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International
Labour Review

Book reviews

**The Informal Sector in Ecuador: Artisans, Entrepreneurs and Precarious Family Firms**, by Alan Middleton. London, Routledge, 2023, xiii + 292 pp. ISBN 9781032570723 (paperback).

This is a very unusual – probably unique – study of informality. It combines a long time frame (nearly 50 years), consideration of the changing economic scenarios over that period, and a discussion and critique of the literature on informality, including the oversimplifications to which various international organizations, such as the World Bank, the ILO and the Organisation for Economic Co-operation and Development, have sometimes succumbed. Overall, it is an insightful and useful study.

Some studies of informality and of where it fits into the bigger economic picture have been much more useful than others. Two persistent challenges have linked its development to that of the economy and understanding the dynamics of different groups of informal enterprises. As befits a sector subject to so much disagreement and viewed from such varying perspectives, the very definition of informality has been open to question and discussion. It is useful to have a number of possible definitions in mind, as the author does en route to his focus on artisans. The fact that Ecuador, a small economy that has historically been dependent on one or another export commodity (initially bananas, later oil), went through such a wide range of macroeconomic phases during the period of study makes it a good base from which to learn. Both the size and the composition of the artisan sector changed in interesting ways over the period. The author also reviews patterns and trends in the political organization of groups and subgroups, and their degree of independence or subordination, among others.

The policy perspectives of relevance here include the neoliberal, the “labour surplus” model introduced by W. Arthur Lewis,<fnref n="1" /> and progressive models generally more supportive of lower-income groups. The inaccuracies and gross simplifications of the extreme neoliberal perspective are appropriately critiqued for the belief that as long as that strategy is pursued “all will be well on all fronts”. In my view, more attention might have been paid to the labour surplus model, since its main contributors were serious students of development. Middleton observes that the size of the informal sector in Ecuador and many other countries did not decline as fast as predicted or hoped by some proponents of that model, although it should also be noted that it did so in countries with higher, employment-creating growth rates, like the East Asia success stories and a few others. It might have been helpful to focus more than he does on the

This book review is also available in French, in *Revue internationale du Travail* 164 (4), and Spanish, in *Revista Internacional del Trabajo* 144 (4).

The *International Labour Review/Revue internationale du Travail/Revista Internacional del Trabajo* is a peer-reviewed open access journal published by the Open Library of Humanities. This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC-BY 4.0), which permits unrestricted use, distribution and reproduction in any medium, provided the original author and source are credited. See https://creativecommons.org/licenses/by/4.0/. Bibliographic references to articles in the *Review* are included in Labordoc, the institutional repository of the International Labour Office. Information on the International Labour Organization (ILO), including ILO publications, is available online at www.ilo.org.

OPEN ACCESS

<footnote n="1">¹ W. Arthur Lewis, "Economic Development with Unlimited Supplies of Labour", *Manchester School* 22, No. 2 (1954): 139-191.
https://doi.org/10.1111/j.1467-9957.1954.tb00021.x.</footnote>
more serious analyses presented in the work of authors such as Guillermo E. Perry et al.<fnref n="2" /> and William F. Maloney<fnref n="3" />.

One of Middleton's main themes is the difference between capitalist and non-capitalist enterprises, with the latter characterized by the greater family and social ties that result in different behaviour patterns.<fnref n="4" /> Among the errors of neoliberal theory is the assumption that the owners of family businesses are driven by a profit-only motivation and are natural beneficiaries of neoliberal policies, since nearly all regulations are seen as market-distorting and hence damaging. Middleton (83) criticizes this view: "When people identify with their work, feel intrinsically motivated by it, find it meaningful in itself and take pride in its outputs, they are less likely to be concerned with material rewards." And not all of them want to grow.

Very few studies have followed over such a long period the detailed path of the artisan informal sector, within which Middleton distinguishes family firms, home workers and home-based enterprises. The change in the composition of artisanry in Quito over the 40 years between 1975 and 2015 is striking. The many interviews carried out over those years reveal much that is of interest and thus help guard against the biased oversimplifications of those far removed from the details of reality and steeped in ideology. The interviews raise questions about the market structures within which artisans work (often monopolistic competition; in contrast, neoliberal thinking implicitly assumes that everyone operates in a pure competition model). They provide evidence of the relationships with customers and of the generally limited links between the informal and the formal sectors. One useful focus is on the challenges the artisans found central. In 1975, the need for capital was dominant. By 1982, their main issues of concern were government support and mismanagement. In 1995, following the opening up of the economy, demand issues were central for them. The book also contains a great deal of information on what was happening in the economy and how a sector widely deemed incapable of organizing did so. In fact, artisans have a long history of social relations outside the workplace, dating from the Middle Ages. A huge range of organizations has over the years competed for the alliance of Ecuador's artisans, although no particular group has automatically defended them.

On microfinance, Middleton's view leans towards the negative. What the more simplistic supporters of this modality have in common with their neoliberal counterparts is that they exaggerate the potential benefits, albeit because they focus directly on the welfare of lower-income groups. Since it is based on short loan periods and high annualized interest rates, microfinance was not seen by its creators as relevant to the needs of groups such as well-established artisans but rather of street vendors and others in similar circumstances. Authors like Milford Bateman, to whom Middleton makes frequent reference, criticize what might be termed the over-simplistic and exaggerated microfinance model, but their critique does not invalidate the mechanism's success in the circumstances identified by those who created it. Various empirical studies have shown that microfinance can produce significant benefits. Middleton's doubts about its possible contribution to the groups he analyses are presumably well founded; he does credit it with providing a valuable alternative to loan sharks.

In summary, the author has organized an unusually rich body of information and has mined it well for the lessons it can provide.

Albert Berry
University of Toronto

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<footnote n="2">² Guillermo E. Perry, William F. Maloney, Omar S. Arias, Pablo Fajnzylber, Andrew D. Mason, and Jaime Saavedra-Chanduvi, *Informality: Exit and Exclusion* (Washington, DC: World Bank, 2007).</footnote>

<footnote n="3">³ William F. Maloney, "Informality Revisited", *World Development* 32, No. 7 (2004): 1159-1178. https://doi.org/10.1016/j.worlddev.2004.01.008.</footnote>

<footnote n="4">⁴ It is worth noting that smallholder farming is in many respects a parallel type of enterprise.</footnote>