The Role of the Informal Sector in the National Economy
MOZAMBIQUE
Introduction
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In an attempt to respond to the topic this essay will discuss the role
of the informal sector in the Mozambican economy. For a better
understanding of the topic some important definitions shall be given.
For the purpose of this essay, the concept of economy can be defined
as the science that deals with production and consumption of goods and
services, the circulation of wealth and the redistribution of income.
On the other hand, the concept of the informal sector was introduced
into international usage in 1972 by the International Labor
Organization (ILO) in its Kenya Mission Report. Though there is no
consensus on the definition of the informal sector, coupled with the
fact that in Mozambique the concept varies with the different periods
of history, the following are the common characteristics of this
sector as defined by ILO: (a) ease of entry; (b) reliance on
indigenous resources; (c) family ownership; (d) small scale
operations; (e) labor intensive and adaptive technology; (f) skills
acquired outside of formal sector; (g) unregulated and competitive
markets.
Since that time, different authors and the ILO itself introduced many
definitions. The ILO/ICFTU international symposium on the informal
sector in 1999 proposed that informal sector workforce can be
categorized into three broad groups: (a) owner-employers of micro
enterprises, a few paid workers, with or without apprentices; (b)
own-account workers, who own and operate one-person business, who work
alone or with the help of unpaid workers, generally family members and
apprentices; (c) dependent workers paid or unpaid, including wage
workers in micro enterprises, unpaid family workers, apprentices,
contract labor, home workers and paid domestic workers. (Santos in
Dhemba; 1999)
Mozambique Social Economic Situation
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The signing of the peace agreement and the implementation of the
Structural Adjustment Program (SAP) in Mozambique caused an
impoverishment of the poor, especially in towns where the decline in
purchasing power is most felt as it is harder to find alternative
income to buy food. The liberalization of the market opened up the
possibilities to import goods, however, the purchasing power of
Mozambican citizens are still very low. There was a rise in the levels
of unemployment as a result of the mass retrenchment originated by the
implementation of the SAP policy. According to a World Bank study, and
many other studies, unemployment is a strong indicator of economic
crisis.
In spite of all the measures taken by the Government to bring about
economic and social development, this development was not percolating
down to the masses fast enough. Due to the pervasive effects of the
globalizing economy, population growth and urban migration, the active
labor force was growing at a much faster rate than the availability of
Material and ideological conditions are integral components of a market society, which interacted and changed the ways we view market society today. I will discuss the shift from traditional societies to a market society to explain what Polanyi refers to as “the great transformation”. I will then talk about the changes that have occurred in the workplace, the impact on these workers, and the worldview of those in a market society.
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The Benefits of Sweatshop Sweatshops, when left to operate without government intervention, are the most efficient way out of poverty especially in developing countries. This argument may feel far fetched, but when examined in the context of those working at sweatshops and the locations sweatshops are most often constructed in, the reason why this is true is apparent. The benefits of sweatshops can be found by examining how they increase living conditions, examining the locations where sweatshops are constructed, and looking at how government regulations on factories don’t help anyone. Sweatshops increase the standards of living for the workers and their communities.
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Per the textbook, p. 113 states “in the fringe economy, economic distress and low credit scores translate into high cost that are justified by the supposedly higher risk of serving poor or credit challenged population.” Moreover, on p. 118 “the poor pay more than the middle class for financial services…and the costs are aggravated by a dual financial system, one for the poor and one for middle and upper classes.”
As figure 2 demonstrates, despite 20 years of structural adjustment programmes (SAPS), poverty reduction strategies (PRS), and increased international trade, Africa, Latin America and many parts of Asia continue to remain entrenched in poverty and slow economic growth (Easterly, 2006). Due to public service cuts, privatization, and increased loans, many states suffered from rising indebtedness leading to development disasters. Professor of History George Schuyler (2004) notes that during the 1990s, privatization in Venezuela increased the cost of water and gasoline leading to a drop in the consumption of meat and milk by low-income families. As low wages and high inflation contributed to malnutrition, many unemployed citizens turned to criminal activates as a means to survive. Consequently, “by the mid-1990s, 85,000 Venezuelan children were involved in drug trafficking, prostitution and robbery” (Schuyler, 2004, p.
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Powell, B and Skarbek, D. (2004). Sweatshops and Third World Living Standards. The Independent Institute. 53 (1), 6, 10.
Thus, expanding individual pay by making formal occupations or supporting casual substances is portrayed as the center and speediest strategies for the counter destitution exertion as 75% of the poor are accepted to claim work or casual elements as a methods for
Ardnt, Channing, Paul Chinowsky, Kenneth Strzepek, and James Thurlow. "Climate Change, Growth and Infrastructure Investment: The Case of Mozambique. ." Review of Development Economics (n.d.): n. pag. Print.
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