The Foreign Service Journal, July-August 2003

64 F O R E I G N S E R V I C E J O U R N A L / J U LY- A U G U S T 2 0 0 3 t’s early on a Monday morning on the streets of Mexico City but the street vendors are already lined up hawking their wares. These men and women offer everything from television sets, auto supplies, CDs and all kinds of appliances, to hot tamales and fresh tortillas. If one has any doubt about how vital capitalism is in Mexico, one need only see all 250,000 of these entrepre- neurs busily buying and selling from their small, cramped and crowded locations on the city’s many streets and side- walks. In fact, only a very small fraction of the Mexican working poor are employed in factories or in medium- size companies. Many, perhaps the vast majority (we don’t really know), are out on the streets. The street ven- dors may well outnumber the portion of the Mexican working poor employed in factories or in medium-size companies. Yet until fairly recently, the economic activity of this group was never even counted as part of Mexico’s gross domestic product (the sum of all goods and services pro- duced within a nation’s borders). After all, what self- respecting Mexican government official or World Bank economist would walk the dirty streets to count the num- ber of vendors, calculate their annual sales volume, or assess how they operated their stalls? So until about 20 years ago, this part of the economy simply didn’t exist as far as officialdom was concerned. When the World Bank, the International Develop- ment Bank, the U.S. Agency for International Development and other international development agen- cies finally began to examine this sector globally in the 1980s, they were surprised at how productive it was. In fact, the analysts were so shocked that they had trouble even coming up with a label for it. At first they called it the “parallel economy,” which implied that this economic stream of goods and services went along with the formal national economy but func- tioned outside it. Then the terminology changed and the people selling matches, single cigarettes, candy bars, sodas, food, clothes, motor oil, and building supplies were classi- fied as the “informal sector.” Through this shift the econo- mists belatedly acknowledged that businesses operated by the poor do indeed constitute a significant, productive “sec- tor” like housing or health or education. In fact, subsequent studies have found that the infor- mal sector contributes from 20 to 40 percent to the GDP of many countries. Thus, the real engine of capitalistic growth in any country, Third World or developed, is not the corporation — which, on average, requires a capital investment of one million dollars to create one new job — but new small businesses, many of which are micro- businesses started and managed by the poor. Reflecting that finding, the “informal sector” has now graduated to a new term: “micro-business.” Taking Care of Business What is it like to manage a micro-business on the streets of the capital? James T. Olsen is an international consultant currently liv- ing in Mexico. He has been an editor-in-chief at McGraw- Hill Publishing, an educational expert for the Organization of American States, and a chief of party with USAID in the Dominican Republic. He holds a B.A. and M.A., both in 17th-century English literature, from Columbia University and a Ph.D. in international education and economics from The Union. B Y J AMES O LSEN C APITALISM AND THE M EXICAN P OOR U NTIL USAID AND OTHER INTERNATIONAL DEVELOPMENT AGENCIES LEARN HOW THE LIVES OF THE WORKING POOR REALLY FUNCTION , THEIR AID AND LOANS WON ' T BENEFIT THOSE WHO NEED HELP THE MOST . I