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 slaves—who 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 frontier—they 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, 1815–1846. New York: Oxford University Press, 1991.

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