"The 'informal economy' is usually thought of as a problem: clandestine, unregistered, illegal companies and industries that pay no taxes, that compete unfairly with companies and industries that obey the law and pay their taxes promptly. . . .
"That kind of thinking, as Hernando de Soto proves, is totally erroneous. In countries like Peru, the problem is not the black market but the state itself. The informal economy is the people's spontaneous and creative response to the state's incapacity to satisfy the basic needs of the impoverished masses. . . .
"In Lima alone, the black market (excluding manufacture) employs 439,000 people. Of the 331 markets in the city, 274 have been built by the black-marketeers (83 percent). It is no exaggeration to say that it is thanks to them the citizens of Lima are able to get around, because 95 percent of public transportation belongs to them. The black-marketeers have invested more than a billion dollars in vehicles and vehicle maintenance. As to housing, the figures are equally impressive. Half the population of Lima lives in houses built by black-marketeers. Between 1960 and 1984, the state constructed low-income housing at a cost of $173.6 million. During the same period, the black-marketeers managed to construct housing valued at the incredible figure of $8,319.8 million (47 times what the state spent). Economic freedom existed only on paper before the poor of our nations began to put it into practice independently."
-- From Mario Vargas Llosa's foreword to The Other Path: The Invisible Revolution in the ThirdWorld, by Hernando de Soto (Harper & Row, 1989)* * *