Knock-off Coach bags, Nokia cell phones, and even Calvin Klein underwear are all products sold by unauthorized dealers. As journalist Robert Neuwirth points out, many informal economies function openly without paying taxes or formerly registering with the government. Neuwirth’s 15 minute interview on NPR summarizes the informal economy’s role in society:
Reasonably, businesses and governments are concerned by the lack of taxes and regulation associated with the informal economy. However, last November, the Nigerian government banned what they call “street trading” in Lagos, mainly to reduce crime, clean up the streets, and be more environmentally friendly. Is this the right reason to be restricting the informal economy?
The main ethical issue lies in the majority of the population that depends on the informal economy as their only source of income. For average Nigerians, jobs in the formal economy are inaccessible due to societal barriers. In addition, the Nigerian government doesn’t use its vast oil revenues to provide basic services for its people; almost all Nigerians in Lagos depend on the informal economy for basic services like clean drinking water.
Would it be ethical to regulate or restrict an informal sector that is vital to the well-being of citizens? Can government restrict the informal economy if it plans to implement replacement programs?