Examining the Legal Legitimacy of Informal Economic Activities

Abstract

This article explains the disjuncture between formal parliamentary laws and norms of informal economic activities on the basis of a contextual and layered idea of legitimacy. This explanation clarifies a misunderstanding in certain scholarly and policy circles characterising informal economic activities as extra-legal or illegal. The idea of legal legitimacy helps explain divergent normative logics of formal and informal spaces while indicating that informal activities are not performed in a regulatory void. In addition to helping redefine the informal space, the idea also helps clarify the interaction between formal and informal regulation. By employing Jürgen Habermas’ analytical characterisation of society as constitutive of lifeworld(s) and system, and drawing on the empirical literature, the article argues that a cautious interpretation of Habermas’ analytical categorization helps explain the legality of the informal space. If formal laws need to become legitimate for the informal context, they must integrate the contextual standards of legitimacy recognized in the informal space.