Black market, where goods or services are exchanged illegally, originated in the first great depression (1929 to 1939) when most common household products were rationed to avoid hoarding. While illegal, the black market became a driving force in the Home Front especially in the cities – for those who could afford the prices. It became an entire economy unto itself. It creates its own supply/demand, sets its own prices and caters to everyone that can afford it. This economy is commonly known as “Shadow Economy”.

For the last 90+ years black market AKA shadow economy has seen a steady rise in growth. It even became the 3^rd   largest economy of 2018. This growth has been hampering the economy of countries in various levels of development. The shadow economy drives out legitimate industries that can't compete with the lower costs of illegal operations. The tax-free nature of this market means the government loses revenue. These funds could have been used to provide services to the country's citizens. The overall impact of the black market in a country’s economy can be assessed through the country’s GDP. However, it is hard to estimate the actual impact it has on a country’s economy mainly due to its shadowy aspect and that it is not being reported as it is the case in the normal market. The use of the Dark Web and bitcoins to carry out transactions, makes it even harder to trace it. Last year developed countries like America lost up to 12% ($2.5 trillion) of their GDP to black market and developing countries like Bangladesh lost 39% of the GDP to the black market which estimates roughly to $131.82 billion.

One of the biggest advantage of black market is that there are hardly any recent data available about it. In 2018 the value of the global black market was $10 trillion. According to researches shadow economy occupies 22.67% of the world GDP which could mean that in 2020 the value of the black market was $31.28 trillion making it the largest economy of the world. Currently counterfeiting is the biggest sector of the black market. Sales of counterfeited and pirated goods totals $1.82 trillion per year and is expected to grow to $2.8 trillion by 2022. Drug trafficking is the second largest sector in the black market and is an extremely difficult sector to estimate. According to the United Nations, the probable global figure for the total illicit drug industry would be $650 billion per year. The 3^rd largest sector is Human Trafficking which globally generates an estimated $150 billion annum in profits according to the ILO.  Almost 20% of all trafficking victims are children. Some other big sectors include- fuel theft worth a total of $133 billion annum, illegal wildlife trade worth $23 billion per year, global carbon black market estimated at $18 billion, light weapons trafficking worth $3.5 billion per year, organ trafficking worth $1.7 billion per year, etc. A slightly different sector of black market that solely exist because of the dark web is cybercrime. World Economic Forum now estimates that the cost to the global economy due to cybercrime is roughly $445 billion a year. Even the ongoing pandemic situation couldn’t hold the black market’s growth back. It’s making the already stunted world economy suffer more. It was Estimated that; a developed country’s GDP could increase by 14% to 15% when adding the black market to the GDP calculation.  These percentages jump to 35%-44% in emerging countries.

Shadow economy works like an unseen force behind many of the disastrous economic situations. This economy exists on the loopholes of law. Black market has become an empire shrouded in shadows. It has entangled itself with the economy so thoroughly that it’s hardly possible to eradicate. Sometimes people turn to it as it allows them to afford medicine, health services, and other essential products they could never obtain otherwise. Especially the war-torn countries or countries with economic downturns. Most societies attempt to control this market through various measures like punishment, prosecution or education rather than through radical reforms of the tax and social security system providing more economic dynamic. If the speculations are true, then black market already became the largest economy of the world. If not, then the world still has some time left to make its growth slower. Otherwise, its impact on the global economy would be unimaginable.

 

Writers:

Tanzina Harun Tanni & Majharul Islam

Department of Marketing, Jahangirnagar University

Email: [email protected] ; [email protected]