The Underground Economy
From the beginning of money, trade and taxation, the black market has been a common and prevailing beast that seems unable to be tamed. We will look back to the prohibition of alcohol in the 1920’s. We will also look at the sale of human organs, illegal drugs, prostitution, and digital piracy; even touch base on weaponry and arms trafficking.
In 1920, the prohibition went into effect. The prohibition prevented the production and sale of nearly all alcohol related products. The only available alcohol was used medicinally or if the alcohol content in a beverage was below 0.5 percent. This ban on alcohol was meant to help the economy grow and mature through following the “path of god”. Initially alcohol consumption in itself was following “god’s will” as he was the procurer of it but in the eyes of some extremists, alcohol began to change society and it was deemed alcohol was bad. Once the ban was in effect, everyone (government and business) thought that the sale of products like soda, juice and chewing gum would skyrocket. They also thought that because money was not being spent on alcohol, that housing would increase and that neighborhoods would improve. They were sadly mistaken.
The prohibition caused the exact opposite effect that everyone thought would happen. Gangs increased, crime increased and the production, sale and trafficking of illegal alcohol were abundant. The loss of taxes from alcohol was massive and in the grand picture, the byproduct in the ideology of alcohol, free will and open consumption played a big part in the economy as a whole. The banning of alcohol was also a massive loss of jobs. Jobs ranging from barrel makers, breweries, distilleries and saloons (bars) were all out of commission or saw an extreme loss in business and revenue. Prior to the prohibition, New York had nearly 75% of its revenue from the taxation of alcohol, this revenue was immediately lost. At the national level, the federal government had a total of $11 billion in lost tax revenue all while costing over $300 million to enforce. The most lasting consequence was that many states and the federal government would come to rely upon income tax revenue to fund their budgets. (pbs.org)
The sale of human organs on the black market has been a topic of much interest as of late. According to a report provided by Cato Institute, the price ceiling for organs is at zero dollars because of the status being illegal to sell ones’ own organs. Cato Institute thinks that if the sale of organs was made legal, the price ceiling would be removed thus making the shortage of organs eliminated. The sale of ones’ own kidney on the black market can be for as little as $5000 and resold by gangs in upwards of $200,000. This is a huge dollar figure that affects the economies where the trade is taking place. If these businesses were made legal and taxes could be made from it, the revenue in states or countries would increase.
Much like the sale of human organs, the production and sale of illegal drugs is another massive topic. If this illegal, black market revenue could be brought to the surface, the benefits could far outweigh the negatives. One report given by Dr. Jeffrey Miron suggests that removing the prohibition of marijuana with a system of taxation would promote combined savings and tax revenues of $10-$14 billion annually. This is a massive amount of revenue for the economy all while allowing a practice that is already an immense part of society. This prohibition is much like what we had back in the 1920’s with the alcohol prohibition. It is estimated that the savings portion alone would net roughly $7.7 billion in government expenditures that relate to the enforcement of law against marijuana use; $2.4 billion at the federal level and $5.3 billion at the state or local levels. Revenue from the taxation of marijuana would vary based on how it is taxed. If the government were to decide to...
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