The Black Market is the Free Market

The Black Market is really the Free Market doing what some people (calling themselves “government”) disapprove of.

Here is a post we stumbled across that says it well:

The Black Market
by Harris Kupperman

A few years back, on a trip to some Third World nation, I remember asking a successful businessman why more small businesses are not public. His response was sublime. “I keep two sets of books – one for the government and a real one for myself. I am not showing anyone the real books. If I have shareholders, what will I show them? I will never get fair value for my business if I show them the fake numbers.” Welcome to the black market.

Let’s face it, no one enjoys paying taxes. In many countries, you have a bifurcation. Large companies can use their clout with the government to get special exemptions from various taxes and regulations. As long as the campaign contribution is smaller than the tax, most companies pay it. Smaller companies are less fortunate. They cannot afford protection and so they chose to operate more in the shadows. They do not report certain income and they over-report expenses. In some countries, this is so prevalent that it has become an “accepted” practice.

In many countries, avoiding taxes and stupid regulations is just part of doing business. How can you blame them? The danger is that this limits the ability of these companies to access the capital markets for debt and particularly for equity funding. Without growth capital, there is no growth in your economy. Even worse, many of these companies take their unreported profits and deposit them in overseas banks out of the reach of the taxing authority – which further stymies growth. No country wants to create a black market – it forms naturally out of desperation because of bad governance. Businessmen rarely want to do business in the shadows as there are hidden costs to this sort of business – however, sometimes they have no choice.

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5 responses to “The Black Market is the Free Market

  1. This author gets it. Wisdom in a nutshell
    Hopefully many unemployed in this country will increasingly work off the record and under the radar. This type of black market activity would allow a revival of real entrepreneurial endeavors.

  2. While I never advocate illegal activity, the government is forcing private enterprise to do just that. One of the best examples of a totally failed government activity is the “war on drugs”. Governments can never win such a war because it does nothing to stop the demand. And when a demand exists without supply, someone will always step in to fill it. The only problem here is the anti-competition wars between various drug cartels. If all drugs were legalized, the cartels would fall apart, due to the loss of the huge profits.

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  4. The assumptions of this article are bull. “Let’s face it, no one enjoys paying taxes.” Many contemporary liberals like me enjoy for the most part paying their fair share of taxes. The only thing I don’t like is funding certain wars I don’t feel are just. But I still prefer paying taxes rather than not because its the right thing to do to take care of the needy. Voluntary charity is not enough. “No country wants to create a black market – it forms naturally out of desperation because of bad governance.” The government isn’t forcing people to engage in the slave trade. If there is a demand for slaves, people will usually buy them. Small gov or no gov would not be able to solve this problem and a black market would still emerge and probably be worse.

    • @The Pope above:

      The key point is coercive vs. voluntary relationships. We learn at a very young age that taking another person’s property without their voluntary consent is called “stealing”. When we grow up it’s called “taxation” (taxation is enforced at the barrel of a gun).

      Property is an extension of man’s life. When you take someone’s property without their voluntary consent you rob them of the time, energy and resources they used to create or acquire their property (see My Philosophy of Liberty).

      Stealing from one person or group of persons to give to another person or group of persons (arbitrarily deemed “the needy”) is still theft no matter how “needy” these people are. Who decides who the “needy” are? What gave them that right to decide? Authorizing the theft of another person’s property is the slippery slope to your own destruction since you are, in effect, authorizing others to take your property for whomever they happen to deem “the needy”.

      If taxation were just it would be voluntary. As for “fair share” who are these saints that can determine what is fair? Where did they get their authority? And, since when is stealing “fair”?