On the Other Hand...

The Underground Economy

by Jim Davies

Most readers of this newspaper are members of the Underground Economy. True, few may realize it, and in fairness, some would leave it rather quickly if they did; but it's a fact anyway.

Recall how, last year, the President had such difficulty in finding, for the post of Chief Law Enforcer, a candidate who had not broken the Law by operating underground? The first two or three he considered had employed nannies without paying Social Security "contributions" and so were part of the Underground whether they knew it or not. And being lawyers, we can suppose they knew it.

The Underground Economy, you see, consists of people who trade with each other without getting around to telling (or paying) the government. So if you ever paid a regular babysitter in cash, for instance, without filing an IRS Form 1099 to record the transaction and so make it taxable, you may be part of it. Likewise, if you paid someone in cash to fix the plumbing or do some yard work. I dare say a great deal of such work in New Hampshire is part of the Underground Economy, and I think that's just marvellous.

Lower Prices

Prices would be lower all round if all of our dealings were underground like that. If someone needs $100 to do some yard work, for instance, he has to reckon on paying the Feds alone 25% of what he receives by check and so must charge you $133 in order to leave himself with $100. So if all trading were underground, all prices would quickly fall (assuming of course a freely competitive market) by 25% just on account of the Feds.

Then we try to account also for the burden of the State and Towns, and save even more - but that's harder to figure so we'll leave the detail for another day. Suffice it to mention that States and Towns tax us by a further 20%, so the combined effect on prices if all our dealings were underground would be a drop of about 45%. To put the fraction the other way up, we'd all be nearly twice as well off overnight if all government parasites were removed.

Alas, government people are not fools and they know all that perfectly well, so they constantly take action to prevent it occurring. Let's review some of the actions they take - apart from brutalizing us in jail if they catch us.

First, they conceal these facts. I bet you never saw them published before you read this column! They strongly encourage the major media never to mention them. Some of the tools they use are the implied threats of broadcast license cancellation (in the case of radio and TV), of IRS Audits (for any and all who pose them a threat), and of non-renewal of White House and other Passes, without which major newspapers would be unable to function successfully.

Second, they bombard us with propaganda that says they are indispensible. Every night on TV we see stories of heroic policemen battling crime, or rescuing accident victims. Implied message: society would collapse without them, and the taxes that pay them. Truth: society would do no such thing; it would find other ways to perform those functions, very possibly much better and/or cheaper.

Third: they tell us that operating underground is unpatriotic, or evil, or (their word) "Black". Whenever someone gets a bargain without the blessings of government regulation and taxes, we get told it's a Black Market. Hogwash. It's "free" or "voluntary" or "white", but there's nothing evil about it at all.

Fourth: they make it extremely difficult to operate. One way is to encourage "squealers" - the IRS rewards people who squeal on their neighbors by saying they may have some unreported income. Even children have been encouraged to squeal on their parents, in a breathtaking emulation of Adolf Hitler, in the government's schoolrooms. And another way is to monitor the banks like hawks.

Honest Bankers?

Every check we write, and deposit we make, is microfilmed by our friendly banker. Of course, he has to do that for his own sake, so he can reconstruct the transaction in case of dispute, or uncover fraud; the problem is that a third party by whose permission he is allowed to exist can very easily examine those same records too, for its own purposes.

There is no need for banks to require government permission to operate, any more than hardware stores have such need; but they are forbidden to function without it, and that's the reason why. Uncle insists on having access to every single monetary transaction we make, so that he can regulate and tax it.

So it's easy to understand why Uncle so detests the practice by which we serve each other and pay each other with cash instead of check or plastic. And it's easy to see why Uncle is, as I write, preparing to insert a microchip in each and every dollar bill he prints up, so as to be able eventually to trace every step of its history - who held it, how long, and why. He just hates the idea of the Underground (or Invisible) Economy; and banks are his most reliable spies.

The recent news that a new invention may, as the years progress, frustrate this government scrutiny of our every purchase and sale, is therefore heartening indeed. I've mentioned it before here: it's a piece of uncrackable computer encryption software. The possibility of trading with each other with secure electronic "checks" drawn on invisible "banks" operating outside the government's licensed oligopoly is about to burst on a regulated world. The explosion of prosperity it will let loose could well dominate the history of the first part of the 21st Century. It's that big.

Watch this space for more details of this, the ultimate in Private Banking. And meantime, remember: while the nature of it prohibits accurate counting, it's likely that the Underground Economy, even repressed as it is today, already amounts to something like one trillion dollars a year in voluntary transactions. Just think what it will do when it's set free!

© Copyright Jim Davies 1999

Jim Davies lives in New Hampshire,
and enjoys contemplating which way is up.

The above is Edition # 71

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