We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

Black markets are the most underutilized tool for alleviating poverty. These underground markets are often portrayed in a negative light by governments because they are untaxed, unregulated, and therefore are a hazard to public safety.

A more sinister description often involves black markets as a cesspool of organized crime, overflowing with drugs and weapons, and a source of income for terrorist groups.

Such portrayals are completely dubious. Ninty percent of India’s workforce is employed in the informal sector, which includes everything from agriculture to small scale manufacturing and services

Jairaj Devadiga

Tweet about this on TwitterShare on FacebookShare on LinkedInShare on TumblrShare on RedditShare on Google+Share on VKEmail this to someone

28 comments to Samizdata quote of the day

  • Obviously, the negative portrayal of black markets is due to racism.

  • rxc

    But it doesn’t count, because it is isn’t counted (i.e., reported to the government and taxed). Ergo, it doesn’t exist, and all those people living in the black aconomy are poor and suffering.

    I used to know people who lived like this. Cash for everything. They never wanted for anything.

  • Alisa

    A more sinister description often involves black markets as a cesspool of organized crime, overflowing with drugs and weapons, and a source of income for terrorist groups.

    Such portrayals are completely dubious.

    They are often far from dubious, but it is governments forcing certain products into the black markets that creates these problems.

  • lucklucky

    https://danieljmitchell.wordpress.com/2017/09/06/indias-disastrous-war-against-cash-encouraged-by-american-taxpayers/

    …speculation has raged over who thought up the policy, with the debate getting more divisive last week as a slew of data showed demonetization contributed to a growth slump without meeting its targets. …the cash ban devastated small businesses. More than 1.5 million jobs were said to be lost and newspapers reported deaths linked to the decision.

  • Alisa

    Yep, India is a mess. Jayant Bhandari has a long series on India in general and its economy in particular. He seems a bit too pessimistic when it comes to his home country (and other non-Western countries and cultures, come to that), but his articles are packed with information and analysis normally not seen in the MSM.

  • lucklucky

    Thanks for the link Alisa, added.

  • Alisa

    You’re welcome.

  • Julie near Chicago

    Yes. The first time I saw the “Black Market” episode of the BBC’s 1990 series, in which everyone on both sides deplored the black markets, I thought, “Good grief! They should be grateful! The black markets are what is making life physically possible at all!” [For a good many people, that is.] (Of course, the show stressed dodgy characters purveying things like fancy cheese and smoked salmon, but that’s not the point. Anyway, I adore real German Tilsit and also lox. *g*)

    And, yes, to the extent that things are unaffordable due to either high taxes or, as in 1990, extreme rationing with what one could get legally dependent on one’s standing with the Public Control Department, black-markets will be attractive to those who are ethically challenged. (Has anyone heard of the Mafia/Mob/Outfit? — ‘S not only fiction!)

    Of course, selling counterfeit or stolen Rolexes on the street corner would also be part of the black market, even if there were no taxes on them; hence a criminal activity engage in by crooks. And so is stealing cigarettes from lower-tax jurisdictions for sale in New York; OTOH, it would presumably be mostly a non-issue were the gaspers not so taxed. (Although common crime will always be with us.)

  • Alisa

    Of course, selling counterfeit or stolen Rolexes on the street corner would also be part of the black market

    Ha, the Chinese have internet too, you know 😀

  • Julie near Chicago

    Alisa, I am shocked!

  • Alisa

    I know – me too!

  • Julie near Chicago

    LOL — :>))!!

  • bobby b

    “Black market” used to mean the selling of prohibited products – stolen goods, pot, illegal booze, etc. Then, as state tax schemes became more varied, it expanded to include transporting legal goods from low-tax states to high-tax states. I remember, long ago, how we used to drive over the border, buy cartons of cigarettes, bring them back home, and sell them for less than the stores here had to charge but more than we paid for them. You could make a week’s wages in a trip if you were brave.

    Then the definition expanded to include unreported cash income.

    I’d guess that, if you include this last item, the American “black market” makes up close to 15-20% of American income. If you include untaxed barter income, it’s even higher.

  • Julie near Chicago

    About “1990’s” black market: It was specifically providing food in that episode. In an earlier episode, if one lost the status of “citizen,” one lost all ability to get food legally, save maybe from private charity–not sure about that. Hence, the B.M. saved people’s lives. One would think the Rulers who Care About the People would cheer.

    I wouldn’t be surprised, bobby. Although you’re supposed to pay income tax on barter profits.

    Maybe I should clarify. I was talking specifically about stealing cigarettes to sell on the Black Market — hijacking trucks and so on, or on a puny sale even shoplifting them to sell more cheaply.

    It’s not the easiest thing to phrase clearly, because so much that shouldn’t be is, or at least is called, a crime. You (i.e. “one”) can call it a “crime” to leave barter “income” off your IRS return (and in strict logicality you can argue that it should be considered illegal and punishable — and you can also argue that it shouldn’t, since it’s not financial income; and then you get into the thorny area of distinction between goods and services provided in straight-up trade, vs. as quid-pro-quo, vs. those given as gifts … yadayadayada) but just because you call it a “crime” doesn’t necessarily make it ethically wrong.

    .

    bobby, your pick-up-and-delivery career reminds me that the same thing goes on in the thriving trade (I assume still thriving) in fireworks which are bought legally in Indiana and then brought across the border to sell in Illinois where they are illegal. (I do think sparklers are legal for private purchase here.)

    Same thing with Young People going to a neighboring state to buy booze legally, then returning to the home state to sell it to other Young Persons who are underage for consumption there, or even just to consume themselves or to share. Of course in my Home State at least, convenience stores put up signs all over warning of the dire punishments that will befall anyone who buys ciggies in order to give them to minors.

    But it would be easy to go completely O/T from here, so I shall desist at this point.

  • Laird

    “the only villain in this story is government”

    That can pretty much be said about every government, everywhere.

    Bobby b, I hope the percentage is higher than that, and that it keeps growing.

    And I note your first sentence: “prohibited” does not necessarily mean “bad” (indeed, it rather rarely does). Stolen goods, sure. But pot, “illegal” booze, cigarettes, unpasteurized milk, etc.: all are malum prohibitum, not malum in se. Smugglers evading import duties (or bans) have always been with us (indeed, they helped foment the American revolution), and I hope they always are until such taxes and prohibitions cease. Black markets provide essential goods and services, keep the economy flowing, and most importantly serve to provide at least some check on the excesses of government. They are to be celebrated.

  • bobby b

    “But pot, “illegal” booze, cigarettes, unpasteurized milk, etc.: all are malum prohibitum, not malum in se.”

    To us, sure. To current progressives, I doubt there’s a distinction remaining. The disobedience of a governmental directive – no matter what specific act you perform in doing so – is by itself malum in se.

    When government is your god, laws are your gospel. Pushing for smaller government is, to them, like telling God to cut it down to seven commandments.

  • Julie near Chicago

    Quoth bobby,

    “To current progressives, I doubt there’s a distinction remaining.”

    I think you’re exactly right. Exhibit A: The execrable Prof. Jed Rubenfeld, which (not “who”! 😡 ) shows why you should never ever let yourself nor anyone you hold dear get anywhere near Yale Law School. (Richard: Don’t be shy, tell us how you REALLY feel!)

    UT – .com/watch?v=k7rYKJYj308

    Just over 5 min.

  • Richard Thomas

    Have to wonder how many of those “hijacked” trucks are actually hijacked and how many are by prior arrangement.

  • NickM

    My Dad taught in Zambia in the early ’70s. He was part of the black market. He got gold out of Uganda for Asian friends (this was in the days of our chum Idi). He needed guts, a Ford and a carton of Marlboro to bribe the guards.

    In what way is that bad?

  • In what way is that bad?

    It’s bad in the way that its good. By which I mean that black markets are a behavioural response to the criminalisation of free trade. When taxes on goods are too high then you get smuggling (i.e. the free trade in goods to evade taxes), this acts as a limiter on state power to tax goods too heavily as the Laffer Curve demonstrates theoretically, black markets are practical illustrations of this.

    I may not like the criminals and other shady characters that operate black markets, but I like the state interference which created them even less.

  • john malpas

    In Britain during ww2 and afterwards it enabled ‘the well to do ‘ get what the proles couldn’t.

  • Paul Marks

    “Black Markets” are better than no markets at all – most certainly yes.

    But the idea that hole-in-the-wall operations (constantly under threat of being closed down, and in the hands of people who are likely to be criminal types) can transform society is wrong.

    There is a reason whey deregulation, for example what Ludwig Erhard did in Germany in 1948, is so important.

    In order to transform society (to really reduce poverty over time) production and trade must be legal – out in the open and on a large scale.

    Saying “well deregulation is not that important – as the Black Economy does these things anyway” is, therefore, wrong – horribly wrong.

  • Surellin

    Meanwhile, in Venezuela, Maduro has just capped prices on a list of essentials to prevent a black market. That sound you hear is my eyes blinking increduously. I think it was Milton Friedman who said that socialists don’t understand economics, because if they DID understand economics, they would no longer be socialists.

  • Watchman

    The issue with black markets is the lack of rule of law, and contract law at least is essential to allow commerce to work. Black markets are therefore a symptom of something being wrong in the economy (that something almost invariably being government) and a representation of the fact that a free market will still find a level for goods acceptable to sellers and buyers regardless. As Paul says though, they aren’t a driver for change unless they are somehow regulated (I can’t find an example off the top of my head, unless you want to argue for the United States in 1789 (rebellion is clearly a criminal act, even if justified), but I believe that some criminally-controlled markets have effective contract law in place, presumably as they depend on stability). Otherwise they are just a symptom.

    The real problem is that there are a limited number of roles that need to be performed by some authority, in particular regulation of dispute, and government has monopolised these and tied them into totally unrelated issues such as ‘social justice’ even when they allow a relatively free market.

  • Laird

    In The Mystery of Capital, Hernando de Soto discusses the importance of the rule of law, including enforceable contracts and especially the protection of property rights, in the development of a prosperous society. He is absolutely correct about that, and both Paul Marks and Watchman appear to concur. But I nonetheless disagree with the comments made by both of them that black markets aren’t “a driver for change”, and especially with Watchman’s requirement that they be “regulated”.

    To the contrary, black markets can provide the impetus for significant societal change. I could give numerous examples, but a few just in the US include the abolition of the 18th Amendment (alcohol prohibition); the spreading acceptance of marijuana use (first for medicinal purposes but eventually for recreational ones); and of course during colonial times widespread anger over (and evasion of) sumptuary taxes on such things as paper, tea and salt which formed an important part of the calls for revolution. Black markets are indeed “a symptom of something being wrong with the economy”, but they are much more than that. They also provide an outlet for people’s industry and creativity, a source of consumer goods of better quality (and frequently cheaper) than would otherwise be available, and serve as a focal point for societal dissatisfaction and, ultimately, change. There is a reason why black markets exist wherever and whenever governments have interfered too severely with the inherent human tendency to barter, and why such governments inevitably loosen their grip or fail. Black markets are not the whole of the reason, but neither are they an insignificant part of it.

    Watchman seems to believe that markets (black or otherwise) require “regulation”, which he apparently equates with government regulation. Nothing could be farther from the truth. The market itself provides the best (most effective and efficient) form of regulation: that imposed by customers who choose, or not, to buy the product on offer. By contrast, government regulation is invariably ineffective (lagging behind market shifts), driven by political factors, and a severe drag on the economy. Government regulation is the worst possible form, but unfortunately it is the only one most people can conceive of.

  • bobby b

    “The market itself provides the best (most effective and efficient) form of regulation . . .”

    The markets in cocaine and heroin are prime examples.

    These are both highly disciplined and regulated black markets. Unable to use the powers of the state to enforce compliance with contractual agreements, they self-regulate through the use arms and the fear of violence.

    And it works. Very few contracts are violated. It is a very efficient system.

    In rural America, the barter economy is in full swing, and it’s entirely self-regulating. If you break an agreement, you won’t be killed as in the drug trade, but you will lose access to the barter market. Given the tax rates, that can be a substantial loss.

    Government isn’t the only wielder of influence.

  • @Laird: – I Completely agree. Absolutely.

    @Bobby B: – I accept what you say at face value, but balk at justifying physical violence (or threat thereof) as a means of ensuring settlement.

  • bobby b

    John Galt
    September 13, 2017 at 3:52 am

    “I accept what you say at face value, but balk at justifying physical violence (or threat thereof) as a means of ensuring settlement.”

    What does government use to ensure compliance? If I drive too fast and ignore tickets, they send people out to arrest me at gunpoint. If I ignore city planning officials and build a nonapproved fence and then ignore their summonses, they send people out to arrest me at gunpoint. If I fail to pay my taxes, they send people out to arrest me at gunpoint. If I violate a contract and have a judgment entered against me and refuse to turn my property over to the deputies sent out to levy upon my assets, they send people out to arrest me at gunpoint. Why else would I obey them?

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>