The third world — Massive shadow economy review— Exit, Voice, and loyalty perspective
Featured image of Scott’s article was taken in Agege railway line, Lagos.
This is an excellent piece written by Scott Beyer @marketurbanist during his Global South trip, when he was with me in Lagos. In my perspective, it points out the reasons for Exit, Voice, and Loyalty of the governance system in developing countries.
The piece explained the regulatory hurdles for starting an informal business in developing economies. It also shows the strength of zero barriers to entry that is inherent in the informal sector of the economy, which citizens can easily take advantage of to spur an entrepreneurial spirit among them. At the upper-high, elitists engage in rent seeking and regulatory capture to take advantage of the business environment.
The legal and illegal narrative describes how humans by nature seek their free movement and the free movement of goods and services. This majorly contribute to their “loyalty” to their nation state.
The piece gave reasons to why people escape or “exit” the web of dysfunctional governance to functional ones, as against “ethnocentric loyalty.” Absence of rule of law, property rights, legal certainty has yielded little or no economic opportunities for them. Opting for “Voice” through protests has recorded unsuccessful results most times.
Furthermore, Scott explained that merchants exit medieval Europe due to the monopolistic behaviors of mercantile guilds. They moved to a new world, building freer and functioning jurisdiction out of which the U.S. emerged. This demonstrates how protectionist guild “regulatory capture” by elitists strangle competition and favourable business environment in the global south. This has led to exit from the government system in developing countries in similar manner.
Here is my review on Cities of Commerce for Startup Societies, Institute for Competitive Governance describing how loyalty to the governance system during medieval Europe worked to promoting loyalty prior to Exit -
Institutional changes was proposed and written by private actors — merchants themselves — during medieval Europe to create institutional arrangements for free markets and competitive governance to thrive.
If the rule of law is upheld alongside free market economic policies, people stick to ethnocentric-loyalty but when there’s legal and regulatory impediments, people will seek an exit option.
I believe in patriotism but also identify that people are sovereign individuals.
