Barefoot Hamburger

Temperatures in north Germany hover around freezing point at this time of year, so the weather varies between rain and snow. Given the chill, it struck me as unusual to see a homeless man walking barefoot around Dammtor S-Bahn station early this morning.

Winter is a terrible time of year for the homeless, and public transport is one of the few warm areas that provide shelter. Shortly after that, I was wondering around the Hauptbahnhof, or central station, the heartbeat of any German city. What I was doing, was taking photographs of security cameras, storage areas, and other bits and pieces that are required for the closing scenes of my new manuscript. Behind me, at one point, were two policemen from the Deutsche Bahn. I thought the two cops, who together would add up to my exact age and to triple my height, might remonstrate, or ask what I was doing, in these terror-infested days. 

Perhaps even more so, because I was loitering at the Steindamm Straße exit. About ten minutes walk down that street, on the left, over what is now a gym of the nightclub steroid doorman persuasion, was the mosque where Mohamed Atta & Co. planned the September 11th attacks, during Islamic Year 1422, according to the Hijri calendar. I had been down there yesterday evening, past the Afghani travel agent and the Kabul restaurant, to ground-truth some stuff for the book. I took plenty of snaps there too, and got some dubious looks from the locals in return.

But the railway cops didn’t give a damn about me. They zeroed in on a poor guy who was sitting on a step, oblivious to my pictures, cradling his head in his hands. They berated him, and he groaned. He said something in incomprehensible German, to the effect that he was doing nothing wrong, but the police were unmoved.

“AUFSTEHEN, RAUSGEHEN! Get up, get out,” shouted the cop, with the implacable arrogance of youth.

There but for the grace of god go I.

Precise instructions in a German bathroom. The imaginative use of the toilet brush is surpassed only by the prodigious length of the title word.

Sovereign debt in Europe is prone to contagion. Apparently. A couple of decades ago, Robert May came up with a model for disease called SIR, highly appropriate since May has since been knighted. SIR stands for Susceptible―Infected―Recovered (or Removed, i.e. dead). What that means is if you are not susceptible, you do not get infected. And the whole of Europe is susceptible. Oh, if only we weren’t all such pigs! Worries increase about Eastern Europe, which tumbles Austria, and as Europe falls, so will Germany.

One of the issues that isn’t talked about much is the relationship between the European recovery from recession and bond prices. Because interest rates are near zero, buying bonds is a huge risk, whether or not debtors default. The reason is that when rates are at 1%, you need to put up five hundred grand to get five grand interest per year. If the rate goes to two percent, you only need two hundred fifty thousand to get your five grand. The intrinsic value of the bond you owned is therefore halved. I wouldn’t put money in it. If base rates were higher, bonds would be more attractive, despite the risk.

But there is another area in Europe which is highly contagious, and largely already infected. And that is unemployment. Shortly before leaving for Fuhlsbüttel, an area that housed a concentration camp for Jews, gypsies, and homosexuals during World War II, I watched a TV interview with an unemployed British architect. The poor man railed when he had discovered that his car insurance premium had been substantially increased because he was out of a job.

The anchorman grilled an insurance executive about this, and delivered a well-deserved trouncing. Apparently your premium goes up because statistically, unemployed people have more accidents. This is because they drive more in search of jobs, and they are less likely to have well-maintained cars, since they can’t afford it. Undoubtedly higher motor insurance premiums are a huge help!

The world’s informal economy. The colors show the parallel economy as a percentage of GDP.

What all this means is that the economy has shifted, in many parts of the world significantly, to what is quaintly called the informal economy. This is the subject of a new book called, surprisingly enough, ‘The Global Rise of the Informal Economy’. The only reason I haven’t bought it already is that I’m on a plane, and the net isn’t.

The size of that economy is conservatively estimated to be ten trillion dollars per year. Puts EU sovereign debt to shame. However, the interesting thing is that this corresponds to a global job market. Asia, Africa, South America, and yes, Europe and the United States, are all well represented. Economics is a zero sum game. So who gets the ten trillions?

Funnily enough, a good slice goes to legitimate business. As long as it is prepared to do illegitimate things. Procter and Gamble’s largest customer is Walmart, but it sells more to the combined slums of Nigeria, Cape Flats, Favela do Vidigal, and Jakarta. The informal buyers don’t pay tax, so somewhere down the supply chain there is a tax cut―as in zero tax. The sellers, maybe two or more links up the food chain, also don’t pay. The manufacturers do, but somewhere on that chain is the cutoff. See no evil, hear no evil.

The products are wonderfully diverse: purified water bags in sub-saharan Africa, dual-sim cell phones to keep costs down for the immigrants of this world, knock-off luxury brands for Chinese people who can’t read western alphabets. The more u’s in Gucci the better. The dual-sim knock-offs were apparently an innovation generated by the infomal market.

But even if half of those ten trillion is soaked up by big business (who knows exactly what’s going on, and how to profit from it), and we discount that contribution to worldwide employment, this still leaves five trillion’s worth of informal income. Let’s be generous and say each player averages five dollars a day (I like easy math). How many jobs is that? Well, it’s a trillion divided by the number of days in the year. So er… three billion jobs, or seven times the whole population of Europe. The downside of all this is that it completely erodes the tax base, which is supposed to pay for education, health care, and other services.

The author, interviewed in Wired magazine, says the informal economy accounts for half the world’s jobs. There are six billion souls in the world today, and although you might be excused for thinking there’s a discrepancy here, because kids go to school and old folks retire, think well out of the box. In most of the world everyone works.

Or they die trying.

The India Road QR links for smartphones: point your camera and click.

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