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When one system falls apart, another steps in to take its place out the sheer force of vacuum left behind. “System D” a catchphrase coined by Robert Neuwirth for the black market activity that does not include gun-running, drugs, and human trafficking, but is still illegal. What makes it illegal? Often, governments that are experiencing economic problems will enact laws to try to regulate trade, causing hardship on segments of the population who will turn to the black market to get their wares instead. In the informal economy that System D represents, business owners can bypass strict taxes, duties, and regulations, while customers have access to needed goods or services. System D accounts for $10 trillion of economic activity and it is growing more and more.

Informal Market Dynamics

While there is a stigma to black market operations in that they are illegal, not all deal with shady or underworld themes. An operation can bootleg clothing through ports and that is seen as part of System D, while human trafficking has different dynamics. System D is still illegal, and customers often know their purchases come from illegal activity, but when the laws make it difficult to obtain a needed good or service, then System D flourishes and the question of morality becomes skewed in favor of System D. Instead of viewing the workings of an informal market as immoral, many of these backstage entrepreneurs see it is feeding their families, providing jobs, and goods and services, where the regular economy has failed them. The global recession has been a major factor in the rise of System D, making people look to other resources than government-controlled economic activities that basically price them out of the market and provide no employment. By some accounts, System D employs half of all the world’s workers.

Mutually Beneficial Business

Part of the dynamic is also the age-old business paradigm of a mutually-beneficial transaction between seller and buyer. When countries undergo financial turmoil, as in the last year, some goods may be taxed to try to make other goods more appealing or to raise revenue for the government. This is not beneficial to business or to the customer. As a third entity, the regulation becomes unwelcome and both businesses and customers revolt and turn to the black market to freeze out government controls. It is expected that countries that may undergo financial austerities and/or excessive government intervention will automatically create a ripe environment for black marketeering. When a law becomes so unwelcome that it adds to a population’s misery and is seen as not being of benefit to the community, the moral dilemma of whether it should be obeyed simply because it is encoded as a law becomes a moot point. People bypass laws they feel are unfair and there is a level of acceptability when many people refuse to obey an unjust law, as in the example of conscientious objectors who refuse to be drafted even when they are ordered to go to war. The stage may be set for a global economy, but to the local business owner and customer, the transaction is still local and they make the buying decision.