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Encyclopedia > Underground economy
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The underground economy or shadow economy consists of all commerce that is not taxed. This market includes not only legally-prohibited commerce (for example, drugs, prostitution, and gambling are illegal in some locales), but trade in legal goods and services because some income is not reported and consequently taxation is avoided, through money laundering, payment in cash (which almost never can be traced), or other means. The underground economy also includes transactions that governments may allow to be free of taxation, either by legal sanction or by simply choosing to refrain from enforcement of tax laws in certain markets. The term underground economy typically is not used to refer to trade in stolen goods, which may more appropriately fall under the definition of the "black market". Underground economy transactions are typically cash transactions to avoid traceability by governments or complex financial operations involving the use of multiple subsidiaries and tax havens, as the Attac NGO has underlined. The Clearstream scandal is a perfect example of such tax evasion. Based in Luxembourg, Clearstream practices financial clearing, which means it centralize operations of multiple banks, some based in tax havens. An autarky is an economy that does no trade with the outside world, or an ecosystem not affected by influences from its outside, and relies entirely on its own resources. ... Dual economy is the existence of two separate economic systems within one region; common in the less developed countries, where one system is geared to local needs and another to the global export market. ... A gift economy is an economic system in which the prevalent mode of exchange is for goods and services to be given without explicit agreement upon a quid pro quo, or the concept of a favor for a favor in the Latin language. ... A market economy (aka free market economy and free enterprise economy) is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. ... This box:  • • A mixed economy is an economy that has a mix of economic systems. ... An open economy is an economy in which people, including businesses, can trade in goods and services with other people and businesses in the international community at large. ... Participatory economics, often abbreviated parecon, is a proposed economic system that uses participatory decision making as an economic mechanism to guide the allocation of resources and consumption in a given society. ... This box:      A planned economy is an economic system in which a single agency makes all decisions about the production and allocation of goods and services. ... Media:Example. ... Anglo-Saxon economy or Anglo-Saxon capitalism (so called because it is largely practiced in English speaking countries such as Australia, the United Kingdom and the United States) is a capitalist macroeconomic model in which levels of regulation and taxes are low, and the quality of state services and social... The American School also known as National System in politics, policy and philosophy represents three different yet related things. ... It has been suggested that this article or section be merged with World economy. ... In anthropology, the hunter-gatherer way of life is that led by certain societies of the Neolithic Era based on the exploitation of wild plants and animals. ... Information economy is a loosely defined term to characterize an economy with increased role of informational activities and information industry. ... The term, originated by the Organization for Economic Cooperation and Development (OECD), describes nations of the Third World that have enjoyed rapid economic growth and can be described as middle-income countries. ... A palace economy is a system of economic organisation in which wealth flows out from a central source (the palace), eventually reaching the common people, who have no other source of income. ... This article is in need of attention. ... The Social market economy was the German and Austrian economic model during the Cold War era. ... A transition economy is an economy which is changing from a planned economy to a free market. ... A virtual economy (or sometimes synthetic economy) is an emergent economy existing in a virtual persistent world, usually in the context of an Internet game. ... Capitalism is an economic system in which the means of production are mostly privately owned and in which prices of capital and commodities are determined in a market which operates in the pursuit of profit. ... This box:  • • Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to civic assemblies that represent economic, industrial, agrarian, and professional groups. ... Natural economy refers to a type of economy in which money is not used in the transfer of resources among people. ... This box:  • • Socialist economics is a broad, and sometimes controversial, term. ... A token economy is a system of behavior modification based on the principles of operant conditioning. ... Image File history File links Portal. ... Commerce is the trading of something of economic value such as goods, services, information or money between two or more entities. ... A tax is an involuntary fee paid by individuals or businesses to a state, or to functional equivalents of a state, including tribes, secessionist movements or revolutionary movements. ... Retail selling Street selling is the bottom of the chain and can be accomplished through purchasing from prostitutes, through cloaked retail stores or refuse houses for users in the act located in red-light districts which often also deal in paraphernalia, dealers marketing merriment at night clubs and other events... A sex worker in Germany. ... Gambling has had many different meanings depending on the cultural and historical context in which it is used. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... The or underground market is the part of economic activity involving illegal dealings, typically the buying and selling of merchandise or services (for example sexual services in many countries) illegally. ... Cash usually refers to money in the form of liquid currency, such as banknotes or coins. ... Finance addresses the ways in which individuals, business entities and other organizations allocate and use monetary resources over time. ... A subsidiary is a corporation controlled by another. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC - Association pour la Taxation des Transactions pour lAide aux Citoyens) is an activist organization for the establishment of a tax on exchange transactions. ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... In banking and finance, clearing denotes all activities from the time a transaction is made until it is finally settled (see settlement). ... The First Provincial Bank of Taiwan in Taipei, Republic of China was formerly the central bank of the Republic of China and issued the New Taiwan dollar. ...


Some estimates of the size of the underground economy in the U.S. alone range to up to $1 trillion.


Measurement of the size of the underground economy is subject to a large margin of error. Economists seeking to measure its size have often looked at the volume of cash in circulation, although a large part of the underground economy takes place via bank accounts located in tax havens. Discrepancies between the growth of officially reported spending (GDP) and the growth of cash in circulation may be used to infer growth in the size of the underground economy, but these estimates are subject to a considerable amount of judgement, and are controversial.


The growth of online commerce may have increased the size of the undeground economy. eBay has over 40 million regular users, including international users. The sellers are legally responsible to pay taxes[1]. However, there is no report on how many actually do, and government rarely if ever intervenes to ensure that they do. eBay headquarters in San Jose eBay North First Street satellite office campus (home to PayPal) eBay Inc. ...


The underground economy, when trading decisions are not the result of coercion, is arguably a free market, since, by definition, it lacks government intervention. However, various governments have engaged themselves in the underground economy, thus blurring the line between public intervention and its absence. Furthermore, underground economy may result in monopolies and oligopolies, which contradict the very notion of "free market". Thus, the Mafia usually enjoy an important control over individuals. A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... This article is about economic monopoly. ... An oligopoly is a market form in which a market is dominated by a small number of sellers (oligopolists). ... The Sicilian Mafia or, simply, Mafia, more correctly Cosa Nostra is a secret society which first developed in the mid-19th century in Sicily. ...


References

  1. ^ Going Underground: America's Shadow Economy, FrontPage magazine, January 2005

See also

The or underground market is the part of economic activity involving illegal dealings, typically the buying and selling of merchandise or services (for example sexual services in many countries) illegally. ... Agorism is a radical left-libertarian political philosophy popularized by Samuel Edward Konkin III, who defined an agorist as a conscious practitioner of counter-economics (peaceful black markets and grey markets). ...

External links

  • Official March 2000 French Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe by French MPs Vincent Peillon and Arnaud Montebourg, third section on "Luxembourg's political dependency toward the financial sector: the Clearstream affair" (pp.83-111 on PDF version)
  • The Underground Economy from National Center for Policy Analysis (1998)
  • Going Underground: America's Shadow Economy by Jim McTague (2005)
  • undergroundeconomics.com: your source for hard-to-find economic statistics
  • The Underground Economy: Global Evidence of Its Size and Impact (1997)

  Results from FactBites:
 
Underground economy - Wikipedia, the free encyclopedia (549 words)
Underground economy transactions are typically cash transactions to avoid traceability by governments or complex financial operations involving the use of multiple subsidiaries and tax havens, as the Attac NGO has underlined.
Measurement of the size of the underground economy is subject to a large margin of error.
The underground economy, when trading decisions are not the result of coercion, is arguably a free market, since, by definition, it lacks government intervention.
Underground Economy (1493 words)
The underground economy involves the exchange of goods and services which are hidden from official view.
Since the 1930s, the underground economy continued to change as taxation and government regulation grew, while its illegal sector began emphasizing new activities.
Perhaps the most unusual part of the underground economy was Jane, a group founded in 1969 by feminists in Hyde Park to provide abortions.
  More results at FactBites »

 
 

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