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What is the Black Market?

Illegal drugs are part of the black market.
Cigarettes may be sold without tax in the black market.
Black market businesses can include sex work and prostitution.
The black market is often associated with organized crime.
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  • Last Modified Date: 13 September 2014
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The black market is not a physical place, but rather an economic activity in which merchandise and/or services are bought and sold illegally. Also called the “underground market,” this market gets its name due to the fact that its activity is conducted out of sight and often “in the dark,” outside the sight of law enforcement. It can be illustrated by something as innocent and innocuous as selling gum on the playground, or by something as serious as the sale of smuggled weapons or drugs.

Many factors can make a transaction illegal, thus qualifying it as a black market transaction. The good or service itself may be illegal, such as illicit drugs, weapons, or prostitution. One prime example of an illegal market created because of an illegal product was the result of prohibition. After alcohol was outlawed in the U.S. in 1919, it was smuggled into the country and sold at speakeasies and private bars. The result was an era of organized crime and an estimated 500 million US dollars (USD) in lost tax revenues annually.

An example of an illegal service sold on the black market is prostitution. Outlawing the prostitution of women and children throughout most of the world has created a huge illicit sex trade. Countries where this type of illegal market flourishes are a destination spot for those seeking to pursue this activity.

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In other cases, goods may be stolen and then re-sold on the black market. When a good is euphemistically referred to as having “fallen off the back of a truck,” usually it means that it has been stolen for the purpose of being sold illegally. If you are purchasing a new stereo, for example, from an individual at an extremely low price, there’s a good chance that it’s been stolen. Another way that a transaction can be illegal is if it is an otherwise legal good or service that is bought or sold in such a way as to avoid proper licensing or taxes. This is the case with unregistered firearms and cigarettes, which usually include a hefty local, state, or federal tax.

Due to man’s inherently entrepreneurial nature, coupled with government’s pesky tendency to regulate, black markets can and do exist everywhere. They do, however, tend to develop more readily in states or countries with especially heavy regulation. Even though a good or service becomes outlawed or heavily regulated, the market may continue to demand it. As a result, the black market springs up to meet the market’s demand. This is the case when governments place price controls, rationing or complete prohibition on a good or service.

Although the consumer’s demand is met, usually the seller or “black marketeer” is the one who profits from a transaction. Prices on this market tend to be higher due to smaller supply and constant demand. The risk that a marketeer takes in acquiring and selling a good or service is also included in the price. If it is a difficult good to acquire, it will have a higher price as well. At times, prices can be lower if the seller has lower “overhead” because he or she stole the good or is avoiding high taxes.

Consumers are often willing to overlook the illegality of a black market transaction if they feel that the good or service is “harmless.” This is often the case with illegal prostitution and also applied to alcohol sales during prohibition. Although some people think that most illegal transactions are relatively harmless, the money generated is often used for nefarious purposes. The mafia in the U.S. thrived during prohibition, resulting in bloody battles over turf and profits. Governments combating illegal markets spend vast fortunes fighting organized crime and racketeering, and lose millions in tax revenues from the prohibited good.

Many solutions to the black market have been proposed, including deregulation, legalizing drugs and prostitution, and increasing supply of a particular good. Some argue that this is a concession to criminals and drug users, while others argue that government resources can be put to better use.

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Discuss this Article

anon313815
Post 75

@ Post42: The black market existed well before the United States banned alcohol. Think about slavery! You don't believe that was any kind of a black market, or hell let's go to the Greeks. You don't think they illegally traded or sold human beings for slavery and prostitution? The fact is, that it happens every day and it's all around us.

Whether you participate it in or not we, are all involved in it in some way or another. Illegal downloading of music or movies, and bootlegging them for profit.

anon295598
Post 74

Do they still sell children in today's world?

Moderator's reply: See What is Human Trafficking?

anon274221
Post 73

Black markets are everywhere, all the time. Just look at what is prohibited or illegal or scarce and you will know there is a market you don't see for it. Governments create black markets by statute and regulation. If they said and did nothing, the black markets would not exist or would not thrive.

anon256027
Post 71

The black market is a scary business. Once you start you can't stop!

anon168755
Post 64

since the black market is actually just the act of illegally selling things from candy, songs downloaded from the internet illegally and giving them freely like limewire does. Everyone becomes part of the black market whether they know it or not. buying a piece of candy then selling it for more is actually an act of black marketing, believe it or not. the black market cannot be stopped. it will stay as long as there is a way of trade and service like the entire world uses.

anon166358
Post 62

Some of you seriously need to take your time when you read an article. You are all asking questions that were covered and answered. Were the answers too detailed or just the words were too big for you to understand!

anon164649
Post 61

When down in Honduras, I'd sell $1 and get 8 lempiras from the guy on the corner since the bank was offering only 2. How does the guy on the corner make money?

anon156901
Post 59

I need a chemical called chloroform for a story I'm writing, but as far as I know, it's practically impossible to come by unless you happen to be some kind of scientist. In the story, though, I'm trying to keep things at least fairly legal, but I think I'll need the assistance of the black market. Thing is, I don't know how it works exactly.

anon152905
Post 58

why do price controls often lead to black markets?

anon137015
Post 56

Number 55 yes they do sell other peoples organs.

anon96653
Post 55

Do they sell other people's organs in the black market?

anon95907
Post 54

Ninety percent of your questions are answered in the article. Where is the black market? It's not a place. What is sold on the black market? Anything that is illegal. Reason for existence? Illegal goods are *illegal!* Getting inside it? What? It's not a place. And that is precisely what undercover policemen do with the drug trade. There is no central "Black Market". It is a euphemism for any illegal transaction.

anon94429
Post 53

The black market seems helpful in certain places. Why don't you just make some of the things legal in third world countries rather than have them continue on doing things illegally that will hinder the growth of the countries?

anon91848
Post 50

we have black markets in england. counterfeit goods are sold on private outdoor markets.

anon81853
Post 45

true the IRA or British republican army is not exactly an army -- it is guys that buy weapons on the black market.

anon81261
Post 44

I am curious to know whether or not the black market is actually real or not. Is it just a scam?

anon80628
Post 42

The black market was made in reaction to the united states banning beer, whiskey that kind of stuff. Since then it expanded to include Illegal weapons, submachine guns, assault rifles, explosives, drugs, animals apparently, possibly even down to gasoline and other types of fuel. Whatever you buy and sell is probably being sold or bought cheaply on the black market.

There's a kind of organization and disorganization to the black market, depending on certain demands or goods. Like nasturtium said, it depends on the culture, so it can be highly organized, or it can be one person.

If you're buying and selling illegal items, you're black marketing. Gangs, the Mafia, any organized crime buys and sells some type of goods on the black market, either in the States, the UK or anywhere. ESD for life.

anon79004
Post 41

black market is an abstract, neither can be seen nor touched.it's an action where in those black marketeers are selling products behind the knowledge of law enforcers.

anon74076
Post 36

I want to know how to use the black market.

anon72673
Post 35

thank you very much. i have one more question.

prostitution, which is already legalized in some countries, is it again a part of the black market?

anon70202
Post 33

I want to have more details about Tunnel Trade and if there are references, boxes, articles related to the subject.

anon66403
Post 32

does anyone know how to get inside the black market? i think if we get inside it we can take it down.

anon65175
Post 30

It unfortunately happens in my country India too.

mliviu86
Post 28

Hello everybody. Can anyone tell me how you can estimate the value of a black market? Thank you.

anon60311
Post 26

the black market is real! this is a serious issue! the government might be tracking down people who sell drugs through the black market, but i think we should be more concerned with the selling of animals, endangered animals.

For example people are buying Komodo dragons, which are really rare for a pet! isn't that crazy? a Komodo dragon has a really toxic poison in its saliva and animals die when they get in touch with the saliva. However, scientists don't want it to be killed because they need to know what the mystery is, what the Komodo dragon has in its blood that makes itself immune to its own saliva.

anon58014
Post 25

Seriously -- did any of you actually read the article?

anon55839
Post 24

Could you sell, say, gum? At a black market? Just curious. Also does anyone think human hair would be acceptable? Being completely serious here folks.

anon54259
Post 22

Where does one find black market stuff?

anon50760
Post 20

is the united kingdom against the black market?

more specific: the black market organ trade.

anon50582
Post 19

The black market cake is a lie in my opinion.

anon44684
Post 15

There is great information online about the black market, including counterfeit goods, human trafficking, and the global drug trade.

anon39066
Post 14

what is the basic reason behind black market?

anon39065
Post 13

what type of items are sold through black market?

anon37238
Post 12

what is the effect of black market?

anon34266
Post 10

Hey don't they sell body parts and babies and stuff like that on the black market? I heard they do in some cases and I recently looked up a movie called "Sick Nurses". It's where the nurses use dead body parts from their patients to sell on the black market.

anon31938
Post 9

How do you find the black market?

When did it first start?

anon31649
Post 8

what is the effect of black market?

anon30475
Post 7

It doesn't matter what it is, a black market arises when a government makes trafficking or possessing something which has a demand illegal.

anon27091
Post 5

So how does one find the black market?

anon19876
Post 4

what is the basic reason behind black market?

anon13866
Post 3

Many things are sold on the black market such as drugs, weapons and prostitution. And sometimes things such as kids. This might seem weird but like in china they will buy a boy kid from a black marketer because they have a girl and can't have another kid because of the one child policy.

anon13406
Post 2

what type of Items are sold through blackmarket?

nasturtium
Post 1

Depending on the country, the black market can be very accepted. In the US, it is often looked down upon, but in many third world countries, everyone buys things on the black market - it's just how it's done. It just depends on the culture.

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