Informal economy, wage goods and accumulation under structural adjustment: theoretical reflections based on the Tanzanian experience

Wuyts, Marc (2001). Informal economy, wage goods and accumulation under structural adjustment: theoretical reflections based on the Tanzanian experience. Cambridge Journal of Economics, 25(3) pp. 417–438.

DOI: https://doi.org/10.1093/cje/25.3.417

Abstract

Economic development in sub‐Saharan Africa under structural adjustment witnessed the upsurge of informal sector development—the development of unregulated labour‐intensive activities, in part export‐oriented. This paper argues that two factors played an important role in shaping the dynamics of informal sector development: (1) the process of the relative cheapening of wage goods as a result of their importation, partly financed through foreign aid, thereby lowering unit‐labour costs in labour‐intensive production, and (2) the processes at work of subsidising real wages by other forms of economic security as a result of multiple, diversified and spatially extended livelihood strategies. While these factors undoubtedly brought a new vitality to economic development, this paper questions the long‐run sustainability of this new trend for two reasons. One is its dependence on foreign aid to finance imports. The other is that it does not appear to propel endogenous increases in productivity by achieving greater synergy in intersectoral linkages between agriculture and industry.