السوق الموازي بين صمام الأمان الاقتصادي وتهديد استقرار الدولة ــ The Parallel Market… Between an Economic Safety Valve and a Threat to State Stability
Clarification: The parallel
market, or what is known as the informal economy, is in fact an (economic
pressure valve), but it can also turn into a (hole in the body of the state) if
it gets out of control.
What is the parallel market?
The parallel market is any
economic activity that takes place outside the official framework of the state,
i.e., without legal registration, without paying taxes or fees, and without
government oversight, such as street vendors, unlicensed workshops, trade
outside the banking system, and some unregistered freelance activities.
What is the importance and benefit of the parallel market?
1. At the societal level – It provides quick job opportunities for those who cannot find formal employment, helps the poor secure a daily income, offers goods and services at sometimes lower prices, and prevents social unrest during times of crisis – an “informal safety net.”
2. At the state level – Although it is outside of government
control, it has beneficial aspects, including absorbing unemployment and easing
pressure on the government, reflecting the true market demand, and potentially
being integrated into the formal economy later.
What is the economic value of
the informal market?
In some developing countries,
the informal market constitutes 30% to 60% of the economy and employs a
significant portion of the workforce; therefore, it is not marginal but a
genuine parallel economy.
When is it beneficial and when is it harmful?
1. Beneficial – When it is temporary or transitional (a
pre-formal integration phase), limited in scale and not dominant, operating in
simple, low-risk activities, compensating for complex official procedures, and
resulting in lower rates of commercial fraud.
2. Harmful or dangerous – Commercial fraud and counterfeit
goods, tax evasion, unfair competition with the formal economy, use in illegal
activities (smuggling, money laundering), and weakening investor confidence in
the country.
When is it effective or ineffective?
1. Effective – when it provides goods and services quickly and efficiently, fills gaps not addressed by the formal economy, creates economic activity in impoverished areas, and adapts rapidly to market changes.
2. Ineffective – when it lacks quality and standards, causes
price instability, disrupts the state's economic planning, leads to a loss of
revenue (taxes), and perpetuates poverty instead of alleviating it.
In summary:
1. The informal market often emerges when the formal system is
unable to accommodate everyone.
2. The informal market is useful as a transitional phase
but dangerous if it becomes a permanent, haphazard way of life.
3. The informal market is not an enemy to be completely
eradicated, nor is it a solution that can always be relied upon.
4. The informal market needs to be managed and gradually
transformed into a formal economy by simplifying licensing procedures, reducing
taxes initially, gradually integrating its workers, and offering incentives for
formalization.
Additional Information:
War Economy:
1. A system implemented during
times of crisis and war, where the state directs all its resources and
capabilities to serve the war front and meet its military needs.
2. It is implemented at the
expense of sectors such as civilian industry, agriculture, and services.
Factories are converted to produce weapons and ammunition, farmers are directed
to produce crops needed by the army, and overall consumption is reduced.
Military Economy:
1. A suitable military economy
is one that maintains a delicate balance between the role of the military
establishment in economic activity and the role of the private sector.
2. This balance aims to
maximize the utilization of state resources, promote economic growth, and
ensure national security, while preserving the role of the private sector as
the main driver of the economy.
The Formal Economy:
1. The formal economy
encompasses all economic activities that are conducted legally and on which
taxes are paid.
2. The formal economy is that portion of economic activity that is officially recorded, subject to government oversight, and contributes to the Gross Domestic Product (GDP).
• Research and
preparation by Badr Al-Din Ahmed
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