Black markets and Authoritarian Rulers

Black markets are a common phenomenon in authoritarian regimes. According to Spechler  (2009), a black market also referred to as an underground economy is a place where the trading of goods and services outside a formal market that is established or else supported by a state. Most often, black markets thrive in most economies during war. A case in point is the third world economies where legitimacy of government is questionable. In a number of African economies, authoritarian rulers who are at war with their neighbors or dealing with internal uprisings against their regimes impose restriction in the use of resources i.e. food, gold, oil and rubber. These rulers impose such rationing use of resources to enable them fund their wars. Therefore, in such cases, black market sprouts to ensure that the rationed goods are in full supply though at exorbitant prices.  Price controls and rationing by both the third world and emerging economies increases relatively activity levels in the black market. Increase in black market activity is detrimental to trade and development of a country. This is because the benefits accrued by sellers are unquantifiable and does not benefit the government as they evade taxation.

            Authoritarian rulers together with their governments often encourage the sprouting of black markets through their insensitive policies that seek to ration the trading of some goods in a formal market. There policies are much aligned with their selfish interests i.e. the need to harness more profits from reducing the trading on some selected goods. This discourages economic growth as it impedes trade and development (Bingman, 2006).