Underground economy
Encyclopedia
A black market or underground economy is a market
in goods or services which operates outside the formal one(s) supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat" or the state jurisdiction "the black market in China".
It is distinct from the grey market
, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market
, the legal market for goods and services.
Worldwide, the underground economy is estimated to provide 1.8 billion jobs.
There is no single underground economy, there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified:
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as drug trafficking, arms trafficking, and prostitution
.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported
economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a "tax gap" of $450–$500 billion.
The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts
) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist
accounting system to UN standard national accounting
. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. But there is still little consensus concerning the size of the unreported economies of transition countries.
The "informal economy
" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally. The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government
, or included in any gross national product (GNP), unlike the formal economy. In developed countries
the informal sector is characterized by unreported employment
. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects. On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband
is traded.
Black markets can form part of border trade
near the borders of neighboring jurisdictions with little or no border control if there are substantially different tax rates, or where goods are legal on one side of the border but not on the other. Products that are commonly smuggled
like this include alcohol
and tobacco
. However, not all border trade is illegal.
Even when the underground market offers lower prices, consumers still have an incentive to buy on the legal market when possible, because:
However, in some situations, consumers can actually be in a better situation when using black market services, particularly when government regulations and monopolies hinder what would otherwise be a legitimate competitive service. For example:
In developed countries, some examples of underground economic activities include:
, although in most jurisdictions it is not illegal to sell the medallions. In Baltimore
, Maryland
, for example, it is not uncommon for private individuals to provide illegal taxicab service for city residents.
. Many people nonetheless continue to use illegal drugs, and a black market exists to supply them. Despite law enforcement efforts to intercept them, demand remains high, providing a large profit motive for organized criminal groups
to keep drugs supplied. The United Nations has reported that the retail market value of illegal drugs is $321.6 billion USD.
Although law enforcement officers do capture a small proportion of the illegal drugs, the high and very stable demand for such drugs ensures that black market prices will simply rise in response to the decrease in supply—encouraging new distributors to enter the market. Many drug legalization activists draw parallels between the illegal drug trade and the Prohibition
of alcohol in the United States in the 1920s.
In the United Kingdom, it is not illegal to take drugs, but it is illegal to possess them. This can lead to the unintended consequence
that those in possession may swallow the evidence; once in the body they are committing no crime.
is illegal or highly regulated in most countries across the world. These places form a classic study of the underground economy, because of consistent high demand from customers, relatively high pay, but labor intensive and low skilled work, which attracts a continual supply of workers. While prostitution exists in almost every country, studies show that it tends to flourish more in poorer countries, and in areas with large numbers of unattached men, such as around military bases.
Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codewords
and subtle gestures. In countries such as the Netherlands
, where prostitution is legal but regulated, illegal prostitutes exist whose services are offered cheaper without regard for the legal requirements or procedures— health checks, standards of accommodation, and so on.
In other countries such as Nicaragua
where legal prostitution is regulated, hotels may require both parties to identify themselves, to prevent the rise of child prostitution.
of weapon
s. These restrictions can range from small knives
to firearms, either altogether or by classification (e.g. caliber
, automation, etc.), and explosives. The black market supplies the demands for weaponry that can not be obtained legally, or may only be obtained legally after obtaining permits and paying fees. This may be by smuggling
the arms from countries where they were bought legally or stolen, or by stealing from arms manufacturers within the country itself, using insider
s. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmith
ing their own firearms. Those who may buy this way include criminals, those who wish to use them for illegal activities, and collectors.
In England and Wales some kinds of arms designed for shooting animals may be kept at home but must be registered with the local police force and kept in a locked cabinet. Some people buy on the black market if they would not meet the conditions for registration— for example if they have a record of committing a criminal offense, however minor.
In some jurisdictions, collectors may legally keep antique weapons. Sometimes they must be disarmed (incapable of being fired); but sometimes they are so ineffective by modern standards that they are allowed to be kept intact. For example a blunderbuss
or cannon
is hardly likely to be used for a drive-by shooting
.
to a high-tax state can lead to a profit of up to $2 million. The low-tax states are generally the major tobacco producers, and have come under enormous criticism for their reluctance to increase taxes. North Carolina
eventually agreed to raise its taxes from 5 cents to 35 cents per pack of 20 cigarettes, although this remains far below the national average. But South Carolina
has so far refused to follow suit and raise taxes from seven cents per pack (the lowest in the USA).
In the UK it has been reported that "27% of
cigarettes and 68% of roll your own tobacco [is] purchased on the black market".
and Dublin, Ireland
.
Providing the goods are for personal consumption, "booze cruises" are entirely legal. Because there are no customs restrictions between European Union
countries it is not strictly a black market, but closer to a grey market
. The UK and Ireland are both European Union
members and are both in a Common Travel Area
so there are neither customs nor passport checks between the two countries.
There is however a thriving black market in goods, rubbing tobacco in particular, which have avoided the payment of excise duty. This is partly supplied by "booze cruises".
s, music CDs, and computer software such as video games, sometimes even before the official release of the title. A determined counterfeiter with a few hundred dollars can make copies that are digitally identical to an original and suffer no loss in quality; innovations in consumer DVD
and CD writers and the widespread availability of cracks
on the Internet
for most forms of copy protection
technology make this cheap and easy to do.
This has proved very difficult for copyright holders to combat through the law courts, because the operations are distributed and widespread— there is no "Mr. Big". Since digital information can be duplicated repeatedly with no loss of quality, and distributed electronically at little to no cost, the effective underground market value of media is zero, differentiating it from nearly all other forms of underground economic activity. The issue is compounded by widespread indifference to enforcing copyright law, both with governments and the public at large. To steal a car is seen as a crime in most people's eyes, but to obtain illicit copies of music or a game is not.
Yet, the preceding comparison, although common, is not truly analogous. Automobile theft results in an item being removed from the owner with the ownership transferred to a second party. Media piracy is a crime of duplication, with no physical property being stolen. Copyright infringement law goes as far as to deem illegal "mix-tapes" and other such material copied to tape or disk. Copyright holders typically attest the act of theft to be in the profits forgone to the pirates. However, this makes the unsubstantiated assumption that the pirates would have bought the copyrighted material if it had not been available through file sharing
or other means. Many artists and film producers have accepted the role of piracy in media distribution. The spread of material through file sharing is a major source of publicity for artists and has been shown to build fan bases that may be more inclined to see the performer live (live performances make up the bulk of successful artists' revenues).
A government may officially set the rate of exchange of its currency with that of other currencies— typically the US dollar. When it does, it is often pegged at an exchange rate that is artificially low— that is, below what would be the market value if it were a floating currency. Others in possession of the foreign currency, for example expatriate workers, will sell the foreign currency to buy local currency at higher exchange rates than they can get officially.
In situations of financial instability and inflation, citizens may substitute a foreign currency for the local currency. The U.S. dollar is viewed as a relatively stable and safe currency and is often used abroad as a second currency. At the present time, $340 billion dollars, roughly 37 percent of all U.S. currency is believed to be circulating abroad. The widespread substitution of U.S. currency for local currency is known as defacto dollarization, and has been observed in transition countries and in some Latin American countries. Some countries, such as Ecuador
, abandoned their local currency and now use US dollars, essentially for this reason, a process known as de jure dollarization. See also the example of the Ghanaian cedi
from the 1970s and 1980s.
If foreign currency is difficult or illegal for local citizens to acquire, they will pay a premium to acquire it. U.S. currency is viewed as a relatively stable store of value and since it does not leave a paper trail, it is also a convenient medium of exchange for both illegal transactions and for unreported income (tax evasion) both in the U.S and abroad.
Between the Republic of Ireland
and Northern Ireland
there has often been a black market in petrol and diesel.
The direction of smuggling can change depending on the variation of the taxes and the exchange rate
between the Euro
and Pound Sterling
; indeed sometimes diesel will be smuggled in one direction and petrol the other.
In some countries diesel fuel for agricultural vehicles or domestic use is taxed at a much lower rate than that for other vehicles. This is known as dyed fuel
, because a coloured dye is added so it can be detected if used in other vehicles (e.g. a red dye in the UK, a green dye in Ireland). Nevertheless, the saving is attractive enough to make a black market in agricultural diesel. In 2007 it was estimated that £350 million was not gained in potential revenue this way in the UK.
, the black market prospers. Black marketeers can reinvest profits in diverse legal or illegal activities, well beyond the original source of profit.
Some, for example in the marijuana-trade debate, argue for removing the underground markets by making illegal products legal. This would, in their view:
. States that are engaged in total war
or other large-scale, extended war
s must necessarily impose restrictions on home use of critical resources that are needed for the war effort, such as food
, gasoline
, rubber
, metal
, etc., typically through rationing
. In most cases, a black market develops to supply rationed goods at exorbitant prices. The rationing
and price controls enforced in many countries during World War II
encouraged widespread black market activity. One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened. Another in Britain was supplies from the USA, intended only for use in USA army bases on British land, but leaked into the local native British black market.
During the Vietnam war
, soldiers would spend Military Payment Certificate
s on maid
service and sexual
entertainment, thus supporting their partners
and their families. If the Vietnamese civilian wanted something that was hard to get, he would buy it at double the price from one of the soldiers, who had a monthly ration card and thus had access to the military stores. The transactions ran through the on-base maids to the local populace. Although these activities were illegal, only flagrant or large-scale black-marketeers were prosecuted by the military.
is epidemic
al. India currently tops the list for illegal monies in the entire world with almost US$1,456 billion in Swiss banks (USD 1.4 trillion
approximately) in the form of unaccounted money. According to the data provided by the Swiss Banking Association, India has more black money than the rest of the world combined. Indian Swiss bank account assets are worth 13 times (1300%) the country’s national debt, and, if this black money is brought back to the country, India has the potential to become one of the richest countries in the world.
of alcohol during the 1920s in the United States. Many organized crime
syndicates took advantage of the lucrative opportunities in the resulting black market in banned alcohol
production and sale. Most people did not think drinking alcohol was particularly harmful nor that its buyers and sellers should be treated like common criminals
. So illegal speakeasies
prospered, and organizations such as the Mafia
grew tremendously more powerful through their black market activities distributing alcohol. This lasted until repeal of Prohibition.
Although Prohibition ended in 1933, there are still some parallels today with evasion of the drinking age of 21 in the United States, which is high compared to other industrialized countries and three years above the age of majority
in nearly all states. Like Prohibition, this law is widely (but more covertly) disobeyed as well. Though social sources of supply predominate for underage drinkers, some bars and stores knowingly serve and sell to those who are underage, and some may even make deals with local police. Many college towns especially have a vast network of fraternities and sororities (and others) that run what can be considered modern-day speakeasies in their houses, in which age is irrelevant. Since the substance in question, alcohol, is legal for those over 21, it can be considered more of a gray market than a black market.
in bars and restaurants. In these jurisdictions, smokeasies
arise which allow smoking despite the legal prohibition. In a sense the owner is not a black marketeer since he is not necessarily selling tobacco, but he profits by the sale of other goods on his premises (typically alcohol).
This phenomenon is very prevalent in many US state jurisdictions with smoking bans, including California
, Philadelphia, Utah
, Seattle
, Ohio
, and Washington, D.C.
.
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
in goods or services which operates outside the formal one(s) supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat" or the state jurisdiction "the black market in China".
It is distinct from the grey market
Grey market
A grey market or gray market also known as parallel market is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer...
, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market
White market
The white market, in libertarian economic theory, is the legal market for goods and services. It is distinct from the black market of illegally trafficked goods and the gray market, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended...
, the legal market for goods and services.
Worldwide, the underground economy is estimated to provide 1.8 billion jobs.
Background
The literature on the black market has avoided a common usage and has instead offered a plethora of appellations including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black. This profusion of vague labels attests to the confusion of a literature attempting to explore a largely unchartered area of economic activity.There is no single underground economy, there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified:
- the illegal economy
- the unreported economy
- the unrecorded economy
- the informal economy
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as drug trafficking, arms trafficking, and prostitution
Prostitution
Prostitution is the act or practice of providing sexual services to another person in return for payment. The person who receives payment for sexual services is called a prostitute and the person who receives such services is known by a multitude of terms, including a "john". Prostitution is one of...
.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported
economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a "tax gap" of $450–$500 billion.
The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts
National Income and Product Accounts
The National Income and Product Accounts are part of the national accounts of the United States. They are produced by the Bureau of Economic Analysis of the Department of Commerce...
) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist
Socialist economics
Socialist economics are the economic theories and practices of hypothetical and existing socialist economic systems.A socialist economy is based on public ownership or independent cooperative ownership of the means of production, wherein production is carried out to directly produce use-value,...
accounting system to UN standard national accounting
United Nations System of National Accounts
The United Nations System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953...
. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. But there is still little consensus concerning the size of the unreported economies of transition countries.
The "informal economy
Informal economy
The informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product , unlike the formal economy....
" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally. The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
, or included in any gross national product (GNP), unlike the formal economy. In developed countries
Developed country
A developed country is a country that has a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue...
the informal sector is characterized by unreported employment
Unreported employment
Unreported employment, often referred to colloquially as working or being paid under the table or cash-in-hand, is employment that is not reported as required by law to the appropriate local, state or provincial, or national government agency. This is often done by the employer or the employee in...
. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects. On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband
Contraband
The word contraband, reported in English since 1529, from Medieval French contrebande "a smuggling," denotes any item which, relating to its nature, is illegal to be possessed or sold....
is traded.
Pricing
Goods acquired illegally take one of two price levels:- They may be cheaper than legal market prices. The supplierFence (criminal)A fence is an individual who knowingly buys stolen property for later resale, sometimes in a legitimate market. The fence thus acts as a middleman between thieves and the eventual buyers of stolen goods who may or may not be aware that the goods are stolen. As a verb, the word describes the...
does not have to pay for production costs or taxes. This is usually the case in the underground economy. Criminals steal goods and sell them below the legal market price, but there is no receipt, guarantee, and so forth. - They may be more expensive than legal market prices. The product is difficult to acquire or produce, dangerous to handle or not easily available legally, if at all. If goods are illegal, such as some drugs, their prices can be vastly inflated over the costs of production.
Black markets can form part of border trade
Border trade
Border trade, in general, refers to the flow of goods and services across theinternational borders between jurisdictions. In this sense, it is a part of normal legal tradethat flows through standard export/import frameworks of nations...
near the borders of neighboring jurisdictions with little or no border control if there are substantially different tax rates, or where goods are legal on one side of the border but not on the other. Products that are commonly smuggled
Smuggling
Smuggling is the clandestine transportation of goods or persons, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.There are various motivations to smuggle...
like this include alcohol
Alcoholic beverage
An alcoholic beverage is a drink containing ethanol, commonly known as alcohol. Alcoholic beverages are divided into three general classes: beers, wines, and spirits. They are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption...
and tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
. However, not all border trade is illegal.
Consumer issues
| No government, no global nonprofit, no multinational enterprise can seriously claim to be able to replace the 1.8 billion jobs created by the economic underground. In truth, the best hope for growth in most emerging economies lies in the shadows. |
| —Global Bazaar, Scientific American Scientific American Scientific American is a popular science magazine. It is notable for its long history of presenting science monthly to an educated but not necessarily scientific public, through its careful attention to the clarity of its text as well as the quality of its specially commissioned color graphics... |
Even when the underground market offers lower prices, consumers still have an incentive to buy on the legal market when possible, because:
- They may prefer legal suppliers, as they are easier to contact and can be held accountable for faults;
- In some jurisdictions, customers may be charged with a criminal offense if they knowingly participate in the black economy, even as a consumer;
- They may feel in danger of being hurt while making the deal;
- They may have a moral dislike of black marketing;
- In some jurisdictions (such as EnglandEnglandEngland is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
and WalesWalesWales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...
), consumers in possession of stolen goods will have them taken away if they are traced, even if they did not know they were stolen. Though they themselves commit no offense, they are still left with no goods and no money back. This risk makes some averse to buying goods that they think may be from the underground market, even if in fact they are legitimate (for example, items sold at a car boot saleCar boot saleCar boot/trunk sales or boot/trunk fairs are a mainly British form of market in which private individuals come together to sell household and garden goods.The term refers to the selling of items from a car's boot or trunk...
).
However, in some situations, consumers can actually be in a better situation when using black market services, particularly when government regulations and monopolies hinder what would otherwise be a legitimate competitive service. For example:
- Unlicensed taxicabTaxicabA taxicab, also taxi or cab, is a type of vehicle for hire with a driver, used by a single passenger or small group of passengers, often for a non-shared ride. A taxicab conveys passengers between locations of their choice...
s. In BaltimoreBaltimoreBaltimore is the largest independent city in the United States and the largest city and cultural center of the US state of Maryland. The city is located in central Maryland along the tidal portion of the Patapsco River, an arm of the Chesapeake Bay. Baltimore is sometimes referred to as Baltimore...
, it has been reported that many consumers actively prefer illegal taxis, citing that they are more available, convenient, and priced fairly.
Traded goods and services
| Largest black markets | Estimated annual market value (Billion USD) |
|---|---|
| Total | 796 |
| Marijuana | 142 |
| Prostitution Prostitution Prostitution is the act or practice of providing sexual services to another person in return for payment. The person who receives payment for sexual services is called a prostitute and the person who receives such services is known by a multitude of terms, including a "john". Prostitution is one of... |
108 |
| Counterfeit technology products | 100 |
| Counterfeit pharmaceutical drugs | 75 |
| Prescription drugs | 73 |
| Cocaine | 70 |
| Opium Opium Opium is the dried latex obtained from the opium poppy . Opium contains up to 12% morphine, an alkaloid, which is frequently processed chemically to produce heroin for the illegal drug trade. The latex also includes codeine and non-narcotic alkaloids such as papaverine, thebaine and noscapine... and heroin |
65 |
| Web Video piracy | 60 |
| Software piracy | 53 |
| Cigarette smuggling | 50 |
In developed countries, some examples of underground economic activities include:
Transportation providers
Where taxicabs, buses, and other transportation providers are strictly regulated or monopolized by government, a black market typically flourishes to provide transportation to poorly served or overpriced communities. In the United States, some cities restrict entry to the taxicab market with a medallion system— that is, taxicabs must get a special license and display it on a medallion in the vehicle. This has led to a market in Carpooling/illegal taxicab operationIllegal taxicab operation
While most jurisdictions require taxicab operators to be licensed, many unlicensed cabs are in operation. Some of these are marked taxi vehicles , and others are personal vehicles used by an individual to offer unauthorized taxi-like services...
, although in most jurisdictions it is not illegal to sell the medallions. In Baltimore
Baltimore
Baltimore is the largest independent city in the United States and the largest city and cultural center of the US state of Maryland. The city is located in central Maryland along the tidal portion of the Patapsco River, an arm of the Chesapeake Bay. Baltimore is sometimes referred to as Baltimore...
, Maryland
Maryland
Maryland is a U.S. state located in the Mid Atlantic region of the United States, bordering Virginia, West Virginia, and the District of Columbia to its south and west; Pennsylvania to its north; and Delaware to its east...
, for example, it is not uncommon for private individuals to provide illegal taxicab service for city residents.
Illegal drugs
From the late 19th and early 20th centuries, many countries began to ban the keeping or using of some recreational drugs, such as the United States' war on drugsWar on Drugs
The War on Drugs is a campaign of prohibition and foreign military aid and military intervention being undertaken by the United States government, with the assistance of participating countries, intended to both define and reduce the illegal drug trade...
. Many people nonetheless continue to use illegal drugs, and a black market exists to supply them. Despite law enforcement efforts to intercept them, demand remains high, providing a large profit motive for organized criminal groups
Organized crime
Organized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
to keep drugs supplied. The United Nations has reported that the retail market value of illegal drugs is $321.6 billion USD.
Although law enforcement officers do capture a small proportion of the illegal drugs, the high and very stable demand for such drugs ensures that black market prices will simply rise in response to the decrease in supply—encouraging new distributors to enter the market. Many drug legalization activists draw parallels between the illegal drug trade and the Prohibition
Prohibition
Prohibition of alcohol, often referred to simply as prohibition, is the practice of prohibiting the manufacture, transportation, import, export, sale, and consumption of alcohol and alcoholic beverages. The term can also apply to the periods in the histories of the countries during which the...
of alcohol in the United States in the 1920s.
In the United Kingdom, it is not illegal to take drugs, but it is illegal to possess them. This can lead to the unintended consequence
Unintended consequence
In the social sciences, unintended consequences are outcomes that are not the outcomes intended by a purposeful action. The concept has long existed but was named and popularised in the 20th century by American sociologist Robert K. Merton...
that those in possession may swallow the evidence; once in the body they are committing no crime.
Prostitution
ProstitutionProstitution
Prostitution is the act or practice of providing sexual services to another person in return for payment. The person who receives payment for sexual services is called a prostitute and the person who receives such services is known by a multitude of terms, including a "john". Prostitution is one of...
is illegal or highly regulated in most countries across the world. These places form a classic study of the underground economy, because of consistent high demand from customers, relatively high pay, but labor intensive and low skilled work, which attracts a continual supply of workers. While prostitution exists in almost every country, studies show that it tends to flourish more in poorer countries, and in areas with large numbers of unattached men, such as around military bases.
Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codewords
Code word (figure of speech)
A code word is a word or a phrase designed to convey a predetermined meaning to a receptive audience, while remaining inconspicuous to the uninitiated.- Medical :...
and subtle gestures. In countries such as the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
, where prostitution is legal but regulated, illegal prostitutes exist whose services are offered cheaper without regard for the legal requirements or procedures— health checks, standards of accommodation, and so on.
In other countries such as Nicaragua
Nicaragua
Nicaragua is the largest country in the Central American American isthmus, bordered by Honduras to the north and Costa Rica to the south. The country is situated between 11 and 14 degrees north of the Equator in the Northern Hemisphere, which places it entirely within the tropics. The Pacific Ocean...
where legal prostitution is regulated, hotels may require both parties to identify themselves, to prevent the rise of child prostitution.
Weaponry
The legislatures of many countries forbid or restrict the personal ownershipOwnership
Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...
of weapon
Weapon
A weapon, arm, or armament is a tool or instrument used with the aim of causing damage or harm to living beings or artificial structures or systems...
s. These restrictions can range from small knives
Combat knife
A combat knife is a fighting knife designed solely for military use and primarily intended for hand-to-hand or close combat fighting.Since the end of trench warfare, most military combat knives have been secondarily designed for utility use in addition to their original role as close-quarter combat...
to firearms, either altogether or by classification (e.g. caliber
Caliber
In guns including firearms, caliber or calibre is the approximate internal diameter of the barrel in relation to the diameter of the projectile used in it....
, automation, etc.), and explosives. The black market supplies the demands for weaponry that can not be obtained legally, or may only be obtained legally after obtaining permits and paying fees. This may be by smuggling
Smuggling
Smuggling is the clandestine transportation of goods or persons, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.There are various motivations to smuggle...
the arms from countries where they were bought legally or stolen, or by stealing from arms manufacturers within the country itself, using insider
Insider
An insider is a member of any group of people of limited number and generally restricted access. The term is used in the context of secret, privileged, hidden or otherwise esoteric information or knowledge: an insider is a "member of the gang" and as such knows things only people in the gang...
s. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmith
Gunsmith
A gunsmith is a person who repairs, modifies, designs, or builds firearms. This occupation is different from an armorer. The armorer primarily maintains weapons and limited repairs involving parts replacement and possibly work involving accurization...
ing their own firearms. Those who may buy this way include criminals, those who wish to use them for illegal activities, and collectors.
In England and Wales some kinds of arms designed for shooting animals may be kept at home but must be registered with the local police force and kept in a locked cabinet. Some people buy on the black market if they would not meet the conditions for registration— for example if they have a record of committing a criminal offense, however minor.
In some jurisdictions, collectors may legally keep antique weapons. Sometimes they must be disarmed (incapable of being fired); but sometimes they are so ineffective by modern standards that they are allowed to be kept intact. For example a blunderbuss
Blunderbuss
The blunderbuss is a muzzle-loading firearm with a short, large caliber barrel, which is flared at the muzzle and frequently throughout the entire bore, and used with shot and other projectiles of relevant quantity and/or caliber. The blunderbuss could be considered to be an early form of shotgun,...
or cannon
Cannon
A cannon is any piece of artillery that uses gunpowder or other usually explosive-based propellents to launch a projectile. Cannon vary in caliber, range, mobility, rate of fire, angle of fire, and firepower; different forms of cannon combine and balance these attributes in varying degrees,...
is hardly likely to be used for a drive-by shooting
Drive-by shooting
A drive-by shooting is a form of hit-and-run tactic, a personal attack carried out by an individual or individuals from a moving or momentarily stopped vehicle without use of headlights to avoid being noticed. It often results in bystanders being shot instead of, or as well as, the intended target...
.
Alcohol and tobacco
It has been reported that smuggling one truckload of cigarettes from a low-tax US stateU.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
to a high-tax state can lead to a profit of up to $2 million. The low-tax states are generally the major tobacco producers, and have come under enormous criticism for their reluctance to increase taxes. North Carolina
North Carolina
North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte...
eventually agreed to raise its taxes from 5 cents to 35 cents per pack of 20 cigarettes, although this remains far below the national average. But South Carolina
South Carolina
South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence...
has so far refused to follow suit and raise taxes from seven cents per pack (the lowest in the USA).
In the UK it has been reported that "27% of
cigarettes and 68% of roll your own tobacco [is] purchased on the black market".
Booze cruise
In the UK, the booze cruise — a day-trip ferry to continental Europe simply to get alcohol and tobacco at lower tax rates— is still very popular. Its popularity varies on the Euro to Sterling exchange rate, and the relative tax rates between the different countries. Some people do not even bother to get off the boat; they buy their stock on board and sail straight back. Ferry companies offer extremely low fares, in the expectation that they will make the money up in sales on the boat. The same system exists for boats between LiverpoolLiverpool
Liverpool is a city and metropolitan borough of Merseyside, England, along the eastern side of the Mersey Estuary. It was founded as a borough in 1207 and was granted city status in 1880...
and Dublin, Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
.
Providing the goods are for personal consumption, "booze cruises" are entirely legal. Because there are no customs restrictions between European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
countries it is not strictly a black market, but closer to a grey market
Grey market
A grey market or gray market also known as parallel market is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer...
. The UK and Ireland are both European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
members and are both in a Common Travel Area
Common Travel Area
The Common Travel Area is a passport-free zone that comprises the islands of Ireland, Great Britain, the Isle of Man and the Channel Islands. The area's internal borders are subject to minimal or non-existent border controls and can normally be crossed by Irish and British citizens with only...
so there are neither customs nor passport checks between the two countries.
There is however a thriving black market in goods, rubbing tobacco in particular, which have avoided the payment of excise duty. This is partly supplied by "booze cruises".
Copyrighted media
Street vendors in countries where there is scant enforcement of copyright law, particularly in Asia and Latin America, often sell deeply discounted copies of filmFilm
A film, also called a movie or motion picture, is a series of still or moving images. It is produced by recording photographic images with cameras, or by creating images using animation techniques or visual effects...
s, music CDs, and computer software such as video games, sometimes even before the official release of the title. A determined counterfeiter with a few hundred dollars can make copies that are digitally identical to an original and suffer no loss in quality; innovations in consumer DVD
DVD
A DVD is an optical disc storage media format, invented and developed by Philips, Sony, Toshiba, and Panasonic in 1995. DVDs offer higher storage capacity than Compact Discs while having the same dimensions....
and CD writers and the widespread availability of cracks
Software cracking
Software cracking is the modification of software to remove or disable features which are considered undesirable by the person cracking the software, usually related to protection methods: copy protection, trial/demo version, serial number, hardware key, date checks, CD check or software annoyances...
on the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
for most forms of copy protection
Copy protection
Copy protection, also known as content protection, copy obstruction, copy prevention and copy restriction, refer to techniques used for preventing the reproduction of software, films, music, and other media, usually for copyright reasons.- Terminology :Media corporations have always used the term...
technology make this cheap and easy to do.
This has proved very difficult for copyright holders to combat through the law courts, because the operations are distributed and widespread— there is no "Mr. Big". Since digital information can be duplicated repeatedly with no loss of quality, and distributed electronically at little to no cost, the effective underground market value of media is zero, differentiating it from nearly all other forms of underground economic activity. The issue is compounded by widespread indifference to enforcing copyright law, both with governments and the public at large. To steal a car is seen as a crime in most people's eyes, but to obtain illicit copies of music or a game is not.
Yet, the preceding comparison, although common, is not truly analogous. Automobile theft results in an item being removed from the owner with the ownership transferred to a second party. Media piracy is a crime of duplication, with no physical property being stolen. Copyright infringement law goes as far as to deem illegal "mix-tapes" and other such material copied to tape or disk. Copyright holders typically attest the act of theft to be in the profits forgone to the pirates. However, this makes the unsubstantiated assumption that the pirates would have bought the copyrighted material if it had not been available through file sharing
File sharing
File sharing is the practice of distributing or providing access to digitally stored information, such as computer programs, multimedia , documents, or electronic books. It may be implemented through a variety of ways...
or other means. Many artists and film producers have accepted the role of piracy in media distribution. The spread of material through file sharing is a major source of publicity for artists and has been shown to build fan bases that may be more inclined to see the performer live (live performances make up the bulk of successful artists' revenues).
Currency
Money itself is traded on the black market. This may happen for one or more of several reasons:- The government sets ("pegs") the local currency at some arbitrary level to another currency that does not reflect its true market value.
- A government makes it difficult or illegal for its citizens to own much or any foreign currency.
- The government taxes exchanging the local currency with other currencies, either in one direction or both (e.g. foreigners are taxed to buy local currency, or residents are taxed to buy foreign currency)
- The currency is counterfeitCounterfeit moneyCounterfeit money is currency that is produced without the legal sanction of the state or government to resemble some official form of currency closely enough that it may be confused for genuine currency. Producing or using counterfeit money is a form of fraud or forgery. Counterfeiting is probably...
. - The currency has been acquired illegally and need to be launderedMoney launderingMoney laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
before the money can be used.
A government may officially set the rate of exchange of its currency with that of other currencies— typically the US dollar. When it does, it is often pegged at an exchange rate that is artificially low— that is, below what would be the market value if it were a floating currency. Others in possession of the foreign currency, for example expatriate workers, will sell the foreign currency to buy local currency at higher exchange rates than they can get officially.
In situations of financial instability and inflation, citizens may substitute a foreign currency for the local currency. The U.S. dollar is viewed as a relatively stable and safe currency and is often used abroad as a second currency. At the present time, $340 billion dollars, roughly 37 percent of all U.S. currency is believed to be circulating abroad. The widespread substitution of U.S. currency for local currency is known as defacto dollarization, and has been observed in transition countries and in some Latin American countries. Some countries, such as Ecuador
Ecuador
Ecuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
, abandoned their local currency and now use US dollars, essentially for this reason, a process known as de jure dollarization. See also the example of the Ghanaian cedi
Ghanaian cedi
The Ghana Cedi is the unit of currency of Ghana. The word "cedi" is derived from the Akan word for cowry shell. The Ghana cedi was introduced on 3 July 2007 and is equal to 10,000 old cedis...
from the 1970s and 1980s.
If foreign currency is difficult or illegal for local citizens to acquire, they will pay a premium to acquire it. U.S. currency is viewed as a relatively stable store of value and since it does not leave a paper trail, it is also a convenient medium of exchange for both illegal transactions and for unreported income (tax evasion) both in the U.S and abroad.
Fuel
In the EU it is not illegal for a person or business to buy fuel in one EU state for their own use in another, but as with other goods the tax will generally be payable by the final customer at the physical place of making the purchase.Between the Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
and Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
there has often been a black market in petrol and diesel.
The direction of smuggling can change depending on the variation of the taxes and the exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
between the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
and Pound Sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
; indeed sometimes diesel will be smuggled in one direction and petrol the other.
In some countries diesel fuel for agricultural vehicles or domestic use is taxed at a much lower rate than that for other vehicles. This is known as dyed fuel
Fuel dyes
Fuel dyes are dyes added to fuels, as in some countries it is required by law to dye a low-tax fuel to deter its use in applications intended for higher-taxed ones...
, because a coloured dye is added so it can be detected if used in other vehicles (e.g. a red dye in the UK, a green dye in Ireland). Nevertheless, the saving is attractive enough to make a black market in agricultural diesel. In 2007 it was estimated that £350 million was not gained in potential revenue this way in the UK.
Appearance and disappearance
If an economic good is illegal but not seen by many in society as particularly harmful, such as alcohol under prohibition in the United StatesProhibition in the United States
Prohibition in the United States was a national ban on the sale, manufacture, and transportation of alcohol, in place from 1920 to 1933. The ban was mandated by the Eighteenth Amendment to the Constitution, and the Volstead Act set down the rules for enforcing the ban, as well as defining which...
, the black market prospers. Black marketeers can reinvest profits in diverse legal or illegal activities, well beyond the original source of profit.
Some, for example in the marijuana-trade debate, argue for removing the underground markets by making illegal products legal. This would, in their view:
- decrease the illegal cashflow, thus making the performance of other, potentially more harmful, activities financially harder
- allow quality and safety controls on the traded goods, thus reducing harm to consumers
- let the goods be taxed, providing a source of revenue
- free up court time and prison space and save taxpayer money.
Wars
Black markets flourish in most countries during wartimeWartime
The term wartime could refer to:* Wartime, Saskatchewan, a small community in Saskatchewan, Canada.* Wartime Station, Saskatchewan, a small community in Saskatchewan, Canada.* A formal state of war, as opposed to peacetime...
. States that are engaged in total war
Total war
Total war is a war in which a belligerent engages in the complete mobilization of fully available resources and population.In the mid-19th century, "total war" was identified by scholars as a separate class of warfare...
or other large-scale, extended war
War
War is a state of organized, armed, and often prolonged conflict carried on between states, nations, or other parties typified by extreme aggression, social disruption, and usually high mortality. War should be understood as an actual, intentional and widespread armed conflict between political...
s must necessarily impose restrictions on home use of critical resources that are needed for the war effort, such as food
Food
Food is any substance consumed to provide nutritional support for the body. It is usually of plant or animal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals...
, gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
, metal
Metal
A metal , is an element, compound, or alloy that is a good conductor of both electricity and heat. Metals are usually malleable and shiny, that is they reflect most of incident light...
, etc., typically through rationing
Rationing
Rationing is the controlled distribution of scarce resources, goods, or services. Rationing controls the size of the ration, one's allotted portion of the resources being distributed on a particular day or at a particular time.- In economics :...
. In most cases, a black market develops to supply rationed goods at exorbitant prices. The rationing
Rationing
Rationing is the controlled distribution of scarce resources, goods, or services. Rationing controls the size of the ration, one's allotted portion of the resources being distributed on a particular day or at a particular time.- In economics :...
and price controls enforced in many countries during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
encouraged widespread black market activity. One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened. Another in Britain was supplies from the USA, intended only for use in USA army bases on British land, but leaked into the local native British black market.
During the Vietnam war
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...
, soldiers would spend Military Payment Certificate
Military Payment Certificate
Military Payment Certificates, or MPC, was a form of currency used to pay U.S. military personnel in certain foreign countries. It was used in one area or another from a few months after the end of World War II until a few months after the end of U.S. participation in the Vietnam War -- from 1946...
s on maid
Maid
A maidservant or in current usage housemaid or maid is a female employed in domestic service.-Description:Once part of an elaborate hierarchy in great houses, today a single maid may be the only domestic worker that upper and even middle-income households can afford, as was historically the case...
service and sexual
Human sexuality
Human sexuality is the awareness of gender differences, and the capacity to have erotic experiences and responses. Human sexuality can also be described as the way someone is sexually attracted to another person whether it is to opposite sexes , to the same sex , to either sexes , or not being...
entertainment, thus supporting their partners
Sexual partner
Sexual partners are people who engage in sexual activity together. The sexual partners can be of any gender or sexual orientation. The sexual partners may be in a committed relationship, either on an exclusive basis or not, or engage in the sexual activity on a casual basis...
and their families. If the Vietnamese civilian wanted something that was hard to get, he would buy it at double the price from one of the soldiers, who had a monthly ration card and thus had access to the military stores. The transactions ran through the on-base maids to the local populace. Although these activities were illegal, only flagrant or large-scale black-marketeers were prosecuted by the military.
Indian black-money
The black money market situation in IndiaIndia
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
is epidemic
Epidemic
In epidemiology, an epidemic , occurs when new cases of a certain disease, in a given human population, and during a given period, substantially exceed what is expected based on recent experience...
al. India currently tops the list for illegal monies in the entire world with almost US$1,456 billion in Swiss banks (USD 1.4 trillion
Trillion
-Numbers:Either of the two numbers :* 1,000,000,000,000 for all short scale countries...
approximately) in the form of unaccounted money. According to the data provided by the Swiss Banking Association, India has more black money than the rest of the world combined. Indian Swiss bank account assets are worth 13 times (1300%) the country’s national debt, and, if this black money is brought back to the country, India has the potential to become one of the richest countries in the world.
Alcohol
A classic example of creating a black market is the ProhibitionProhibition
Prohibition of alcohol, often referred to simply as prohibition, is the practice of prohibiting the manufacture, transportation, import, export, sale, and consumption of alcohol and alcoholic beverages. The term can also apply to the periods in the histories of the countries during which the...
of alcohol during the 1920s in the United States. Many organized crime
Organized crime
Organized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
syndicates took advantage of the lucrative opportunities in the resulting black market in banned alcohol
Alcoholic beverage
An alcoholic beverage is a drink containing ethanol, commonly known as alcohol. Alcoholic beverages are divided into three general classes: beers, wines, and spirits. They are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption...
production and sale. Most people did not think drinking alcohol was particularly harmful nor that its buyers and sellers should be treated like common criminals
Crime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...
. So illegal speakeasies
Speakeasy
A speakeasy, also called a blind pig or blind tiger, is an establishment that illegally sells alcoholic beverages. Such establishments came into prominence in the United States during the period known as Prohibition...
prospered, and organizations such as the Mafia
Mafia
The Mafia is a criminal syndicate that emerged in the mid-nineteenth century in Sicily, Italy. It is a loose association of criminal groups that share a common organizational structure and code of conduct, and whose common enterprise is protection racketeering...
grew tremendously more powerful through their black market activities distributing alcohol. This lasted until repeal of Prohibition.
Although Prohibition ended in 1933, there are still some parallels today with evasion of the drinking age of 21 in the United States, which is high compared to other industrialized countries and three years above the age of majority
Age of majority
The age of majority is the threshold of adulthood as it is conceptualized in law. It is the chronological moment when minors cease to legally be considered children and assume control over their persons, actions, and decisions, thereby terminating the legal control and legal responsibilities of...
in nearly all states. Like Prohibition, this law is widely (but more covertly) disobeyed as well. Though social sources of supply predominate for underage drinkers, some bars and stores knowingly serve and sell to those who are underage, and some may even make deals with local police. Many college towns especially have a vast network of fraternities and sororities (and others) that run what can be considered modern-day speakeasies in their houses, in which age is irrelevant. Since the substance in question, alcohol, is legal for those over 21, it can be considered more of a gray market than a black market.
Smoking
This effect is seen similarly today, when jurisdictions pass bans on smokingSmoking ban
Smoking bans are public policies, including criminal laws and occupational safety and health regulations, which prohibit tobacco smoking in workplaces and/or other public spaces...
in bars and restaurants. In these jurisdictions, smokeasies
Smokeasy
A smokeasy is a business, especially a barroom, that allows smoking despite a smoking ban enacted as a criminal law or an occupational safety and health regulation. The term is also used to describe locations and events promoted by tobacco companies to avoid or evade bans on smoking...
arise which allow smoking despite the legal prohibition. In a sense the owner is not a black marketeer since he is not necessarily selling tobacco, but he profits by the sale of other goods on his premises (typically alcohol).
This phenomenon is very prevalent in many US state jurisdictions with smoking bans, including California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
, Philadelphia, Utah
Utah
Utah is a state in the Western United States. It was the 45th state to join the Union, on January 4, 1896. Approximately 80% of Utah's 2,763,885 people live along the Wasatch Front, centering on Salt Lake City. This leaves vast expanses of the state nearly uninhabited, making the population the...
, Seattle
Seattle, Washington
Seattle is the county seat of King County, Washington. With 608,660 residents as of the 2010 Census, Seattle is the largest city in the Northwestern United States. The Seattle metropolitan area of about 3.4 million inhabitants is the 15th largest metropolitan area in the country...
, Ohio
Ohio
Ohio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
, and Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
.
See also
- AgorismAgorismAgorism is a political philosophy founded by Samuel Edward Konkin III and developed with contributions by J. Neil Schulman that holds as its ultimate goal bringing about a society in which all "relations between people are voluntary exchanges – a free market." The term comes from the Greek...
- Counter-economicsCounter-economicsCounter-economics is a term originally used by Samuel Edward Konkin III and J. Neil Schulman, libertarian activists and theorists. Konkin defined it as "the study and/or practice of all peaceful human action which is forbidden by the State." The term is short for "counter-establishment economics"...
- Informal economyInformal economyThe informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product , unlike the formal economy....
- Grey marketGrey marketA grey market or gray market also known as parallel market is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer...
- Business ethicsBusiness ethicsBusiness ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...
- Wide boyWide boyWide boy is a British term for a man who lives by his wits, wheeling and dealing. According to the Oxford English Dictionary it is synonymous with spiv. The word 'wide' is in this sense means wide-awake or sharp-witted...
- Household electricity approachHousehold electricity approachThe Household Electricity Approach to measuring the size of the underground economy or black market of a country exploits the presumed relationship between household electrical consumption and a country's GDP. It assumes that undeclared economic activity still needs to use resources, such as...
- Unreported employmentUnreported employmentUnreported employment, often referred to colloquially as working or being paid under the table or cash-in-hand, is employment that is not reported as required by law to the appropriate local, state or provincial, or national government agency. This is often done by the employer or the employee in...
External links
- Havocscope Black Markets - Database and statistics on black market activities
- Official March 2000 French Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe by French MPs Vincent PeillonVincent PeillonVincent Benoît Camille Peillon is a French politician and Member of the European Parliament for the north-west of France...
and Arnaud MontebourgArnaud MontebourgArnaud Montebourg is a French politician, and a deputy of the fifth district of Saône-et-Loire to the French National Assembly for the Socialist Party. He has also been elected president of the local assembly of Saône et Loire after local elections in 2008...
, third section on "Luxembourg's political dependency toward the financial sector: the Clearstream affair" (pp. 83–111 on PDF version) - The Underground Economy from National Center for Policy Analysis (1998)
- Going Underground: America's Shadow Economy by Jim McTague (2005)
- The Underground Economy: Global Evidence of Its Size and Impact (1997)
- The Effects of a Black Market Using Supply and Demand
- Economist, 11 August 2010, A lengthening shadow: Shadow economies have grown since the financial crisis began