Business Insider (BI) published the article "Forget China, 'System D' Is the World's Second Largest Economy", on the worldwide black market, or secondary economy, now dubbed "System D". I am always surprised (although I know I should not be) at how these stories never seem to address the "why" of the secondary economy. The article, and infographic below, frames the discussion through lost tax revenues and "black market entrepreneurs" who have higher profit margins than those in the legitimate economy.
What stories like this fail to look at is why the secondary economy exists. Yes, there are those who are driven by the prospect of high profit margins and are willing to take on the risk associated with large scale black market operations in order to obtain them, but I have no doubt that the majority (of people, not money) do not fall into this category. I think the larger issue is that those who work in the secondary economy do so to support themselves and their families, because for one reason or another they are not able to within the primary economy. They may be barred by poverty, lack of education, lack of resources, former incarceration, racism, sexism, religious oppression or just plain prejudice.
When we look at countries with the largest black markets (see Shadow Economies all Over the World: New Estimates from 162 Countries from 1991-2007 an updated version of the IMF paper linked to in the article), we see corrupt and poor governments, with even poorer populations. We also see a concentration of brown and black peoples in most of these countries--which historically means countries and peoples who have been mined for resources and left to fend for themselves with alien cultures foist upon them.
If we look at the U.S. and who participates in the secondary economy we see, again, largely black and brown bodies who are barred from participation in the primary economy. We can look at several sociological papers and books written by Waquant, Pitts, Wilson.... and so on which point out that participation in the secondary economy is not usually by choice. Institutional racism has concentrated blacks and other minorities in certain geographic areas and then systematically denied those areas public services such as access to public transit, competitive schools, road repairs, etc. The private sector abandoned these areas as well, despite a real demand in the market for services. These things work in concert to bar involvement in the primary economy and, as if this is not enough, when caught participating in the secondary economy these individuals are incarcerated. Incarceration, besides the abuse and emotional toll, means that one is further barred from participation in the workforce. It is no wonder the mass incarceration is considered the New Jim Crow.
As I read the comments on the BI article many point to high taxes and the "welfare state" as a reason for the secondary economy, I would have to argue the opposite. It because these governments do not provide basic services to these communities that secondary economy flourishes. The smallest secondary economies exist in countries with higher tax rates. Although I do not have the numbers to back myself up here, I am also willing to bet that the secondary economy in those countries, the U.S. included, are peopled by those segments of the population which fall through the cracks and are not provided their basic needs.
At the end of the day I suppose I am just thankful for my sociological education, that I can supplement popular media claims with sociological research and look at the "why." I just wish that as a society we tried to take a more holistic view of our problems and culture. Hopefully we will get there.