The Underground Economy
The estimates of the scale of the present American underground economy range between $800 billion to $2.8
trillion per year. The American Revolution was essentially a conflict between a Colonial Underground Economy and the British
Empire.
Among the early problems for the newly formed United States was the Whiskey Rebellion of 1794. A conflict over taxes and
government services between Washington and Western Pennsylvania.
The history of civilization is a history of economic duality between a traditional economy and an underground economy. They are the yin and yang
of economic balance. Economic stability and prosperity favors the traditional economy. Economic uncertainty, excessive regulation, taxes and
growing unemployment favor the underground economy.
As any Government's economy tanks, the citizens' standard of living falls and unemployment jumps, the underground economy grows. As business
people find it increasingly difficult to make a living in the traditional economy, the underground economy grows.
The underground economy is all the revenues generated in a country that isn't reported to the government for tax, regulation or other
reasons. The best guess is these revenues represent between 20% and 30% of GNP in Western Europe and North America.
Rapid growth of the underground economy has been the trend in the United States and Western Europe for the past decade. In the last thirty years,
economists estimate that the underground economy has doubled. Currently, the underground economy is growing faster than the traditional U.S.
Economy.
In the United States, the IRS estimates that the underground economy may represent as much as 40% of the GNP. In some countries, like North
Korea, the estimate is that 80% of the North Korean GNP goes unreported as part of their underground economy. The Kyrgyz Republic's economy is
primarily an underground economy. Economic instability means a strong underground economy.
Historically, the underground economy has been a cash economy. The European Union's currency is the Euro. It's now competing for the underground
economy's business by having 500 Euro bills. It's worth more than five times the U.S. Dollar. We haven't printed a larger bill than the $100 bill
in over than 50 years.
One million dollars in $100 bills fits into a briefcase. But, one million U.S. Dollars worth of 500 Euro bills would fit into a
purse. The smaller bill stack is a major advantage in the underground world. The underground economy results from many factors, including
criminal activity. But the bulk of it arises from ordinary businessmen and workers who are evading taxes, government regulations or can't
find meaningful employment in the traditional economy.
The Underground Economy can be divided into at least six sub-economies. Scholars should name these sub-economies, since the members of one
sub-economy often have little in common with their counterparts in another sub-economy. The sub-economies appear in almost every country.
1. Criminals: From fraud to kidnapping, criminals don't tell their governments the amount of their annual incomes.
2. Politicians and Bureaucrats: Bribery is alive and well in the world. The only country that may have keep dishonest people from government
service is Singapore. When Mobutu Sese Seko left office, he had accumulated a $10 billion dollar fortune.
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