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Black Market

BLACK MARKET

A black market was a major structural feature of the Soviet economy throughout the communist era. Having emerged during World War I in response to the regulation of prices and supplies, the black market burgeoned after the Bolshevik seizure of power. In 19181919, the Bolsheviks' radical vision of socialism as an economy without capitalists or market mechanisms led to the closure of virtually all private shops. Until their re-legalization in 1921, in connection with the New Economic Policy, the distribution system consisted of a vast, bureaucratized, socialized network of state and cooperative outlets, and an equally vast underground trade.

In subsequent decades, the black market reflected the general condition of the economy. Through the early 1950s, staple foods, clothes, and other necessities predominated. World War II marked the zenith of this tendency, as the urban population was forced to sell off surplus possessions on the black market in order to purchase supplementary food. As survival-threatening crises receded, the array of goods sold on the black market widened to reflect the rising expectations of Soviet consumers. By the 1980s, observers noted the prevalence of such items as automobile spare parts, imported blue jeans, rock-and-roll records, and home decor. Foreign currency (especially U.S. dollars) was also the object of black-market transactions throughout the postwar period, with underground exchange rates for foreign bills greatly exceeding the official rate.

Three factors complicate assessments of the black market. First, a black market by definition eludes data collection and reporting. Quantitative estimates of its aggregate role in the Soviet economy thus necessarily remain speculative.

Second, the Soviet Union's unstable legal environment makes it difficult to track changes over time. The basic juridical rubric for the black market was speculation (buying and reselling goods with the intention of making a profit), which was outlawed in every Soviet criminal code. It was applied sparingly and rather arbitrarily during the New Economic Policy, but Josef Stalin's renewed assault on the private sector in the late 1920s created pressures for a formal redefinition. The law of August 22, 1932, mandated a five-year labor-camp sentence for speculation, including petty sales, but it failed to standardize prosecution, which exhibited the campaign character (extreme fluctuations in prosecution rates) typical of the criminal justice system as a whole. The law was finally softened in 1957 through the redefinition of petty speculation as a noncriminal offense, and then through the reduced prison sentence for criminal speculation in the 1960 RSFSR Criminal Code.

Third, the black market's parameters are blurred by the fact that some private transactions remained legal. Through at least the 1950s, most black-market sales took place at outdoor markets or bazaars. The primary function of these venues, from an official point of view, was to enable farmers to sell surplus produce after all delivery obligations had been met. Their secondary function, however, was to provide a space where any citizens could hawk used clothes and surplus possessions, and where registered artisans could sell certain kinds of handmade goods. These transactions, which eventually came to include the private provision of services, included many shadings of legality. Aron Katsenelinboigen accordingly argued that the Soviet economy should be thought of in terms of a spectrum of colored markets, and not just black versus red.

In sum, the black market was a product of regulated prices, shortages, and geographical disparities in the availability of goods, as well as a legal system that criminalized most private transactions.

See also: second economy

bibliography

Katsenelinboigen, Aron. (1977). "Coloured Markets in the Soviet Union." Soviet Studies 29(1):6285.

Julie Hessler

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"Black Market." Encyclopedia of Russian History. . Encyclopedia.com. 18 Aug. 2017 <http://www.encyclopedia.com>.

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Black Market

BLACK MARKET

The "black market" refers to the persistence of economic activity outside the bounds of the legitimate economy. Since colonial days there has always been a stratum of society that resisted being drawn into the formal market economy. The earliest black market involved virtually the entire existence of runaways the enslaved American Indians, abused indentured servants, and newly arrived African slaveswho sometimes escaped into the backwoods and reverted to a life of hunting and gathering or subsistence farming. During the "market revolution" of the early 1800s when ordinary settlers began using currency within the broad social division of labor, there were whole families that picked up and moved with the frontierthey trapped, shot, fished or otherwise raised their own food and made their own clothes.

The reasons that they avoided being drawn into mainstream American economy were various. Some faded into the woods to avoid serving out the terms of their indenture or to escape enslavement; some feared being conscripted into the army; others objected to paying taxes or having anything at all to do with the economic elite of the country or its institutions. Some, no doubt, just reveled in the bounty of the land and in the life of independence.

But remaining outside the market was sometimes ruled illegal. One example was the "Proclamation of 1763," in which the British government ruled that colonial whites could not move west of the Appalachian watershed. The motive for this was to prevent hostile encounters with the Native Americans and to integrate the European population into a colonial workforce. But the proclamation was a futile gesture: with no one to stop them the settlers kept coming over the mountains at the Cumberland Gap or at other crossings and they spread out into the Ohio basin.

Even after the War of Independence, the government of the United States tried to corral this population. In 1794 the "Whiskey Rebellion" in western Pennsylvania broke out over the government's attempt to tax corn whiskey. For a few months the rebels terrorized the "revenuers," or tax collectors. The rebellion was put down in the summer of 1794 with an extraordinary display of force, when President Washington and Alexander Hamilton (who, as secretary of the treasury, had recommended the tax in 1791) raised an army of 12,900 militia men, marched across Pennsylvania and dispersed the rebels.

This episode illustrates the relationship between the black market and the mainstream American economy. By refusing to pay the tax on liquor, the farmers were defending the black market, or the "informal economy," of barter and pseudo currency. The black market services social needs that the legal market cannot meet. Every time that the government passes laws making ordinary activity illegal, the boundaries of the "black market" expand to include this illegal activity. This happened in the 1920s when the 18th amendment to the Constitution ruled alcohol illegal. In more recent decades the same story has been repeated in the case of marijuana cultivation or the smuggling of cigarettes.

See also: Illegal Drugs, Prohibition, Whiskey Rebellion

FURTHER READING

Nash, Gary B. Red, White, and Black: the People of Early America. Englewood Cliffs, N. J.: Prentice Hall, 1982.

Sellers, Charles. The Market Revolution: Jacksonian America, 18151846. New York: Oxford University Press, 1991.

Tindall, George Brown and David E. Shi. America: A Narrative History. New York: Norton, 1999.

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"Black Market." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. 18 Aug. 2017 <http://www.encyclopedia.com>.

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black market

black market, the selling or buying of commodities at prices above the legal ceiling or beyond the amount allotted to a customer in countries that have placed restrictions on sales and prices. Such trading was common during World War II wherever the demand and the means of payment exceeded the available supply. Most of the warring countries attempted to equalize distribution of scarce commodities by rationing and price fixing. In the United States black-market transactions were carried on extensively in meat, sugar, tires, and gasoline. In Great Britain, where clothing and liquor were rationed, these were popular black-market commodities. In the United States, rationing terminated at the end of the war, but a black market in automobiles and building materials continued while the scarcity lasted. In the decades following World War II, as the countries of Eastern Europe were trying to industrialize their economies, extensive black-market operations developed because of a scarcity of consumer goods. Black marketing is also common in exchange of foreign for domestic currency, typically in those countries that have set the official exchange value of domestic currency too high in terms of the purchasing power of foreign money. Black-market money activities also grow when holders of domestic currency are anxious to convert it into foreign currency through a fear that the former is losing its purchasing power as a result of inflation. See also bootlegging.

See W. Rundell, Black Market Money (1964).

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"black market." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. 18 Aug. 2017 <http://www.encyclopedia.com>.

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black market

black mar·ket • n. an illegal traffic or trade in officially controlled or scarce commodities: they planned to sell the meat on the black market. DERIVATIVES: black mar·ke·teer (also black-mar·ke·teer) n. black mar·ket·er n.

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"black market." The Oxford Pocket Dictionary of Current English. . Encyclopedia.com. 18 Aug. 2017 <http://www.encyclopedia.com>.

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"black market." The Oxford Pocket Dictionary of Current English. . Retrieved August 18, 2017 from Encyclopedia.com: http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/black-market