Ever since governments began banning and licensing different parts of the economy, the black market has made sure people still have access to the things they need. Unstable governments always turn on their own citizens using price controls, heavy taxes, and even the threat of imprisonment to prop up their failing systems. As conditions inevitably deteriorate, as they have in Venezuela and Greece, the underground economy becomes invaluable to those living through the crisis.
Markets Survive in Venezuela
The shadow economy refers to more than just the trade of illegal goods. A grey market, for example, provides legal products distributed through illegal channels. Since basic things like toilet paper, medicine, and even food have disappeared from store shelves in Venezuela, the peer-to-peer network has become the only reliable way to secure life’s necessities. In desperate situations like this, the existence of independent merchants can mean the difference between life and death.
Even the value of Venezuela’s currency has started to move away from the government’s control. At one point, the official exchange rate was fraudulently set at 10 bolivars per U.S. dollar, while on the black market it was trading at 1,000 to one. This action hurt millions by suppressing wages across the country and eroding any remaining trust. Inflation has quickly become the most imminent threat to the Venezuelan people, stealing the value of their labor and savings. For years, the bolivar has experienced hyperinflation, increasing the cost of living almost exponentially.
The State’s desperate response was to institute price controls, but that has only led to shortages across the board. Luckily, the unregulated markets have been able to determine the true value of goods and provide vital support for the struggling communities. Many people think that so-called price gouging is unethical, but isn’t it better to buy what you need at twice the price than to not be able to get it at all?