Many call it the unofficial or informal economy,

Many call it the "unofficial" or "informal" economy, others call it the "grey economy" but the old name satisfies it best: the "black economy". In the USA "black" means "profitable, healthy" and this is what the black financial system is. Macedonia should count its blessings for having had a black overall economy so strong and thriving to view it through the transition. If Miscuglio had to rely only on its endorsed economy it would have gone bankrupt sometime ago.

The black economy is made up of a couple of constituent activities:

These two types of exercises together are thought to comprise between 15% (USA, Germany) to 60 per cent (Russia) of the economic activity (as measured by the GDP), depending on the nation. It would probably be an underestimate to talk about that 40% of the GDP inside Macedonia is "black". This equates to 1. 2 billion USD per annum. The money generated by these routines is largely held in foreign exchange outside the banking system or smuggled abroad (even through the local banking system). Encounter in other countries shows that circa 15% in the money "floats" in the recipient nation and is used to finance consumption. This would translate to 1 billion free flying dollars in the hands of the a couple of million citizens of Macedonia. Enormous amounts are transferred to the outside world (mostly to finance additional transactions, some of that to be saved in foreign loan companies away from the long hand of the state). A trickle of money comes back and it is "laundered" through the opening of tiny legal businesses.

These are excellent reports for Macedonia. It means that when the macro-economic, geopolitical and (especially) typically the micro-economic climates will change - huge amounts of USD will flow back to Miscuglio. People will bring their money back to start businesses, to support family members and just to consume it. It all depends on the mood and on the atmosphere and on how much they will feel that they can rely on the politics stability and rational management. Such enormous flows of capital took place before: in Argentina after the Generals and their corrupt regime were substituted by civilians, in Israel once the peace process started and in Mexico following the signature of NAFTA, to say but three cases. These stores can be lured back and transform our economy.

But the black economy has many more important functions.

The black economy is a money economy. It is liquid and quickly. It increases the velocity of money. It injects much needed foreign exchange to the overall economy and inadvertently increases the effective funds supply and the resulting money aggregates. In this sense, it defies typically the dictates of "we know better" institutions such as the IMF. It fosters economic activity and employs folks. It encourages labour mobility and international trade. Black economy, in short, is very positive. With the exception of illegal exercises, it does everything that the official economy truly does - and, usually, more efficiently.

Therefore, what is morally The Best electronic cigarette wrong with the black economy? The answer, in brief: it is exploitative. Other parts of the economy, which are definitely not hidden (though would have liked in order to be), are penalized for their visibility. They pay taxes. Workers in a very factory owned by the state or in the government service cannot refrain from paying taxes. The money that the status collects from them is invested, for instance, in infrastructure (roads, phones, electricity) or used to pay for public expert services (education, defence, policing). The providers of the black economy enjoy these kinds of services without paying for them, without keeping the costs and worse: while others hold the costs. These encourages them, theoretically to use these resources less effectively.

And all this might be true in a very highly efficient, almost ideal market economy. The emphasis is at the word "market". Unfortunately, we all are living in societies which are regulated by bureaucracies which are controlled (in theory, hardly ever in practice) by politicians. These elites have a tendency to misuse and to mistreat resources and to allocate them in an inefficient manner. Even economic principle admits that any dollar still left in the hands of the private field is much more efficiently used than the exact same dollar in the hands of the most honest and well meaning and nicely planning civil servant. Governments around the world distort economic decisions and misallocate scarce economic resources.

Thus, if the goals are to encourage employment in addition to economic growth - the dark-colored economy should be welcomed. This is exactly what it does and, by definition, it can do so more efficiently than the government. The less tax dollars a authorities has - the less damage it does. This is an opinion shares by most economists in the world today. Lower taxes rates are an admission of this truth and a legalization of parts of the black economy.

The black economy is especially important in times of economic hardships. Countries in transition are a private case of emerging economies that are a private case of developing countries which used to be called (in reduced politically correct times) "Third Country Countries". They suffer from all manner of acute economic illnesses. They lost their own export markets, they are technologically backward, their unemployment skyrockets, their also and machinery are dilapidated, their own infrastructure decrepit and dysfunctional, these are lethally illiquid, they become immoral societies (obligations not honoured, crime flourishes), their trade deficits and budget deficits balloon and they are conditioned to become dependent on handouts and dictates from various international financial institutions and donor countries.

Read this list again: just isn't the black economy a perfect answer until the dust settles?

It enhances exports (and competitiveness through imports), it encourages technology transfers, that employs people, it invests in legit businesses (or is practised simply by them), it adds to the wealth of area (black marketeers are big spenders, good consumers and build real estate), it injects liquidity to an normally dehydrated market. Mercifully, the black economy is out of the reach associated with zealous missionaries such as the IMF. It goes its own way, unnoticed, unreported, unbeknownst, untamed. It doesn't pay attention to money supply targets (it is much larger than the official money supply figure), or macroeconomic stability goals. It plods on: doing business and helping the region to survive the double scourges of transition and Western piousness together with patronizing. As long as it is there, Miscuglio has a real safety net. The government is advised to turn a blind eye to it for it is a blessing in disguise.

There is one sure medicine: get rid of the population and both unemployment in addition to inflation will be eliminated. Without the black economy, the population of Macedonia examine have survived. This lesson should be remembered as the government prepares to be able to crack down on the only sector of the economy which is still alive and kicking.

Operational Suggestions

The implementation of these recommendations in addition to reforms should be obliged to be GRADUAL. The informal economy is an important strain valve for the release of interpersonal pressures, it ameliorates the interpersonal costs inherent to the period of move and it constitutes an important part of the non-public sector.

As we said in the body of your report, these are the reasons for the daily life of an informal economy and they must be obliged to all be tackled:

Reporting Requirements and Transparency

Reduction of Cash Transactions

Government Tenders

Databases and Information Gathering

Law Enforcement

Reforms and Amnesty

The Tax Code

Legal Issues

Customs and Duties

Public Campaign