Human ingenuity is as old as humankind itself but that ingenuity doesn't
always respect legal or ethical bounds. As long as humans have participated in
any sort of commerce, some have sought to take advantage with little thought for
the consequences of others and others found ways to provide for their loved ones
by ignoring legal niceties in
the face of hard facts.
The black market is the home of all types of commerce that happen outside the
bounds of the law and it's not a physical space, although there are sometimes
physical marketplaces which deal primarily in illegal goods. The black market
goes by multiple
names, including: the underground market, the second economy and the
informal market. Despite being risky, it continues to thrive in the shadows outside of
legal economic activity.
15) How Do Black
Markets Work?
With the wide range of black markets operating in the world, there are many
methods by which black market activity is conducted. The most common factor is
that black market sales are kept clandestine for the protection of buyers and
sellers alike. In order to purchase black market goods, a buyer may have to have
the right contacts or know specific locations to find sellers. The difficulty of
finding such information also varies widely depending on the market and the
goods involved. Finding a seller for street drugs is relatively easy; finding a
seller of stolen rare art or collectibles may be considerably more difficult.
There are cases where black market activity happens more or less in the open.
Some stolen goods may find their ways to street fairs or open markets, for
example, where they are sold at steep discounts to buyers who have no idea they
are purchasing stolen goods. In other cases, black market goods may be sold
openly recognized by sellers and buyers alike if there is a sufficiently low
chance of interference from law enforcement officers. A noted modern example of
this is China, where there is a burgeoning market in counterfeit goods.
Map of China
Street Vendor in China
14) Who Works in the
Black Market?
There is a broad spectrum of all types of people working in black market commerce
and you can't just tell by looking at someone. The first
image many people have of black market workers are those obviously working
outside of the law, such as: drug dealers, prostitutes, human traffickers,
weapons dealers and mafia members. These types of individual do make up a large
segment and there are correspondingly large numbers of people involved. However, the stereotypical images of these people may be off
base. Someone who makes large sums of money dealing drugs may otherwise have a completely ordinary middle class
or lower class lifestyle to cover it up.
A Diverse Variety of People Work in the Black Market
It's also important to remember that black market activity encompasses a
broad range of activity and under the basic definition that black market commerce
is simply any commerce that happens outside strict legal bounds, many more
people are included. Some of them are the street vendors and unlicensed
small business owners of the developing world who are out to make a relatively
honest living. Some of them are people at the highest levels of corporations and
governments, conducting most of their business in an above board way but
dealing in shady activity on the side. Some wealthy individuals may conduct
their professional lives legally but engage in the black market as consumers,
purchasing prostitution or buying stolen rare art or antiquities.
13) What Products
Are Sold on the Black Market?
There is potentially no limit to the types of products that can be sold on the
black market. Some products and services come quickly to mind, such as: drugs, prostitution, slavery and assault weaponry. Rare animals have a
strong place in black market activity; either live animals captured
and sold as pets or animals which are killed in order to sell tusks, horns,
pelts as well as other parts at high prices. Recent years have also seen the growth
of a black market for human organs; either sourced from individuals living in
extreme poverty who offer their own body parts for sale or from people who are
kidnapped and assaulted for their organs.
Exotic Animals and Animal Products are Sold in the Black
Market
The black market is not all made up of morally questionable or condemned
goods, many ordinary products also find their way into black market sales. Any
product which is stolen and later sold becomes part of the black market. Goods
such as cigarettes and firearms often find their way into black market
transactions so that the seller can avoid paying the legal taxes as well as fees
that are required in the legal sale of these items. Also, payment for legal
services which are not reported on a person's taxes are technically black market
transactions. For a list of black market items, check out this article on the
top 15
unusual items sold in the black market.
People are Kidnapped and Sold into Slavery on the Black
Market
12) What Services
Are Sold on the Black Market?
Along with the black market for goods, services also make up a large segment of
the black market. The most prominent is prostitution but there are many others,
any service which is technically illegal falls into this category. Government officials accepting bribes and then giving
preferential treatment, is a black market service. Employees in legal service industries may offer extra
services or preferential treatment in exchange for additional compensation
outside of their reported fees.
Accepting Bribes is a Black Market Good
One of the most common forms of black market activity which could fall under
this category is tax evasion. Services are provided and compensation for those
services is received but the individuals providing the services fail to report
some or all of their compensation as legal income. Some transactions involve
both parties, such as: a job being paid for "under the table"
via cash so that
there is no record of money changing hands. Most of these types of services are
completely legal in themselves but intentionally keeping them out of the eye of
government regulation and taxation moves them into the realm of the black
market.
Tax Evasion is a Black Market Activity
11) Why Do Black
Markets Develop and Thrive?
There are two primary reasons why black markets develop and one of them is
government regulation. If a commodity is illegal but there is still a demand for
it, an illegal market will develop to meet the demand. As long as there is
profit to be made, whether legal or not, there will be someone willing to sell.
In states where regulation is especially heavy, black markets have all the more
impetus to grow and expand. Examples of this from recent history include the
economies of the Soviet Union and other communist states during the 20th
century. As heavy government regulation controlled what products were made and
sold, black markets grew to provide for food, clothing and other necessary
needs.
Government Regulations can Cause Black Markets to Appear
The other main cause of black market creation is a scarcity of goods, whether
legal or illegal. This tends to happen during times of war, famine and other
hardships that cause the normal production as well as sale of goods to be disrupted.
In the United States during World War II, many basic consumer goods were
rationed because so many resources were being absorbed in the war effort. Black
markets in food, gasoline and other scarce goods grew to meet the demand. All of
these goods were legal to purchase and own but purchasing them outside of the
legal rules made them black market goods.
Scarcity of Goods Creates a Demand for the Black Market
10) How Old Are
Black Markets?
Exploring the history of the black market is difficult for the same reason that
the modern black market is difficult to study and measure. Buyers and sellers both are keen to keep
their business out of the public eye. It seems safe to speculate that as long as
there have been laws controlling economic activity or gathering taxes based on
commerce, there have been people willing to circumvent those laws for profit. A
few ancient examples of black markets serve to demonstrate the age of such
activity.
China is home to one of the oldest cultures in the world and is no stranger
to black market economics today. During the Song Dynasty, which lasted from
960-1279 A.D., economic conditions fostered a large black market. A guild system
regulated skilled artisans and controlled the production of many kinds of goods.
Unfortunately, the guilds tended to restrict competition in order to maintain
high prices. As a result, a black market in goods flourished that provided items at
lower rates than the guilds.
Song Dynasty Town In Dali, Yunnan Province, China, One of
the Black Market Origins
In medieval Europe a severe famine from 1315 to 1317 led to
enormous food shortages. Governments of the day tried to control the grain
supply by outlawing exports and setting price controls. Inevitably, much of the
available grain ended up on the black market via theft and resale
or price gouging by black market speculators.
The Famine during Medieval Times in Europe Stimulated
a Black Market
9) How Do Black
Markets Compare to Legal Markets?
While black market commerce is nearly as old as legal commerce, the means by
which transactions take place is always changing. Just as legal business owners
take advantage of new technologies to make a profit, black market sellers are
equally ready to use technology to make their activities safer and more
profitable. In recent years, websites specializing in the sale of illegal goods
have appeared and made it easier for some to buy goods for their own use or
to resell to local buyers. Illegal drugs, including meth and LSD, are common
products for sale on such sites. Other goods on the digital block may include;
pornography, counterfeit products, guns, other weaponry and software products
used by hackers as well as online thieves.
Pornography is a Lucrative Business on the Black Market
In order to stay off the radar of law enforcement, such sites use
sophisticated web technologies and anonymous online currencies. Many of these
sites use Tor technology, which is a system for enabling a person's web use to
remain completely anonymous. Tor itself is legal and is used by many people who
simply want to maintain a high level of privacy on the Internet. However, it's also
used by black marketers and their customers to hide their transactions. Many black market sites use the online currency Bitcoin,
a legal anonymous currency system with no connections to banks or credit card
companies, because
money transfers through the Bitcoin system are impossible to track.
Software Products and Technology are used by Internet
Thieves on the Black Market
8) How Large Is the
Global Black Market Today?
It's very difficult to assess the size of the global black market or any
smaller segment of it. It's nearly impossible to gather hard data about how many
items are sold or how much money is made in black market sales due to black
market commerce taking place outside the bounds of the law and being kept
secret. Some researchers believe that the
size of the global black market rivals many legitimate markets, even beating the
size of many national economies. Billions of dollars are spent on black market
transactions every year, adding up to roughly 22 percent of global gross
domestic product (GDP). One estimate says that the global black market is worth
$10 trillion annually, quite a chunk of change for underground business.
Black Market Commerce is Immeasurable
7) What Are the
Legal Penalties for Black Market Activity?
The legal penalties associated with black market crime vary enormously depending
on the crime and country they are committed in. Such
penalties are generally set as part of the laws which either declare certain
goods to be illegal or which regulate them. The possible penalties range from
light fines to significant time in prison if convicted.
Participation in the Black Market can Lead to Prison Time
Even where there are serious penalties for black market crimes,
these laws are not always effectively enforced. In some cases, law enforcement
agencies lack the personnel or resources to pursue black market activity and other types of crime take precedence. In other cases, the market is simply
difficult to police even with strong law enforcement or other agencies to carry
the burden of investigation. There are cases where police agencies and
other regulators are themselves involved in the black market, where they
accept bribes or other incentives to avoid pursuing black market activity.
Hefty Fines can be a Consequence for being Caught in the
Black Market
6) How Does Law
Enforcement Fight Black Markets?
Preventing black markets from growing or stopping them once they are established
is a complicated problem. Since all markets are built
on basic economic forces of supply and demand, manipulating these forces so that
black market commerce is not attractive or profitable is one way to prevent
their growth. A contemporary example, is the black markets of Afghanistan which
depend on pilferage from U.S. army bases. With the upcoming withdrawal of U.S.
troops from Afghanistan, these markets will lose their source of goods and
either shrink considerably or disappear altogether.
The Law tries to Fight Against the Black Market
Afghanistan has a Large Black Market for U.S. Army Supplies
5) How Does a Global
Economy Influence Black Markets?
The global economy has a similar influence on the black market as it does on
legitimate markets. Before the development of the global economy, all markets
were size limited by geography. The size of markets rise or fall with supply and
demand, the fewer people involved naturally limit the size. This is true for
both legal markets and black markets. With the global economy comes new
opportunity for selling goods and services to more people, which means markets
can grow. Savvy business owners can make more profits by sourcing new goods
for their existing customers and finding new customers for their existing goods.
The Global Economy Plays a Role in the Black Market
The interplay of economic forces across greater geographic areas and the
higher level of interconnection between markets can influence black markets to
grow or shrink. Part of what makes some black markets profitable is the ability
to reach buyers in distant locations then provide the service or item they need
at a price they are willing to pay.
4) Who Gets Hurt by
Black Markets?
Some black markets have direct victims where the connection between the black
market activity and those who are hurt by it are clear. One of the most obvious
of these is the black market sex industry in which millions of individuals are
forced into prostitution. It's estimated that 2.5 million people are victims of
human trafficking at any time, the vast majority of them women and children but
men are affected as well.
Even when prostitution is legalized, it has been demonstrated that human
trafficking increases as few individuals choose to be prostitutes of their own
volition.
Human Trafficking Individuals are Victims of the Black
Market
In other black markets, the victims may be harder to see. There may not be a
clear link between the illegal commerce and individual people who are hurt. Such
markets may actually affect more people but in a less acute way.
Sometimes there isn't a clear link on who is a victim of
the Black Market
3) Is Anyone Helped
by Black Markets?
There are arguments to be made for the benefits of some black market activity,
especially commercial activity which trades in goods that are otherwise legal
and not morally objectionable. Journalist Robert Neuwirth, who has studied black
market activity around the globe, argues that off the books small businesses
account for trillions of dollars of economic activity and employ up to half of
the world's workforce. Such unlicensed, untaxed businesses are run by
entrepreneurs who are providing for their families and contributing to their
communities by creating jobs and providing needed goods as well as cash flow. Neuwirth
claims that in many developing countries black market activity, or "System
D" economies, is the only economic sector that is growing. The participants in
these markets don't see themselves as criminals but as self-reliant
hard-working businessmen and businesswomen.
Some Small Businesses Benefit from the Black Market
Underground Businesses Benefit from being part of the Black
Market
2) Can Black Markets
Be Prevented?
Black markets thrive under conditions where goods are scarce because there
simply aren't any goods to go around, government regulation
makes them available at the wrong price or tries to make them totally
unavailable by outlawing them. One of the best ways to prevent black markets
from developing is to remove the conditions of scarcity and regulation. In most
cases, this is more easily said than done.
Value and Price of Demandable Items can Help Combat the
Black Market
In general, the greater economic freedom there is in a state or society then the
less need or appeal there will be in a black market economy. If an individual
can produce and sell a product legally under a fair and sustainable level of
government regulation as well as taxation then they will have little incentive to sell
their goods on a black market. Likewise, if people can choose and purchase the
goods they want easily at fair market set prices then there will be much less demand
for black market goods.
Globalization may be able to help the situation where goods are simply
scarce. When there is scarcity in one region, other regions may be unaffected
and have plenty of goods available. If entrepreneurs in regions with an abundant
supply are able to sell their products legally and at a profit in areas where
there is scarcity, everyone benefits. This is also more easily said than done but the global marketplace is making it more possible all the time.
Globalization can help Prevent Black Markets
1) What Do People
Think about Black Markets?
Public opinion about black market commerce varies widely and depends on the
products as well as services being sold. This is compounded by the broad scope
of black market activity, where some types of commerce are seen as morally
offensive and others may be seen as
permissible or as "not hurting anyone". One notable example of mixed
public opinion regarding black markets happened during the period of American
Prohibition, where the manufacture and sale of alcohol was outlawed between 1920
to 1933. With a stroke of the pen, an activity which was seen as completely
ordinary and positive by many was made illegal against their wishes. An enormous
black market in smuggling and selling illegal alcohol sprang up, largely under
the control of organized crime. As these organizations fought for a greater
share of the market, violence and higher levels of corruption among government
as well as law enforcement agencies followed. Citizens were outraged by these types of
crime but not by the equally criminal, in the eyes of the law, activity of
simply buying alcohol. Many citizens were criminalized
for their normal patterns of behavior under Prohibition law, which a few scant years earlier had been
completely legal and acceptable.
There is a broad range of Opinions about the Black Market
Conclusion
The black market is a complex topic and an even more complex business. There are
possibly as many forms of black market commerce as there are legal market
commerce crossing a wide range of legal as well as moreal considerations.
Devastating trafficking in human lives,
accepting a professional fee "under the table", sales of guns, dealing
of drugs, sales of vital supplies and
illegal commerce threads its way through every nation on earth via many types of
communities. Wherever there is economic demand, someone
will seek to supply that desire. When the law restricts such sales, some
entrepreneurs will still find underhand ways to do business. The world's black
markets are hard to measure and easy for many to ignore. Whatever else is
true about them, one thing is certain and that is that they're not going anywhere.
