Karachi

Karachi doesn't have an informal economy problem. Karachi's informal economy IS the economy. Up to 70% of the city's 18 million workers operate outside formal registration, generating between 25% and 45% of Pakistan's GDP through kinship networks, cash transactions, and parallel systems invisible to official measurement. The formal city overlays the informal one like a thin crust over magma.

The city was a fishing village called Kolachi until 1729, unremarkable until the East India Company recognized its deep natural harbor on the Arabian Sea. Partition in 1947 transformed Karachi overnight: selected as Pakistan's first capital, it absorbed hundreds of thousands of Muslim migrants while its Hindu population fled. The population exploded from 450,000 to over 1 million within four years—a demographic founder effect that embedded the Muhajir kinship networks still dominating informal commerce. Seoul modeled its own Five-Year Plan on 1960s Karachi. Then political instability, ethnic violence, and the capital's relocation to Islamabad in 1967 eroded governance without reducing economic function.

Two ports—Karachi and Port Qasim—handle 90% of Pakistan's maritime trade, with combined throughput exceeding 2.5 million TEUs annually. The city collects 35% of national tax revenue and produces 30% of manufacturing value-added. Yet Karachi needs 1,200 million gallons of water daily and receives only 650—a gap that has spawned a tanker mafia earning $500 million annually while urban aquifers drop 2-3 meters per year. Over 10,000 tankers serve 25% of households as their primary water source; poor families spend up to 60% of their income on water while connected households spend 2%.

Karachi grows like a locust swarm—r-selected reproduction at city scale. Informal settlements expand roughly 100 square kilometers per generation. Like rats thriving in subway tunnels while the trains run above, Karachi's informal sector occupies every space the formal state abandons. Metabolic flexibility keeps it functioning when systems fail: hawala transfers replace banks, unregistered construction fills housing gaps, tanker mafias deliver what pipes cannot. Like capybaras exploiting niches that kill specialized species, informality finds a way.

But resource constraints are absolute. The Indus Basin—source for 92% of Pakistan's water—approaches scarcity thresholds below 860 cubic meters per capita. Karachi may be reaching an alternative stable state where neither formal nor informal systems can manage what's coming. The city's resilience works until it doesn't—and water is the constraint that could force the phase transition. Compare with Mumbai's different megacity trajectory, or explore how source-sink dynamics shape urban economies.