Thursday, 7 June 2012

The Underground Economy

There is a bustling and shadowy world where jobs, services, and business transactions are conducted by word of mouth and paid for in cash to avoid scrutiny by government officials. It is called the “underground economy,” which is as old as government itself.
It springs from human nature that makes man choose between given alternatives. Facing the agents of government and their exactions, man will weigh the alternatives  and may choose to go “underground.”
In our era, man has again become a subject under the watchful eye of government.
When government intervention fails to satisfy him, or even works evil, he is slow to relinquish his notions and prejudices. He may cling to them with tenacity and perseverance, but may seek to avoid the ill effects through circumvention, evasion, and escape.He may find his way to the “black market,” where economic transactions
take place in violation of price control and ration laws. Or he may descend to the “underground” where political edicts are ignored and exactions avoided through word-of- mouth dealings and cash transactions.
The underground economy must be distinguished clearly and unmistakably from the criminal activities of the underworld.
Government officials and agents are ever eager to lump both together, the criminals and their organization with the producers in the underground. Both groups are knowingly violating laws and regulations and defying political authority.
But they differ radically in the role they play in society. The underworld comprises criminals who are committing acts of bribery, fraud, and racketeering, and willfully inflicting wrongs on society. The underground economy involves otherwise law-abiding citizens who are seeking refuge from the wrongs inflicted on them by government. They are employers and employees who are rendering valuable services without a license or inspection sticker, or failing to report their productive activities to the political authorities.
Underground activities can be grouped into four main categories:
  1. Economic activity yielding income that is not reported to the tax authorities.
  2. Economic production that violates one or several other mandates, such as compulsory government licensing and rate making, inspection and label laws, labor laws, government regula tions of agriculture, export and import controls, government control over money and banking, governmental control of energy production and distribution, andcountless others. Violators may or may not evade taxes, but they all work illegally, hiding from swarms of government inspectors.
  3. Productive activity by transfer beneficiaries who draw Social Security benefits or receive public assistance. Their freedom to work is severely restricted.
  4. Productive activity by illegal aliens without residence status. They may pay income taxes and other taxes, but must remain underground for fear of deportation
Many people enter the labor market via the underground. As young children they may earn their pocket money through odd chores that make  them think, and teach them to be attentive, industrious, and confident.
Many parents are convinced that children should labor to be healthy and happy. But if they should work they probably violate some child- labor law. And if they should neglect to file an income tax return and fail to pay
the levies, the children are actually working in the underground. Surely, there is a minimum amount that is exempt from income taxation.
In a climate of economic stagnation and decline the underground economy serves a useful economic and social function. It provides jobs to millions of willing workers, affords opportunities for learning and
training, and teaches the importance of individua l initiative. It constitutes an important safety valve that relieves discontent and tension in a world wracked by political disruptions.

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