Zimbabwe: When the Black Market Becomes the Real Market
Zimbabwe: When the Black Market Becomes the Real Market by Jeff Thomas – International Man
For many years, I’ve described black markets not as the evil danger to economies that governments profess them to be, but as predictable and sensible reactions to the overregulation of official markets.
Black markets appear whenever an official market has become overregulated or otherwise unworkable due to governmental interference. They then thrive in direct proportion to the failure of official markets to function freely. They are, in fact, both a barometer and a checks-and-balances system for official markets.
Back in 2008, I commented on the growth of the black market in Zimbabwe, as that country slid from inflation to hyperinflation. At that time, the people resorted to the use of other currencies (most notably the US dollar) as black market currency. The government, desperate to force their people into the dying Zim dollar, made it illegal to use the US dollar, but this hardly made a dent in the use of what was clearly a more stable currency. The ban on the US dollar only succeeded in driving it underground. Commerce did not grind to a halt, and money did not cease to change hands. The only real change was that the Zimbabwean government was taken out of the monetary loop.
The significance here is that when a government corrupts its official market, a black market arises in equal measure to recreate a “free” market. Its very illegality assures that it remains free of regulations and functions effectively.
In 2008, the Zim dollar crashed through hyperinflation. (At that time, the largest denomination for a bank note was $100 trillion, and even that soon became worthless in terms of purchasing power.)
The government then attempted a series of measures that were, predictably, big on government control but did little to correct the government-created economic problem.