Black Market
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The Black Market also known as the underground market is the part of economic activity involving illegal dealings. Typically the buying and selling of merchandise or services illegally. Goods such as weapons and illegal drugs are inherently illegal, merchandise may also be stolen or may be otherwise legal goods sold illicitly to avoid tax payments or licensing requirements, such as cigarettes.
Black markets develop when the state places restrictions on the production or provision of goods and services that come into conflict with market demands. When state restrictions are heavy, such as a period of prohibition price controls or rationing, the market prosper. Black markets are present in any economy. “Black Market” comes from a time in the eighteenth century when southern Carolina slaves were encouraged to grow their goods to market. As they grew profitable, local government barred white people from buying their food, yet many continued to do so.
As a result of an increase in government restrictions, black market prices, for the items most needed, will rise. Restrictions represent a decrease in supply and an increase in risk on the part of the suppliers, sellers, or any middlemen. A decrease in supply will increase prices, and also increased enforcement of restrictions will increase prices for the same reason. There are two levels in illegal goods. One is the good may be less expensive than legal market prices because the supplier did not pay the normal costs of production or pay the taxes. Illegally supplied products can be too difficult to get and may as well not be available legally.
In the case of the legal prohibition of a product that large segments of the society view as harmless in spite of its legal status, such as alcohol under prohibition in the United States, the black market will prosper. The black marketers often reinvest profits in a diverse way. Black market prices can be reduced by removing the relevant legal restrictions. The term ” Black Market” also applies to illegal monetary exchange outside the authorize institutes.
A classic example of black market activity is the prohibition period in the early twentieth century in the United States. Numerous organized groups too advantage of the opportunities in the resulting black market, the government banned alcohol production and sales. Organizations such as the Mafia grew tremendously more powerful through their black market activities distributing alcohol. Another example is Burma under the rule of Ne Win. The country became one of the poorest in the world and only the black market and rampant smuggling supplied the peoples needs.
In many countries today drugs such as marijuana, heroin, and cocaine are used in the black market. Despite ongoing law enforcement efforts to intercept illegal drug suppliers. Demands for these and other drugs remains high, encouraging criminals to ensure their availability. Law enforcement usually catch these criminals but such a high demand for these drugs ensures that the black market prices will rise, encouraging new distributors to enter the market in perpetual cycle. Prostitution is illegal in many places as well, yet market demand for the services of prostitutes remains very high. Black markets also form near when neighboring jurisdictions have substantially different tax rates on similar products.
Between 1984 and 1993, Canada doubled its taxes on cigarettes with the aim of reducing smoking and increasing tax revenues. Sergeant Alain Giroux testified on the effects of those tax increases before a United States Senate subcommittee on behalf of the Royal Canadian Mounted Police. He said underage smoking has failed to decrease because of the high percentage of cigarettes sold on the black market. The growth in the black market due to the high cigarette tax in Canada spawned violence and nurtured organized crime. Since teens are able to buy cigarettes and drugs on the black market, underage youths increased their smoking, and their health is in great danger. The black market definitely effects the community. Since California raised its cigarette tax in 1988, black market sales have risen to an estimated eighteen percent to twenty-three percent of cigarettes sold. So the increase in tax for cigarettes and alcohol have not been effective.
More than 10 million illegal immigrants