System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people.
his essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy.
What happens in all the unregistered markets and roadside kiosks of the world is not simply haphazard. It is a product of intelligence, resilience, self-organization, and group solidarity, and it follows a number of well-worn though unwritten rules. It is, in that sense, a system.
Today, System D is the economy of aspiration. It is where the jobs are. In 2009, the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by the governments of 30 of the most powerful capitalist countries and dedicated to promoting free-market institutions, concluded that half the workers of the world — close to 1.8 billion people — were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes.
In many countries — particularly in the developing world — System D is growing faster than any other part of the economy, and it is an increasing force in world trade.
A 2009 study by Deutsche Bank, the huge German commercial lender, suggested that people in the European countries with the largest portions of their economies that were unlicensed and unregulated — in other words, citizens of the countries with the most robust System D — fared better in the economic meltdown of 2008 than folks living in centrally planned and tightly regulated nations. Studies of countries throughout Latin America have shown that desperate people turned to System D to survive during the most recent financial crisis.
So what kind of jobs will predominate? Part-time work, a variety of self-employment schemes, consulting, moonlighting, income patching. By 2020, the OECD projects, two-thirds of the workers of the world will be employed in System D.
Yet there’s plenty that’s positive. The digital divide may be a concern, but System D is spreading technology around the world at prices even poor people can afford.
And there’s a definitional problem as well, because the border between the shadow and the legal economies is blurry. Does buying some of your supplies from an unlicensed dealer put you in the shadows, even if you report your profit and pay your taxes? How about hiding just $1 in income from the government, though the rest of your business is on the up-and-up?
“It’s very difficult to separate the nice African ladies selling oranges on the street and jiggling their babies on their backs from the Indian gangsters who control the fruit trade and who they have to pay rent to.”
The total value of System D as a global phenomenon is close to $10 trillion.
Huge size (second largest in 2006 based on 2003 data), rises fast, ruled by unwritten rules, both positive and negative impacts, but more positive than negative, difficult to define and categorize; represent future jobs (part time, consulting, moonlighting); provide flexibility and saves households from trouble in crisis. A perfect example for my CICE, not part of institutionalized economy.