Smuggling and Black Markets

Smuggling and black markets are two different aspects of illegal trade. Smuggling is one of many ways to feed black market demand for illegal goods or services. Criminal entrepreneurs can also supply wholesale and retail black markets through theft and counterfeiting, to name but two alternatives. Smuggling takes place across borders—for example, migrant smuggling across the U.S.-Mexico border—but such boundaries don't constrain black markets, which can be local, regional, national, international, or global in character. The variety of things traded illegally includes stolen goods, ration coupons, passports, diamonds, drugs, guns, tobacco, alcohol, human organs, sex, nuclear materials, information, and much more. Traders and their customers are just as diverse. The only thing these trades have in common is their illegality. The reasons for outlawing some or all aspects of a trade are as various as the things subject to regulation or prohibition.

The best-known global black markets today are the markets for illegal narcotics, such as cocaine and heroin. Grown and processed in the developing world, these drugs are run by smugglers into developed countries where the biggest retail markets are found and the highest profits can be made. The global traffic in humans receives almost as much attention from law enforcement agencies and the media. To distinguish between voluntary and forced illegal migration, the United Nations splits the trade into two categories: migrant smuggling and human trafficking, respectively. The boundary between these two trades isn't always clear. The illegal trades in drugs and humans, as well as that in arms and munitions, are ones in which there is a rare degree of international consensus as to the harm they cause and the need for regulation if not prohibition.

Without government regulating or prohibiting the production, distribution, or consumption of a good or service, a black market, whether supplied by smugglers, thieves, or counterfeiters, could not come into being. The wording of the relevant laws, their administration, and their enforcement create opportunities for avoidance or evasion by leaving loopholes in the edifice of control, determining the chances of being caught and punished, and fixing the penalties for breaking the law. As such, the past, present, and future of smuggling and black markets [Page 1295]are inextricably linked to the fate of national and international governance.

Smuggling of imports and exports has posed a problem for political authorities for as long as they have tried to regulate cross-border trade through taxation, quotas, or embargoes. But British experience, filtered through the writings of British political economists, has shaped contemporary ideas about smuggling. Smuggling flourished in the British Isles from the sixteenth to the nineteenth century, its supposed golden age, when the British state raised revenue by taxing foreign trade. The steep duties imposed on imported tea, tobacco, and spirits, especially brandy, encouraged established traders and criminal entrepreneurs to conceal imports from elsewhere in Europe, especially France and the Channel Islands, so as to evade tax. Traders seeking a profit could sell the goods for less than they fetched in the legal “white” market and still realize a higher return. War, a regular feature of this period, aided these traffics, as the Royal Navy diverted ships to guard the high seas at the expense of coastal patrols. Smuggling and black markets always flourish in such conditions, as protracted conflicts stretch government's resources, reducing its capacity to administer and enforce the law. Geography also facilitated the illegal trade.

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