Sudhir Venkatesh (2006). Off the Books. Harvard University Press: Cambridge.
The “informal sector” of the economy is the set of business exchanges done without any government oversight or taxation. Informal economies are very different around the world, from the bartering of an Amazon village to the operations of organized crime. In a country with a highly organized state structure like the United States, informal economies are usually illegal.
Sudhir Venkatesh’s Off the Books is a study of informal economies in one neighborhood of Chicago’s South Side during the late 1990s and early 2000s.
Historically, African Americans were prevented from engaging in the formal, mainstream economy. They were not allowed to buy or rent homes outside of certain neighborhoods, they were denied police protection, they were barred from employment at most businesses, and they were denied bank loans to start their own businesses. African Americans usually only interacted with these public institutions when they were victims of their exploitation.
In response, a parallel economy grew up in black communities, largely ignored by mainstream laws and regulations. Much of the time, these informal enterprises were simply a way for desperately poor people to earn small amounts of money. As Venkatesh shows, these informal jobs permeate all levels of society: it’s not only gang leaders and homeless people who participate in illegal activity but also housewives and pastors.
Even in a highly developed and organized economy like the United States, the “black market” can be hard to define. When most people think of the black market, they think of an organized crime syndicate importing and selling hard drugs. A more sympathetic example, perhaps, are illegal immigrants who are paid in cash and don’t report their earnings. Still more sympathetic is a child’s lemonade stand or a teen who babysits or mows lawns for their neighbors: they are also paid in cash and don’t report their earnings.
Venkatesh argues that it’s important to distinguish between the morality and the legality of actions in the informal economy: both categories are fuzzy and overlap imperfectly. Babysitting, for example, is a legal activity, even if a babysitter is theoretically supposed to pay taxes on his/her earnings. Selling cocaine, in contrast, is illegal even if you pay taxes. But both jobs are unregulated. If a babysitter’s employer refuses to pay him/her or stops hiring him/her without cause or explanation, the employee may have no legal recourse.
What if a formal employer, like an auto mechanic, pays their workers in unreported cash? What if a family’s primary income is in unreported cash? For people with very low incomes, small, informal businesses like the adult equivalents of a lemonade stand or babysitting can be the difference between getting by and not. In areas where these informal exchanges are common, the lines of morality and legality can become blurred. For example, what if an organized drug gang pays a church a regular stipend in order to help young drug dealers find honest jobs, but then they use those jobs to get formal bank accounts where they can store drug money more safely? In Venkatesh’s words, “Figuring out exactly what is and isn’t ‘criminal’ can be very hard in the ghetto, because it is difficult to find much in people’s day-to-day lives that does not involve the underground economy” (p. xix).
The morality of a largely informal economy can get complicated fast. Venkatesh’s main point is that in certain low-income neighborhoods, almost everyone is involved with the informal economy in some way. The basic rule is that the more desperate a person’s situation, the more they’ll be forced into increasingly less legal and less moral activities. They don’t do these things because they want to but because they have to. When times are good, they’re able to shift to more formal and socially-acceptable jobs.
At the center of Venkatesh’s narrative are three middle aged moms. They are the primary income in their households, and they keep a close eye on the neighborhood for the sake of their young children. Eunice (all the names have been changed) works as a janitor for minimum wage; she supplements her income selling soul food to the lunchtime crowd. Bird is a prostitute. Marlene works a variety of jobs but makes most of her money nannying for middle-class families in other neighborhoods. Venkatesh has chosen to call their neighborhood “Maquis Park.” The three women meet regularly to talk about their families, their jobs, and the neighborhood. They each work between sixty and seventy hours a week (p. 22).
Marlene’s nannying job is unusual because it takes her outside of the neighborhood. Domestic work of this kind is one of the best jobs available for local women: however, the work is still unregulated so employees have no way to prevent abuse from their employers. They could lose their jobs without notice. That’s simply one of the risks they must face. Usually, these domestic jobs are organized by a local pastor, who himself takes a share of the wages.
Bird’s prostitution involves similar challenges, though these are more severe because the work itself is illegal. She says it’s better to work with a pimp than to work independently, because the income is more reliable and abuse is less common. The pimp’s job is to find customers and to make sure they’re trustworthy. However, when Bird does experience abuse, it’s usually at the hands of her pimp. In a good month she earns less than a thousand dollars (p. 32).
Because their work is legal in and of itself, Marlene and Eunice can call the police if they are robbed, but Bird has to call the local gang instead.
The reliability of work is one of the biggest challenges in the informal economy. The best jobs are those that pay regularly instead of day-to-day. A worker must often arrange for childcare in order to go looking for jobs; if they don’t find any work that day then the whole day is wasted.
The most vulnerable members of the community, whose jobs are the least reliable, are those whom Venkatesh refers to as street hustlers. Many are homeless; some merely engage in panhandling, whereas others have regular businesses that earn a steady income. One of the most prominent hustlers in Maquis Park is an auto mechanic named James Arleander. He fixes cars out of an alley. At one point he was saving up his earnings to open a proper repair shop, but when the real estate company refused to lend to him, “I just spent all that money on booze, just drank it away ’cause I was so upset I couldn’t get nobody to help me” (p. 166).
In an unregulated economy, information and negotiation are crucial to success. Street hustlers play an important role because they spend most of their time in public places, so they know what everyone else is up to. Other local businessmen often call on them to resolve disputes, calling on their detailed knowledge of the neighborhood. (Venkatesh himself was actually called into this role, as his observations as a sociologist meant he was, like the hustlers, always hanging around the neighborhood watching people.) Street hustlers are also frequently hired as an inexpensive security detail. Often, they are called upon to regulate the more disorderly homeless: some real estate companies hired local hustlers to guard vacant buildings and prevent drug users and homeless people from sleeping there. Usually, this meant that a somewhat more trustworthy homeless person was payed to sleep there and keep the others away.
Street hustlers, like all members of the informal economy, must do what they can to stay alive. In desperate times, this might force them to engage in types of employment they themselves consider immoral. Venkatesh cites Elijah Anderson’s 1999 book Code of the Street, which argues that the community is divided between those practicing a “street” ethic, which is violent, lazy and immoral, and those with a “decent” ethic, which is law-abiding, peaceful and hardworking. Venkatesh disagrees with this dichotomy. He argues that people are forced into “street” activities because they have no other options, but almost everyone prefers the “decent” route when they can get it. After all, illegal work is risky, unreliable, and can risk alienating neighbors. Everyone in the neighborhood dreams of a more peaceful life:
They point to a time in the distant and unspecified future when they will have accumulated wealth and security, when today’s hardships will be alleviated. Marlene and Bird want someday to hold well-paying jobs with benefits, and Eunice would like to see her daughter turn their homemade food sales into a successful Southside Chicago restaurant. All three imagine a Maquis Park free of street crime and shoddy schools. Each sees leisure-filled retirement in the offing. (p. 39)
According to Venkatesh, this morality affects even the less moral trades. The lives of those who do dangerous, harmful work (such as drug dealing) are defined by insecurity: they have made many enemies for themselves and few friends. Even the most successful gang leaders must constantly live in fear and are unable to plan for any long-term future.
In general, those who define their primary work as being in the illicit underground trades, like theft, robbery, vice, narcotics, and weapons trading, express less confidence that they will have someone to provide for their welfare as they grow older. This heightened sense of personal danger and insecurity, in both the short and the long run, is one way to differentiate women who work in the illicit trades from those who, like Eunice, sell licit goods under the table or who, like Marlene, live illegally simply because of failure to report income. (p. 53)
Venkatesh reports that everyone he talked to who works in the informal economy expressed some degree of concern about the morality of their work. They also set expectations for others in the community, and manage social norms:
Residents may weigh delinquent activity that has an economic dimension differently than, say, crimes of passion like domestic violence and assault. This does not mean that all underground activity is tolerated. But if the activity generates income, any ethical dilemmas it creates must also be judged in terms of how the activity supports a household and even the wider community. Given that poverty and desperation drive much of the illegal economic activity and many households receive some kind of unreported income, the options for curbing such behavior may be limited. (p. 74)
The role of the local drug gang in the life of the community illustrates the further reaches of the illegal economy. While most of the community despises the gang’s activities, they recognize that gang members are children of the community. They do not “see the gang as the ‘enemy within'” (p. 68), but as another group of people trying to make ends meet, who cause particular problems that must be managed.
In the late 1990s, the market for crack cocaine went into a steep decline in the neighborhood. The reasons for this, Venkatesh says, are uncertain: some point to better police enforcement, others say that all the addicts died and no one took their place. Whatever the cause, Maquis Park’s drug gang found themselves in need of a new source of income. They began extorting more and more money from local businesses and hustlers. Once, they had agreed to only sell drugs in the park at certain hours of the day, when children were not around; now, they began selling at all hours.
These activities alienated the community. However, the gang’s position was by no means secure. The community decided to arrange meetings at a local church to address their grievances. The gang’s leader, Big Cat, attended regularly. The gang wanted and needed the community’s support in order to function.
It was important to Big Cat to find moral justification for his work. He wanted to see himself as a contributor to society:
‘Ask anybody around here,’ he liked to say. ‘I am a man of the community, a community man. I give money, my boys clean up the parks, we help old ladies cross the street. Anything to help people get what they need.’ Close your eyes, and you would think Big Cat either held elected office or was landed gentry. (279)
The community decided to deal with the gang directly instead of calling in the police, they said, because they didn’t think the police were reliable. Their primary complaint against the police was for neglect. They felt the police could only be persuaded to give the neighborhood a certain degree of attention, and they wanted to “save up” their police time, so to speak, for emergencies. They said if they called in the police to fight the gang, then maybe there’d be a police car patrolling the neighborhood for a week or two, then patrols would become less frequent and soon disappear altogether, and the gang would return. In bargaining with the gang directly, the community sought a longer-term solution.
Christian churches played an instrumental role in negotiations between the gang and the community. Many pastors see their job of caring for the community as a call to minister those whom society rejects, even those whom society considers its enemies. Venkatesh says that outside observers have been surprised at the importance of pastors in mediating gang violence, but he argues that it is natural given their traditional role in black communities.
The African American church has historically been a connector between the nation’s mainstream political institutions and black voters. Venkatesh observed a growing disconnect between black churches that have oriented themselves towards large-scale political organizing (and, in turn, the middle-class suburban black community) and those who work closely with inner-city gangs. Politics, after all, contains its own varieties of illegal and semi-legal markets.
The local pastors and community leaders Venkatesh spoke to said they felt the mainstream black political machine was ignoring their interests. Even when there was a black mayor in Chicago, they said, the city’s public services continued to neglect black neighborhoods. On the other hand, one black political aide told Venkatesh that small organizations in neighborhoods like Maquis Park lacked the organizational capacity to run expensive programs.
Churches are ubiquitous in Maquis Park, but that doesn’t mean it’s easy for pastors to make a living. Pastors of small congregations must work part-time to support themselves, often in the underground economy. As mentioned above, some help their neighbors find jobs in exchange for a fee. Like anyone else in the neighborhood, pastors are vulnerable to desperate times. In this context, negotiations with gangs can represent both an opportunity and a temptation.
When the community wanted to meet with the local gang leader, a pastor was the logical choice of mediator. Often, the line between helping the individuals in a gang and helping the gang itself was thin and vague. Churches would rent space for the gang’s use–that way they stay off the street and spend more time around the minister’s positive influence. But if gangs start using the church’s space for their illegal activities–they paid for the space, after all–is the church involved in their crime? What if the church needs that money to continue their ministry?
Venkatesh reports that local pastors are accustomed to speaking with a confident, “assured delivery. They are, after all, motivated by a higher authority.” However, when they “discuss their role in the underground economy, hesitation colors their voices…they will scratch their heads in exasperation and lower their voices” (p. 257). Venkatesh interprets this in terms of his general theory that economic necessity will force even the most well-intentioned people to make difficult decisions, often choosing paths they’re uncomfortable with. Even something as simple as hosting a funeral for a murdered gang member can lead to surprisingly large donations from anonymous sources. Some pastors navigate these subtle allegiances better than others.
In contrast, storefront businesses typically have a more adversarial role with the gang. As storefronts have their own source of profits, they are often targets for extortion and “protection” rackets as the gang takes advantage of the minimal police presence in the neighborhood.
Storefront businesses also have a unique relationship with street hustlers and other underground groups. As mentioned above, hustlers are often a source of security, information, conflict resolution and day-to-day labor. Because almost everyone in the neighborhood is involved in the informal economy in some way, business owners see these kinds of deals in terms of customer outreach. They find jobs for their neighbors even if they don’t have to, because it makes them more popular in the community. It’s their way of giving back.
In theory, a successful street hustler can graduate to formal business ownership, as James Arleander was trying to do. Many business owners were once hustlers themselves and so feel a certain sympathy with their needs.
Venkatesh found that local business owners often found it hard to expand their operations outside the neighborhood because of their reliance on local social networks. They worried that without these relationships to fall back on, the slightest obstacle in an unfamiliar neighborhood could be devastating.
In navigating the demands of business in a low-income neighborhood, flexibility is the primary virtue. A storefront might be a mechanic’s shop but also have a hair salon in one corner, then maybe the whole shop would be converted to a hair salon, then it might become a restaurant and then revert back to mechanic’s shop again–all under the same ownership. This flexibility requires an intimate knowledge of the community’s needs and tastes, and also a broad network of potential employees with a range of skillsets. In an unfamiliar neighborhood, access to these social networks might not exist; furthermore, they might be replaced by racism, or at least the potential for racism.
However, these local networks are often a burden. Many businesses are paid for their goods and services by barter, or by promise of later payment. “If I had a dollar for every dollar I don’t get paid…” (p. 92) quips one businessman. Eunice, owner of the soul food operation, is often able to trade food for other products with local business owners. Ultimately, the biggest problem with owning a business in a place like Maquis Park is that the customers don’t have much money. In summing up their plight, Venkatesh says, “The risks of being a business owner in Maquis Park are great; generally, the rewards are not” (p. 161).
Many business owners in neighborhoods like Maquis Park are owned and operated by people from outside the community: the famous stereotype being the Korean grocery store. Venkatesh reports that this stereotype is not as prevalent as some may think: by his count, 115 out of 157 small businesses in the neighborhood were locally owned (p. 113). The so-called “ethnic” businesses, owned by Asians, whites or other non-black groups, are typically not connected to the neighborhood’s informal economy. They tend to see street hustlers as a nuisance and gangs as a threat to their safety. These outsider businessmen typically draw on their own cultural networks for credit and employment, which are often equally illegal.
In describing the broad patterns of the black market, Venkatesh describes how unregulated economies tend to develop their own forms of regulation. Hustlers have to determine what kind of illegal activity is acceptable and what is to be frowned upon. Neighbors must negotiate with drug dealers, determining how much illegality they can tolerate and how much they can actually enforce.
Being unwritten, these rules can be easy to break, even out of ignorance. Doing business in the informal economy can be chaotic, hence the need for well-informed local actors to negotiate and resolve conflicts.
Changes in the informal economy can have surprising effects across the system. For example, Venkatesh begins and ends the book with scenes from the funeral of Big Cat, the local gang leader, who was murdered by a rival gang. What happens in his absence? Should local businesses expect to avoid extortion? Will violence in the neighborhood increase, as young gang members escape their boss’s control? After all, a decline in cocaine sales, which could be considered good news, was the original cause of Big Cat’s expanded extortion racket.
Similarly, Venkatesh argues, for any outsider observer looking to influence the neighborhood, for better or worse, it is crucial to understand the nuances of the informal economy. If governments or nonprofits want to fight poverty in neighborhoods like Maquis Park, they need to understand the history and role of illegality in those communities. If people are driven to illegality by desperation, then stricter enforcement of the laws (in isolation) may only lead to more crime.
As Venkatesh says, “We cannot truly understand the ‘shady’ economy if we see it as a dirty, lawless world of violence and disrepute, one that tarnishes an otherwise pristine sphere where everyone pays their taxes, obeys the laws, and turns to the government to solve disputes and maintain order” (p. 7). Instead, we must see this economy as its participants see it: as a means to an end, as a way of getting by, as a morally complex part of their every lives.
Questions for Reflection and Discussion
- Do you have a general sense of the underground or informal or “off-the-books” economy of depressed inner cities? What questions do you have about the informal (legal and illegal) means of employment and business?
- Ideally, how much illegal or informal activity do you think should be tolerated? Should lemonade stands and babysitters report their earnings to be taxed? What about a larger operation, like Eunice’s food business or a retail store that pays its employees in cash?
- Do you agree with Venkatesh’s assertion that most people who engage in illegal activity do so out of desperation, and would prefer legal work if they could get it?
- What do you think would be the best way to reduce poverty in a neighborhood characterized by informal economies? What could governments or non-profits do that would be most helpful in the short-term or long-term?
- Why do you think the economic and political influence of inner city pastors has been minimized in most of the literature? Can you think of ways their influence might be enhanced for the healthy development of their communities?
- Illegal and informal markets are common in low-income African American neighborhoods due to their neglect and avoidance by mainstream American institutions.
- People engage in illegal activity primarily out of desperation. Harder times force them into more dubious ways of earning money, but in good times they can switch to more legal jobs.
- Informal economies eventually create their own rules and cultural norms. However, these rules don’t have police and courts to enforce them, nor are they written down in law books, so their effectiveness can be variable.
- Any attempts to reduce poverty in an area with strong informal economies must understand the role of those economies in people’s lives. Merely enforcing the laws might only make things worse, and lead to more lawbreaking.
© 2017 CYS