Grossman brings the reader into the politics of hundreds of marketplaces, associations and the traders that create them in Lagos, Nigeria. She introduces us to a wine market and a car parts market in different areas of the city and to the market associations and leaders that enable efficient trading or predation within those markets. The book situates the markets, traders and leaders as laboratories of private governance and the maintenance of property rights. Contrary to conventional wisdom, Grossman argues that these markets protect traders’ property rights, promote trade and provide private governance when the local government threatens to intervene in the market. When the state adopts a hands-off approach, market leaders predate on traders and embezzle money from the market. A truly astounding mountain of original surveys, maps and interviews supports Grossman's argument.
Grossman addresses the question of why some groups develop good private governance institutions while others do not. Some of the Lagos marketplaces she studies work smoothly and promote trade and cooperation and some do not. Grossman argues that threats of state interference motivate strong group leaders to invest in pro-trade policies – particularly when members are not in direct competition with each other – so that the leaders can mobilise members if the state tries to interfere. In the absence of state threats, strong leaders use their power to extort traders and embezzle market funds. Competition between traders, as well as weak leaders, can also lead to poor private governance and poorly functioning markets. Grossman concludes that private governance works best in the shadow of the state – under enough threat of interference to motivate strong leaders to build governance institutions but not so much interference that the government crushes or takes over market institutions.
The book supports the argument with a rich array of original surveys, maps, administrative data, observations, and interviews with traders in Lagos. Informal work and institutions are notoriously difficult to quantify because they exist by definition outside of regulatory agencies that collect regular data and labour statistics. Grossman addressed this challenge by building a sampling frame of markets from the Lagos Waste Management Authority, mapping out every market in the city and taking a census of 52,830 shops. Grossman then randomly selected shops from this frame and surveyed 1179 traders in face-to-face interviews with a team of enumerators. She conducted three waves of surveys in 2015, 2016 and 2018, with 834 traders participating in all three waves. This trove of data gives Grossman unprecedented quantitative data on the economic and political decisions of an important group of microenterprises over time. Grossman uses these data to prove her points as well as anticipate objections and alternative explanations. She illustrates the numbers with interviews, stories and observations across the market landscape in Lagos.
Grossman asserts that her account of private governance institutions in Lagos marketplaces uncovers a channel for trade and development that does not require a benevolent or efficient government or even the rule of law. Instead, she argues, all a government needs to do to spur efficient private institutions is to threaten to intervene in business people's affairs. She convincingly demonstrates that when predatory politicians work against traders’ interests, they unintentionally trigger private policies and mobilisation that benefits traders. This book should be on the reading list of scholars working on property rights, development, governance, informality, African politics and urban politics.
