Last Updated 27 Jul 2020

Black Market

Category Currency, Market, Tax, Trade
Words 2760 (11 pages)
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The black market was a response to rationing that was introduced during World War Two. While illegal, the black market became a driving force in the Home front especially in the cities - for those who could afford the prices. The activities of German U-boats in the Atlantic greatly restricted the amount of food that came into the country. Therefore the government had to introduce rationing so that everyone got a fair share - primarily of food.

However, this led to a gap in the rake, which was filled by those involved in black market activities. While cigarettes and alcohol were never rationed they were in short supply. Both these commodities were invariably acquired via the black market. The Ministry of Food investigated complaints against those suspected of being involved in the black market and the penalties for those caught could be severe - a fine of IEEE and a possible two years in prison.

People most associated with the black market were commonly known as 'spies'. This was thought at the time to be VISP' back-to-front. Introduction A black market or underground economy is the market in which illegal goods are traded. Due to the nature of the goods traded, the market itself is forced to operate outside the formal economy, supported by the established state power. The segment of a country's economic activity that is derived from sources that fall outside of the country's rules and regulations regarding commerce.

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The activities can be either legal or illegal depending on what goods and/or services are involved. For instance, a construction worker who is paid under the table will neither have taxes Ethel, nor will the employer pay taxes on the earnings. The construction work is legal; it is the nonpayment of taxes that classifies the event as part of the black economy. The illegal-weapons trade is an example of black-economy activity that is illegal. Black markets are those goods and services that form the black (or underground) economy.

Typically, black markets arise when a government restricts economic activity for particular goods and services, either by making the transaction illegal or by taxing the item so much that it becomes cost-prohibitive. A black market ay arise to make illegal goods and services available or to make expensive items available for less money Worldwide, the underground economy is estimated to have provided 1. 8 billion Jobs. Background 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 according to the particular institutional rules that they violate. Five specific underground economies can be identified: 1 . Criminal acts 2. The illegal economy 3. The unreported economy 4. The unrecorded economy 5.

The informal economy 1 The illegal 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. 2 The unreported economy 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. 3 The unrecorded economy The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies.

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 4 The informal economy 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 entrants, torts, financial credit and social security systems.

A summary measure of the informal economy is the income generated by economic agents that operate informally. 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. Pricing Goods acquired illegally take one of two price levels: * They may be cheaper than legal market prices. The supplier does not have to pay for production costs or taxes. This is usually the case in the underground economy.

Criminals steal goods and sell them below the legal market price, but there is no receipt, guarantee, and so forth. * They may be more expensive than legal market prices. The product is difficult to acquire or produce, dangerous to handle or not easily available legally, if at all. If goods are illegal, such as some drugs, their prices can be vastly inflated over the costs of production. Black markets can form part of border trade near the borders of neighboring Jurisdictions with little or no border control if there are substantially different tax rates, or where goods are legal on one his include alcohol and tobacco.

However, not all border trade is illegal. Consumer issues Even when the underground market offers lower prices, consumers still have an incentive to buy on the legal market when possible, because: * They may prefer legal suppliers, as they are easier to contact and can be held accountable for faults; * In some Jurisdictions, customers may be charged with a criminal offense if they knowingly participate in the black economy, even as a consumer; * They may feel in danger of being hurt while making the deal; * They may have a moral dislike of black marketing;

Traded goods and services of black economy. Some examples of underground economic activities include: Illegal drugs 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 rugs is $321. 6 billion SUDS. 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 an increase in the retail price. 2 Prostitution 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. Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codeword's and subtle gestures, to prevent the rise of child prostitution. Weapons 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, automation, 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 gun smiting their own firearms. Those who may buy this way include tizzies interested in protecting their dwellings, families or businesses. 4 Illegally logged timber Illegally logged timber is a huge problem. According to Interpol, the illegal logging industry is worth almost as much as drug production industry, in some countries. [14] [15] 5 Animals and animal products In many developing countries, living animals are captured in the wild and sold as pets.

Wild animals are also hunted and killed for their meat, hide, organs, Organs and other animal parts are sold for use in traditional medicine. 6 Alcohol Alcohol is world widely smuggled and available in every country and city, some Mounties allow the usage of alcohol but the usage, import and export of alcohol is more than they have allowed so. 7 Tobacco It has been reported that smuggling one truckload of cigarettes from a low-tax US state too high-tax state can lead too profit of up to $2 million.

In Asian counties the smuggling and illegal selling of tobacco is a main concern. 8 Biological organs Biological organs and their black marketing is also a main concern now a day in various countries of the world the certain markets selling biological organs selling of human organs is a major issue. Transportation providers Where taxicabs, buses, and other transportation providers are strictly regulated or monopolized by government, a black market typically flourishes to provide transportation to poorly served or overpriced communities. 0 Copyrighted media Street vendors in countries where there is scant enforcement of copyright law, particularly in Asia and Latin America, often sell deeply discounted copies of films, music CDC, and computer software such as video games, sometimes even before the official release of the title. A determined counter fitter with a few hundred dollars can aka copies that are digitally identical to an original and suffer no loss in quality; innovations in consumer DVD and CD writers and the widespread availability of cracks on the Internet for most forms of copy protection technology make this cheap and easy to do.

This has proved very difficult for copyright holders to combat through the law courts, because the operations are distributed and widespread. 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 ere, 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 talent. 11 Currency Money itself is traded on the black market. This may happen for one or more of several reasons: * The government sets ("pegs") the local currency at some arbitrary level to another currency that does not reflect its true market value. A * The government taxes exchanging the local currency with other currency. Currencies, either in one direction or both (e. G. Foreigners are taxed to buy local currency, or residents are taxed to buy foreign currency). * The currency is counterfeit. * The currency has been acquired illegally and needs to be laundered before the none can be used. A government may officially set the rate of exchange of its currency with that of other currencies, typically the US dollar. When it does, the peg often overvalues the local currency relative to what its market value would be if it were a floating currency.

Those in possession of the "harder" currency, for example expatriate workers, may be able to use the black market to buy the local currency at better exchange rates than they can get officially. 12 Fuel In the EX. It is not illegal for a person or business to buy fuel in one EX. State for their win use in another, but as with other goods the tax will generally be payable by the final customer at the physical place of making the purchase. Petrol tanks for cooking/ water heating are often smuggled in many parts of the world.

Size of the black markets Largest black markets I Estimated annual market value (Billion SUDS) I Totally;29 1 Counterfeit pharmaceutical drugs | 200 | Prostitution | 187 | Counterfeit electronics | 169 | Marijuana | 142 | Cocaine | 85 | Prescription drugs | 73 | Opium and heroin | 68 | Software piracy | 59 | Movie piracy | 58 | Gas and oil smuggling | 53 Cigarette smuggling 150 1 Organized crime People engaged in the black market usually run their business hidden under a front business that is legal.

Often, certain types of illegal products are traded against one another, depending on the geographical location. Consequences or Reason of Black market Black markets flourish in most countries during wartime. States that are engaged in total war or other large-scale, extended wars must necessarily impose restrictions on home use of critical resources that are needed for the war effort, such as food, develops to supply rationed goods at exorbitant prices. The rationing and price controls enforced in many countries during World War II encouraged widespread black market activity.

One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened. Another in Britain was supplies from the USA, intended only for use in USA army bases on British land, but leaked into the local native British black market. During the Vietnam war, soldiers would spend Military Payment Certificates on maid service and sexual entertainment, thus supporting their partners and their implies.

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-marketers were prosecuted by the military. Advantages and disadvantages of black economy Underground economy can bring a competitive power to economy; it increases the employment, and providing resource to official/formal economy.

Those are no much positive side of black market. On the other hand, some of the negative effects in economy are: 1. The growth of black market means shrinkage of formal economy and it causes tax losses. 2. It brings unfair competition. 3. It causes unreliable statistical data. When we think of the black market, we often imagine a dark alley filled with rusty garbage cans, rain puddles and a shadowy figure lurking in the corner. While this may be the setting for many illegal activities, black markets are alive and kicking in all corners of the world, sometimes in plain view.

And they are big business, accounting for a significant portion of the world's economic activity. Pakistan is the 31st among the black market hierarchy out of 91 countries Pakistan on Thursday was ranked 31st among 91 countries with an estimated black market net worth of $ban. Pakistan was ranked 31st by Havoc scope and the figure was determined by combining the total value of 52 black market products and activities with the total value of the black market activity in 91 countries.

World crime statistics and values are gathered from law enforcement and security agencies, international organizations, industry lawyers and representatives, and news articles. Havoc scope website stated that Pakistanis black market's estimated value is $6. Ban per year with cocaine price in Pakistan at $118. 7 per gram; heroin price $3. 0 per gram; price paid to human smugglers $22,000; and human traffickers' price is $342. Similarly, book piracy in Pakistan is estimated at $mom; counterfeiting $mom; cigarette smuggling $mom; drug trafficking $4. Ban; and gas and oil smuggling is estimated at $mom.

Havoc scope further stated that heroin trafficking in Pakistan is racy stands at $mom Conclusion All told, black markets generate revenue in the trillions of dollars yearly, and measures to combat these illegal markets cost billions. And you don't have to be in a dark alley to become a black market participant. Throughout the world, these goods and services are available on street corners, in parks and even in regular shops. It is big business, and while the goods and services may change from time to time, there will still be black markets as long as sellers and buyers can be matched.

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