Why is the black market called the “black” market? This type of market has existed for as long as there has been trade, but the name “black market” appears to have become common after World War 2 and it is probably only called black because it is a shadow, or hidden market.
A black market is one that operates outside the laws of a country and the rules of commerce. There is no control, there is no protection for customers, and there is no way of knowing the providence of the things being sold. In some countries, the black market is the only place that many things can be bought because state run providers can’t provide. The black market is usually hidden from the government, although quite often government officials might be paid to look the other way. In some countries, the government officials might even be the ones running or supplying the things to sell on the black market.
The black market is different from legal commerce and trade, but there is also a grey market. Anything can be sold on a black market, but a gray market is a place where things are sold by people who are not authorized to sell them by the manufacturer. The gray market is possible because of international trade and the difference in prices between countries. If the price of something like a camera is X in one country, but it is a much cheaper price of Z in another country, an enterprising person can buy it from the cheaper country and sell it in the more expensive country for Y, which is more than Z, but less than X. The seller make a profit but undercuts the prices of the expensive country. This is a grey market.
The expression “black market” appears to come from 1931 and was first used in the Economist magazine. The magazine article was bout the trading of British Sterling on the black market exchange. There was a crisis with the pound sterling because Britain’s economy had been heavily damaged by World War 1 and they weren’t able to keep up with the gold standard. The world economy was crashing, sparked by the Great Depression in America. Most countries would be forced to leave the gold standard over the next few years. It was difficult to sell the pound because of government fees and regulations, so a “black market” for currency trading sprang up. This was the first use of the expression. It was probably only used because the market was shadowy and hidden.
The use of the word black market really took off after World War 2 in Britain. If you look at a graph of the usage of the black market over time, you can see that it rockets up in the late 1930s before peaking in the mid 1940s and then coming back down. The war tied up so many resources and rationing made so many things scarce that the black market was often the only way to get things. Although, one could argue that if the things weren’t on the black market, people might have been able to get them more easily.
There are a few theories about why it is called the “black” market. Here are two of them. The British government had a monopoly on graphite in the 17th and 18th centuries and they sold it around the world. It was needed for pencils, but also for armaments. People often stole and sold the graphite. They would get covered in graphite and have black hands, hence black market. Another theory is that it comes from the Scottish word “blathaich”, which means to protect. That is also thought to be the origin of blackmail as well. In that case, it would have meant a market that was protected, However, I still think the most likely explanation is because the regular market went on during the day and the black market was hidden in the shadows, or possibly at night. I guess there is no real way to know.
Black markets around the world take in an enormous amount of money. There is obviously no way of working out exact figures, but it is estimated that 36% of the GDP of developing nations and 13% of the GDP of developed countries comes from the black market. Some developing countries could not function without their black markets and they enable society to keep functioning even when the government cannot function. And this is what I learned today.
Image By User: (WT-shared) Shoestring at wts wikivoyage, CC BY-SA 1.0, https://commons.wikimedia.org/w/index.php?curid=22548113
Sources
https://www.oed.com/dictionary/black-market_n?tl=true
https://www.investopedia.com/terms/b/blackmarket.asp
https://en.wikipedia.org/wiki/Black_market
https://en.wikipedia.org/wiki/Grey_market
https://www.encyclopedia.com/social-sciences-and-law/law/crime-and-law-enforcement/black-market
https://www.stlouisfed.org/on-the-economy/2015/may/how-to-measure-the-black-market