Black market
A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is not compliant with an institutional set of rules. If the rule defines the set of goods and services whose production and distribution is prohibited or restricted by law, non-compliance with the rule constitutes a black-market trade since the transaction itself is illegal. Such transactions include the illegal drug trade, prostitution (where prohibited), illegal currency transactions, and human trafficking.[1] [2][3]
"Black Market" and "Black money" redirect here. For other uses, see Black Market (disambiguation) and Black money (disambiguation).
Participants try to hide their illegal behavior from the government or regulatory authority.[4] Cash is the preferred medium of exchange in illegal transactions, since cash transactions are less easily traced.[5] Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or evade price controls or rationing. Typically, the totality of such activity is referred to with the definite article, e.g., "the black market in bush meat".
The black market is distinct from the grey market, in which commodities are distributed through channels that, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market, in which trade is legal and official.
Black money is the proceeds of an illegal transaction, on which income and other taxes have not been paid, and which can only be legitimised by some form of money laundering. Because of the clandestine nature of the black economy, it is not possible to determine its size and scope.[6]
Goods and services acquired illegally and/or transacted for in an illegal manner may exchange above or below the price of legal market transactions:
Even when the underground market offers lower prices, consumers may still buy on the legal market when possible, because:
However, in some situations, consumers may conclude that they are better off using black market services, particularly when government regulations hinder what would otherwise be a legitimate competitive service. For example, in Baltimore, many consumers actively prefer illegal taxi cabs, citing that they are more available, convenient, and fairly priced.[17]
Causes[edit]
Wars[edit]
Black markets flourish during wartime. States engaged in total war or other large-scale, extended wars often impose restrictions on use of critical resources that are needed for the war effort, such as food, gasoline, rubber, metal, etc., typically through rationing. A black market then 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.[57] One source of black-market meat under wartime rationing was farmers declaring fewer domestic animal births to the Ministry of Food than had actually happened. Another in Britain was supplies from the U.S., intended only for use on U.S. army bases on British land, but leaked into the local native British black market.
For example, in the Parliament of the United Kingdom on February 17, 1945,[58] members said that "the whole turkey production of East Anglia had gone to the black market" and "prosecutions [for black-marketing] were like trying to stop a leak in a battleship", and it was said that official prices of such foods were set so low that their producers often sold their produce on the black market for higher prices; one such route (seen to operate at the market at Diss, Norfolk) was to sell live poultry to members of the public; each purchaser would sign a form promising that he was buying the birds to breed from, but then take them home for eating.
During the Vietnam war, American soldiers would spend Military Payment Certificates on maid service and sexual entertainment. Also if a 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.
Laws and regulations[edit]
A classic example of new regulation creating a black market is the prohibition of alcohol. When such a law disappears, so does the black market. Sin taxes — taxes levied on harmfully deemed products such as alcohol and tobacco — may increase the black market supply.[59] One argument for legalizing marijuana is the elimination of the black market, and taxes from that economy becoming available for the government.