Will the real economy please stand up?
The new focus on the ''Underground Economy'' now flourishing in the United States, Italy, Britain, and other industrial countries is a welcome correction of economists' myopia. This rapidly growing, largely illegal subterranean economy not only discredits much traditional macroeconomic analysis, but also accounts for much of the distortion in measuring GNP performance, levels of total employment, rates of saving, investment and productivity - all of which are significantly understated.
However, great care must now be taken not to confuse it with the ''Counter-Economy'' of altruism, cooperation, voluntarism, and sharing. The Counter-Economy is the other half of a society's productive system that is not monetized, paid, or accounted for in cash, but rather subsidizes and buttresses the cash-based GNP-measured half.
This nonmonetized half of the productive system includes all household and community production for use (not sale), cooperative enterprises, rural and subsistence agriculture, family farming, non-profit community health, education, and other public volunteer projects, do-it-yourself and ''sweat-equity'' home rehabilitation, home-steading, shop-steading, house-sharing, bartering, reciprocity and mutual aid.
Such nonmarket, socially cohesive work, as well as the vital caring and parenting of children, still comprises over 50 percent of all the world's real economic activity - even in industrial societies. The newer-monetized, GNP-measured sectors in all nations grow out of such basic social and maintenance infrastractures and rest upon them, not the reverse, as many economists currently believe.
Thus, economic statistics (however denominated: in dollars, yen, francs, pounds, rubles, or zlotys) tend to mislead government and corporate leaders with a map of only half the territory. It's no wonder this macro-economic map and the policy levers it offers are failing.
A misunderstanding of the key difference between the Counter-Economy and the Underground Economy, which represents the concealed 15 percent underside of the GNP-measured half of the economy, could be socially disastrous to the vitally necessary functioning of the nonmonetized half, which offers a social safety net in hard times.
This Counter-Economy, still invisible to most economists and policymakers, fosters individual responsibility, mutual aid, local self-reliance, small-scale enterprises, renewable-resource technologies and the decentralization of economic and political power. Not surprisingly, it is most often studied by noneconomists using sociological surveys. It is also termed ''the Informal Economy'' by researcher James Robertson (Britain); the ''Shadow Economy'' by Ivan Illich (Mexico), the ''Household Economy'' by Scott Burns (US). West Germany's Joseph Huber sees it as one half of the ''Dual Economy,'' and Sweden's Lars Ingelstam and Nordal Ackerman study the cooperative, local economy using similar approaches.
The United Nations International Labor Organization has studied the predominant role of women in the nonmonetized sectors of all the nations, subsidizing the GNP-sectors with unpaid, indispensable labor, growing food, parenting children, caring for the sick and old, and taking part in volunteer community services. On a global basis the ILO reports that women account for 47 percent of all the productive hours worked, but receive only 10 percent of the world's wages and own only 1 percent of the property.
The most comprehensive look at the world's nonmonetized sectors is that of futurist-economist Orio Giarini in ''Dialogue on Wealth and Welfare'' (1980), in which he documents that 80 percent of all the world's capital and investment is not monetized.
It is not surprising that economists also misunderstand the process of development - too often erroneously equating it with per-capita GNP-measured ''economic growth.'' Today sociologists are constructing new indicators of development and human welfare which show progress in meeting the basic needs of the most deprived people for food, shelter, education, health care, access to tools, and political participation; indicators such as the BHN (Basic Human Needs index) and the PQLI (Physical Quality of Life index).
Since some of the categories studied by those probing the Underground Economy overlap with those studied by Illich, Robertson, and others in the nonmonetized Counter-Economy, it is crucial that distinctions clarify these diametrically opposite segments of national productive activity. If not, we will no doubt see more of the tax witch-hunting of the poor and unemployed who try to earn cheaper food by working unpaid hours as members of their local food co-op, while cocaine dealers and the banks that accept their cash deposits go unprosecuted.
If we do not emphasize the difference between the ''self-employed'' divorced mother growing sprouts on her windowsill or taking in washing or typing to support her children, and the Mafia's billion-dollar gambling and loan-sharking, or between small-scale group sharing and bartering as opposed to multinational corporate barter deals - then ordinary citizens will continue to view ''the Feds'' as unfair bullies of the weak and poor, rather than the legitimate government of all the people.
This sense that government is unfair and the tax code favors the rich and powerful, as Business Week correctly points out, is why the cash-based Underground Economy is booming. It is also the reason, together with Reaganomics , that so many people are forced to take refuge in their local, sharing, safety-net Counter-Economy to survive.