Elena Panaritis is an economist and Founder of Thought4Action, an “action tank” striving for the elimination of socio-economic barriers. She formerly served as a Special Advisor to the Prime Minister of Greece and Member of the Greek Parliament. You may follow her on X @Elena_Panaritis.

In recent decades, efforts to alleviate poverty through development have predominantly centered on addressing factors such as education, healthcare, gender equality, and social inclusion.

While some progress has been made, our efforts have been misguided. The numbers speak for themselves: almost half of the global population is recorded as living below the $6.85 poverty line. An estimated 10 percent of people go to bed hungry each night. And, according to my research, two in every three people live in a condition of vulnerability and stress due to economic marginalization. What are we getting wrong? 

The reason why our approaches to development and poverty alleviation aren’t working is that they fail to address a crucial systemic bottleneck hindering our economies: that of informality. 

Informality is characterized by the absence of clear, codified property, identity, and contractual rights within society—known as property rights. It is the inability to prove anything about oneself, what one owns, or what one is owed. In the informality ecosystem, there has been a rupture in the social contract, leading to an absence of trust. A society built on such a foundation cannot be properly prosperous, unified, or secure, while development and poverty alleviation cannot be sustainably promoted.

All this stems from a cycle in which governments unintentionally create or sustain an ecosystem of uncertainty, born out of historical and contextual factors that result in a mosaic of opaque laws and overburdened bureaucracy. People operate in unpredictability and become engulfed in administrative process when it comes to proving their identities, properties, and contracts. 

Globally, informality is one of the key drivers of poverty, instability, and exploitation. It is creating an ever-widening gap, with 70 percent of the world’s population trapped in a cycle of poverty. Meanwhile, the remaining 30 percent are at risk of being pushed out of the formal systems. When it occurs, this predicament is most often irreversible. People are not equipped to resolve their condition of informality, because formal structures fail to provide the tools to address it. This is especially acute in the wake of the COVID-19 crisis, which pushed 179 million people below the $6.85-a-day line.

Despite being one of the most straightforward and consequential global problems to solve, very little is being done about it. If we continue to allow this issue to fester, we are taking the risk of letting the irreversible damage caused by informality further undermine our societies. 

That is why I urge you to join me in calling for a new global movement to transform our approach to development. The prevailing orthodoxy is no longer fit for purpose. We urgently need a major shift and a realignment of the responsible economic paradigm. 

To achieve this, we first need to move away from static economic policy models inherited from the Bretton Woods system, which assume that property rights are already well in place. We know today that this assumption is wrong and must be corrected.  

My methodology—encapsulated by the Reality Check Analysis—offers just that. It serves as a disciplinary tool which excavates the root causes behind informality through a dynamic, country adaptive approach. By tracing the evolution of a country’s institutional arrangements and approach to property rights, it identifies the bottlenecks hindering its bureaucracy, which then feeds into detailed roadmaps setting out a path for its systems to change. 

Crucially, the Reality Check Analysis aims to reinstitute trust at the heart of the institutional process and enable the successful alignment of all players and their demands. If we are to succeed in addressing the challenges faced by global development, we need to apply this method as the foundational model for reversing the negative dynamics currently in action and allowing people to join the formal economy and thrive. 

A reversal of the downward spiral caused by informality is still possible, provided we are able to build momentum for a coalition that recognizes the problem and promotes a realistic, pragmatic solution to explicitly tackle it—which the Reality Check Analysis proposes.

By focusing on the drivers of poverty and instability rather than their symptoms, we can much more effectively and sustainably enable prosperity and stability. Done right, this will transform global development, unlock economic growth, and revolutionize societies across the globe—from the Global North to the Global South. 

Join our movement now: Thought4Action. 


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