The Recession and the Underground Economy

How will the recession impact the underground economy?:

The Other Chicago School, by Elisabeth Eaves, Forbes: You may think the economic meltdown is hitting bankers and Realtors hard, but spare a thought for members of the underground economy--prostitutes, drug dealers and purveyors of stolen goods, to name just a few participants. That's what sociologist Sudhir Venkatesh does, having spent much of the last 15 years studying, and sometimes living within, the underground economies of New York and Chicago.

"The recession is engendering more violence," says Venkatesh, a professor at Columbia University. "There's far greater competition for whatever meager resources there are. The folks down on Wall Street peddling drugs, they're fighting. The sex workers are trying as hard as they can to retain their clients," he says...

Venkatesh is watching black market workers slip into despair along with the rest of the population affected by the economy. Lest legal workers consider this a distant problem, one conclusion of Venkatesh's work is that the underground and mainstream economies are intimately entwined. "The boundaries are fluid, particularly in the global city where the black market has become instrumental--one might even say vital--to the overall economy," he says. In New York City illegal workers serve sex, drugs and takeout to the wealthiest members of society--or at least they did until financial sector layoffs began in 2008.

The underground economy includes a vast array of people providing services that are off the books but otherwise legal. ... And as business contracts, underground workers face certain problems unique to their status. They have no unemployment insurance or other benefits, and, with little protection from law enforcement, they tend to resolve disputes by physical means. ...

Venkatesh is struck by how much the black market resembles the wider society in which it is enmeshed. In the same Parisian banlieues that erupted in riots in 2005, he observed an "almost aristocratic," highly centralized criminal operation. In the ghettos of Chicago, by contrast, he observed underground workers convene an ad hoc court to solve a dispute. His dismisses the "culture of poverty" theory, which suggests that poor blacks in America don't work because they don't value employment. "People in America want to work," he says. They do so ever so industriously, even when they're breaking the law.