1. Introduction
African economies are faced with a complex landscape of formal and informal economic activities, with the latter sometimes dominating. Informal economic activities could be defined as activities that are ‘outside the reach of different levels and mechanisms of governance’ (Guha-Khasnobis and others Reference Guha-Khasnobis, Kanbur, Ostrom, Guha-Khasnobis, Kanbur and Ostrom2006, p. 4). In African economies, it is quite common for some parts of an economic activity to be carried out formally while others are informal; this challenges the sometimes-binary analytical approach to the formal/informal distinction. Informal economic activity presents a formidable challenge to the mainstream economics methods. What is missing in some of the economic studies is understanding and explaining informal economic activities analytically, empirically or normatively. Studying informal economic activity as complex social phenomena may require ‘transcending disciplinary boundaries, promoting inter and transdisciplinary research’ (van der Waldt Reference van der Waldt2024, p. 1). Some scholars acknowledge the complexity of the informal economic activities by suggesting that ‘African governments should undertake a careful review of all policies, laws, and frameworks to assess their impact on the well-being of informal sector workers’ (McCormick et al. Reference McCormick and Charmes2020, p. 109). The social and economic entanglement of informal economic activities needs to be studied through interdisciplinary if not transdisciplinary approaches such as economic sociology of law (ESL) because it ‘holds out the best prospect of overcoming the prisons of our limited disciplinary modes of thought’ (Cotterrell Reference Cotterrell1995, p. 72). shown by informalty’s persistence and ubiquity in most economic activities in the Global South locations such as Africa, showing the variation of social including economic experiences and interactions.
In presenting informal economic activities, I am aware that ‘the informal economy is both deceivingly simple and extraordinarily complex, trivial in its everyday manifestations’; these aspects may elude, be invisible to and challenge state regulation (Portes and Haller Reference Portes and Haller2010). Informal economic activity is better described through picturesque examples of production, exchange and consumption for the purposes of providing a background to the discussion in this article. The ‘heterogeneity’ of informal economic activities is one compelling reason for the challenges of adopting a catchall approach to classifying informal economic activity (Trager Reference Trager1987, p. 242). It is also the reason for adopting an approach that integrates law and economic life within wider social life. One form of informality that has been studied is that of traders and artisans in Kenya. It exhibits a level of organisation and has sustained itself for some time (Kinyanjui Reference Kinyanjui2019). Traders and artisans in Kenya seem to display ‘values, customary practices, patterns of material interests, [and] collective allegiances’ (Cotterrell Reference Cotterrell2013, p. 61), displaying limited interfaces with official governance systems. It seems these groups do not rely on state law and institutions, or only do so opportunistically, including resolving disputes among themselves. In West Africa there is thriving cross-border trade that predates colonialism and the adoption of formal laws. It is based on kinship around which economic life is organised. Street vending in Africa is one of the most common forms of informal economic activity on the streets of the cities and towns of sub-Saharan Africa (Mesa Reference Mesa2024). In most places, street vending is outlawed according to formal law, but it persists with the actors showing no sign of relenting on the practice despite the threat and/or use of state force against the practice (Tonda and Kepe Reference Tonda and Kepe2016).
In generally conceptualising this phenomenon of ‘informality’, this article brings Cotterrell’s legal concept of community based on mutual interpersonal trust interactions as forming an ‘internal culture of networks of community’ in economic life to expand the critical horizons of ESL in its analytical, normative and empirical aspects (Cotterrell Reference Cotterrell2013). For some time, scholars on law and development recognised the importance of taking account of non-state legal frameworks to enhance the effectiveness of legally driven development projects rather than a strictly rule of law approach in the Western style that emphasises state law and institutions (Swenson Reference Swenson2018; von Benda-Beckmann Reference Benda-Beckmann2001). This train of thought was embraced by the World Bank’s research departments when it gathered together scholars of legal pluralism and development practitioners (Tamanaha et al. Reference Tamanaha, Sage and Woolcock2012). It was firmly set out in the World Development Report from the World Bank in 2019 and thus seemed to have been firmly adopted in the methodology of law and development.
Bringing in Cotterrell’s framework goes beyond attempts such as rational choice to reduce economic relations to a solely instrumental basis to determine the regulatory needs of these trust-based economic networks of community. The dominance of economic thinking in economic relations has overwhelmingly been a flow of economic values and interests into law, to the marginalisation of other perspectives (Campbell and Picciotto Reference Campbell and Picciotto1998). Most discussions on informality, which is defined as economic activities outside official sites of interactions, tend to be dominated by mainstream economics. This article proposes an alternative framework for looking at informality (economic activities outside formal regulated systems) in Africa through the lens of ESL to better understand and explain it, especially how it relates to development. Law and development in Africa faces pervasive informality and discourses about it by some development scholars who use economic metaphors to explain informal economic activity. Metaphors as figures of speech are not only used by individuals but can ‘craft and deploy us’ through the analytical and normative prescriptions that they carry (Williams Reference Williams2022, p. 7). As Cotterrell suggests, these prescriptions may only encourage a study of informality through ‘casuistry, dogma and hypocrisy’, which is likely to be ‘in relative ignorance of society’s character’ (Cotterrell Reference Cotterrell1995, p. 296). Cotterrell’s trust-based communal network can open up legal pluralism’s explicatory potential not only for what Sally Engle Merry has termed ‘new legal pluralism’ (state law as one of the many normative orders in any society) but also for how ‘how [state and non-state] legal regimes in any society as intersecting, interpenetrating, overlapping’ with implications for law and development (Cotterrell Reference Cotterrell2006, p. 35). In some places, the concepts of Cotterrell may need to be supplemented by the sociological scholarship of Max Weber, the classical sociologist in Europe, or Pierre Bourdieu, who conducted ethnographic research in colonial Algeria. For these reasons, Cotterrell’s legal concept of community is better suited to expand the critical horizons of ESL to emphasise its analytical, normative and empirical aspects of informality in the imbrication of law and development (Trubek and Santos Reference Trubek and Santos2006).
This article is premised on the importance of the study of wider social life to understand how and why law fails and/or succeeds in intermediating the various interests, especially in relation to the informal economy, law and development. It proposes a conceptual framework for the further analytical, empirical and normative investigation of informal economic activity in law and development. In the foreword to his work on the sociology of law, Ehrlich stated that ‘the center of gravity of legal development lies not in legislation, nor in juristic science, nor in judicial decision, but in society itself’ (Ehrlich and Zweigert Reference Ehrlich and Ziegert2017, p. lix). This observation has been echoed by African scholars looking for African solutions to the challenges that law faces (Tamale Reference Tamale2020). This echoes Cotterrell’s challenge to take a sociological perspective to the study of ‘contemporary law as a social phenomenon’ for the purpose of capturing legal experience in most of its variations (Cotterrell Reference Cotterrell2006, p. 53).
After discussing the place of informality in law and development in the next section, the main framework for ESL is presented. The ESL section will also present an analytical and normative scalar approach, at the heart of my ESL approach, to gain insights on informal economic activity, using the ESL scalar framework to investigate empirical and normative aspects of informality. The final sections conclude by offering a way forward.
2. Law, development and informality
The importance of informality in development can be seen in how it continues to attract the attention of the World Bank and IMF. How then can we explain the relationship between law and informality in the economy?
It has been argued that law in development ‘lies in a nebulous area at the intersection of the economic, legal and social’ (Haldar Reference Haldar2014, p. 320). Some approaches such as those of mainstream economics insist on a separate approach to the legal, economic and social aspects. Although academic disciplines can and do make useful contributions to our understanding of social life, they can sometimes become ‘prisons’ that obstruct our understanding of perspectives on law and development (Cotterrell Reference Cotterrell2006, p. 50). A leading text on informal economic activity in the Global South portrays the complexity and invisibility of informal economic activity to mainstream economics by describing it as a ‘gray area which has a long frontier with the legal world and in which individuals take refuge when the costs of obeying the law outweighs the benefit’ (De Soto Reference De Soto1989, p. 12). For the World Bank, there is little doubt that informality is associated with challenges in their view of development-as-economic-growth, with the list of challenges including ‘informal sectors [which] tend to have less access to finance for the private sector, lower labour productivity, slower physical and human capital accumulation, and smaller fiscal resources’ resulting in ‘higher income inequality and poverty and less progress toward the Sustainable Development Goals’ (Ohnsorge and Yu Reference Ohnsorge and Yu2022, p. xxiii). It is difficult to measure because it seems to defy the methods of mainstream economics of mathematisation and measurement. Similarly, the IMF noted that informal economic activity ‘is a complex and multifaceted phenomenon that is difficult to measure and analyze’ (Deléchat and Medina Reference Deléchat and Medina2021, p. 1).
The ‘law and development’ field has undergone various stages for post-colonial Africa in what has been referred to as an ‘oft-repeated circle’ (Tamanaha Reference Tamanaha2011, p. 209). This has in a sense reflected broader global trends of law and legal thought (Kennedy Reference Kennedy, Trubek and Santos2006). Each trend has seen approaches toward attempting to formalise informal economic activities. The ‘first moment’, roughly starting with the wave of independence in the 1960s for most African states, was a period where law was seen as an instrument for the creation of modern formal structures to spur economic growth modelled on similar structures in the West. It was around this time that scholars noted emerging informality, especially in urban areas (Hart Reference Hart1973). Around this time, informal economic activities were expected to disappear and be absorbed into formal structures. The ‘second moment’, roughly starting from the late 1970s, was associated with the centrality of the market and a major scaling back of formal structures set up in the first moment. The essence of the second moment was that state law should facilitate ‘market-led’ private enterprise. To provide one example, the impact on the informal economy was described as ‘mixed’ for the Ghanaian economy, generally regarded as having fair responses to structural adjustment programme (Barwa Reference Barwa1995). Informal economic activities were seen as rational responses to state overregulation (De Soto Reference De Soto1989).
The rather disappointing results from the second moment led to the ‘third moment’, calling for a much broader perspective on the relationship between law and development at the turn of the twentieth century. It seems the role of law is seen much more broadly to involve the ‘incorporation of the social’, or taking a much wider perspective of law as social phenomena (Rittich Reference Rittich2004). Thus, socio-legal studies can contribute to understanding and explaining conditions that make it more likely than not that particular approaches in law and development may succeed or fail. In the third moment there have been calls to revise the meaning of development beyond economic growth to encompass improvement in human welfare, so that the focus should be on developing capabilities of persons to live lives they have ‘reason to value’ (Sen Reference Sen1999, p. 74).
The approaches on the relationship between law and informality seem to suggest two extremes. First, there may be suggestions that informality is improper or an aberration and should be legislated against. Second, there may be views that informal economic activities are an inevitable by-product of development and should be accommodated. Either view seems to underestimate the analytical, normative and empirical complexity of informal economic relations with their unique challenges and needs in relation to law. One of the challenges that development in Africa has had to consider is the dominance of informality in the economies. Approaches to ‘the concept of informality [has] been mobilized to elevate the visibility and standing of millions of vulnerable workers’ but this sometimes ‘risks oversimplifying and re-stigmatizing them’ (Rosaldo Reference Rosaldo2021). Joining other scholars from various disciplines, ‘legal scholars have sought to contribute to debates about development as an idea, as well as to intervene in development practice’ (Lander Reference Lander, Creitzfeld, Mason and McConnachie2019, p. 207). In the absence of trust in formal systems, individuals build and invest trust in informal systems.
Law has been at the heart of attempts at planning and restructuring economic change in Africa since the early decades of independence to the present. In the early decades of African independence, development was seen as economic growth, to catch up with the developed world, although there was a growing realisation that it should or could be more than this. Law has seen changes in thinking on how it should relate to development (Trubek and Santos Reference Trubek and Santos2006). In the first decades after independence in Africa was seen as ‘an instrument of wide-scale social and economic planning’ with the assumptions about state power that come with it (Cotterrell Reference Cotterrell1992, p. 44). Despite attempts to modernise the economies by independent African state, informal economic activities grew alongside and sometimes overtook the formal system in spectacular ways. The expansion of informal economic activity seems to have increased exponentially with the emergence of neoliberalism since the 1980s. The neoliberal era emphasised markets as the engine of development, with the state relegated to the role of supporting markets. Presently, although some nexus between development and informality seems unavoidable, the role of law seems unclear, casting serious doubts on the now-discredited modernisation theory such as the stadial approach to development (Rostow Reference Rostow2017).
The empirical manifestations of the informal sector were noted early on within the first decades of independence in Africa. Informal economic activity is seen by mainstream economics as one of the factors standing in the way of development and also a symptom of the absence of development in Africa (Loayza Reference Loayza2018). Informal economic activities are seen to benefit those involved in them by avoiding the regulatory apparatus of the state; at the same time, informal economic activities are seen as serving important social welfare functions – ‘no less important is the fact that the informal sector fulfils the function of generating employment, especially during economic recessions’ (Loayza Reference Loayza2018). The latter position suggests perhaps that we need to look to wider social life itself to understand why and how it produces informal economic activities. It is also acknowledged how the informal sector is largely invisible to the state and its institutions. Law seems to be, in some way, the cause of but also the solution to informality through what may be termed formalisation (bringing informal interaction within official governance). It is suggested that the scalar ESL approach should be used to explain this paradoxical phenomenon.
3. Economic sociology of law
ESL is the ‘sociological analysis of law in economic life’ (Swedberg Reference Swedberg2003). ESL involves ‘shared understandings of how and why one might use sociologically-inspired approaches (analytical, empirical, and normative) to investigate relationships between legal and economic phenomena’ (Ashiagbor et al. Reference Ashiagbor, Kotiswaran and Perry-Kessaris2013, p. 1). It emphasises the dynamic interplay and interconnectedness of legal and economic phenomena. In ESL, law is not restricted to formal law or the law of the state (formal statutes and case law). Largely driven by legal thinking in the Western tradition, it is easy to take for granted the ‘parochialism of the Western legal tradition’ promoted by such scholars as H. L. A. Hart (Hart Reference Hart1994). While claiming to be pursuing a ‘general jurisprudence applicable to all legal systems’, not just those of the West, most social (inter)actions from the Global South were rendered invisible from the ‘legal’ by H. L. A. Hart. Others have urged that it may be helpful to avoid simply defining law in relation to the state because ‘defining law as limited to state law is composed of a number of factors: the alignment of capitalism with statism; the colonialist downgrading of non-state law … and other matters that serve to isolate law from its social and relational foundations’ (Davies Reference Davies2017, p. 39).
ESL avoids the artificiality involved in separating legal, economic and social (inter)actions (Haldar Reference Haldar2014). ESL attempts to examine law beyond what is expressly included in state law to also encompass ‘forms of social order or social interaction in diverse groups, institutions or associations’ (Cotterrell Reference Cotterrell1995, p. 33). Law is regarded as a field of experience and can be known in many ways – in a sense, trust-based interactions built around the idea of community as ‘the web of understandings about social relations’ (Cotterrell Reference Cotterrell2006, p. 67). The concept of scale from geography by zooming in and out makes ‘some objects become visible and others invisible’ (Davies Reference Davies2017, p. 91). This is particularly suited to informal economic activity that seems to take place at the micro- and meso-level of social life. This contrasts with state-based perspectives of law as the presumed measure of scale when it comes to law and lawful authority.
This article adopts the term ‘econo-socio-legal’ for the purpose of emphasising ‘the interconnectedness that characterizes the intersections between economic and legal aspects of social life, and ought to characterize the ways in which we think about those intersections’ (Perry-Kessaris Reference Perry-Kessaris2015, p. 58). Some ways of thinking about law are mostly in instrumental terms, as if law is an autonomous field outside wider social life (Merry Reference Merry1988). These approaches are hardly able to explain why law fails or succeeds in understanding different actors pursuing actions motivated by different sometimes opposing or conflicting interests. It has been argued that ‘all law-however defined-is constituted through its cultural and social environment and imparted with meaning by the people who experience and engage with it’ (Darian-Smith Reference Darian-Smith2013, p. 39). ESL also reveals interactions and the role of values and interests in these interactions.
4. The relevance of economic sociology of law to informality in law and development
Since the time of independence in Africa, law has been central in development, usually seen as a modernising instrument of economies. In the present, this entanglement of law in/and/with development is expected to encourage and support activities that lead to economic growth in wider social life. The legal, economic and sociological ‘spheres are analytically separable but practically intertwined’, which calls for an approach that will not privilege the economic view or the sociological view over the legal perspective (Trubek and Santos Reference Trubek and Santos2006, p. 4). This entanglement of the law and economy within social life calls for a suitable approach that treats the legal and the economic as the social aspects as an integrated field of study, at least to achieve better understanding of the phenomena analytically, empirically and normatively. Law in development faces the challenge that when approached from the perspective of law and economics, law is dominated ‘almost entirely by the purview of economists’ while in law and society approaches, law is ‘dominated by a fundamentally sociological view’, resulting in the eclipse of law (Haldar Reference Haldar2014, p. 320).
Further, the interdisciplinary field of law and development has been dominated by ‘technocratic and depoliticised patterns of thinking and acting common to mainstream economics and black-letter law’ (Lander Reference Lander, Creitzfeld, Mason and McConnachie2019, p. 207). ESL approaches complement formal law by highlighting values, interests or rationalities (worldviews) behind legal (inter)actions and regimes, at what is referred to in social theory as the meta-level of social life. State law claims neutrality and objectivity by focusing on text; however, it privileges some values and interests over others, hence many are unable to meaningfully trust in it. It has been argued that formal law embodies values or ideals to ‘inform conduct and attitudes’, which must not be left out of analysis (Cotterrell Reference Cotterrell1992, p. 13). This may sometimes result in the problem of the divergence of law in the books and law in action. ESL approaches are flexible and ‘can be extended as a project demands, functioning magpie-like to “borrow” useful aspects from different theoretical lenses, traditions, or disciplines’, to understand and explain economic life in Africa, which tends to defy mechanical understandings or predominantly mathematical explanations (Williams Reference Williams2022, p. 35).
In the African context, as demonstrated by over five decades of post-colonial experience, political choices are more useful in addressing issues of inclusive economic growth. Decades of law and economy have revealed the complexity of African societies when it comes to change using law. Approaches offered by technical and depoliticised mainstream economics and black-letter law may simply result in change without the needed transformation – for example, the less than satisfactory outcomes of World Bank-sponsored structural adjustment reforms in the 1980s and 1990s. Perhaps the structural adjustment programmes seemed to overlook ‘sociality’, which could be defined as ‘the tendency of people to be concerned with and associate with each other’ (World Bank 2015, p. 6). Indeed, World Bank economists, after a decade of structural adjustment reforms, admitted that it had ‘ignored many of the nonprice constraints to [economic] growth which had become evident from the rural development experience in the decade preceding the start of the adjustments’ (Lele Reference Lele1990, p. 1207). Non-price constraints could as well refer to the wider social life of the reforms.
5. A revised law and community approach to economic sociology of law
This section will set out the ESL scalar approach of micro-, meso-, macro- and meta-level of social life based on the law and community approach, which has been usefully applied to explain the role of law in economic life (Cotterrell Reference Cotterrell2013). Each of these levels are mutually constitutive. Such an approach helps us think about law more pluralistically by setting out an analytical framework and its normative aspects that can be readily applied to empirical contexts such as those of informal economic activities. Despite being developed in a Western context, Cotterrell’s legal concept based on trusting relations approach is sufficiently pluralistic to accommodate non-Western views about law in social life. Pluralistic thinking at the centre of Cotterrell’s law and community approach ‘recognises the diversity of forms of regulation’ and is simultaneously aware of the need to explore ‘the variety of settings and methods of creation, interpretation, and application of’ law (Cotterrell Reference Cotterrell1995, p. 310). Cotterrell raised a number of issues that perspectives of law and development in Africa have largely overlooked. While black-letter approaches to law and over-deference to viewpoints from mainstream economics seem to dominate, emerging empirical evidence seems to suggest that ‘social behaviour in legal contexts’ cannot be regarded as ‘relatively unimportant’ (Cotterrell Reference Cotterrell1995, p. 298). Further, the limited impact of law in addressing informal economic activities requires that legal scholarship in Africa should go beyond ‘an image of law as a mechanism of centralised government intervention’ (Cotterrell Reference Cotterrell1995, p. 299). To address these challenges, socio-legal scholarship on or about law should pay attention to ‘understanding the specific character of particular social fields and the forms of regulation existing within those fields’ (emphasis in original) (Cotterrell Reference Cotterrell1995, p. 300). Trust-based communal networks are one promising approach to look at these social fields.
After initial hesitations, Cotterrell put forward the law and community approach to explain the role of law in economic life (Cotterrell Reference Cotterrell2013). Further applications have used it analytically, empirically and normatively to explain legal systems and foreign direct investment in the Global South (Perry-Kessaris Reference Perry-Kessaris2016). However, the law and community approach starts at the meso-analytical level of sociological analysis, which means there is a need to supplement it with micro-, macro- and meta-levels of sociological analysis to cover as much of social life as possible (Frerichs Reference Frerichs2009). The scalar approach enables not only that the ‘concept of law […] be separated from that of the nation-state and imagined in other conceptual and physical spaces’ but also that ‘the idea of law […] be rehabilitated from the sphere of abstract rationality to a spatial, material, and embodied existence’ (Davies Reference Davies2017, p. 106). This seems to draw from Cotterrell’s view that the scalar approach obviates ‘the creation of absolute legal worldviews that actually reflect only partial and limited practical legal experience’ (Cotterrell Reference Cotterrell2006, p. 167).
The law and community approach ‘is not related to, even necessarily sympathetic to communitarian ideas in political and legal philosophy’ (Cotterrell Reference Cotterrell2016, p. 17). The analysis is based on Weberian analysis of social life to address the ‘key failing of economic analysis’ by emphasising ‘the complex interplay, in market networks, of instrumental (economic) relations with relations based on affect (emotional allegiances or rejections), traditions (for instance customary practices) existing in shared work environments and beliefs or ultimate values’ (Cotterrell Reference Cotterrell2013, p. 56).
The support of state law is taken by economic relations in their own way and on their own terms. This view suggests the way in which interactions in economic relations may support, obstruct or reinterpret state law by shaping their internal regulation – ‘as simultaneously entirely parasitic on and yet also significantly autonomous of state legal controls…’ (Cotterrell Reference Cotterrell2013, p. 56). This approach is suitable to the analysis of informal activity and its apparent persistence. This suggests that it is not possible to isolate economic or legal life from wider social life. This perspective contrasts directly with the assumptions of law and economics proponents influential in international financial institutions such as the World Bank and IMF.
5.1 Micro-level econo-socio-legal actions
The reference to motivation in micro-sociological analysis is not a reference to psychology. The micro-sociological approach suggests an understanding ‘that social phenomenon – laws, political institutions, social norms, economic systems - do not merely act externally on individuals but are themselves also the result of and the embodiment of social interaction’ (emphasis in original) (Cotterrell Reference Cotterrell1992, p. 145).
With this approach, ‘the positivist identification of law as something “acting upon” society or existing autonomously cannot be maintained’ (Cotterrell Reference Cotterrell1992, p. 146). The law and community approach is discussed to emphasise the mutually constitutive nature of law and economy as part of wider social life; this aspect has been underemphasised by dominant approaches to legal thinking and practice. With the law and community approach, we can talk about ‘social life (analytically) through an economic lens’ and ‘focus (normatively) on economic values and interests’ to provide a fuller explanation of empirical reality (Perry-Kessaris Reference Perry-Kessaris2011, p. 407).
Individual action ‘may consist of positive intervention or passively acquiescing in [a] situation’ with respect to which ‘the acting individual attaches subjective meaning’ (Weber Reference Weber1947, p. 88). Inter(actions) are rarely oriented by a single motivation in social life. Micro-level analysis enables us to see ‘how law might be reinterpreted, and so reimagined and reshaped, when understood in a broader sociological perspective’ (emphasis in original) (Cotterrell Reference Cotterrell2006, p. 59). Personal characteristics convey to others whether the (inter)actions are trustworthy or not. Interactions of trust increase or decrease depending on the presentation of oneself as trustworthy and how others interpret the presentation. The emerging trust goes both ways between the person trusting (the truster) and the person trusted, in mutual interpersonal trust, which involves ‘a moral bond, and often a positive conferment of trust by the truster on the trusted, a decision to take the risk of relying on the other’ (Cotterrell Reference Cotterrell1993, p. 91).
The emergence of ‘modernity’ represented a break that witnessed the breakdown of traditional forms of the emergence and maintenance of trust in Europe, just as the advent of colonialism in Africa set in motion similar changes whose effects are reverberating to the present. For trust, these events meant the creation of ‘[a] very complex world’ which is ‘rich in possibilities’ with differentiated systems demanding a special kind of trust (Luhmann Reference Luhmann2017, p. 53). The social complexity created some kind of distance between the truster and the persons or institutions to be trusted, which Cotterrell refers to as ‘moral distance’ (Cotterrell Reference Cotterrell1995, p. 330). With the onset of colonialism in Africa, the previous bonds of mutual interpersonal trust started to break down, creating a trusting gap or what has been termed moral distance. It becomes difficult for a person ‘freely establish affirm or adjust their judgment of trust in relation to other members’ (Cotterrell Reference Cotterrell1995, p. 331).
In Weberian terms, viewed as ideal types, (inter)actions may be motivated or oriented either instrumentally, traditionally, affectively or by belief (Weber Reference Weber1947). As ‘ideal types they do not indicate actual, empirically identifiable’ actions and in social life ‘may be combined in an infinity of ways’ (Cotterrell Reference Cotterrell2006, p. 69). Weber was looking at ‘actions that we deliberately or consciously take in relation to and directed towards other people’ (Craib Reference Craib1997, p. 46). He suggests that such action is a way ‘for the successful attainment of the actor’s own rationally chosen ends’ (emphasis supplied) (Craib Reference Craib1997, p. 46). According to Weber, calculation in achieving ends determines whether action is rational, but I would suggest that Weber is unduly restrictive because he focused only on ‘the end, the means and secondary results’ of (inter)actions (Weber Reference Weber1947, p. 88).
5.2 Meso-level econo-socio-legal (inter)actions
This section analyses the law and community approach, also referred to as the sociological approach of ‘communal networks’ or ‘legal concept of community’, in the works of Cotterrell (Cotterrell Reference Cotterrell1998). It provides an important contribution by Cotterrell to ESL through his analyses of social trust as a basis for meaningful econo-socio-legal interactions. Trust, which ‘implies power and dependency’, provides ‘fundamental mutual orientation of actions’ in econo-socio-legal relations (Cotterrell Reference Cotterrell1995, p. 330). The section adopts law and community approach at meso-level because it critically analyses the roles of trust and its importance in constituting (macro-level) social regimes of informal economic activity. Explaining legal regimes in terms of law sheds little light compared with explaining legal regimes through ‘the patient quest to explain its doctrinal and institutional characteristics as social phenomena having empirically identifiable social causes and social effects’ (Cotterrell Reference Cotterrell1987, p. 79). Legal positivistic approaches in legal thinking and practice overemphasise macro-level regimes with little to no reference to the meso-level interactions.
Communal networks involve the meso-sociological level of social life. This analysis enables us to extend the empirical basis of social action. These interactions are also motivated by ‘Weber’s four sets of values and interests’ that motivate (inter)actions (Perry-Kessaris Reference Perry-Kessaris2015, p. 60). Just as at the micro-level, these meso-level (inter)actions are also motivated by the four categories of motivation, combining in infinite ways. Collective involvement may be fleeting or seen ‘objectively, [acquire] some degree of stable, sustained interaction’ and from a subjective point of view a ‘sense of attachment’ by the actors, which is ‘to others or to something beyond the individual; a degree of mutual concern and involvement’ (emphasis in original) (Cotterrell Reference Cotterrell2006, p. 70). The non-fleeting and stable interactions with a sense of attachment for the actors are referred to as ‘communal networks’ by Cotterrell. Communal networks may be based on infinite combinations of values and interests characterised by ‘convergence of interests’, relatively ‘stable interactions’ and a ‘high degree of trust’ which may build over time (Cotterrell Reference Cotterrell2006, p. 74). Communal networks are always ‘co-existing, overlapping and interpenetrating’ in social life (Cotterrell Reference Cotterrell2006, p. 67). They are always forming and coming apart. This suggests that for continued (inter)actions, economic activity may need to provide a firm basis ‘for strong [rather than] weak, organised [rather than] diffuse’ interactions (Cotterrell Reference Cotterrell2006, p. 68).
In this context, law, however defined, works to enable participation of all or most actors if it ‘expresses, in the form of contracts, institutions and so on, the trust that holds actors together; law draws actors in further by ensuring their participation in social life; and law coordinates the differences that hold actors – and different networks of community – apart’ (Perry-Kessaris Reference Perry-Kessaris2016, p. 149). Communal networks offer ‘a more flexible and sophisticated framework for conceptualizing’ problems of mutual trust, which is perhaps an important aspect of economic relations (Cotterrell Reference Cotterrell2006, p. 75). Trust ‘is the basic element of the idea of community as a web of understandings about social relations’ and it forms ‘the common building blocks of the four ideal types of collective involvement’ referred to earlier as communal networks (Cotterrell Reference Cotterrell2006, p. 73). Trust is at the heart of the law and community approach. International financial institutions such as the World Bank and IMF typically miss this point through their mathematised analyses, seeing trust not as something that grows over time via communal interactions but placing so much faith in institutions attaining ‘take-off’ when the right factors are involved.
Mutual interpersonal trust is perhaps the foundation of impersonal systems of trust, which is one of the central aspects of formal economic relations (Cotterrell Reference Cotterrell1995, p. 330). The process is similar to the transformation of trust that Cotterrell notes from interpersonal moralistic notions to trust in systems (Cotterrell Reference Cotterrell1993). The lack of support for trust may lead to disintegration of confidence in formal economic relations. Positivist legal approaches, focusing on the discipline of law, seem to lack a theoretical lens through which to study the nature, role and reasons for trust in economically oriented legal relations. A communal lens can demonstrate how trust evolves and under what conditions, from interpersonal trust to impersonal systems of trust, which forms sometimes taken for granted aspects of the economy. A law and community approach exposes how ‘a high degree of trust, which, in general, can only be securely built over time, with the accumulated experience of past interactions [which] encourages future interaction and provides the motivation to engage in relatively free, uncalculated relations with others’ (emphasis in original) (Cotterrell Reference Cotterrell2006, p. 73). This high degree of trust is an essential component of formal economic activities. Impersonal trust systems are founded on interpersonal mutual trust, which increases confidence in modern economic systems – for example, electronic commerce. Impersonal trust is ‘trust in abstract systems’ and is not dependent on previous interactions (Luhmann Reference Luhmann2017). In some cases, human agents may be responsible for providing connecting points, but their role as points of human interaction is limited. The systems rely almost entirely on impersonal trust for their functioning.
Mutual interpersonal trust is replaced with ‘generalised media of communication’ to form the basis for ‘impersonal systems of trust’ in a socially complex world – for example, stock exchanges in world financial centres, which are markets where personal characteristics do not influence (inter)actions (Luhmann Reference Luhmann2017, p. 53). Law may rely on economic devices with certain characteristics to perform similar functions in formal economic systems, like that of money in an economy. This is only possible if the legal device can be demonstrated as able to communicate and evoke trust by possessing ‘the possibilities it promises’ (Luhmann Reference Luhmann2017, p. 53). Interpersonal mutual trust is thereby converted into system trust. The functioning of formal economies and their ability to evoke and retain impersonal trust depend on their ability to readily demonstrate trust.
The form of communication involved in representing the trustworthiness of impersonal systems of trust may connect system trust, or trust in abstract mechanisms – for example, in an ATM – with interpersonal trust. The representation takes places in ‘multiple and complex dimensions’ (Kroeger Reference Kroeger2017, p. 508). The process of creating impersonal systems of trust presupposes interpersonal trust. Trust such as interpersonal mutual trust helps reduce the complexity in the social world in which decisions have to be made, and actions based on them, to manageable and tolerable levels. The withholding of trust in communal networks results in considerably reduced interactions because increased interpersonal mutual trust is an important basis for interaction, even for impersonal systems of trust.
If the law is unable to evoke and retain impersonal trust in formal economic activity, it is ignored by the actors who would otherwise be interested in the formal economic activities. According to Cotterrell, in such situations ‘people vote with their feet’ and ‘avoid reliance wherever possible on structures or systems that they no longer trust’ (Cotterrell Reference Cotterrell1993, p. 94).
The situation does not result in ‘a legal vacuum’ because ‘people find law – that is, meaningful social rules’ that are socially enforced (Cotterrell Reference Cotterrell2006, p. 35). Therefore, actors will spontaneously create their own law to support the kind of (inter)actions that may be preferred. This potentially explains the prevalence of informal economic activities in Africa despite international and domestic efforts to reduce them.
5.3 Macro- and meta-levels econo-legal (inter)actions
At the macro-level of social life is ‘the totality of interrelations’ that constitutes regimes. The way we think about regimes, or their underpinning epistemic basis, are rationalities, which is what lies in the depth of regimes. This section will discuss regimes first. These are ‘complex and complementary institutional constellations that connect and integrate relatively automatous spheres of action’ (Frerichs Reference Frerichs, Joerges and Falke2011, p. 68). They may not fit easily with the ideas of social theorists such as Bourdieu discussing social fields centring around, inter alia, the juridical field and symbolic power (Bourdieu Reference Bourdieu1986). This is because, as Cotterrell notes, although ‘there is power as an element of social relationships it is neither excluded by community nor opposed to it’ (Cotterrell Reference Cotterrell1995, p. 330); for my purposes, space constraints do not allow such a discussion.
Traditional legal theory such as that of H. L. A. Hart emphasises regimes that are usually put forward in a top-down manner by a central authority, to the exclusion of regimes from the bottom upwards (‘social regimes’) in wider social life. Such traditional legal theory seeks to impose a concept of law that assumes society as a blank slate waiting to be regulated, preferably by some central authority bringing in regimes. This may also represent a dominant understanding of legal thinking and practice. Oftentimes, top-down state law regimes may compete or conflict with, or even be rendered ineffective by, social regimes. That analysis offers an alternative basis of activities in the nebulous area in which informal economic activity takes place. Law may flourish without any formal legal institutions. Social regimes are as pervasive as social action. The World Bank’s World Development Report in 2017 stated, ‘[i]n all societies, state law is but one of the many rule systems that order’ social life including economic life (World Bank 2017, p. 88). While the World Bank might speak in this language, there are deeper questions as to how well the implications of this point are understood within this institution.
Turning to rationalities, these are ways by which actors make sense of social life. They are mutually constitutive with the other levels of social life. The longevity and force of regimes in social life tend to derive from rationalities. The term rationality comes from Weber, who came up with the concept of rationality in order ‘to examine regularity and patterns of action’ not only in Europe but ‘at all societal and civilisational levels’ (Kalberg Reference Kalberg1980, pp. 1147–48). In social life, ‘multiple often competing rationalities are often in operation’ in any econo-socio-legal (inter)actions, communal networks and regimes (Perry-Kessaris Reference Perry-Kessaris2015, p. 61). Rationalities exist at the meta-level of social life as ‘modes of reasoning’ that ‘are mutually constitutive of (inter)actions’ and regimes (Perry-Kessaris Reference Perry-Kessaris2015, p. 61). Rationalities provide an ‘actor’s mental models as well as her perception and understanding of’ regimes and (inter)actions as a kind of direction for (inter)action in a sort of ‘bidirectional dialogue’ (Williams Reference Williams2022, pp. 54–55).
The classification of rationalities from Weber includes ‘practical, theoretical, substantive, and formal’ rationalities (Kalberg Reference Kalberg1980, p. 1148). The differences in rationalities may be attributable to ‘the relative sophistication of means available to master daily problems’ (Kalberg Reference Kalberg1980, p. 1152). Practical rationality examines the given circumstances of everyday life and works out ‘the most expedient means of dealing with the difficulties they present’, while theoretical ‘rationality’ involves increasing ‘mastery of reality through increasingly precise abstract concepts’ (Kalberg Reference Kalberg1980, p. 1152). What is known as informal economic actions, with their practical orientation, is a typical example of the possible dominance of practical rationality in a social regime. Substantive rationality is based not only ‘on the basis of purely means-end calculation of solutions to routine problems but in relation to past, present and potential’ values (Kalberg Reference Kalberg1980, p. 1155). The assumed values may be a ‘cluster of values that vary in comprehensiveness, internal consistency, and content’ (Kalberg Reference Kalberg1980, p. 1155). A form of rationality that was limited to Europe is ‘formal rationality’, and it is associated with the European Industrial Revolution – ‘most significantly the economic, legal and scientific spheres’, ‘dominated by bureaucracy’ and ‘means-end rational calculation by reference back to universally applied rules, laws and regulations’ (Perry-Kessaris Reference Perry-Kessaris2015, p. 61).
Arguably, it might have had a key role in the making of modernity in Europe. The dominant legal positivist approaches extol law based on formal rationality as the law to the exclusion of any other legal perspectives. Weber narrowed down the emergence of formal law as a guide for social econo-legal (inter)actions in social processes in what has been called rationalisation (Kalberg Reference Kalberg1980). According to Weber, the process of rationalisation in different societies as ‘the general unfolding of civilizations’ takes place at different rates and in different forms in different societies (Kalberg Reference Kalberg1980, p. 1150). In relation to law, it has been argued how in Europe only a gradual process led to the dominance of state law in the process of rationalisation over the eighteen centuries from the pluralism of earlier periods (Tamanaha Reference Tamanaha2008).
When massive importation of laws and economic systems were made in colonised territories in Africa, the imports included rationalities. These colonised places were not without rationalities. The challenge relating to transferring legal texts and other systems from one place to another is associated with social complexities involving regimes and rationalities, which has attracted socio-legal scholars (Nelken and Feest Reference Nelken and Feest2001). This inevitably led to some conflict between the local values and the values brought in through the imported regimes; the conflicts sometimes manifested in (inter)actions. The physical and symbolic power of the colonising state often suppressed these conflicts. The conflicts remanifested themselves with the end of colonialism and are persistent features of the post-colonial state. Colonial law could be regarded as a creator of identities that continue to define post-colonial social relations in various ways (Mamdani Reference Mamdani2018). The challenge of the revised ESL approach for the Global South is to disentangle the regimes and values in this sociological plurality. There are even instances where social regimes seem to overwhelm formal law regimes – for example, the persistence and expanding regimes of economic activity referred to as informality, which have been acknowledged by the World Bank and IMF.
6. Informality through the economic sociology of law lens
This section demonstrates the potential of the ESL law and community approach toward explaining informality analytically, normatively and empirically. This section applies the concepts of ESL to informality to explain informal economic actions generally, and specifically how law excludes actors, leaving them only with the option of informal (inter)actions. This may also suggest fruitful avenues for ESL study of phenomena such as the qualitative aspects of informal regimes in economies, their endurance and persistence despite changes inspired by law and economics approaches. How can ESL shed light on the actions of those actors who are informal not by choice but because they are excluded by the (inter)actions required in formal regimes?
Through lack of trust, informal interactions may be by choice rather than exclusion; the actors exit or avoid formal governance mechanisms and institutions. The conditions for the emergence and sustenance of trust offer an important sociological variable in the ‘complex relationship between the state and the informal economy’ rather than a simplistic explanation of ‘barriers to access to formal activity’ (De Soto Reference De Soto1989, p. 259). Views on informality have changed from the post-independence decades of the 1960s, when it was seen a remnant of Africa’s ‘uncivilised’ past as was suggested by modernisation theorists in the 1960s, to the twenty-first-century perspective where it is seen as an integral part of African economies with the participation of the majority of the population. Perspectives toward informal regimes at different decades in Africa’s post-independence history were shaped by the dominant forms of rationality about development thinking. Ineluctably, the role of law in economic life tended to follow the dominant ways of thinking in each decade mostly from economics. From the perspective of ESL, informality may be as no more than particular interactions and interrelations as outside the reach of the regimes of the state.
These unexplored aspects demonstrate the limits of positivistic legal approaches that fail to account for the social regimes that empirically manifest themselves in informal economic activities. These regimes are persistent and quite pervasive. There are even instances where social regimes seem to overwhelm formal law regimes – for example, the persistence and expanding regimes of economic activity referred to as informality, which have been acknowledged by the World Bank and IMF but whose implications have not been adequately appreciated.
The most stable and non-transient interactions are formed by actors with specific socially constituted dispositions or mindsets toward regimes. For every econo-socio-legal (inter)action, there has to be a match between dispositions, which Bourdieu refers to as ‘habitus’, defined as a ‘disposition [that] orients and organizes the economic [inter(actions)] of daily life – purchases, saving, and credit – and also political representations, whether resigned or revolutionary’ (Bourdieu Reference Bourdieu1979, pp. vii–viii), in relation to econo-socio-legal action on the micro-level of social life. I appropriate the term ‘disposition’ as the necessary ‘legal mindsets’ for non-transient social interactions. If there is a ‘mismatch’ it is likely to be ‘discover[ed] that access to the most elementary economic behaviours’ such as savings and credit according to Western societies ‘is in no way axiomatic and that the so called “rational” economic agent is a product of quite particular historical conditions’ socially constituted (Bourdieu Reference Bourdieu2000, p. 18). This led Bourdieu to argue that ‘economic logic is not independent of the logic of social relations’ (Bourdieu Reference Bourdieu2000, p. 20). A specific mindset enables dispositions toward a type of economic life available to actors. In capitalist societies or market societies, mindsets enable (inter)actions with regimes that constitute such apparently mundane formal economic activities such as financial planning that may include banking, savings, pensions and insurance. On the other hand, in non-capitalist societies, a mindset can be compatible with life without such mundane capitalist activities as impersonal exchange in markets. Attempts to universalise actors such as the rational economic actor or homo economicus cause so many challenges because these aspects of social life are overlooked.
One of the defining moments in individual action and motivating mindsets is when there is a change in the regimes and (inter)actions in which the mindsets were acquired and sustained. The idea of legal mindset or legal consciousness has the most explanatory value when one asks ‘what uncertainties and miseries people feel when their habitus [or mindset] is overtaken by rapid change in objective structure’ of social life such as those brought by new regimes (Bourdieu Reference Bourdieu2000). Bourdieu noticed this among Algerian smallholder farmers steeped in traditional or habitual ways of life. Through colonialism, Western capitalist market behaviours were imposed in a non-capitalist society, ‘causing two forms of economic organisation, normally separated by a gap of several centuries and making contradictory demands on their participants’ (Bourdieu Reference Bourdieu2000, p. 18). These instances demonstrate a mismatch between socially constructed dispositions and regimes.
The mismatch between dispositions and new regimes is referred to in Bourdieusian terminology as ‘the hysteresis effect’. Hysteresis relates to legal consciousness resulting in an ‘inability to process and evaluate historical but also individual crises according to previously formed categories of perception, appreciation, and comprehension that are linked to one’s social origins’ (Barlösius Reference Barlösius2014, p. 38). The socially constituted legal mindset or legal consciousness is overcome by narrowing the range of interactions open to actors. Similarly, it has also been said of legal mindsets that ‘our mental models are continually affirmed or challenged through feedback loops; the reflexive monitoring of our own’ legal mindsets and (inter)actions in regimes (Williams Reference Williams2022, p. 137). Where (inter)actions are challenged, actors may be reduced to (inter)actions based on practical rationality, which mainstream economics may deem ‘irrational’ and therefore antidevelopment.
The hysteresis effect results in formidable challenges for actors whose (inter)actions are motivated predominantly by substantive rationalities such as tradition when new economic regimes are imposed, and related specific economic (inter)actions are required usually by state action or formal law. It may explain why and how legal regimes may lead to the exclusion of participants with mindsets that are unable to interact based on the demands of regimes, or how actors engage in (inter)actions whose constellations may result in regimes such as informality. It may also be a possible explanation for the World Bank’s questions on ‘Why are carefully designed, sensible policies too often not adopted or implemented? When they are, why do they often fail to generate development outcomes such as security, growth, and equity? And why do some bad policies endure?’ (World Bank 2017, p. 43).
Cotterrell’s ideas help establish a strong repertoire to expand the critical horizons of an ESL lens analytically, normatively and empirically on informality, to offer a fuller picture of where informal economic activity is located in wider social life and in relation to formal law. His trust-based legal concept of community not only vividly illustrates the limits of the Hartian conception of law but also calls us to reconsider the role of law in law and development by looking at the empirical realities of informal economic activities. Sociological analysis of the role of law in economic life such as law and development should embrace ‘diverse practices, but in order for law to have any reality beyond an assumption or fiction it can only be regarded as the practices themselves’ (Davies Reference Davies2017, p. 156).
One of the important ideas is the role of trust, calling for more empirical studies, especially on the role of trust-based social regimes in co-constituting, co-existing with or obstructing regimes of state law. This perspective suggests informal economic activity persists despite massive effort and resources targeted at formalisation in legally driven development projects. Understanding the mergence and sustenance of trust in informal economic regimes promises to be a more fruitful line of inquiry for law-and-development thinking and practice.
Informality seems to occur where trusting interactions required by formal law are beyond the reach of actors, or by choice, where actors find that the interactions in social regimes of informality serve their interests better. Once the actors develop a high degree of trust in informal regimes, they are unlikely to abandon them even when they appear to thrive economically and are therefore expected to move to formal economic (inter)actions. Informal (inter)actions tend to have a high degree of trustworthy internal organisation.
Their longevity or persistence could also be explained by looking at the role of trust in social regimes. Formalisation regimes driven by formal rationality are likely to evoke distrust among the actors in informality, especially when they fail to deliver what they promise. Formalisation, especially in Weberian legal rational regimes, demands a distinctive form of trust, known as ‘trust in abstract systems’, as opposed to Cotterrell’s interpersonal mutual trust, the former arguably a unique feature of European modernity (Giddens Reference Giddens1990, p. 83). Further, informality seems to demonstrate that formally rational action is not universal, and insistence on formal regimes as development may simply lead to more informality and a limited understanding of the relationship between law and development.
7. Conclusion
Cotterrell’s law and community approach demonstrates that formal regulation of economic activities ‘coexists with many other forms of regulation emerging or powerfully shaped within many different specific social contexts beyond the professional control of lawyers’ (Cotterrell Reference Cotterrell1995, p. 311). ESL, enriched with Cotterrell’s law and community approach and trust-based non-transient interactions, can reveal not only the relationship between state regulation and informal activities but also how formal law may inadvertently create conditions for the emergence and sustenance of informality, sometimes through exclusion. The option left for some actors is to engage in economic interactions that are attuned to their legal mindsets; these have a depth and quality for these actors that make informal economic regimes persistent. These would throw light on how law may support informal economic activities rather than overlook informal economic activities as an aberration or inappropriate. The role of formal law is not the destruction, directly or otherwise, of trust-based communal networks of informal economic activities but supporting non-transient econo-socio-legal interactions that are meaningful for various actors.
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