A black market allows the private buying and selling of goods and services that are forbidden or controlled by the government. Classic examples of goods and services traded in black markets include some forms of gambling, phonographic materials, and illegal drugs. Such markets commonly exist in economies that are highly controlled by the governments whereby many products such as gas, luxury goods, and foods are rationed. Sometimes, the trade of legal goods and services is carried out in black markets to avoid taxes. When goods are banned by the government, they can be produced illegally or smuggled yielding high profits to some people (Dallago, 1990). This paper explains whether black markets benefit the society or not.
The black market may lead to the underestimation of national income thus making the governments unable to determine the correct economic statuses of the countries. Thus, the governments will have difficulties in implementing appropriate or necessary policies of stabilizing the economies of the countries so as to raise people’s standards of living. Further, black market leads to the distortion of unemployment data. For instance, the recorded data will overestimate the unemployment rate in the society because some of the people who are expected to be unemployed or jobless, as reflected by the economic data, could be gaining from black market activities or underground businesses (Ben-Ner & Montias, 1991).
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Another negative effect of a black market to the society is related to the collection of tax. For instance, it is very difficult for the government to collect taxes from black market trading. Also, it is impossible to detect or determine income that is earned in a black market. This problem affects the ability of the government to get funds to finance its important expenditure programs. This is problematic for the whole society because the government is forced to increase official tax rates for legitimate taxpayers to cover the losses. The people who pay taxes my perceive this increases negatively and looks for ways of evading taxes thus avoiding to contribute to the pocket of the government. Based on various budgetary challenges, the quantity and quality of many public goods and services may go down. This implies that the society will be compelled to pay the price of increased black market operations or businesses. In other words, the activities of black markets impose heavy external costs to the entire society, just as pollution does (Dallago, 1990).
Many black market goods and services are always stolen from legal markets thus interfering with the business of law-abiding business people or entrepreneurs. While some buyers in the black market might not mind getting goods at high discounts because they perceive retail prices to be very high, some would be worried if they realize they would be supporting criminal activities in the process of them getting a bargain. For instance, many black market businesses are carried out by criminals or organized gangs theft always characterizes them and buying and selling of stolen goods. Sometimes, black market businesses are used in supporting and funding terrorism because profits associated with them are not easily traceable. Obviously crime and terrorism is a big vice in the society, and anything that supports them is not allowed (Schmid, 1992).
Another problem associated with black markets is violence. Based on the fact that black markets are unregulated, legitimate police protection or security services cannot be relied on in the event of any crime. For example, if some marijuana is stolen from a drug dealer by another one, he or she will never seek the intervention of the police to get his or her goods back. Instead, he or she might decide to shoot the marijuana thief to recover the stolen marijuana. Such actions affect the society in a negative manner because they compound the impacts of crime (Pitt, 1984).
On the other hand, black markets have some benefits to the society, and they are supported by some people. For instance, they enhance the supply of goods and services that can improve people’s quality of life even if they are illegal. For example, people exchange marijuana on the black market that is used in alleviating pain for some patients who may not be relieved by legal medicines. Further, the society gain from the black markets by accessing essential legal goods and services whose supply is limited (Cussen & Block, 2000). Besides, the shadow economy created by black markets allow some individuals to earn their daily bread who would otherwise unproductive individuals who would be productive if the government had no regulations in an economy that has high employment rates. Through black market, people may move to get the benefits of various private goods. For instance, black markets provide people with opportunities to become rich while avoiding taxation. If the law enforcement has a lax, the black market could be a very important equalizer, giving every person who is willing to take the associated risks a chance of becoming wealthy through trade in contraband.
In conclusion, black markets will continue to thrive as long as there are taxes and regulations. Regulations that bar human beings from accessing the goods and services they need as well as taxes that take a share of what they feel belongs to them will always compel them to hide their business activities from tax authorities, law enforcement agencies and other trade regulators. The black markets’ case is very subjective, and it is dependent on people’s moral beliefs. If one feels that taxes are very high, he or she might be happy to do an illegal trade. If one thinks that black market activities will create meaningful employment, he or she will become part of the market’s participants. However, the black market has no benefits to the society because it promotes crime, violence, and takes taxes that are vital in developing the society. Therefore, black market does not benefit the society.
- Ben-Ner, A., & Montias, J. M. (1991). The introduction of markets in a hypercentralized economy: The case of Romania. The Journal of economic perspectives, 163-170.
- Cussen, M., & Block, W. (2000). Legalize drugs now!: An analysis of the benefits of legalized drugs. American Journal of Economics and Sociology, 59(3), 525-536.
- Dallago, B. (1990). The irregular economy: the” underground” economy and the” black” labour market. Dartmouth Pub Co.
- Pitt, M. M. (1984). Smuggling and the black market for foreign exchange. Journal of International Economics, 16(3), 243-257.
- Schmid, A. P. (1992). Terrorism and democracy. Terrorism and Political Violence, 4(4), 14-25.
