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The Making and Unmaking of the (In)formal Sector

Anjan Chakrabarti and Atanu Thakur
Crit Sociol 2010 36: 415
DOI: 10.1177/0896920510365198
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Critical Sociology 36(3) 415-435

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The Making and Unmaking of the (In)formal Sector

Anjan Chakrabarti
Calcutta University, West Bengal, India

Atanu Thakur
Calcutta University, West Bengal, India

Abstract
Using class-focused Marxist theory we examine the received category of the informal sector in order
to demonstrate two results. First, we explicate the process of making the informal sector in terms
of the formal sector. Derived from a centrist logic that shapes the mainstream development paradigm, this involves a process of its devaluation in terms of the norm of the formal sector. Moreover,
attempts to introduce heterogeneity within an already homogeneously defined informal sector are
shown to be failing. Second, we show how placing the concept of the informal sector within the
non-centric class-focused economic terrain fundamentally displaces, indeed unmakes, the received
definition of the informal sector. Our analytical frame of a non-centric class-focused economic
terrain reveals, on one hand, how the making of the informal sector serves as a political rationale
for shaping societal transition in favor of modern capitalism, and on the other, the problematical
nature of the rationality.
Keywords
centrism, class, informal sector, heterogeneity, overdetermination, process

Introduction
A picture held us captive.
And we could not get outside it for it lay in our language
and language seemed to repeat it to us inexorably.
Ludwig Wittgenstein, Philosophical Investigations

In 1973 Hart found a large sector in Kenya which he called informal to differentiate it
from the formal sector. Characterizing the informal sector as containing the survival
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DOI: 10.1177/0896920510365198

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Critical Sociology 36(3)

activities of the poor Hart (1973) suggested that poor people join the informal sector not
to reap profit out of production, but to survive with the goods and services produced
therein. Fulfilment of their bare subsistence and not profit consideration was the primary
motive of the informal sector populace.
Following this intervention, academicians, researchers and international agencies like
the International Labour Organization (ILO) have since developed a number of theories
of the informal sector. Notwithstanding the otherwise diverse renditions of the informal
sector, the literature and language of the informal sector, its constituent elements and its
operations, helped construct the informal sector in a certain way and we call this process of
construction the making of the informal sector.
Starting from a class-focused Marxist approach, we challenge this making of the
informal sector on two fronts. First, we show that the differences within the informal sector
approaches, and that includes other Marxian interventions as well, counts for nothing
when it comes to an acceptance of the deterministic methodology of capitalcentric
orientalism (capturing the centricities of capital and modernity respectively) that is
revealed as driving the process of the making of the informal sector. This de-familiarizing
of the dominant method of positing and analyzing the informal sector helps challenge
the typical glorifications (as victim) or vilifications (as backward) so often attributed to
the informal sector and, in the process, unravel how and why such an image of the informal
sector facilitates the centricity and expansion of a capitalist economy. Far from being a
neutral, apolitical or technical concept, the informal sector turns into an ideological
trope to reconstruct, in the name of development, the structure of Southern economies
in terms of capitalism. The informal sector is governed from two sides in its relation to
global capital and to state (Chakrabarti et al. 2007, 2008, 2009). This in turn requires,
in the first place, the informal sector to be positioned as an object of governance. This
article does not deal with governance per se, but rather considers how the condition for
governance of the informal sector comes into existence, a condition shared by defenders
and opponents of capitalist development alike.
To demonstrate our claim, we begin by arguing that the schema of the making of the
informal sector is in compliance with mainstream development discourse. As part of that
discourse, the very formation of the categories of formal and informal sector produces, and
is sustained by, a process of normativization. More specifically, mainstream development
discourse constructs the informal sector as a representative figure of the third world in order
to promote the predetermined agenda of development striving to produce and expand
capitalism. The informal sector, essentially symbolized by a homogeneous non-capitalist
segment, is constructed as an inferior other of a privileged formal sector deemed to
be capitalist, where its inferior status results from a series of devaluations vis-a-vis the formal
sector. This underdeveloped position of the informal sector, fixed in terms of the formal
sector, secures the terms of locating and analyzing the informal sector; it explains the
projected peculiarity of its transitional character as encapsulating a pre-assigned movement
towards a more formalized existence. Once confined by the methodology of capitalcentric
orientalism that produces the formal/informal duality (as we will show is evidently the case
with various informal sector approaches), the terms of analyzing the informal sector, its

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 417

structures and its transition too are organized in relation to the privileged formal sector. In
this context, policies, national or international, seemingly directed exclusively towards the
informal sector, are in fact either undertaken in terms of a privileged position of the formal
sector and/or used to secure and expand the primacy of the formal sector.
Interestingly, there is a certain ambiguity inherent in this centrism. The claim of
mainstream development theory which demands the ultimate liquidation or formalization
of the informal sector (constituting, for example, the goal of the ILO) as part of its
self-proclaimed progressive logic, militates against the increasingly entrenched linkage
of the so-called informal sector within the formal capitalist sector that globalization is
bringing about. On one hand, the informal sector is rendered inferior as a third world
representation and ideally ought to be truncated in scope and size and even ultimately eradicated; yet, what is perceived as the informal sector continues to grow through its connection with the circuits of global capital. While the issue of connection of the so-called
informal sector to the circuits of global capital is not the point of discussion here (see
Chakrabarti et al. 2009), this ambiguity compels us to question, first, the given representation of the economy as divided into the informal and formal sector (and that too
from a pre-formed centricity of formal sector) and, secondly, its related teleological
transition in the direction of formalization of the informal sector.
Such a questioning of the economy takes us into the territory where the received
understanding of the informal sector and indeed its very conceptual existence becomes
a point of debate. This constitutes the second contribution of the article. Given the above
described dual economy based on a capitalcentric orientalist perspective, any further
advancement in the understanding of the informal sector, such as trying to bring the
aspect of heterogeneity within its definition, is held captive to formal sector centrism.
Aware of the pitfalls of a homogeneous representation of the informal sector, informal
sector analysts are uncomfortable with the usage of any pre-determined criteria to define
the informal sector as distinct from the formal sector. In recent times, attention has
turned towards addressing the problem of heterogeneity within the informal sector (the
possibility of certain criteria being present in both the informal and formal sector).
However, we contend that the much discussed heterogeneity is not unhinged from the
formal-centric representation and in fact remains tied to an already pre-formed homogeneity. Once a homogeneous informal sector, based on an equally pre-assigned homogeneous formal sector, is defined, any further analysis of heterogeneity circulates in
relation to these homogeneous dual spaces. The presence of a dual economy thus erases heterogeneity at the definitional level. Not only does this leave the devalued image of the
informal sector intact, it also implies that subsequent endeavors to re-define the boundary and characteristics of the informal sector become restricted by a pre-constituted homogeneous space that is imposed on the discussion.
In sharp contrast, we question the terms used in posing
1) the negative representation of the informal sector and
2) the heterogeneity of the informal sector within a homogeneous whole in relation to
another homogeneous whole, that of the formal sector.

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Critical Sociology 36(3)

If we want to unlock the strangleholds of pre-determined valuation and homogeneity

that a presumed centricity of the formal sector imposes on the economy, we must interrogate and dismantle the received representation of the formal-centric dual economy.
Nothing short of a methodological break will suffice in charting this departure. Specifically,
this demands a de-centered economic cartography which will render impossible any
deterministic endeavor to situate the informal sector as a devalued other of the formal
sector. With this breakdown of centrist logic, heterogeneity would come to be expressed
at the level of construction of the economy. Such a non-centric approach would not only
dispute any inference of the informal sector as inferior, but also challenge any advocacy
of a teleological transition path for the informal sector.
To produce such an economic cartography in order to deal with the problem of
heterogeneity at the basic level, we use a class-focused Marxist approach following the
lead of Resnick and Wolff (1987) and expanded upon by Chakrabarti and Cullenberg
(2003). Instead of taking class as a noun, which has its own quota of problems (Hindess
1987, 1988), we deploy class as processes of performance, appropriation, distribution
and receipt of surplus labor within an overdetermined reality, in order to produce an
alternative economic cartography. With the adopted anti-determinist methodology of
overdetermination operating in this class-focused economic terrain, no centering, no
reductionism, no homogeneity of the kind relating to the informal sector is any longer
possible. By thus extricating the discussion from the formal-centric theory of the informal sector, the class-focused approach allows us to move into a heterogeneous terrain
where the term informal sector itself gets disaggregated the unmaking of the (in)formal
sector. The act of unmaking puts at risk the consensus of development in general, and
the informal sector in particular, and immediately unpacks a quite different transition
path that is non-teleological.
The trajectory of the article is as follows. In the next section, we formulate the
process of the making of the informal sector that is anchored by the determinist logic
of capitalcentric orientalism. We examine how this process of making remains synchronized to the hegemonic development paradigm that places the category of informal
sector within a teleological notion of transition. Attempts to move the informal sector
into a domain of heterogeneity from within a dual economic perspective as well as the
difficulties encountered in the process, are taken up in the third section (The Issue of
Heterogeneity). The class-focused Marxist theory is introduced in the fourth section
(Class and Overdetermination) to lay down the anti-deterministic logic of overdetermination and the inherently heterogeneous class-focused economic terrain it helps
generate. In the fifth section (The Unmaking of the (In)formal Sector), we expand
upon the class-focused economy to disinter the received definition of informal sector as
produced from a formal sector centric approach. The formal centric-defined informal
sector or the kind of progress underwritten in the received development theory are no
longer tenable in this class-focused economy. With the so-called informal and formal
sector shown to be dissolving into a heterogeneous space, the terms of locating and
analyzing the informal sector are fundamentally altered.

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 419

The Making of the Informal Sector: The Methodology of

Capitalcentric Orientalism
Which perspective or worldview operates such that we cannot but arrive at the formalcentric picture of the informal sector? Is this proposed picture of the informal sector an
integral part of a general structure of dualism that drives the mainstream development
paradigm? To answer these questions, we delve into the perspective called capitalcentric
orientalism that we argue shapes the mainstream development paradigm, and then we
relate the development paradigm to a process of the making of the informal sector.
Gibson-Graham (1996) defines capitalcentrism as a perception of the economy in
which capitalism is privileged as the center. Once capitalism is set as a privileged center,
the rest of the economy, no matter how differentiated its practices are, becomes grouped
into the homogeneous whole of non-capitalism. Capitalism becomes the nodal reference
point in terms of which what is not capitalist is conceived, discussed and practiced, and
that too as one congealed, undifferentiated figure of non-capitalism.
As a cultural-political construction, orientalism expresses the production of another
dualism, that between the West/modernity and its Other (Hall 1992; Said 1985[1978]).
The latter in turn has been substituted at times by terms such as, to name a few, the East,
native, the Barbarians, the Orient, the Dark Continent, traditional and, more recently,
third world. The formation of the Other does not reflect what the space of the Other
was all about, but instead how the space denoted as the Other came to be contemplated
in relation to the West/modernity. This was produced by assigning a set of stereotyped
images that not only differentiated West/modernity and Other, but more fundamentally
rendered those differential images discriminatory such that the Other came to be positioned as the lacking underside of the West/modernity. This in turn helped split co-existing
spaces into historical time one backward and the other forward; such a shifting of
spaces into a temporal plane displaces the relationship between spaces into a vertical one
(Chakrabarti and Dhar 2009).
Once defined as fundamentally-foundationally lacking, the set of images that colonized
the produced knowledge of the Other obliterated the otherwise concrete differences as well
as the contradictory moments within that space. The construction of West as normal and
the Other as ab-normal happened concurrently and, following Said (1985[1978]) and
Chaudhuri (1994), we understand orientalism as a worldview no longer confined to white
Western Europe; the brown/black/yellow could be orientalist too. As it has evolved through
colonialism and development, the West/modernity (and by default the Other) has emerged
as a historical, not a geographical construct. Beyond the boundary of continents and
nations, beyond boundaries of identity-color, orientalism has grown into a dualistic
perspective in which one side is produced in the cultural-political domain as inferior in
order to posit the superiority of the other side.
The fusion of capitalcentrism with orientalism produces a rather dramatic transformation
of the meaning of the Southern economy (Chakrabarti and Dhar 2010; Chakrabarti et al.
2008, 2009). Resulting from capitalcentrism, the diverse what are non-capitalist structures

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Critical Sociology 36(3)

are immediately homogenized into non-capitalism in a subordinated existence in relation

to capitalist structures. The orientalist gaze works in tandem displacing further the noncapitalist setting as the devalued space of the third world in relation to the capitalist space
that in turn is positioned as the valued space of the West/modernity. Through the
concomitant logics of capitalcentrism and orientalism, non-capitalism is displaced into
the derogatory rendition of pre-capitalist where pre-capitalist is not simply a subordinate
space in relation to the capitalist space, but is now also viewed as abnormal, reflective of,
and in turn reflecting, the abnormality of what is known as the third world. In this way,
traditional-pre-capitalist-third world comes to symbolize a signpost of economic backwardness; household, agriculture and informal sector emerge as traditional sites of backwardness;
peasant families, indigenous populace, informal sector workers, the poor, poor women
and poor children emerge as harbingers of pathology, as figures of backwardness, as
victims of the so-called traditional structure, as third worldliness as a whole and as legitimate
subjects for external, civilized, interventions.
Given this kind of duality opened up by the capitalcentric orientalist worldview, the turn
towards a teleological notion of transition is inevitable. The development paradigm that
presumes a dual space (traditional pre-capitalist economy, modern capitalist economy) that
is vertically divided in a historical time zone defines progress as the transition of the economy
in terms of, and towards, the telos of full-blown modern capitalism. By virtue of the
very picture created by the development discourse, any other idea or possibility of making
history other than that defined by this idea and path of progress is ruled out; the making of
history becomes a naturalized route towards achieving modern capitalism. Taking their cue
from this understanding, Chakrabarti et al. (2007, 2009) describe how capitalism comes
into the Southern countries such as India through the logic of development. Accordingly, it
is argued that development policies with their associated array of development practices, are
enacted in terms of this perceived progressive transition.
Our contention is that the received discourse of the informal sector is part and parcel
of this development paradigm that flows from the capitalcentric orientalist worldview.
Regarding the making of the informal sector, two aspects demand our attention. First,
the informal sector is a construct of the mainstream development paradigm, very much
a product of the capitalcentric view and, secondly, the informal sector is ranked as a
devalued Other of the formal sector, much like the orientalist perspective. Consequently,
the proposed logic of two (formal sector, informal sector) is in fact a monist logic of one,
wherein the formal sector is positioned as the center. Accordingly, the informal sector is
essentially seen as a site of pre-capitalism; it is to be discussed and policed (through policies)
in terms of the formal sector that in turn is essentially positioned as the normalized space
of capitalist activities. Moreover, the mainstream story of formalization of the informal
sector, which is self-proclaimed to be a progressive journey, is evidently a logical extension
of the developmental notion of transition as derived from the capitalcentric orientalist
world-view.
Having discussed the place and dynamics of the informal sector within the broader
development paradigm, we will now try to explicate how the process of making the
informal sector from the capitalcentric orientalist worldview drove the conventional

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 421

discourse of the informal sector; in that context, we argue how and why the attempt to
introduce heterogeneity in the informal sector failed by virtue of the very framework
adopted in that discourse.

The Issue of Heterogeneity of the Informal Sector in a

Capitalcentric Orientalist Framework
The process of making the informal sector has been taking place through the very manner
in which the informal sector has come to be defined. The informal sector is defined as a
sector which is not formal in the sense that it lacks the criteria which are used to define
the formal sector. Therefore, the concept of the informal sector underwrites the element
of lack vis-a-vis the set of criteria used to fix the formal sector. In this way, the (b)order of
the formal sector is concretized and the informal sector is positioned as being generated
outside of that (b)order, as one negative image of the formal.
Once the place of the informal sector as a lacking Other of the formal sector is fixed,
a proliferation of definitions of the informal sector ensues. Yet, no matter how different
these definitions are and notwithstanding how heterogeneous a space they attempt to
produce, the theoretical terrain of addressing heterogeneity within the informal sector
remains fixed by the formal-centric dualistic structure. The dualistic structure and the
place of heterogeneity within it can be seen from the following explication.
Suppose that A is one criterion capturing the formal sector. In that case, not having A,
call it - A, signifies the sign of informality. -A can be made to manifest in different ways
like -A1, -A2, -A3 up to logical infinity. A acts as the center and -A1, -A2 up to infinity
are reducible, albeit negatively, to A. For a specific example, take the case of remuneration
that is displaced into fixed wage and lack of fixed wage in order to produce a particular
relationship between formal and informal. The fixed wage is the defining criterion for the
formal sector, standing for security, permanency, organization/voice and so on. The lack of
fixed wage is treated as the defining characteristic of the informal sector. Wage systems such
as wage in kind, subsistence wage, piecemeal wage, contractual wage, etc., would typically
come within the broad band of lack of fixed wage. The informal sector has no criteria of its
own. What it actually has is the appearance of lack of formal sector criteria implying that
formal sector criteria are deployed to define and differentiate the characteristics of the
informal sector. This is precisely what has happened in the informal sector discourse.
Notwithstanding their other differences, these approaches remain united by the production
of the informal sector through a set of images that is designed to mark out its differences
from the formal sector. This claim of ours can be substantiated by evaluating some of the
major approaches to the informal sector.
Majumder (1976) uses the criterion of protection to demarcate the informal sector
from the formal one. According to Majumder, the formal sector enjoys protection by law
and also by the government with respect to, to name a few, wage, jobs, market of the
commodity and supply of inputs, which are treated as necessary to carry out production.
On the other hand, the informal sector lacks all these dimensions of protection.

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Critical Sociology 36(3)

In contrast, De Soto (1989) defined the informal sector as the activities which are
desirable and productive, but carried on outside the law. He identifies legality as the key
element and economic activities are categorized according to the presence/absence of that
element. The government has very little or no role in instances of dealing with the informal
sector which functions almost under extra legal conditions by virtually being ignored by
the formal body of laws and regulations. The aspect of legality was further highlighted
in Portes et al. (1989) in terms of characteristics like the nature of employment, wage
structure, working condition and labor status.
Papola (1981) gave a detailed and analytical exposition of different analyses of the
dichotomy between the formal and informal sector. Each approach takes a particular
characteristic for defining the informal sector and that way every approach excludes other
characteristics. According to Papola, there is no such unique and universal criterion upon
whose basis the informal sector can be defined. He argued that the following could be
taken as characteristics commonly observed in the informal sector:
a)
b)
c)
d)
e)
f)

Small size of operation

Informal structure and family ownership
Non-modern technology
Lack of access to government favors
Competitive and unprotected product market
Unprotected labor market.

Still, Papola doubts whether these criteria can be exclusively credited to the informal
sector. He concludes that it is very difficult to identify the informal sector as a distinct
analytical category because the different attributes of this sector are neither consistent
with each other nor universally applicable in diverse empirical situations. He therefore
remains sceptical about the schema of defining the informal economy.
The ILO (1972, 2002) has been at the forefront of popularizing the formal-centric
method of analyzing the informal sector. To begin with, it produces a conception of
the informal sector from a presumed centricity of the formal sector where pre-assigned
valued aspects of right, recognition, protection, security and so on are considered as
achieved. Moreover, complete absence or deficient presence of these valued attributes
help differentiate the informal sector from the formal sector that, at the same time,
produces a devaluation of informal enterprises as embodying an underdeveloped economic
state. The informal sector represents such traces of underdevelopment which, in order
for society to progress, need to get connected to the formal sector and, finally, as part of a
deterministic transitional logic, become formalized over a period of time.
[I]n the longer term, create enough employment opportunities that are formal, protected
and decent for all workers and employers. Already in 1991, the ILO had made it clear
that the informal economy should not be developed or promoted as a low-cost way of
creating employment. In the twenty-first century, decent work is certainly about much
more than a job at any price or under any circumstances. Therefore, new job creation

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 423
should not be in the informal economy. The emphasis has to be on quality jobs in the
upper rather than lower end of the continuum. (ILO 2002: 89)

While the ILO (2002) has been increasingly accepting of the need to account for
heterogeneity, its adopted capitalcentric orientalist perspective of development means
that heterogeneity can only be viewed from within a devalued homogeneous informal
sector and that too is positioned in terms of a privileged formal sector.
Typically, such renditions of the informal sector fix characteristics in terms of the formal sector within which these are presumed to be already operating. Consequently, by the
very nature of the construction of the informal sector, in relation to the presumed centrality of the formal sector, these characteristics assist in identifying the lacking features of
the informal sector, thereby helping shape the devalued existence of the informal sector.
Though the dualistic approach has gained widespread currency for defining the informal
sector, doubts over the effectiveness and suitability of dualism have persisted. The central critique has concentrated on the inability of the dualistic approach to account for and explain
the presence of heterogeneity within the respective sectors. There are many units which cannot be categorized as purely formal or informal because they consist of some characteristics
of the formal sector and some from the informal sector. Because of the presence of this grey
area, the sceptics are in favor of defining a continuum with its two extremes formal and
informal. To capture the continuum, Harding and Jenkins (1989) construct a matrix taking
the informal enterprises and informal labor market as two measures of informality judged in
terms of chosen characteristics (which are supposed to hold in the formal sector) present
(absent) in each economic activity. Each productive enterprise is assigned a particular degree
of informality (formality) and placed within the matrix. Similarly, Sethuraman (1976[1981])
argued in favor of a continuum in terms of economic activity and labor productivity. For all
their efforts, it is noteworthy that none of these critiques attempted to question the received
categories of informal and formal sectors. Rather, they try to displace their existence by keeping intact the conceptual division between informal and formal.
Radical approaches towards the informal sector also remained captivated by the dualism of formal/informal sector and thus fared no better. The core-periphery approach
looked at the informal sector as an independent and autonomous peripheral sector in
comparison to the formal sector the core. Whether the relationship between the two
was benign or exploitative became a contentious point of debate (Moser 1978; Quijano
1974; Weeks 1975). While some highlighted aspects of heterogeneity to question the
presumption of exclusivity of the informal sector (Tokman 1978), none of the protagonists questioned the {formal/core, informal/periphery} dualism founded on the centrality of the formal sector. Closely related Marxist approaches considered the capitalist
mode of production as symbolizing the formal sector which was taken as central and
superior in comparison to the pre-capitalist mode of production qua informal sector. Given this division, exponents debated the presence or absence of a continuum
between the two extremes, and the nature of a continuum (Bienefeld 1975; Moser
1978). Defining class in terms of ownership of capital, exponents like Breman (1976)
argued against dualism by defining the continuum of working population in terms of

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Critical Sociology 36(3)

classes such as the labor elite in the formal sector and the paupers in the informal sector,
with the petite bourgeoisie and sub-proletariat in between.
While concern about accounting for the presence of heterogeneity led to some valid
questions regarding dualism, the problem is that these approaches are not free of formal
sector centrism either. The formal-centric methodology in turn severely undermines the
effort of accounting for heterogeneity. In effect, these approaches take as a given the
existing definition of the informal sector as a homogeneous whole situated in terms of
the formal sector and are, at best, demonstrating various kinds of deviation in this informal
sector. Faced with empirical discrepancies, they try to incorporate heterogeneity through
a continuum within a framework in which the conceptual division between formal-informal
is presumed. What they are attempting is thus the incorporation of heterogeneity within a
pre-constituted homogeneity which incapacitates any attempt to shake up the formalcentric dualistic structure that shapes the perception and position of informality in the first
place. This remarkable commonality in the otherwise diverse informal sector approaches,
left and right, is perhaps indicative of a certain inability to recognize and appreciate the
grip of the capitalcentric orientalist worldview with its connected trait and problem of
centrism, a centrism that fundamentally drove the train of the making of the informal
sector and which these seemingly diverse approaches, almost without exception, rode.
These approaches failed to appreciate that the problem is not only empirical but also
theoretical; not simply descriptive but also epistemological and normative.
Having examined the limitations of interrogating the problem of heterogeneity within
the formal sector centric approach, it is imperative to first dislocate the methodology
from the capitalcentric orientalist world-view and from the theory of the mainstream
development paradigm such a perspective generates. We need a non-deterministic
methodology that, in producing a conception of the economy as inherently heterogeneous, would dissolve homogeneity along with its feature of devaluation of the informal
sector. For constructing such an alternative frame we take a clue from Papola (1981) who,
instead of advocating pre-determined characteristics as markers of homogenization, is
more in favor of heterogeneity arising from the intersection of different processes within
society, like class, caste, gender, politics, race and so on. This calls for adopting a theoretical approach where heterogeneity emerges at the definitional level of the economy. To
achieve this end, we deploy the anti-determinist logic of overdetermination to produce a
class-focused economic cartography (Resnick and Wolff 1987). The inherent heterogeneity in the class-focused Marxist economy dissolves the formal-centric definition of
the informal sector by dismantling the dualism of formal/informal itself, as a way of
thinking about the economy and its development. Such a displacement of the category
of economy will pave the way for the unmaking of the formal-centric informal sector.

Class and Overdetermination: Relocating the

Theoretical Terrain of the Informal Sector
The concept of overdetermination lets loose an anti-deterministic structure of causality
which, being inherently anti-centrist, plays an instrumental role in the unmaking of the

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 425

informal sector (Resnick and Wolff 1987: chapter 2). Overdetermination entails that
economic, cultural, political and natural processes mutually constitute one another. Each
process is both the cause and effect of other processes. In so far as an enterprise is constituted by various effects from the economic and non-economic processes, institutional
settings, including the familiar sites of informal enterprises, must be seen as social institutions. They are literally brought into existence by a confluence of effects, to name a few,
from economic processes such as class, political processes such as the authority wielded by
management and state, cultural processes pertaining to advertisement, race, gender, caste,
and natural processes such as the environment on the shop floor.
The methodological structure of overdetermination immediately renders problematical
the logic of centrism. Under overdetermination, no one process is more important than
another process and, consequently, no process can serve as a center. Moreover, because no
process can be reduced to another in any capacity, the logic of overdetermination is inherently
anti-reductionist. As de-centered and non-reductionist, economy becomes a heterogeneous
web of overdetermined processes consisting of mutually constituting economic and
non-economic processes. As such, the idea of an independent and autonomous economy
existing outside the non-economy is rejected in the overdeterminist setting.
We can immediately refer to three important consequences of adopting the methodology
of overdetermination for the informal sector analysis. First, if placed within the overdeterminist conception of an economy, the formal sector is, by the very construction of the
social terrain, dethroned from its privileged position as a causal force. The informal
sector must now be conceived free from formal centricity. Importantly, without the
anchor of the latter, questions regarding the formal sectors conceptual existence immediately surface. Second, overdetermination enables a rethinking of alternative ideas of
development outside of the progressive logic of the mainstream development paradigm.
Because the centricity of capitalism qua formal sector loses its valued position as the center,
the idea of capitalist induced development as a signal for a normal progressive journey
becomes debatable. Third, overdetermination forces a rethinking of dynamics within the
informal sector. Every site in this economy is a unique condensation of numerous overdetermining processes. This makes it impossible to reduce a particular production enterprise
to another because each such overdetermined site is unique. This captures a feature of
heterogeneity that says that no production type can be reduced to another production
type by any pre-given set of criteria.
The challenge then is to produce the conception of an economy within which overdetermination, and not determinism, will operate. To theorize such an economy, we, following
Resnick & Wolff (1987), choose and deploy the economic process of class as the entry
point of social analysis where class is defined as processes of producing, appropriating,
distributing and receipt of surplus labor. The object of Marxian analysis is to locate and
analyze the diverse manners in which the class process is constituted by, and in turn
constitutes, other economic, political, cultural and natural processes. Despite the focus on
class (economic), no explanation in this Marxist theory can be class (economic) specific.
Marxist theory turns its attention towards process of performance and appropriation
of surplus labor (called fundamental class process or FCP) and its distribution and
receipt (called subsumed class process or SCP). Not only do FCPs and SCPs mutually

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Critical Sociology 36(3)

constitute one another, but these in turn are constituted by non-class processes as well.
In this context, class enterprise is a conceptual site of an overdetermined cluster of class
(FCP and SCP) and non-class processes. Because the cluster of overdetermined processes
congregates uniquely in a particular site, each class enterprise is distinct. Not only do
the SCP, FCP and non-class processes mutually constitute one another uniquely in each
enterprise, the combined set of diverse effects impacting each enterprise moves the
respective enterprises in different directions. That is, the distinct class enterprises move
unevenly as well.
Against this background, we ask: how does a class-focused economy based on an
overdeterministic logic affect the category of the informal sector and the vexed question
of heterogeneity?

The Unmaking of the (In)formal Sector

We unravel the inherent heterogeneity of a class-focused economy in a single frame, a
portrait particularly dissimilar to the one presented by the formal-centric dual economy.
Once such a heterogeneous economic terrain is presented, we shall show that the framework
of formal-informal duality immediately gets dislocated in a manner that dissolves the
received formal-centric category of the informal sector.
We start by identifying three broad types of labor:
1) direct labor (symbolized by A),
2) non-labor (B), and
3) collective labor (C).
Direct labor is performed individually in the production of goods or services. Non-labor
symbolizes those who are not involved in directly producing any goods or services.
Collective labor, on the other hand, refers to the mass of laborers who, via certain divisions
of labor, produce goods and services. Chaudhuri and Chakrabarti (2000) classify the
process of performance and appropriation of surplus labor or the FCP into six types of
class processes.
Table 1

Process of performance and appropriation of surplus labor

Appropriation of surplus labor

Performance of surplus labor

A
(Individual Labor)

B
(Non-Labor)

C
(Collective Labor)

AA
CA

AB
CB

AC
CC

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 427

The first letter indicates the performance of surplus labor and the second stands for
the appropriation of surplus labor. For example, AA stands for a setting where surplus
labor is performed individually (A) and appropriated by the same person (A). The economy
can be conceptualized in terms of six class processes:

AA: Independent
AB: Exploitative
AC: Community non-exploitative
CA: Community exploitative
CB: Exploitative
CC: Communistic non-exploitative

AB, CA and CB represent situations of exploitation in which all or some of the direct
producers find themselves excluded from the process of appropriation. These exploitative
class processes further map out into slave, feudal, capitalist and CA communitic types.1
In contrast, CC (the communist class process) and AC2 (a communitic class process)
represent situations of non-exploitation in which every direct producer, whether as part
of collective producers or as an individual producer, is not excluded from the process
of appropriation of surplus. Rather, the surplus is appropriated collectively in some
socially defined manner. Finally, AA (the independent class process) represents situations where the surplus produced individually is self-appropriated by the same producer.
Importantly, unlike other radical approaches, the existence of capitalist is not captured
by property, power or market, but by the mode of appropriation in connection to the
commodity form. More specifically, capitalist class process refers to a mode of appropriation
in which productive capitalists appropriate the surplus labor performed by productive
laborers in a scenario where means of production, labor power and the product are in
value form (Resnick and Wolff 1987, 2002). Other class existences such as communist,
feudal, independent and so on, could also be in commodity form (in addition to possible
non-commodity forms), but their modes of appropriation would certainly differ from
that of the capitalist.
These varied class processes potentially co-exist with associated conditions of existence
and each cluster of processes drives the diverse institutional settings that shape the economy. To capture sharply the feature of heterogeneity in these institutional settings, we
expand on Cullenberg (1992) and Chakrabarti and Cullenberg (2001, 2003) by considering the diverse processes of distribution and receipt of goods and services in addition
to the processes of performance and appropriation of surplus labor.3 We take three types
of appropriation:
1) self-appropriation,
2) exploitative appropriation, and lastly
3) collective appropriation.

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Critical Sociology 36(3)

In the case of distribution, we consider only two forms of output distribution to keep
the matter simple commodity and non-commodity. Following the same rationale, we
take workers remuneration in its two forms wage and non-wage. Combining these
three aspects (modes of appropriation, forms of output distribution and remuneration)
produces 24 different class sets (Table 2) which represent the different institutional
arrangements in which the FCPs may exist in an economy.
The 24 class sets would encompass capitalist, feudal, slave, communitic, independent
and communist class processes. Even at this elementary level the economy becomes the
institutional configuration of innumerable forms of these 24 class sets. Considering further
conditions of existence for these class sets increases the level of heterogeneity in the economy.
For example, if we count overdetermining conditions of existence, such as the subsumed
class conditions referring to distribution and receipt of surplus, property structure, power
structure, income distribution, cultural dimensions pertaining to race, gender, caste, etc.
Table 2

The 24 class sets

Serial No.

Performance of
surplus labor

Workers access
to appropriated
surplus

Output distrbution

Workers
remuneration

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

A
A
A
A
A
A
A
A
C
C
C
C
A
A
A
A
C
C
C
C
C
C
C
C

A
A
A
A
B
B
B
B
A
A
A
A
C
C
C
C
B
B
B
B
C
C
C
C

Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com
Com
Non-Com

Wage
Wage
Non-Wage
Non-Wage
Wage
Wage
Non-Wage
Non-Wage
Wage
Wage
Non-Wage
Non-Wage
Wage
Wage
Non-Wage
Non-Wage
Wage
Wage
Non-Wage
Non-Wage
Wage
Wage
Non-Wage
Non-Wage

Com: commodity. Non-Com: non commodity

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 429

the diversity of class sets in their overdetermined relations will only reveal the increased
state of heterogeneity of the economy. The class-focused economy is thus inherently
heterogeneous. In so far as the economy cannot be reduced to one or a set of class sets,
the class-focused economy is also de-centered. At a conceptual level, it becomes impossible
now to specify any economy as capitalist or feudalistic. This economic terrain makes it
virtually impossible to adopt a capitalcentric orientalist perspective.
The class-focused economy is fundamentally different not only from the neo-classical
conception of the economy, but also that forwarded by certain strands of conventional
Marxian approaches. Typically, in the latter, a dominant mode of production is expressed
with specific characteristics and economic activities. Other modes of production that do
not conform to these characteristics are generally identified as subordinated traces of
the dominant mode. This is due to a pre-determined position of such Marxism: there exists
only one mode of production at a particular time, either singularly or as the dominant mode.
Whether in describing the nature of society or of its transition, what matters is the
shape and trajectory of the dominant mode of production. In so far as the incorporation of
heterogeneity is concerned, such deterministic economic representations are not helpful, as
our earlier review of mode of production literature of the informal sector made clear.
Adopting the de-centered and heterogeneous class-focused economy as our theoretical
terrain, we would now like to interrogate the formal-informal binary and its associated
definition of the informal sector. We first locate the feature of centricity of the formal
sector and ask whether a formal sector centric definition of the informal sector is possible
from within a class-focused economic terrain. If not, what are the implications?
In terms of the class-focused economy, accepting the dualistic structure would imply
a move to further reconfigure the economy by fixing a particular class process, say, capitalist,
as symbolizing the formal sector and the other class processes, namely non-capitalist, as
the informal. In that case, the economy would get reduced to two axes capitalism captured
by capitalist class sets, and non-capitalist class sets grouped into another homogeneous
whole of non-capitalism. The heterogeneous economy is simplified into the dualistic
structure of capitalism/non-capitalism which, when looked at from within mainstream
development theory, takes various forms such as the one between the formal sector and
the informal sector.
As already described, the reconfiguration of an otherwise heterogeneous economy
towards a capitalcentric based dualism is further displaced by the orientalist dimension.
Recall that mainstream literature on the informal sector gives a positive value to the
formal which, by default, is the capitalist class process; at the same time, mainstream
literature first devalues the other non-capitalist class processes and, second, positions
the devalued class processes in relation to capitalist class processes. This way the otherwise
de-centered and heterogeneous non-capitalist class processes are homogenized into
pre-capitalism or its substitute category of informal sector. Not only is the heterogeneous
economy reduced to two homogeneous wholes, the de-centered economy in turn is
now posited in terms of the privileged center of the formal sector, also known as the
capitalist sector. Once this capitalcentric orientalist view is accepted, it becomes all but
impossible to deviate from the picture of an economy in which the formal sector (or

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Critical Sociology 36(3)

capitalism) is presumed to be the norm(al). The production of such a norm(al) is accelerated

further through subjective evaluations (decent work, protection, security, etc.) that
refer to the orientalist impulse. For example, in the ILO discourse:
work in the informal economy cannot be termed decent compared to recognized, protected,
secure, formal employment. (ILO 2002: 1, emphasis added)
The term informal does not mean that there are no rules or norms regulating the
activities of workers or enterprises. People engaged in informal activities have their own
political economy their own informal or group rules, arrangements, institutions and
structures for mutual help and trust, providing loans, organizing training, transferring
technology and skills, trading and market access, enforcing obligations, etc. What we do
not know is what these informal rules or norms are based on and whether or how they
observe the fundamental rights of workers (ILO 2002: 7).

This move to universal rights brings into sharp focus the matter of the orientalist constitution of the category of the informal sector. What is meant by fundamental rights?
Whose fundamental rights are at stake? From which perspective is it fundamental? Why do
we begin with the question of rights in the informal domain? If the ILO does not have a
clue about the political economy of the informal sector, how does it address the question
of rights in that domain? Even as the ILO is troubled by the unexamined nature of the
political economy underlying the informal activities, it is not dissuaded by the mysterious
presence of informal rules and norms within such societies. Instead of trying to comprehend what those rules and norms are, and these are indeed very complex questions, it
moves the focus to another, a quite different, set of rules and norms that is bound to the
marker of decency, an attribute already taken as an embodiment of the formal sector.
If, however, we accept the overdeterminist economic reality specified by the classfocused economy, then even at its most elementary level such an economy consists of the
24 class sets and no process in such a heterogeneous economy can legitimately be identified as the center. In our scheme, not only can the economy not be reduced to the centrism of the capitalist sector (which itself is now disaggregated into various class set types),
but even what has come to be known as the so-called non/pre-capitalism is, by definition,
divided into various types with further disaggregation within each sub-type. In so far as
the formal sector is symbolized by the capitalist class set, it cannot serve as the center; even
if, for arguments sake, the category of formal sector is reformed to include some noncapitalist existences, it still, in a class-focused economy, cannot serve as the center. The
different class sets are now situated in a horizontal analytical register which excludes any
possibility of pre-determined division of spaces into a historical time zone backward and
forward that would reduce the relationship between the spaces into a vertical one. As a
result, no basis exists for attributing the term informal as a marker of devaluation to a
particular class set; nor can such a marker serve as a conduit for justifying policies that procure
and expand the central position of a formal sector. An implication of the class-focused
economic terrain is then that it is no longer possible to project a deterministic transitional

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 431

logic in terms of one or a group of class sets, clubbed into a formal sector, that are presumed
to be the center. The idea of history as a pre-determined route from backward state to a
forward state is disallowed even as it now makes room for diverse possibilities and interventions to create historical events in an open-ended terrain. In such an altered terrain, the
process of the making of the formal-informal duality in development discourse is seen as
a particular kind of intervention to bring about and secure the event of capitalism even as
the mainstream development discourse tries to establish this division and the ascribed
journey attached to it (formalization of an informal sector) as a normal facet of third
world existence.
Having disputed the privileged position ascribed to the formal sector, let us now with
the help of the ILO definition of the informal sector exemplify two more effects of the
class-focused analysis:
1) why the secured theoretical position of formal and informal sector as capitalist and
non/pre-capitalist respectively tends to get disturbed, and
2) why any form of conceptual division of formal and informal becomes moot.
The international symposium on the informal sector organized by ILO and the
International Confederation of Free Trade Unions (ICFTU) in 1999 classifies the informal
sector workforce into three major groups:
a) owner-employers of micro enterprises employing a few paid workers, with or without
apprentices;
b) own-account workers owning and operating one-person businesses, who work alone or
with the help of unpaid workers, generally family members and apprentices; and
c) dependent workers, paid or unpaid, including wage workers in micro enterprises, unpaid
family workers, apprentices, contract labor, home workers and paid domestic workers.
Evidently, these various social settings named by ILO could potentially map out into
the 24 class sets, from exploitative class sets of capitalist, feudal, slave and CA communistic
types (sets 512 and 1720), independent class sets (sets 14) and non-exploitative class
sets of AC communistic and communist type (sets 1316 and 2124). Similarly, whatever
the specified features ascribing its presence, the formal sector would typically map out
into various kinds of class sets. Suppose we rule out from the definition of formal sector
the possibilities:
1) unpaid labor or payment in kind, and
2) non-commodity.
In that case, then, the formal sector could potentially be comprised of class sets 5, 9,
13, 17 and 21, wherein the capitalist class set is only one type. This follows from our
theoretical framework in which varied kinds of mode of appropriation (and not exclusively capitalist) can exist closely with market forms of distribution. This implies that any

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Critical Sociology 36(3)

reduction of the formal sector to the capitalist sector and of the informal sector to the
non/pre-capitalist sector is immediately disturbed. Moreover, it is equally possible that
many of these class sets could be within the informal sector (in terms of characteristics
defined by the ILO). For example, even with similar cultural and political conditions of
existence, class set 9 can belong to both the formal and informal sector; with dissimilar
conditions of existence, the problem of a secured conceptual division only worsens. The
possibility of similar kinds of class sets in both formal and informal sectors make the division
between formal and informal at best hazy and, at worst, impossible.
With the formal sector losing its privileged position, with the association of formal
sector with capitalist class set getting dislocated, and with similar class sets possible for
both formal and informal enterprises, what cannot be sustained any longer is the secured
division between a formal and an informal sector or the connotation of the informal
sector as the devalued Other of the formal sector or of its teleological journey in terms of
formal sector. Once detached from the capitalcentric and orientalist moorings, the received
terms formal sector and informal sector dissolve into the heterogeneity of the economy.
Any further insistence on using the terms formal and informal have to be specified in
the context of this de-centered and heterogeneous economy that not only has no place
for any kind of centrism or devaluation, but also now paves the way for a radically
different idea of transition and development.
Facing the teleological idea of progress telescoped in the formal-centric logic that proposes a unidirectional process of formalization of the economy, the class-focused Marxist
approach would render such a process of development incapacitating and illogical as a
mode of analyzing the transition of a de-centered and heterogeneous economy. Since it
is not possible to either pose homogeneity or centricity in the class-focused economy, any
purported transitional logic built on either can only be considered an ideological trope
to reconstruct the social contour in favor of a privileged entity capitalist or formal.
De-familiarizing the making of the informal sector thus reveals it as a process of
fashioning a political reconstruction of Southern economies favoring the rule of capitalism
where the terms formal and informal help constitute and secure this event. In terms of
our class-focused frame, the formation of the categories of formal and informal sector
makes possible the governance of an otherwise de-centered and heterogeneous economy from the centricities of capital and modernity. Challenging the dualistic structure
of formal/informal, our class-focused approach unlocks a different way to posit and
explain the economy and its transition. As we argue, at the least, it is possible to have all
24 class sets co-existing within an economy. Given the features of de-centering and
heterogeneity, the transition of this economy is uneven and contingent signifying not
only a movement across the types of various class sets (say, from feudal to capitalist or
capitalist to feudal), but also in the forms of the class sets (say, a movement from one
capitalist form to another). This class-focused Marxist theory cannot predict or claim a
teleological movement of the de-centered and disaggregated economy towards a specific
type of class set. One can argue over the ethico-justice standpoint regarding the direction
in which society should move, say, achieving a state of non-exploitation and fair distribution (see, for example, Chakrabarti and Cullenberg 2003; De Martino 2003).

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Chakrabarti and Thakur: The Making and Unmaking of the (In)formal Sector 433

However, in a reality that is overdetermined, no additional claim, such as that society

actually moves or would move in that direction, can be accommodated. To struggle, in
terms of the above-argued Marxian ethico-justice standpoint (or any other competing
standpoint), becomes an interminable struggle for its defined progress. In short, our classfocused approach inaugurates an imaginative space outside the first world/third world
register, in which contemplating and carrying out social reconstruction beyond the captive
language of modern capitalism becomes a possibility. When this happens, the basis of
governance of social space in terms of modern capitalism is fundamentally challenged.

Notes
1 While the rest of the class processes have been widely discussed (see, for instance, Resnick and Wolff
1987), communitic class process is perhaps worth mentioning. CA type communitic class process
signifies a situation where work is done collectively (standing for C) but one member (standing for
A) within the collective appropriates the total surplus labor performed including his own. CA type
communitic class process is exploitative since some direct producers are excluded from the process of
appropriation. An example would be a family based informal enterprise where the entire family
(husband, wife, brothers, sisters, children, cousin, etc.) share in the performance of surplus labor, but
only one person, such as the head of the family, appropriates the surplus labor of all including that
of his own which (s)he then distributes according to some principles and norms.
2 Definitionally, an AC type communitic class process symbolizes a situation where the community
of direct producers, or a bigger group, not excluding the direct producers, appropriate the fruits of
surplus labor collectively (standing for C) while production is performed individually by independent
producers (standing for A). In the context of the informal enterprises, AC communitic class process
would resemble a situation where even if production is individually performed, the individual
producers, say, via a cooperative, appropriate the surplus collectively. CC or communist class process,
on the other hand, resembles a scenario where, along with the appropriation of surplus labor,
performance of the same is collective too.
3 Cullenberg (1992) and Chakrabarti and Cullenberg (2003) do not consider the performance of surplus
labor which we incorporate here.

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For correspondence: Anjan Chakrabarti, Department of Economics, Calcutta University, 56 A, B.T.

Road, Kolkata-700 050, West Bengal, India. Email: chakanjana@yahoo.co.in
Atanu Thakur, Department of Economics, Vivekanada College, Calcutta University, 269 D.H. Road,
Thakurpukur, Kolkata-700 063, West Bengal, India. Email: atanuthakur@yahoo.co.in

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