Precarious Peddling

Rachel Williamson contextualizes a “brawl” in Cairo between police and black-market vendors:

[Nasr] Eissa and his competitors are archetypical of Egypt’s black market economy: opportunistic entrepreneurs who’ll sell you a flag during a national celebration and be back to hocking Batman t-shirts the next day. They’re regular targets of police and bureaucratic shakedowns for bribes, and represent a small fraction of an underground economy. It includes non-taxpaying companies, allegedly up to $360 billion of unregistered real estate assets, and provides up to 40 percent of the country’s GDP, according to research from the Peruvian think tank Institute of Liberty and Democracy (ILD).

These entrepreneurs are also the targets of a brand new government initiative seeking to formalize the informal economy. It’s an idea that’s been tried before in Egypt, but this time, the directives are coming from the very top.

Williamson provides the cases for and against this informal economy:

The sheer size of the informal sector — a genuine parallel economy — creates a structural risk. Diwany says the usual tools for managing an economy are unusable when a sizable chunk of the country’s assets and production are hidden in the black market. For example, last year Youm7 newspaper discovered that unregulated “backdoor” cheese factories were adding formaldehyde to their products to extend shelf lives. …

But not everyone agrees that the existence of the informal economy is bad for Egypt, nor that Sisi’s government can heal decades of distrust in state institutions. Angus Blair, founder of the think tank Signet Institute, points out that the sheer size of the informal sector is what got Egypt through the tough economic times of the last three years. He says it provides a huge amount of liquidity, and that Egypt’s real GDP might not be growing at the 2.3 percent it is now (as projected by the International Monetary Fund) if all that extra, unaccounted-for cash wasn’t floating around.