The Black Economy

Quote:

Originally Posted by bollocks

Guess its the way many earn and spend their untaxed money here.

Is it an economy?

and why black?

As a guy last night told me, Google is my friend, my only friend, sorry for the long-winded answer but my friend does go on abit

A black market, underground economy, or shadow economy is a market characterized by some form of noncompliant behavior with an institutional set of rules.[1] If the rule defines the set of goods and services whose production and distribution is prohibited by law, non-complaince with the rule constitutes a black market trade since the transaction itself is illegal. Parties engaging in the production or distribution of prohibited goods and services are members of the illegal economy. Examples include the drug trade, prostitution, illegal currency transactions and human trafficking. Violations of the tax code involving income tax evasion constitutes membership in the unreported economy.[2][3] Because tax evasion or participation in a black market activity is illegal, participants will attempt to hide their behavior from the government or regulatory authority.[4] Cash usage is the preferred medium of exchange in illegal transactions since cash usage does not leave a paper trail.[5] Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or skirt price controls or rationing. 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".

The black market 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.

Black markets have online counterparts consisting of darknet market websites such as the Silk Road, individual websites, forums and chat rooms. While overlaps exist, the online markets are focused on specific areas including drugs, compromised credentials, malware, digital goods and weapons. Piracy specifically takes place on private or public warez and BitTorrent sites as well as various peer-to-peer file sharing networks.

The literature on the black market has not established a common terminology and has instead offered many synonyms including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.[6]

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 major underground economies can be identified:[7][8]

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.[9]

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.[10][11]

The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies.[12] 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.[13] But there is still little consensus concerning the size of the unreported economies of transition countries.[14]

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.[15] A summary measure of the informal economy is the income generated by economic agents that operate informally.[16][17] 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.[18] On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband is trade

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 drugs. 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.[22]

Although law enforcement agencies intercept a fraction of the illegal drugs, and incarcerate hundreds of thousands of wholesale and retail sellers, the very stable demand for such drugs and the high profit margins encourages new distributors to enter the market without a decrease in the retail price. 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.[citation needed]

Prostitution[edit]
Prostitution 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 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.[23]

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.

Weapons[edit]
Main article: Arms trafficking

A tower of confiscated smuggled weapons about to be set ablaze in Nairobi, Kenya
The legislatures of many countries forbid or restrict the personal ownership of weapons. These restrictions can range from small knives to firearms, either altogether or by classification (e.g. caliber, handguns, automatic weapons, 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 insiders. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmithing their own firearms. Those who may buy this way include criminals to use for illegal activities, gun collectors, and otherwise law-abiding citizens interested in protecting their dwellings, families or businesses.

In England and Wales, certain categories of weapons used for hunting may be owned by qualified residents but must be registered with the local police force and kept within a locked cabinet. Another segment of the population who may purchase weapons on the black market are individuals who are unable to pass the legal requirements for registration — convicted felons or those suffering from mental illness for example. In some jurisdictions, collectors may legally keep antique weapons made incapable of being readily restored to a firing condition.

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