From 2011.
“System D” is the new term for black markets. Black markets around the world are growing. The estimate is that it accounts for $10 trillion worth of production.
I think this is a low-ball estimate. System D accounts for far more. The heart of these markets is secrecy. If you think you can measure it, you have not understood how effective it is in concealing itself.
Still, at $10 trillion, it is second only to the USA. Only it isn’t second; it’s first. Why? Because the GDP for the USA counts the government’s share, which is at least 40%. Then there are the costs of regulation. The System D economy avoids these.
The black market is where people who want to buy get together with people who want to sell. There is no person with a badge and a gun telling them, “You are not allowed to do this.”
The growth of System D appears to be accelerating. In Third World tyrannies, this is where people learn how to meet customer demand.
In the USSR, it was called “Blat.” The black market was where you could get what you wanted.
In the West, the bureaucrats and tax collectors are holding back economic growth. More people conform to the laws. But, in the Third World, the masses have learned how to beat the system. What system? The regulatory system.
This is why the Third World is growing economically. This cannot be stopped. The dictators and their bureaucrats are on the defensive.
In System D, currency is king. Barter is queen.
Continue reading on Foreign Policy.
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Published on November 18, 2011. The original is here.
The Third World's black markets are raising individual wealth. Per capita wealth is increasing at rates not predicted by the United Nations and other international agencies. This is due to entrepreneurs. Wired put it this way in 2011.
If you think of System D as having a collective GDP, it would be on the order of $10 trillion a year. That's a very rough calculation, which is almost certainly on the low side. If System D were a country, it would have the second-largest economy on earth, after the United States.Wired: And it's growing?
Neuwirth: Absolutely. In most developing countries, it's the only part of the economy that is growing. It has been growing every year for the past two decades while the legal economy has kind of stagnated.
Wired: Why?
Neuwirth: Because it's based purely on unfettered entrepreneurialism. Law-abiding companies in the developing world often have to work through all sorts of red tape and corruption. The System D enterprises avoid all that. It's also an economy based on providing things that the mass of people can afford—not on high prices and large profit margins. It grows simply because people have to keep consuming—they have to keep eating, they have to keep clothing themselves. And that's unaffected by global downturns and upturns.
Wired: Why should we care?
Neuwirth: Half the workers of the world are part of System D. By 2020, that will be up to two-thirds. So, we're talking about the majority of the people on the planet. In simple pragmatic terms, we've got to care about that.
One estimate in 2012 put the total scope of System D at 23% of the world's economy.
This gets little attention by economists. Statistics are hard to come by, for obvious reasons.
This is what the Davos crowd ignores. There will be no global re-set. There is no way for the planners to control System D.
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