By Baak Chan Yak Deng, Juba, South Sudan
March 28, 2017 (SSB) — Black markets typically exist because the regular markets are not going to provide a seller the highest possible revenue for an item he has for sale. Because black markets are illegal, the seller requires a substantially higher price than he would get on a legal market.
Reasons for regular markets to not support the higher price would be that the item being sold is illegal or the item being sold has some kind of price control on it that prevents the seller from getting the full amount a buyer is willing to pay.
Illegal items can include goods that have been banned, or goods that have been stolen and cannot be represented as legally obtained by the seller. Examples of banned items are certain arms and ammunition, drugs, books, videos and other compilations of information or ideas that have been prohibited in that jurisdiction.
Goods that have been stolen might be food or other essential items in an area where they cannot be produced or imported legally.
This happens during natural disasters or outbreaks of unrest that result in refugees fleeing to areas where insufficient resources for survival are present locally.
Warlords or thieves will hijack humanitarian aid and sell it on the black market, rather than allow it to be distributed according to need by the authorities.
Price controls can be established in an effort to ensure that lower income people retain access to essential items, but sellers seek to circumvent the price controls and find the highest bidders through the black market.
So, as you can see, to stop these activities requires different actions, depending on the circumstances in play at the time.
Some solutions could include increasing the cost of doing business in the black market, such that sellers of legal goods find the legal market to be the highest net revenue path again. This would involve an expensive detection and enforcement activity.
Other methods could include choking off the supply of goods to black market sellers, and only allowing regulated and licensed sellers with something to lose to be able to receive the goods that are being sold.
Another method is to destroy contraband more effectively, so it does not make its way to the black markets.
The author is Baak Chan Yak Deng is an economic commentator of south Sudan, a graduate in Bachelor of Science in Accounting and Finance at Star International University College South Sudan affiliated to Busoga University of Uganda and can be reached at firstname.lastname@example.org or 0954020202
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