“The emphasis on hope and achievement is convenient
too for the upper classes, for it suggest a lower class
which is willing to integrate itself into the dominant culture,
and furthermore to raise itself by its own bootstraps,
thus necessitating no major redistribution of income.”
There is an underlying assumption to much of the debate surrounding slums and urban poverty: that the urban poor will get to our standard of living eventually, and countries of the South will rise to the same level of material affluence as the industrialised North, just so long as they follow our prescribed free market approach to development. The view that slums were a temporary and unavoidable phenomenon was prevalent in most developing countries until the early 1970s, based on the assumption that slums would be overcome by economic development in both urban and rural areas. It was on this basis that slums and the rights of slum residents were largely ignored by newly-independent Third World governments in the 1950s and 1960s, as reflected in land-use maps that showed informal settlements as blank spots denoting undeveloped land.
Although an official policy of neglect is no longer justifiable for governments [see Myth 2], the assumption that slums are a ‘natural’ part of progress still persists in various forms. In the West, the landscapes of today’s urbanising world bear such resemblances to nineteenth-century Britain that it may bring the reassurance that we have been there before: if only governments continue to follow the same industrial pattern of development, then slums will automatically disappear. Since the neoliberal ascendence in development policy from the late 1970s, the advocated approach for governments was firstly to get the ‘market signals’ right, and then deal with any remaining pockets of the poor and excluded. Urban inequalities, from the latter-day policy perspective, were viewed as a residual and temporary outcome of necessary market-led growth. The orthodox mindset which still prevails could be read as follows: economic growth is good (inevitable/necessary/mandatory), and since such growth depends on populations organising themselves in cities, urbanisation is also good (inevitable/necessary/mandatory).
A number of important correctives are needed to highlight the myths that lie behind these beliefs and rationalisations. To begin with, the policies for industrial development followed by the now-developed countries (NDCs) – Britain, the USA, Germany, France, Sweden, Belgium, the Netherlands, Switzerland, Japan, Korea and Taiwan – were not based on a laissez-faire ideology of free trade and state non-intervention, but instead used protectionist strategies for key industries in the earlier phases of development. This well argued fact goes against the orthodox view of capitalism’s history, and calls into question the neoliberal policy recommendations made to developing countries based on privatisation, deregulation and the liberalisation of international trade and investment. It is upon the assumption that NDCs attained their economic status based on these same non-interventionist policies that the Washington Consensus agenda maintained much of its legitimacy, as well as the international rule-making of the World Trade Organisation since its inception in 1995.
The unofficial history of ‘development’
The reality is more the opposite of the official history. Most notably in the case of Britain, a country widely regarded as having developed without significant state intervention, import protection was widely applied throughout the industrial revolution, and even the short-lived liberalisation of the British economy during the mid-nineteenth century was a highly controlled affair overseen by the state. On the national level, government non-intervention was more to blame for producing the scenes of degradation and squalor recorded by Engels, Dickens, Mayhew and Booth in Victorian England. It was only the tireless work of reformers, improvers and trade unions that created pressure for governments to intervene against the worst abuses of early industrialism, resulting in legislation to limit the hours of work, prevent child labour, make education compulsory, and regulate against unsanitary living conditions and sub-standard housing. The comprehensive welfare state in Britain achieved after the Second World War is still a dream for most of the developing world. Yet the opposite of the policies that eventually raised living and working conditions for the urban poor in Britain are now being advocated to governments in the Global South.
Structural adjustment policies in the 1980s and 1990s therefore had the effect of “kicking away the ladder” of protectionist tariffs and subsidies that the NDCs employed in their progression from economies based on agriculture to those based on high-value goods and services produced in cities. Following the exploitation of foreign lands in the colonial era and a history of infant industry protectionism, rich countries have achieved a position of strength from which they now command less-developed nations to adopt free market economic policies, in spite of their fragile industrial development and dependency on smallholder agriculture. Moreover, the major industrialised nations fail to practice the same economic prescriptions that they preach. As long pointed out by campaigners, the current free trade regime is extremely biased against developing countries, with the US and EU in particular maintaining strong protectionist policies in key industries along with huge subsidies in agriculture and food manufacture. In other words, those policies that rich countries are not prepared to implement at home are being recommended as a panacea to less-advantaged nations with greater levels of poverty and inequality. International financial institutions dominated by the West, in particular the World Bank, IMF and WTO, have effectively institutionalised a biased and unequal world economic system for the benefit of the already advantaged. In this light, it is difficult to account for the belief that the current development policy paradigm is going to lead to the eradication of slums in the future, when the evidence suggests that urban poverty and wealth inequality is exacerbated by a non-interventionist path of industrial growth. The only certainty is that developed countries are recommending policies that they find beneficial for themselves (not least for Western commercial interests), rather than those that are beneficial for the inclusive development of poorer nations.
The complacency that lies behind these attitudes is further highlighted when we question the human costs of industrial development: the exploitation of unskilled newcomers to the rapidly-urbanising city, the former peasants who are forced to adjust to industrial work in factories, the child labourers paid a fraction of the minimum wage, the young women paid $5 a day without benefits in maquiladoras and special economic zones set up by multinational corporations - the human raw material of economic growth, working in conditions that no person from the richest nations could withstand. Just because the megacities of today seem to replicate the ‘transitional’ scenes of human degradation experienced during the early industrial era in Europe and North America, does this exonerate the rich world from failing to prevent – or benefitting from – the exploitation of the poor in developing countries? Is the only answer to create even more wealth, on top of the wealth that has already been created over the past 200 years of industrialisation? If ‘trickle-down’ economics is the solution for the world’s problems, persistent poverty and growing social exclusion in the twenty-first century must surely call this approach into question. Even in those South Asian countries that achieved rapid economic growth over the period of neoliberal globalisation, extreme poverty remains widespread while income inequality is continuing to soar almost everywhere.
Reconceptualising the informal economy
Following the continued failure of ‘trickle-down’ growth strategies to benefit all sectors of society, many development thinkers have turned to the informal economy as an answer or solution to poverty in the developing world. The informal sector of employment – more commonly understood as the huge invisible economy of home-based producers, garbage collectors, garment and domestic workers, and the millions of street traders that characterise the developing world – has become the primary source of livelihood in a majority of low-income countries since the 1980s debt crisis. In some ways reminiscent of the tens of thousands of impoverished entrepreneurs that peddled their wares between the grimey alleyways of nineteenth century European cities, the new urban labouring poor are of a scale unprecendented in human history – by some accounts comprising up to three-quarters of non-agriculture employment in developing countries, or about two-fifths of the working population of the developing world. In sub-Saharan Africa and across Southern Asia, this figure could be higher than 80 percent of all working men and women if reliable data was available, especially if women’s invisible paid work was counted in official statistics.
During the 1980s and 1990s, urban development studies moved beyond the assumption that urban poverty and economic informality is a transitory phenomenon – a ‘temporary’ stage as an economy matures and becomes more developed. By this time, the rate of rural-urban migration had far exceeded the expectations of Arthur Lewis’s classic model of economic development, while the assumptions of the “Todaro Model” - that the informal sector acts as a school for learning basic skills from which most rural migrants can eventually graduate to formal-sector employment - were shown to be increasingly idealistic. In the urban research and debate that followed, neoliberal thinkers – most notably the Peruvian economist Hernando de Soto with support from the intellectual technocracy of the World Bank – reconceptualised the informal sector as an untapped source of micro-entrepreneurship that could overcome the clientelist state, act as a motor of economic growth and bring urban poverty to an end. Although there may be many reasons to praise the “uncelebrated social capital of the slums”, and to perceive the remarkable dependability of poor women in repaying micro-credit loans as a sign of hope that slum-dwellers can pick themselves up by their bootstraps and eventually join the ranks of the middle-classes, there are more reasons to question this business-minded optimism of upward mobility in the informal economy.
The author Mike Davis debunks what he calls the “myths of informality” by partly drawing on the understanding of Jan Breman, a veteran researcher who has spent 40 years studying poverty in India and Indonesia. Informal employment by its very definition, writes Davis, is the absence of formal contracts, rights, regulations and bargaining power – an immeasurable and neglected mass of people who are not registered, let alone taxed. Its essence is not defined by unlimited elasticity and sustainability, but by an endlessly franchised “petty exploitation”. It is usually the weakest and smallest who bear the heaviest burdens of informalisation, in particular women, and competition for work has become so intense that jobs are not generated by “elaborating new divisions of labour, but by fragmenting existing work, and thus subdividing incomes” – as defined by the street scenes in developing cities of shoe-shiners squatting on the sidewalk all day to serve a handful of customers, or young boys hawking tissues to passing rows of smoky traffic, or construction workers waiting each morning in the vain hope of a days work. Worst of all, increasing competition within the informal sector “depletes social capital and dissolves self-help networks and solidarities essential to the survival of the poor – again, especially women and children”.
The safety net of last resort
In effect, the risks of the international financial system are downloaded to the informal sector, which operates as a kind of safety net of last resort for those who lose their jobs in formal employment (especially in the aftermath of financial crises). It is inevitable that earnings in informal employment are likely to fall as work opportunities become crowded out, until the safety net ultimately breaks. Earnings may become so low that individuals cannot meet their basic needs no matter how long the hours they work, or how many family members seek to earn a living on the streets. To therefore believe that private enterprise should be encouraged to operate in low-income settlements by making labour even more flexible, predicated on the belief that the state already intervenes too much and market forces are more efficient, is to casually invite even worse scenes of misery and destitution in urbanising cities (in Davis’s solemn words, a “living museum of human exploitation”). The reform or even removal of regulations cannot automatically ‘formalise the informal’, not when the problem of urban poverty begins with the lack of appropriate regulations and state interventions. The reality is less susceptible to any quick-fix panacea: a global economy that has proven unable to absorb a vast displaced and impoverished humanity, a process of globalisation that has strengthened the rights of the most powerful and weakened the rights of the most excluded, and labour markets sustained by policies that lack any sufficient degree of compassion, imagination or long-sighted vision.
This is not to overlook the crucial role that the informal sector plays in cities of the South, providing work and livelihoods for a large proportion of the urban population in the absence of formal or secure employment opportunities – particularly for those living in slum settlements. On the contrary, it is imperative that governments uphold the rights of informal workers through more effective forms of public intervention. As long recognised by most governments in developing countries, much of the informal sector in which many poor individuals earn an income may be considered illegal, but provide goods and services that are essential to the functioning of the ‘legal’ city (even if the police still subject many informal workers to harassment, fines or arrest). The point of contention is the assumption held by many people in government and the business community that the streetwise operators of the “underground circuits of the economy” are always able to get by without expensive social provisions or welfare support, unencumbered as they are from the tax and benefit systems of the ‘formal’ economy. This complacent view has been resurrected during the ongoing global economic crisis: that the informal sector is a critical safety net that can infinitely absorb more people and offer them a source of income, or in the words of former IMF Chief Economist Simon Johnson, “a last safe haven in a darkening financial climate”. As Jan Breman contests, the “massive army of reserve labour at the bottom of the informal economy is entrapped in a permanent state of crisis which will not be lifted when the Dow Jones Index goes up again.”
The bigger questions
Even if the business potential of the millions of slum-dwellers living in abject poverty could be unleashed and transformed into a widespread material affluence, we can ask if the path of never-ending industrial growth and consumption is the answer to the world’s problems. The very word ‘development’ has a deterministic ring - meaning the path pursued by the West, originally imposed upon the rest of the world through colonial conquest, and now justified on the basis of economic necessity. The mainstream ‘science’ of economics - also originating from and propagated by the West - does not question its assumption that perpetual growth is the foundation of progress, even if common experience raises doubts about the perilous side-effects of unfettered capitalism and industrialisation: the depletion of rainforests and fish-stocks, the threat to ecology and biodiversity, anthropogenic climate change and pollution, and the hundredfold increase in inequality over 200 years. The policy papers of orthodox economists give no insight into what might happen if the remaining four-fifths of humanity successfully follow the same development patterns.
Business-as-usual for politicians in the developing world also spells a very uncertain long-term future, for the real costs of slums are hidden from balance sheets and economics text books - the drain on resources from ‘containing’ slums, the costs of dealing with humanitarian crises caused by outbreaks of contagious diseases, of water pollution from untreated sewerage, or the costs of keeping order when unrest or mass violence occasionally breaks out inside the more volatile shantytowns. And more indirectly, the social costs of maintaining a large population of uneducated men and women who live unfulfilled, underdeveloped and uncreative lives; the quiet psychological burden felt by the middle-classes who have to live with slums beyond their doorstep; and the intangible moral costs felt by those in the privileged world who remain unmoved by this affront to personal dignity and social justice.
As a final question, we might ask if it is acceptable in today’s culture of human rights norms to condemn millions of people to a life in subsistence-wage sweat shops as a point of entry into the game of capitalism, a type of forced labour that gives many slum residents the choice between economic exploitation or continued abjection. Is it likewise acceptable to consider the appalling conditions and human abuses that defined cities all over Europe during the nineteenth century as an inevitable, even if disagreeable, part of progress in a modern industrialising city like Kolkata, Jakarta, Mexico City or Chang Hai? If not, our only choice is to consider alternative goals and more holistic models for development, no longer predicated on endless capital accumulation and economic growth, that prioritise social objectives (such as the right to health and the right to a clean environment, along with the right to adequate shelter and the eradication of poverty) ahead of the profit imperative and GDP, with a more equitable distribution of resources on the national and global level.
 Peter Lloyd, Slums of Hope? Shanty towns of the Third World, Manchester University Press, 1979, p. 34.
 see Squatter Citizen, chapter one.
 Jeremy Seabrook, Cities, Oxfam GB publication, Pluto Press, 2007.
 cf. ‘The elusive fruits of inclusive growth’, The Economist, 13th May 2010.
 cf. Rahul Goswami, ‘Missing the slums for the cities’, Energy Bulletin, Post Carbon Institute, 21st May 2010.
 Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective, Anthem Press, London, 2003.
 Ibid, pp. 19-24. See also Erik Reinert, How Rich Countries Got Rich ... and Why Poor Countries Stay Poor, PublicAffairs, 2007.
 Jeremy Seabrook, op cit.
 Ha-Joon Chang, ‘Kicking Away the Ladder: Infant Industry Promotion in Historical Perspective’, Oxford Development Studies 31:1, 2003.
 For example, see Christian Aid, The economics of failure: The real cost of ‘free’ trade for poor countries, Briefing paper, June 2005; Oxfam, Signing Away The Future: How trade and investment agreements between rich and poor countries undermine development, Briefing paper 101, March 2007.
 For example, see Branko Milanovic, Worlds Apart: Measuring International and Global Inequality, Princeton University Press, 2005; United Nations Development Programme, Human Development Report 2005, New York, 2005; Robert Hunter Wade, ‘Is Globalisation Reducing Poverty and Inequality?’, World Development, vol. 32 no. 4, 2004; Ravi Kanbur, ‘Economic Policy, Distribution, and Poverty: The Nature of Disagreements’, World Development, vol. 29 no. 6, 2001.
 Mike Davis, Planet of Slums, Verso, 2006, p. 178.
 International Labour Office, ‘Women and Men in the Informal Economy: A Statistical Picture’, Geneva: Employment Sector, 2002; see also Kristina Flodman Becker, The Informal Economy: Fact Finding Study, Swedish International Development Cooperation Agency (SIDA), March 2004; and The Challenge of Slums, pp. 40, 46.
 Women in Informal Employment Globalizing and Organizing (WIEGO), ‘Fact Sheets: The Informal Economy’, www.wiego.org/main/fact1.shtml (acccessed June 2010)
 Arthur Lewis’s article entitled ‘Economic Development with Unlimited Supplies of Labour’, published in The Manchester School in May 1954, is widely regarded as the single most influential contribution to the establishment of development economics as an academic discipline. According to the Lewis Model, there is a large ‘reserve army’ of labour in unlimited supply in the rural areas (i.e. the non-capitalist and ‘backward’ subsistence sector), which means that the industrial capitalist sector can expand in urban areas without the need to raise wages.
 see M. Todaro, ‘A Model of Labor Migration and Urban Unemployment in Less Developed Countries’, American Economic Review, 59:1, 1969.
 Hernando De Soto, The Mystery of Capital, Black Swan, 2001.
 see also Democracy Now!, ‘Microcredit: Solution to Poverty or False ‘Compassionate Capitalism?’’, Interview with Vandana Shiva and Susan Davis of the Grameen Foundation, 13th December 2006.
 see Jan Breman, The Labouring Poor in India: Patterns of Exploitation, Subordination, and Exclusion, Oxford University Press, 2003; also Jan Breman and Arvind Das, Down and Out: Labouring Under Global Capitalism, New Delhi 2000, p. 56. Quoted in Mike Davis, Planet of Slums, pp. 179-185.
 Ibid, pp. 181-182.
 Ibid, p. 184.
 Ibid, pp. 185-186.
 Squatter Citizen, p. 29.
 Patrick Barta, ‘The Rise of the Underground’, Wall Street Journal, 14th March 2009, quoted in Jan Breman, ‘Myth of the Global Safety Net’, New Left Review, No 59., September-October 2009.
 Jan Breman, ibid.
 Winin Pereira and Jeremy Seabrook, Asking the Earth: The Spread of Unsustainable Development, Earthscan, 1990, p. 5.
 cf. Michael Cowen and Robert W. Shenton, Doctrines of Development, Taylor & Francis Ltd, 1996.
Link to full report [pdf]: The Seven Myths of 'Slums' - Challenging Popular Prejudices About the World's Urban Poor