Beating up the undergroundIt wouldn’t be called the “underground economy” if it were easy to eradicate. The black market didn’t start hiding in the shadows as part of some treacherous scheme. It naturally developed there based on human instinct.
Let’s look at the sex trade. Those who advocate banning voluntary sex work are not participants in the trade. They raise ethical issues associated with selling and buying sex for money. But those involved in the trade say they’re engaging in economic activities of their own free will. Of course, forced sex trafficking exists but for the purposes of this article, let’s confine the topic to the voluntary aspects of the trade.
In his book “Defending the Undefendable,” libertarian economist Walter Block of Loyola University claims that the sex trade is no different from buying and selling milk and pie. No third party intervenes when you shop for milk or pie. But in the sex trade, people who don’t participate in the industry want to influence it. When prostitution is banned by law, it goes underground. In this way, the underground economy develops strong roots.
The same goes for ticket scalpers. Scalpers exist because demand exceeds supply. They provide a service to customers who want to watch a show or a game. They may have missed their chance to get tickets or they may just not want to wait in line. So they’re willing to pay a higher price. Since both the buyers and the sellers benefit, ticket scalping is unlikely to disappear.
For better or worse, the underground economy is a necessary evil that is a part of the economic ecosystem. The Park Geun-hye administration needs to be careful in dealing with it. No one is against the basic idea of taxing the black market. The definition of taxation is to collect tax on all sources of income. But the new administration is approaching the problem too aggressively. We’ve already heard harsh slogans like “Let’s beat up the underground economy.”
Park can start a war on the black market, but there has to be a strategy for protecting the weak players. Most notably, small-time street merchants are at risk. They haven’t seriously thought about paying taxes because they’re barely eking out a living. They ask, “If the government starts digging out the underground market, will we need to hide deeper?”
The law is well-intentioned but needs to be enforced with consideration. Sometimes justice can offer benevolence. Cracking down on pojangmacha tent bars is cutting off the nose to spite the face. The drive to root out the black market scares the petty merchants even though the government claims they are not the targets. To properly go after the taxes the underground economy isn’t paying, we need a more systematic road map. The government can avoid unnecessary misunderstandings by proposing a clear direction and a definitive schedule. Needless to say, the first objective should be high-income business owners, such as doctors and lawyers with private practices, as well as shady businesses of conglomerates that haven’t been accounted for.
*The author is the new media editor of the JoongAng Ilbo.
by Kim Jong-yoon