Abstract
This paper investigates the real and potential benefits of the informal economy, or black market. It does so from the perspective of the current global economic crisis, as well as from the eves day lives of people who find themselves embroiled within it. The paper claims that, from both of these perspective, the black market can be seen to hold real benefit for individuals and for nation-states. By consulting range of economic and sociological sources, this paper argues that such markets help in the every day survival or surplus-populations, alongside enabling their interaction with the sanctioned economy. It argues also that, by compensating for potential losses in welfare, the black market may provide a cushion for contemporary austerity polices. Finally, it argues that such a market is precisely the kind of incubator necessary to produce a skilled and innovative work force necessary to a growing economy.
Introduction
The existence of the black market is something that is often taken to be serious disadvantage to both the economic health of a country and to its moral structure. Black markets are associated with illegal, contraband product and with the selling of illicit services deemed unsuitable at best, and morally corrupt at worst. Despite these common assumptions, however, it possible to point to several benefits that black markets hold for the contemporary global economy. This paper will consider three as follows: First of all, it is manifestly the case that in many areas of the developing world, black market circulation of goods is essential for individuals to be able to survive. Secondly, the existence of such markets can be argued provide a safety net in European countries employing austerity policies that involve drastic reductions in welfare-provision and, thirdly, the black market itself can be seen a sight of constant innovation and development. This paper will pay attention to each of these points in turn in order to demonstrate the real benefits of the existence of a black market for both local and global economies.
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In his 2007 book, “Planet of Slums,” social historian Mike Davis noted that a huge number of the world’s population in the developing world now live in permanent slums or shanty towns on the outside of major cities. Such locations are more often than not cut off from centres of urban production, and while inhabitants may occasionally find causal employment within city centres, they are often largely dependent for their survival on goods which circulate outside of sanctioned channels. Davis notes, however, that while such people are often dependent on the informal economy, this economy intersects with that sanctioned by the state. He writes, for example that “most participants in the informal economy work directly, or indirectly for someone else (via consignment of goods or the rental of pushcart or rickshaw, for example)” (2006, p. 181). The black market in this situation both provides commodities for those excluded from the formal economy of developed city-life, and enables them to provide a service to those within a more integrated economy. A slum-dwelling taxi driver in a major city in central America would be such an example of a worker who is supported by a black market in commodities and who, nonetheless, provides a service to those who work in the formal economy. Without a market capable of providing commodities necessary for survival then a major part of the scale service industry in such countries would disappear.
It not simply the case, however, that the black market is important in densely populated developing countries. Rather, recent economic conditions have greatly increased its importance in western countries currently deploying austerity measures. Such austerity, aimed at generating for economic recovery via the reduction of State deficits necessarily requires an increasing degree of labour market flexibility and, with it, a contraction of a country’s welfare system. Suzanne Konzelmann (2014) understands the predominance of such measures to be evidence of the fact that “ the global financial markets are now demanding austerity, not because of its economic effects, but as ‘credible’ evidence that governments are serious about managing their budgets and repaying their debts” (p. 729). As such, it is highly likely that welfare reductions will continue around the world in order to secure credit. In this situation, it is likely to be more and more the case that individuals in Europe and US need to be able to exploit the black market in order to be able to survive, and to re-enter the labour market once a country’s economy begins to grow. Far from damaging recovery at this stage, it should be argued that a functioning informal market helps secure its foundation by maintaining a relative standard of health amongst national labour markets.
Finally, it is incorrect to see the black market as merely a static realm for the circulation of pre-existing goods and services. Rather, it can just as well be argued that it is an area of the economy in which innovation and development can be seen to be prevalent and as important as anywhere else. Robert Newirth (2012) notes, in fact, that the black market is the only area of the global economy that has grown consistently over the last thirty years and that the primary reason for this is that it is an area which is based purely on “unfettered entrepreneurial skill” (p. 57). In order to survive and thrive on the black market, one must possess vast amounts of practical intelligence and organizational skill; skills which Newirth notes are likely to be passed down and through generations of workers and groups of workers. In this sense, those who are able to make a living on the black market are likely to be much more innovative workers than those who stagnate within a formal economy. The existence of such workers is likely to be a serious advantage for an economy that is finally able to provide growth and opportunities. As such, rather than seeing successful black market workers as a drain on a national economy, it is just as possible to see them as an important part of its future dynamism.
In conclusion, therefore, the black market can be seen to bring at least three major benefits on both a global and national scale. These revolve primarily around its capacity to support large numbers of potential workers who, as a result of global contraction and large surplus populations, find themselves excluded from sanctioned means of survival. Not only does such markets contribute to the maintenance of an increasingly flexible global labour market, but they can also be argued to actively generate precisely the kind of skill and innovation necessary to aid global recovery.
- Davis, Mike. (2007). Planet of Slums. London: Verso.
- Konzelmann, Suzanne J. (2014). “The Political Economy of Austerity.” Cambridge Journal of Economics. 38. pp. 701-734.
- Newirth, Robert. (2012). Stealth of Nations. New York: Anchor Books.
