As world leaders in government, business and civil society gathered for the 56th Annual Meeting of the World Economic Forum (#WEF56) in Davos last January, their focus was obviously concentrated on the defining challenges of our time: climate change, artificial intelligence, poverty, migration, and economic resilience.
Gatherings of thought leaders like this are vital. They offer a rare space for high-level decision makers, central bankers, ministers, private sector leaders, civil society representatives, and academics to exchange ideas and shape policy on a global scale.
And yet, year after year, despite the shared commitment and expertise we saw collected in those rooms, millions of people around the world continue to struggle. Economies falter. Inequality grows. Even in some of the most advanced nations, we see rising insecurity — economic, social, and human.
Why, despite our best intentions and vast resources, do we struggle to deliver lasting progress for all?
One key reason lies in a structural issue that remains largely unaddressed: informality.
Today, two out of every three people globally operate within informal systems. This means that some combination of their property, identity, or contract rights is not formally recognized by their government. They may live in a home they cannot legally sell. Earn income they cannot securely save or use as collateral. Work without access to legal protections or social safety nets.
Informality is not merely a legal technicality — it is a systemic condition that limits opportunity, slows development, forces migration and undermines the rights and dignity of individuals in plain sight.
When basic rights go unrecognized, entire communities live in a state of vulnerability. Progress is not just slowed — it is almost impossible. The potential of millions is held back, not by a lack of effort or ingenuity, but by the absence of formal recognition and access to the systems that enable upward mobility.
This is not just an issue of the Global South but rather a challenge that spans the globe. Informality exists in many countries with advanced protections such as treaties or a constitution. From the United States to the European Union, we see examples of people and businesses navigating life without the full protections and benefits of formal systems.
This is a global issue. One that affects everyone — whether directly or indirectly — because an economy cannot fully thrive if large segments of its population are excluded from the formal mechanisms that drive growth, innovation, and stability.
The good news is that we have solutions. I have seen what is possible in countries like Peru, Bulgaria, and Chile, where we successfully dismantled systems of informality through clear policy, strong leadership, and a firm commitment to inclusive reform.
Through our work, people once lived trapped in an existence defined hour by hour, where the concept of a future barely existed and survival left no room for dreams. In these conditions, children were unable to complete even elementary school. Today, in some of these countries, poverty has declined by more than 40 percentage points — from 63 percent to 19 percent — and people have transitioned from informality, where they were socially and economically invisible, into a vibrant and growing middle class.
With this transformation, children’s lives changed dramatically. Child labor fell by 28 percent in just one year, and children now not only finish school but go on to attend university and participate fully in the formal economy of their countries. Adults have become entrepreneurs who build homes and businesses, property values have risen from as little as $12 to more than $1 million, investment has increased by over 72 percent in just two years, and trust in the system has grown.
This process — what I call transformality — begins by recognizing the real-world conditions people live in and creating systems that formally acknowledge their rights to identity, ownership, and protection.
Reality Check Analysis, the framework I developed to guide this transformation, offers a practical, dynamic way to tackle entrenched barriers. It focuses on adapting institutions and laws to reflect the lived realities of people and businesses — especially those currently excluded from formal systems.
We are at a moment of tremendous potential. As leaders reflect on the future of global development, we have the opportunity to bring informality to the forefront of the global agenda — and to do so with both urgency and optimism.
Addressing informality is not about abandoning what exists. It is about building on what works — and making sure those systems serve everyone, so they do not have to flee their home countries for a chance of survival. It is about empowering people with the tools to grow, contribute, and thrive.
This issue crosses borders, income levels, and ideologies. And solving it will take collaboration across institutions, sectors, and societies.
The time to act is now. Let us work together — guided by clarity, commitment, and compassion — to create a world where no one is left out of the systems that shape their future.