful reminder that the ‘WEIRD’ (Western, Educated, Industrialized, Rich, and Democratic) nominal world GDP is around $64 trillion, but it’s not the only way; System D, as a percentage, is large and growing rapidly…
In the article “Rise of the Shadow Economy: Second Largest Economy in the World” by Marco Rabinowitz writes: The fact that the shadow economy (or black market or informal economy or underground economy…) is on the rise in the middle of a global financial crisis should be no surprise to economists. In a recent article for ‘Foreign Policy Magazine’, Robert Neuwirth writes that System D is a global phenomenon, transporting products across the planet ranging from machinery to computers to mobile phones.
From street selling to unlicensed trade to compensation under-the-table, many workers are off-the-grid. According to Neuwirth, System D is opening up economy and providing new opportunities for those seeking income through labor. Though the ‘black market economy’ has historically been cast in a negative light, Neuwirth believes that System D is giving workers an avenue to embrace their entrepreneurial spirit.
“Even in the most difficult and degraded situation, System D merchants are seeking to better their lives.” Aside from the legal aspects, the ‘shadow economy’ has negative implications in terms of tax revenue.
In a July 2010 article from Bloomberg Businessweek, Chris Prentice discussed how the rise of the shadow economy affects tax revenue for nations. Based on estimates, Prentice notes that “given US GDP of $14.26 trillion, the world’s largest, that there could still be as much as $1.2 trillion in taxable income that slips through Uncle Sam’s fingers each year”.
Nobel Prize-winning economist Milton Friedman once commented, “The black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people.” Friedman criticized government intervention, price-controls, and occupational licensure. “Such government involvement in the market is what creates the black market in the first place. In some ways, the black market is the free market…”
In the article “Why Black Market Entrepreneurs Matter to the World Economy” by Robert Capps writes: Not many people think of shantytowns, illegal street vendors, and unlicensed roadside hawkers as major economic players. But according to journalist Robert Neuwirth, that’s exactly what they’ve become.
In his new book, ‘Stealth of Nations: The Global Rise of the Informal Economy’, Neuwirth points out that small, illegal, off-the-books businesses collectively account for trillions of dollars in commerce and employ fully half the world’s workers. Further, he says, these enterprises are critical sources of entrepreneurialism, innovation, and self-reliance. And the globe’s ‘gray and black’ markets have grown during the international recession, adding jobs, increasing sales, and improving the lives of hundreds of millions.
It’s time, Neuwirth says, for the developed world to wake up to what those who are working in the shadows of globalization have to offer. “In many countries — particularly in the developing world — System D is growing faster than any other part of the economy, and increasing force in world trade.” But even in developed countries, after the financial crisis of 2008-09, System D was revealed to be an important financial coping mechanism.
Studies of countries throughout Latin America have shown that desperate people turned to System D to survive during the most recent financial crisis. The growth of System D presents a series of challenges to the norms of economics, business, and governance — for it has traditionally existed outside the framework of trade agreements, labor laws, copyright protections, product safety regulations, anti-pollution legislation, and a host of other political, social, and environmental policies.
Yet System D is spreading technology around the world and bringing commerce and opportunity to communities that are off-the-governmental-grid and improving their lives…
The shadow economy or Système D is all the money and jobs generated outside the official economy, whether legally or illegally. In more than 50 countries around the world, the shadow economy is at least 40% the size of documented GDP. The size of a shadow economy can be vitally important.
In the report, Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007 co-authored by Friedrich Schneider, Andreas Buehn, and Claudio E. Montenegro write: One notable finding is that from 1999 to 2007, shadow economies appear to be on the rise in nearly every country the study ranked. (The study excluded what they call ‘typical underground, classical economic crime activities,’ such as burglary, drug-dealing, and tax evasion…)
For example, America’s shadow economy in 1999 was 8.6% and climbed to 9.0% in 2007. (The number was higher for developing countries, where shadow economies increased from an average of 36.6% in 1999 to 38.6% in 2007, as opposed to an increase of 16.8% to 18.7% for the 25 high-income OECD countries.)
The reason behind the rising numbers: ‘Taxation and regulation increased in most countries’ over the past 10 years, says Schneider. As he writes in his report: “reducing the tax burden is the best policy measure to reduce the shadow economy, followed by a lessening of fiscal and business regulation.” Schneider goes even further.
He and his co-authors suggest that the solution is not just more efficient tax collecting and lighter regulation, but also to find ways to make ‘work’ in the official economy more attractive and reduce the incentives to participate in the shadow world. In short, the shadow economy tells us more about what is wrong with government policies:
The increasing tendency to engage in shadow economic activities should be perceived as a warning signal of increased resistance against the existing norms and laws in the economy… governments should reassess and reform the bureaucratic regulations, bureaucratic processes, and all other forms of red tape… thereby benefiting citizens, firms, and the rest of the world as well…
Système D was the economy-of-desperation. But as trade has expanded and with globalization it has scaled up, too: Today, it’s the economy-of-aspiration…
“I’m totally off-the-grid… It was never an option to do it any other way… it was financially absolutely impossible… System D opens the market to those who have traditionally been shut out. This alternative economic system offers the opportunity for large numbers of people to find work… support their families… improve their communities… and live a good life…”