January 15, 2016 • No 338 | Archives | Search QL | Subscribe



Business Lessons from the Underground Economy and the Ultimate Competitor
by Harry Valentine

Businesses and entrepreneurs who operate in the underground or unofficial economy seek to provide customers with products and services that they want to acquire in exchange for compensation, irrespective of governmental decrees. The practice has been going on since time immemorial. Businesses and entrepreneurs usually encounter obstacles and challenges that they need to resolve, such as paying a fee to transport goods along a private path. Rulers of ancient small kingdoms and principalities would charge a tax on the assessed value of goods to assure passage through their territory, as still occurs with the Suez and Panama Canals.

Throughout history, governments have at different times banned the passage of certain types of merchandise through their territory, or increased the fee for passage to such high levels that traders responded by seeking alternative routes to carry the goods and make deliveries. Such obstacles led to the development of the maritime sea route via the southern tip of Africa to carry herbs and spices between the East Indies and Europe.

Governments that seek to restrict the supply of goods or services for which there is a market only serve to raise the price, and indirectly invite very daring and bold entrepreneurs to enter the market to source, transport and distribute the restricted and banned goods and services. Government is like the ultimate competitor to the daring entrepreneurs who seek to serve the customers who are willing to pay the higher price. As a result, entrepreneurs have resorted to a variety of innovative strategies to answer the call of the market.

Some six months ago, the method of escape from a high-security prison in Mexico of their leading drug lord made news headlines, and more recently, his recapture also made headlines as a result of his near-escape. His downfall was apparently the result of him seeking fame by making contact with the movie industry. All scriptural teachings tell devotees to be humble and never boastful in their behavior, a lesson he ignored and that other entrepreneurs of the underground economy may now heed as they confront their ultimate competitor that seeks to terminate their business activities.

The ultimate competitor seeks to infiltrate and disrupt all areas of their business activities, including telecommunications, computers, sales and transportation networks. Such action presents a challenge to the entrepreneurs of the unofficial economy, leaving only the most competent, most ruthless, and most humble to remain in business, as their earnings climb higher. The lessons of the challenge present the official economy with a valuable business model on the role of innovation to assure economic survival in the face of ruthless and uncompromising competition. Some of this innovation has recently become public knowledge.


“Governments that seek to restrict the supply of goods or services for which there is a market only serve to raise the price, and indirectly invite very daring and bold entrepreneurs to enter the market to source, transport and distribute the restricted and banned goods and services.”


The televised news media has suggested that the Mexican drug lord may have employed engineers to design and build tunnels that enabled his escape from prison and from his hideout during a siege. Other news coverage has shown submarine type transport vessels captured by the ultimate competitor. While such coverage enhances the public image of the ultimate competitor, it also provides important lessons to others as to the kinds of mistakes that need to be corrected. The centuries-old, ongoing game of strategy between underground entrepreneur and ultimate competitor has been upgraded to a new level.

The record of estimated value of transactions by underground entrepreneurs, as made public by the ultimate competitor, reveals that the value has steadily risen along with the volume of trade. While the ultimate competitor has intercepted a growing volume of such trade, the percentage of trade being intercepted may actually be lower than in previous years, while the monetary value of the trade has steadily increased along with the personal wealth of some entrepreneurs. Mexico’s leading drug lord’s net worth is estimated to be in excess of $1 billion, earned by supplying customers with the products they want to buy.

Some elected public officials in some South American countries have suggested that the war on drugs has been a failure, citing the carnage that has occurred in cities and the countryside. However, officials in the leading economy of the Americas reject such a hypothesis as they seek to increase the number of officers to disrupt the trade in restricted and banned products. Very few officials seek to understand the cause of the existence of markets for such products. Participants in many recovery programs used such products to provide relief from the grief in their lives, for instance.

One noted counsellor suggested that before officials seek to condemn drug usage, first find out “what is right about drug use” and identify the problem in people’s lives for which its consumption provides relief. Public officials prefer not to recognize that once well-meaning government social programs have undermined people’s families and removed emotional security from children’s lives. Most of the nation’s public school system is riddled with ongoing problems such as peer bullying that negatively impact children. Some of the products of dysfunctional government social programs and dysfunctional government schools may become prime customers for the drug trade.


Harry Valentine is a free-marketeer living in Eastern Ontario.


From the same author

State Grinch Impedes Christmas Travel Plans
(no 337 – December 15, 2015)

Eastern Canada's Economy and Changing Ship Transportation
(no 337 – December 15, 2015)

Economic Development through Public Infrastructure Spending
(no 336 – November 15, 2015)

The High-Tech Hobbyist and the Volkswagen Emissions Test
(no 335 – October 15, 2015)

Political Attempts to Create New Economic Opportunity
(no 335 – October 15, 2015)



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