Transportation providers

Illegal drugs

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.

Prostitution

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.

Weaponry

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.

Alcohol and tobacco

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

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".

Copyrighted media

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).

Currency

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.

Fuel

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.

Appearance and disappearance

Some, for example in the marijuana-trade debate, argue for removing the underground markets by making illegal products legal. This would, in their view:

Modern examples

Wars

During the Vietnam war, soldiers would spend Military Payment Certificates 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.

Indian black-money

Prohibition in the United States

Alcohol

A classic example of creating a black market is the Prohibition 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.

Smoking

This phenomenon is very prevalent in many US state jurisdictions with smoking bans, including California, Philadelphia, Utah,, Seattle, Ohio, and Washington, D.C..

Comparison with regular economy

See also

Further Reading

References

External links

Category:Informal economy Category:Underground culture Category:Crime Category:Anti-globalization Category:Organized crime terminology Category:Retail markets Category:Ethically disputed business practices Category:Financial crimes Category:Tax evasion Category:Corruption