GaWC Research Bulletin 435

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Megacity Dynamics in Globalization: Revisiting Informality

K. Pain*

This note is a brief reflection on the results from the Megacities DFG priority research programme presented at the Bonn final seminar proceedings in April 2013. As an invited observer to the six year project chaired by Dr Frauke Kraas at the University of Cologne, I would like to offer some observations from an external perspective on what has been learned about the central theme of the research – the informal dynamics of global change and the megacities challenge.

Context - Why the informal?

At its outset, the programme appeared to take the relevance of informality for the megacity challenge as given. The stated aim was to develop theoretical approaches and models offering a general explanation of informal processes and structures in the Dhaka, Bangladesh and Pearl River Delta (PRD), China cases, to inform a general understanding of megacity dynamics in the context of global change. Megacity prospects and governance clearly have worldwide significance hence the study set out to establish in what ways the concept of informality should inform sustainable megacity trajectories.

Since the 1970s the notion of informality in an urban context has often been associated with the distinction between a segmented ‘formal’ and ‘informal’ economy and between formal and informal work. There has been an inferred division between the formal and informal in both of these contexts based upon whether or not activity came under the scrutiny of state regulation. Hence, the informal sector has commonly been represented as ‘black market’ or illegal activity (Fleming et al., 2000, p. 408) or as labour ‘marginality’ and ‘peripherality’ (Pahl, 1984; Castells and Portes, 1989) both of which should be countered. However more recently there has been growing recognition that informal economic activity is “here to stay in both new and old guises” (Chen et al., 2001, p. 5) and challenging former understandings of the informal and formal relationship as dichotomous.

Although the value of informal activity in developing economies in terms of efficiency, creativity, and resilience was recognized as long ago as 1972 (ISED, 2002), the perceived division line between the informal and formal has been breaking down and recognised as “blurry” because as groups both in developing and developed countries have been shown to need to work in both capacities to “patch their lives together” (ISED, 2002, p. 43; Losby et al., 2002; Chen, 2005, 2007). The informal economy is growing and

“a permanent, not a short-term, phenomenon; and is a feature of modern capitalist development, not just traditional economies, associated with both growth and global integration. For these reasons, the informal economy should be viewed not as a marginal or peripheral sector but as a basic component—the base, if you will—of the total economy.” (Chen, 2005, p. 8)

Beyond the economy and employment per se, in urban sociology as well as development studies the notion of informality has also been linked to broader issues of spatial and environmental conditions and justice (for example Harvey, 1973, 1997) and has continued to seem especially pertinent to the situation of expanding megacities in the developing world such as Dhaka and the PRD. In such cities lack of enfranchisement (land, property, voting) associated with rapid major rural to urban migration into unregularized, mainly peri-urban, communities (people, activity and structures) has resulted in the urbanisation of basic non-regulated means of human survival on a vast scale (Davis, 2006; UN-HABITAT, 2013). Megacity so-called ‘shanty’ development has commonly been represented by government authorities as a state of urban ‘disorder’ (Castells, 1998; Blowers and Pain, 1999; Perlman and O’Meara Sheehan, 2007) and the megacity informal sector, referred to as the ‘unorganized sector’ in India, has only more recently attracted the interest of states as a means of leveraging productivity from the ‘creative economy’ by retrofitting formal regulatory mechanisms to boost state revenue.

It is against the backdrop of these evolving academic and policy narratives that the relevance of the informality concept has been explored in the DFG research to shed light on the interfaces and interactions between diverse megacity ‘subsystems’, sectors and scales in relation to urban economy, migration, livelihoods, resilience, coping, innovation, food systems, urban environment and risk (water supply, health and climate change), and governance, in an interdisciplinary context.

Informality and agency

Study of this range of megacity phenomena has highlighted the complexity of contemporary megacity dynamics generated by a blizzard of societal, economic, environmental and governance interconnections and interdependencies. A state of relational flux and provisionality has been unveiled across the study, illustrating the inappropriateness of megacity understandings framed by an informal-formal dualism. The hybridity of the relational dynamics uncovered has made ‘positioning’ activity in a framework of binaries impossible. Moreover the issues referred to as of great significance for megacity sustainability across the study prove to be highly interrelated with the formality-informality spectrum in complex ways. The concept of ‘agency’ has surfaced over and over again as essential to community ‘coping capacity’ in the context of major sustainability challenges and can be interpreted as interwoven with the formal-informal false dichotomy as highlighted by contributors to the seminar.

Clemens Simmer and Insa Thiele-Eich note the significance of agency in navigating reciprocal relations between climatic and societal effects in the case of Bangladesh. Climate change effects are shaping megacity financial, human, physical and social capital whilst, at the same time, the urban economy and societal processes are shaping climate change. Agency is necessary to allow robust informal local adaptation of slum dweller coping capacities under conditions of extreme dual socio-economic and environmental vulnerability. Similarly, agency is expressed in employment informalization in the context of the ‘poverty trap’ (Elmar Kulke and Wilfried Endliche). Social capital feeds into survival strategies giving communities agency to “help as we can” even though there is a perceived inability to “get ahead”. The importance of the agency aspiration is evident also from Anna Lena Bercht’s study of the psychology of informal ‘coping’ strategies in the face of Guanzhou mega-challenges.

Trust is shown to be an essential prerequisite to allow limited agency in the context of the Dhaka food sector where 48 per cent of trader loans are taken through the informal banking system. Quality of goods and reputation are essential in a business and where very high interest rates expose the sustainability of the food chain to substantial risk. Here “rice is life” and 75 per cent of income is spent on simple, low cost food. An interview conducted by Benjamin Etzold and Marcus Keck reveals that the urbanisation of poverty and hunger means that a megacity trader’s “entire business works on the basis of trust”. Informal reciprocal networks, social capital and flexible coping strategies are critical for basic human survival, “borrow money, borrow food, portion control, women eat less for children, children sent to relatives to eat” allow resilience in communities where “transformative practices are denied”.

Informal student migratory flows studied by Kimiko Suda, demonstrate the potential for transient human mobilities to build megacity ‘habitus’ (Bourdieu, 1990) through the transfer of temporarily ‘situated’ social and cultural capital to the local level. Student migrants may feel a sense of ‘temporality’ and lack of ‘belonging’ and personal agency in ‘institutionized’ megacity spaces however their commonly expressed ambition to attain a “standard happy life”, can contribute positively to the societal goals and “worlding” (Massey, 2007) of the megacity space. Increasing self organisation of migrant worker non-governmental organisations identified by Bettina Gransow, is a further example of the importance of the basic need for human agency as a megacity survival mechanism.

Informality in inter-city relations

Ingo Liefner’s study results on ‘agile firms’ presented at the Dortmund workshop in 2009, demonstrates the contribution of informalized megacity external relations to local agency, capacity and capability building. Firms participating in extensive global production networks have to be agile and responsive to dynamic, competitive markets by adopting flexible, informal operational modes,: “Hong Kong firms are using a combination of formal and informal modes when interacting with their business partners in the Pearl River Delta”, thus informal relational modes are expected to remain of importance (2009). The organisation of agile firm economic activity embedded in global value chains has also been noted as necessitating a reconceptualisationof the informal-formal dualism in Elmar Kulke and Wilfried Endlicher’s study of Dhaka innovation capacity:

“The assumption of a fragmented development, which is regularly being discussed in the scientific discourse has to be revised. Informal activities do not exist isolated from formal economic cycles. Rather intense linkages and divisions of labour between formal and informal activities can be observed in the productive sector.” (2009)

The significance of informal intercity relations in a advanced producer services was also the central point raised in a keynote presentation I was invited to deliver at the University of Dortmund in June 2009: ‘Mega-city Development in Globalization: Why a distinction between informal and formal strategies in urban development still matters’. In my presentation I argued that there is a special relevance of informality for megacity dynamics at the very top end of their economic relations in a global context (see also Lin, 2005). In the urbanized tertiary sector of the global economy, knowledge-intensive work undertaken in the office networks of specialized financial and interlinked advanced producer services add value to cross-border primary and secondary sector production and trade. Advanced producer services work is dependent on flexible horizontal/informal cooperation and consensual relations that leverage innovation capacity from knowledge and expertise spread across global networks. These spatial relations confer ‘flat’ or ‘heterarchical’ innovation and value-adding capacity on cities in the network (Bourdieu, 1990; Pain 2008a; Pain, 2008b). Whilst this work remains most concentrated in just a few ‘global’ cities, recent analysis shows evidence of a paradigm shift in the global network connectivity of many cities during the past decade, with a major connectivity increase in Asia-Pacific megacities (Pain and Van Hamme, 2014). Pavlou and Majchrzak (2002) have identified similar non-vertical relations in business-to-business e-commerce where relations of trust, coordination, innovation, and shared knowledge are found similarly essential.

Tabea Bork-Huffer has broadened the issue of informality in a theoretical context by considering the megacity as a ‘social product’ (Harvey, 1973, Lefebvre, 1991) emphasizing the need to seek economic explanations by examining social facts as traditional ‘mechanical’ societies transform into ‘complex’ modern societies (Durkheim, 1997; Pahl 1986). Contestation of megacity space as power geometries are negotiated reflects the transience of the social-spatial dialectic associated with increasing informal urban trans-locality. Relational transitions in Castells’ (1996) increasingly globally networked megacity ‘space of flows’ seem to limit the agency of the state in the ‘space of places’. Because the formal modus operandi of states is relatively fixed by the geography of political borders, the informal megacity network space imposes a ‘debordering’ logic on the territorial space (Castells, 1996), raising questions about appropriate new modes of megacity governance.

Informality, agency – The place of governance?

Taylor and Pain (2007) make a distinction between specialized commercial ‘new work’ which adds value by leveraging high cost, specialized global ‘net-work’ and low-cost, labour-intensive ‘old work’, exemplified by elderly female roadside ‘stone breakers’ photographed in the Dhaka study. Leveraging net-work is an ethical matter for megacities to achieve social progress alongside economic growth, and this is dependent on states engaging with flows in informal networks (Pain, 2011).

Controversially, Jacobs’ has hypothesized that there are contrasting ‘moral syndromes’ relating to commercial business and territorial governance which lead to opposite outcomes for city economies (1992). The ‘commercial syndrome’ is the basis for mutually successful inter-city trading relationships (represented by Castells’ space of flows) whereas the ‘guardian’ syndrome of states leads to competitive city relations (represented by Castells’ ‘space of places’) (Taylor and Pain, 2007). As noted by Taylor, “In discussing her work on the two moral syndromes [Jacobs] makes it clear that she is concerned for making a living, which is just part of making a life.” (2006, p. 1990) thus her analysis of a moral and spatial dialectic replicates and reflects both formality-informality and agency-structure dualities from a societal ‘structuration’ theory perspective (Giddens, 1984).

The relevance of the structuration frame for understanding net-work is noted in the Pavlou and Majchrzak study of e-business practices, organizational and market structures (2002, p.179). The importance of trust “in private business networks, both old and new” also applies to “the state itself”. Moreover Raiser has concluded that in economies in transition,

“the emergence of extended trust during the process of economic development requires moral leadership by the ruling elites induced by competition from within and without, and a social structure that reproduces appropriate social norms in dense but open networks” (2003, p.14).

This points to a need for “guardian-commercial symbiosis'' in megacity governance as proposed by Jacobs (1992, p. 214, cited in Taylor, 2007).

Sonia Schoon and Harald Sterly describe geo-political difference between the megacity cases. Strategic/comprehensive land use planning in China seems formal “top down”, regulationist and controlling yet is aimed at “enabling” growth alongside land use efficiency and environmental protection. China is adopting a progressive attitude towards innovation-led growth, and pluralistic governance modes, consensus building and conflict avoidance are emerging through a process of fragmenting authoritarianism and formality. The advantages of market-led with government guided governance for megacity sustainability embrace China’s growing economic network relations whilst balancing and brokering local interests through the mayoral system (sse also Pain, 2010a). In contrast with decentralised governance in Dhaka, Schoon and Sterly describe the Chinese model as that of an innovative, experimental “learning state”. The process of change in the Chinese governance mode has proved capable of “capturing and using” Jacobs’ “transient energy” (2000, p. 47) and reversing the so-called East Asian ‘flying geese’ trajectory (Pain,

Final thoughts – Does informality matter?

Volker Kreibich, University of Dortmund, has summarised the theoretical discourse and tentative conclusions surrounding megacity informality arising from the DFG research programme. In spite of the territorial embeddedness of formal megacity governance structures, a process of “informalization” is an organising logic behind the “fixing of places [without] any prescribed set of regulations or the law”. There is overwhelming evidence of hybrid (informal-formal) socio-functional megacity relations and increasingly informal practices amongst public and private organisations iIllustrating the “Janus face” of the informality paradigm (Roy, 2005). Similarly Chen has emphasized that the “formal and the informal ends of the economic continuum are often dynamically linked” (2005, p. 8) whilst Sindzingre has pointed to the relevance of “continuity of [both] ‘formal’ and ‘informal’ phenomena” (2006, p. 1).

The DFG programme thus endorses a megacity trajectory of formal-informal duality but also indicates the ongoing ontological relevance of both concepts which should not be lightly dismissed. The mobilisation of agency within and between networks of cities still seems critically dependent on a process of relational informalization which must be responded to appropriately by governance structures and processes. Further research beyond the remit of the completed programme would be necessary to interrogate the ways in which different political economy approaches can interact more positively with the megacity dynamics in globalization.


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* Kathy Pain, School of Real Estate & Planning, University of Reading, e-mail:

Edited and posted on the web on 30th June 2014