Economic growth

Economic growth

Regarding the seven percent growth predicted for 1996 (The Jakarta Post, Nov. 8, 1995), I would like to ask the economists: Did they include the informal economy? Evaluating economic growth based on traditional economic tools may not tell the whole story. Overlook the informal sector and you would be barking up the wrong tree.

The economy that concerns economists -- the current account deficit, non-oil exports, currency depreciation, and so on -- is not the one in which people thrive. I rent cars at airports from private entrepreneurs. If I were renting them from Hertz, it would contribute to the GDP.

We pay orang jaga (watchmen), gardeners, parking men. If they were employed by a security company their output would be accounted for in the GDP. If all the people who sell prepared food on the streets were from a fast-food chain, it would be included in the GDP. All the above, plus the men who collect card board for sale and operators of traditional means of transport do not exist as far as economics is concerned.

One may argue that this is small fry. It is not. In 1983, the U.S. informal economy was put at between US$400 billion and $700 billion. At that time, bigger than England's GNP. Italy's submerged economy was put at 30 percent of the total GNP and Communist Russia at 20 percent.

This year, Brazil's most conservative evaluation of the informal economy is $200 billion. Three times Portugal's GNP, or one time Sweden's. Statisticians use electricity consumption to gauge industrial activity. Brazil's electricity consumption is always increasing, regardless what economic indicators say.

I do not believe all the unemployed in developed countries sit at home. In France they travailleau noir (black work) and in Germany, they make up part of the Schattenwirtschaft (shadow economy).

The informal economy has a huge impact both on developed and developing countries. If statisticians and economists looked at the Indonesian informal sector they would be very surprised. Economics, if not correctly evaluated, cannot be called: science.

OSVALDO COELHO

Bandung, West Java