Why the Poor are Poor

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The informal economy built up a whole range of new occupations and services, and its participants automatically acquired new knowledge and skills that in practice could not be learned in any official institution. Such skills have developed in all the major fields of informal production: in labour-intensive market-gardening, in modern construction techniques, in a wide range of repair-services, computer-work, agency services, etc. As soon as the opportunities occured, all this knowledge and skill was quickly turned to business use. The rapidly expanding service-sector (currently embracing some 80 per cent of one-man business) testifies that people have been able to utilize within a very short time what they have learned in the decades of informality about management, administration, financing, economizing with money, time and scarce resources. In this sense, those who had not been participants were excluded from a vast learning process, and no formal schooling or training programme could give them hope to make up for this. At the same time, their exclusion from a quasi-market also meant that they remained outside the networks of contacts through which mobility occured, the exchange of labour, the loans and mutual help of the informal world. These networks - or the capital that informal relations and acquaintance embodied - proved to be even more important than capital for successful entry into the market when small businesses began to be organized on a suddenly proliferating scale. Thus, the lack of contacts with the informal world has resulted in those trapped in socialism completely falling behind the main body of society. They have no access to the market and the ties linking them to the state have been broken by the state itself, which hastily reinterpreted its functions with the change of regime.

The most acute and spectacular consequences of this can perhaps be seen in the field of labour.

To a considerable extent, it is exclusion from the network of market relations which, for the broad masses, means that the loss of a job in the old socialist sector now involves not only unemployment but also drastic marginalization. Unemployment here is not a temporary, frictional nature - as is the case during periods of structural adjustment in developed market economies - but long-term and very likely permanent.

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