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Forget China, 'System D' Is World's Second Largest Economy (Infographic)
By EconMatters
A recent article at Foreign Policy noted that the $10 trillion global black market is now the world’s fastest growing economy, and that in 2009, the OECD concluded that half the world’s workers (almost 1.8 billion people) were employed in the shadow economy.
By 2020, the OECD predicts the shadow economy will employ two-thirds of the world’s workers. This new economy even has a name: ‘System D’.
According to an IMF economic study, black market, also called the shadow, underground, informal, or parallel economy, "includes not only illegal activities but also unreported income from the production of legal goods and services, either from monetary or barter transactions. Hence, the shadow economy comprises all economic activities that would generally be taxable were they reported to the tax authorities."
The IMF study also outlined the the potentially serious consequences of worlds fastest growing economy:
- The growth of the shadow economy can set off a destructive cycle. Transactions in the shadow economy escape taxation, thus keeping tax revenues lower than they otherwise would be. If the tax base or tax compliance is eroded, governments may respond by raising tax rates—encouraging a further flight into the shadow economy that further worsens the budget constraints on the public sector. (On the other hand, at least two-thirds of the income earned in the shadow economy is immediately spent on the official economy, resulting in a considerable positive stimulus effect on the official economy.)
- A prospering shadow economy makes official statistics (on unemployment, official labor force, income, consumption) unreliable. Policies and programs that are framed on the basis of unreliable statistics may be inappropriate and self-defeating.
- A growing shadow economy may provide strong incentives to attract domestic and foreign workers away from the official economy.
Based on an estimate by BusinessWeek, “[G]iven US GDP of $14.26 trillion, the world’s largest, that could still be as much as $1.2 trillion in taxable income that slips through Uncle Sam’s fingers each year."
In fact, shadow economy is part of the contributory factors to the current Euro crisis in the context of reduced government tax revenue and driving up consumer price levels. The IMF study showed in the 21 OECD countries in 1999–2001, Greece and Italy had the largest shadow economies, at 30% and 27% of GDP, respectively. In the middle group were the Scandinavian countries, and at the lower end were the United States and Austria, at 10% of GDP, and Switzerland, at 9%.
More importantly, the rise of System D highlights the inadequacy of global governments policies, processes, red tapes, and bureaucracies. This infographic lays out everything about the black market, how it affects our economy and our culture.
Further Reading - Debt Crisis 2012: Forget Europe, Check Out Japan
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I think you're right; this is designed to help bring about greater acceptance of having all transactions done through traceable electronic credit/debit systems, to move towards banning paper and coin currencies altogether.
"to move towards banning paper and coin currencies altogether."
..............
And the WHY of this direction? Bankers can take a slice of every electronic transaction... not so with paper, barter, etc.
Local paper just ran a story about a lady getting $10 from an ATM and the transaction fee was $5. Fuck the bankers.
I'd reckon upwards of 50% of people under 35 are already in "System D", not by choice, but in order to survive. Their elders fucked them over big time. If you're a Boomer, have fun trying to collect the benefits you so "deserve".
I think you are wrong. It is as said. The more restrictive governance becomes and the less faith people have in government (I can tell you it is now quite low and headed from the upper left to the lower right), the more people say Fok it and feel justified in defying the law. There are innumerable restaurants and tradespeople who get paid in cash and they do not report I can assure you. I played mini-golf last summer at a place that ONLY takes cash. They are relatively rural (barn, homestead) artists and run this artistic sculpture garden/mini-golf to supplement income. I guarantee you they are not reporting any of it. I just got an extrusion pump replaced by a plumber in the yellow pages we have used for years and he demanded payment in cash, over $700 ($500 for the pump but still). When we need any HVAC work done, the guy gets paid in cash. I would guess that all that cash business that is unreported is bigger than the drug trade and probably even bigger than all the illicit trades combined.
It will change when people have a renewed sense of faith in the fairness of the legal and governance system. Unfortunately that will only happen when the seats of governance are no longer considered personal sinecures that run in fee simple to the current occupant. And that will change only when we have term limits. Unfortunately the Supreme Court foreclosed that option when they invalidated term limits about 10 years ago. And that dear children is one of the main reasons why the American Experiment will eventually end, probably in the lifetime of my children or their children.
You are amazingly ignorant, and evidently haven't left the house, let alone the country, in several years.
Street vendors are everywhere in much of the world. You can hardly sit down at a restaurant in Mexico without being accosted by peddlers of all sorts. The restaurants themselves are often "informal" economy. Stand in the street in La Paz, BCS and watch Mexicans and tourists swarming the food stands down by the malecon. The Mexican economy is estimated to be at least 30% off the books.
I was in Medias, Romania not long ago and noticed that most commerce was taking place at street stands and impromptu markets. I stood outside the passport office in Sibiu and was almost immediately accosted by Roma (gypsy) people offering to sell me European furniture, clothes, antiques, whatever.
I've never been offered drugs in a foreign country, but I've been offered just about everything else, from stained glass windows to motorcycle jackets to giant tiger shrimp.
Wow look at how much the swiss spend on prostitutes. Must be all those central bankers. Whores must be doing a land-office business in Davos right now. Everyone knows that bankers are filthy pigs.
I expected a lot of prostitution in the Philippines, but more than Thailand? Wow.
And the Turks and Israelis love their whores too. Who knew.
"The Mexican economy is estimated to be at least 30% off the books."
Lopez Obrador (mex prez candidate) estimated Black Market of 50% back in 2006...
Imminent Crucible
I've never been offered drugs in a foreign country
I could not walk 50' in downtown Nassau, without being pushed into a wall, and offered drugs, any thing I wanted.
Had to leave downtown.
Sickening
Only been to Nassau once. I didn't get any drug offers. I probably looked too poor to afford to buy drugs. They did try to sell me paintings, but nothing there looked half as good as the artwork for sale in the square at Port-au-Prince. Come to think of it, the Haitians didn't offer me drugs, either.
Were you wearing a Grateful Dead jacket?
I know many expats Brits and Americans who work overseas on a 90 day visitors visas and are known as perpetual travelers. They do not pay taxes anywhere, as non-US companies overseas do not report incomes. Think about doubling your salary and then it is actually quadrupled since the 50% tax stays with you.
Okay, I'll bite. Provide some company names and links please.
Well, we bring much of our produce to a local farmer's market. many long term unemployed willing to barter for produce, some even volunteer their labor. Wake the fuck up dude. "Selling pencils" is the best you got? Just calling it like I see it. Where the fuck do you think those long term unemployed are going?
Considering the relationship between US citizens and rule of law, knowning that the US is stolen from the Indians, factoring in that US citizenism is spreading all accross the world, destroying every other alternatives in the doing, the last question is rhetorical.
US citizenism is as US citizen does.
Where have you been, bro? You're pithy sarcasm has been missed. It would revert from sarcasm to truth if you abandoned the 'us citizen' crap, and substituted 'us ruling class'. Don't you know that elites run the world and always have? Why are you blaming average citizens, who still think (as do billions elsewhere) that their criminal government is actually working for what is 'best'? Ignorance is not always malfeasance.