Austerity measures will open the door to the black market

Chris Bowlby takes a look at how today's financial crisis could see a return to the old phenomenon of the black market.

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Illustration by Femke de Jong

When the mainstream economy faces crisis, there has always been a tempting alternative. The ‘informal’ or ‘black’ economy has a long and fascinating history in Britain. It has created new characters such as the spiv, the tax dodger and the unlicensed street trader. For beleaguered communities, it has been seen as a defence mechanism. Wealthier members of society have mixed moral disapproval with enthusiastic participation. Governments, for their part, have regularly tried to clamp down on the activity.

So historians will be watching with interest to see how today’s crisis creates new versions of this old phenomenon. Dr Mark Roodhouse of the University of York is completing a book on the black market in the Second World War, and the roots of a black economy that grew in relation to the welfare state.

But he notes that alternative economic activity and debate about its legitimacy was marked well before then – for example, as Britain responded to the late 1920s slump. Especially in areas like the north-east of England, where opportunities for ‘real’ employment collapsed, informal economic activity was regarded as an entrepreneurial and legitimate alternative. It created skills that were then adaptable to exploiting the wartime world of rationing.

There was widespread disapproval of those avoiding the rules of tax and paperwork. Yet, once wealthier consumers realised this alternative could provide them with goods and services they would otherwise have to do without, attitudes often changed. This other economy, argues Dr Roodhouse, created new bonds between the classes, new income streams that could make it “socially progressive”.

Governments sometimes felt the need to clamp down. This was partly to encourage an idea of shared sacrifice – ‘we’re all in this together’, as today’s government likes saying – and to persuade those sticking to the rules that they would not lose out. Ministers facing unpopular spending cuts have also found such clampdowns a useful way of promising pain-free extra income for the government.

Yet the gains have rarely been large, as enforcement is costly.It has also met substantial resistance. This area of research is especially interesting, revealing complex and shifting attitudes towards lawbreaking. People fed up with increasing regulation regarded the breaking of rules as “not really proper crime”, says Mark Roodhouse, or at least crime that was “victimless”. Again, such attitudes were not confined to those on lower incomes. Growing middle-class defiance of parts of the law had previously been attributed to the spread of mass motoring. But Roodhouse believes it may have emerged from earlier black market activity after the war, encouraged by Conservative rhetoric about freeing people from regulation.

Among the most intriguing indicators of attitudes are the heroes and villains that dissident economic behaviour creates. Some characters enter popular culture, such as ‘Del Boy’ in the 1980s BBC TV series Only Fools and Horses, a not very successful wheeler-dealer whose defiance of regulations would nevertheless have appealed to many viewers.

Earlier there were what the Labour politician Herbert Morrison denounced in the late 1940s as “spivs, drones, eels and butterflies”, whose black market activities were “anti-social”. But “demonising the spiv”, Mark Roodhouse points out, “proved singularly unsuccessful” as they were seen as colourful defiers of austerity authority.

Current government minister Vince Cable resurrected the spectre of the spiv at the Liberal Democrat party conference last autumn. However he was trying to link the term to bankers, not exactly part of the “black” economy even if widely suspected of not playing by the economic rules.

Modern bankers are unlikely to enjoy the more positive reputation of black market spivs. Their reputation, suggests Roodhouse, is more like that of wartime profiteers – seen as feathering their own nests without helping others to survive.

So we will see how far today’s economic troubles boost the informal, ‘cash-in hand’ economy, how far tax-dodging or welfare fraud increases, which new heroes and villains emerge. It is all part of the politics of austerity – the norm rather than the exception during the last century of British life.

 

Chris Bowlby is a presenter on BBC radio, specialising in history.

This series is produced with History & Policy. You can find out more about them and read their papers at www.historyandpolicy.org