Capitalism requires poor and unemployed workers: Critiquing "informality" and global labor policy

What is it about?

This article takes a Marxist look at the idea of “informality” and the broader Informal Economy Paradigm (IEP), a framework that has shaped how governments and international organizations think about jobs, unemployment, and economic policy since the 1970s. The article argues that the IEP grew out of the NGO‑development world and carries liberal assumptions that make it unable to explain why so much work, especially in the Global South, is extremely insecure, low‑paid, and exploitative. The article traces how the IEP first emerged in the mid‑20th century, when the International Labour Organization (ILO) tried to address unemployment and underemployment in Africa while also trying to contain socialist movements. Over time, the IEP has shifted toward describing poor workers as “entrepreneurs,” which effectively removes them from any class analysis and hides the structural forces shaping their lives. The article also points out a major conceptual problem: the term “informality” is used to describe two very different things. One meaning refers narrowly to economic activity that happens without state regulation. The other meaning refers more broadly to unstable, irregular, and precarious work. Mixing these two ideas together creates confusion and weakens the concept. Using a Marxist approach, the article proposes two new concepts to replace the IEP. The first is the “global army of irregular labor” (GAIL), which expands Marx’s idea of the reserve army of labor to fit today’s global economy. The second is “new peripheral capitalism” (NPC), which updates dependency theory’s idea of peripheral capitalism to better describe current global conditions. Overall, the article calls for a more critical and realistic understanding of the global working class under 21st‑century capitalism, something the author argues is only possible through a Marxist framework.

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Photo by Sheila C on Unsplash

Photo by Sheila C on Unsplash

Why is it important?

This work challenges one of the most influential ways that governments and development agencies describe work and poverty in the Global South. For decades, the idea of an “informal economy” has been used to explain why so many people rely on unstable, low‑paid, and insecure jobs. But that framework often obscures the deeper economic forces that create and sustain widespread precarious labor. By tracing the political origins of the Informal Economy Paradigm and showing how it grew out of institutions trying to manage unemployment without confronting class relations or global inequalities, the study reveals how the paradigm misrepresents exploited workers as “entrepreneurs” and strips away any analysis of power. It also exposes a major conceptual flaw: the term “informality” is used to describe two very different phenomena, which leads to confusion and weak explanations. The work’s contribution lies in offering clearer, more rigorous Marxist concepts, such as the global army of irregular labor (GAIL) and new peripheral capitalism (NPC), that better capture how contemporary capitalism depends on vast pools of insecure workers. These concepts provide a stronger foundation for understanding the realities of the global working class today. This study exposes the limits of a dominant policy framework and offers sharper tools for understanding how global capitalism actually organizes labor in the 21st century.