Counter-Economics by Samuel Edward Konkin III
Introduction:
by Samuel Edward Konkin III
Are you reading a self-help book, a personal liberation manual, a financial
advisory, an esoteric economics text, an anti-political platform, a muckraking
history, a sensational expose of underground life, or an anarchist cookbook?
The answer is all of the above.
That may sound confusing, but the main purpose of this writing is to extract
unity from these topics usually unconnected in most minds today. I hope it will
indeed amuse and excite the reader about another, accessible way of life, give
new explanation to some of the vexing problems that beset our social life, and
perhaps solve a few. Along the way, a few more burdens may be lifted off the
back of many of the oppressed -- especially those who have chosen to fight back.
Above all, may some of you be moved to act -- on your own behalf.
That is where it begins -- with the self. If the individual has rights and
chooses to exercise them in the teeth of organized, institutionalized
opposition, Counter-Economics begins. One need not be an anarchist or even much
of a libertarian to counter-economize -- and most to date have not been. Yet if
a socialist or fascist or even one devoid of ideology or thought learns and
applies counter-economic acts, the purest libertarianism has been, to my mind,
advanced.
To that end, I have deliberately left the philosophical implications of
Counter-Economics to the end of the book. And to make sure you've found wading
through the subject exciting enough to take a plunge into deeper theory, I've
put the economics next to the end.
This is not meant to lure the resistant or to trap the unwary. This book is
neither treatise nor manifesto; the author has those available elsewhere.
Counter-Economics is meant to make Counter-Economics as accessible to as many as
possible.
Up front, then, with the deep stuff in the back, here's what Counter-Economics
is. Economics is the study and practice of human action involving voluntary
exchange. Establishment "economics" is the presentation of explanations of
human action in such a way as to benefit the establishment or ruling segment of
society. The former is an attempt at science; the latter is con-artistry.
Counter-Establishment Economics is the study and practice of that part of human
action committed in spite of the official legitimacy (government legislation) to
the contrary.
As counter-establishment culture proved unwieldy in the 1960s and was shortened
to counter-culture -- though not without subsequent misrepresentation of its
aims -- counter-establishment economics will be shortened to counter-economics.
To avoid misrepresentation, what I refer to as Counter-Economics will be
capitalized consistently and defined in this way:
Counter-Economics is the theory and practice of all human action neither
accepted by the State nor involving any initiatory violence or threat of
violence.
If this formulation appears a bit arcane, it is required explicitly to exclude
murder and theft from Counter-Economics. Governments have a near-monopoly on
murder (war) and theft (taxation and inflation) and we can leave the few
freelance statists out to give us a sharp, clean distinction.
Given, then, the libertarian moral code of not harming your fellow-sentient,
Counter-Economics is doing what you want, when you want, for your own good
reasons. And, with that, we push the theory to the back and get ready to survey
the field.
The focus of the book is to show the reader what Counter-Economics is. We'll
look at it in every aspect of life in all parts of the globe and beyond. Black
market; grey market; dissidence both foreign and domestic; tax resistance;
economic feminism; underground schools and shopping centers; gold, silver,
barter, and illegal aliens; creative computing and secure information systems;
gun-running and Bible-smuggling; life extension and intelligence increase;
self-fulfillment and psychiatric resistance; sensational exploits and cold,
hard, historical revisionism; alteration of inner space and outer space -- it's
all here.
After seeing for yourself, and then understanding in full, if you wish to try
it... you'll find that you already have! If you wish to expand your freedom,
you'll undoubtedly find some new ideas. Most important to me, if you are
already expanding your freedom and were concerned about its validity, you
hopefully will see the picture in full and judge for yourself your rightness.
If any counter-economist changes her or his mind about giving up a life of free
marketeering to return to the "straight," sick, statist society, this book will
have half-fulfilled its purpose. And if others perceive her or him in a new,
more sympathetic light, the other half is fulfilled.
And now on to real human action. -- SEK3
PART ONE
Chapter One:
Tax Counter-Economics
"A vast underground economy rivaling the entire output of Canada in size,
involving as many as 20 million people and generating hundreds of billions of
dollars in untaxed income, is thriving beneath America's economic mainstream.
All told, more than half a trillion dollars a year -- about one quarter of
recorded output in the U.S. -- is involved, according to some estimates. Even
the most conservative judgments start at nearly 200 billion."
U.S. News & World Report
Cover story, October 22, 1979
"There's something happening here. What it is ain't exactly clear..."
-- Stephen Stills, "For What It's Worth"
Something called the "Underground Economy" has been discovered by the
large-circulation, "Establishment" media. The Los Angeles Times, for example,
during the years that the author kept close watch, ran the following stories:
* July 17, 1979 -- "100 Billion 'Underground Economy' Revealed" (Section IV,
Pages 1 & 11). "'Anybody who has looked at the subterranean economy will tell
you it's very large,' Allen Voss of the General Accounting Office told the House
Ways & Means oversight subcommittee.
"Officials describe the underground economy as consisting of persons who report
less than they earn, including those who engage in bartering or work for cash
only, and those who don't even bother to file a return."
* September 18, 1979 -- "'Underground Economy' Comes Up for Air" (Part II, Page
5). Columnist Robert J. Samuelson complains, "Government agencies have a way of
conferring respectability on ideas, and that's just what the Internal Revenue
Service has done for the 'underground economy.' Until recently, this was just
another random subject for newspaper and magazine stories. Now the IRS has
delivered a heavy report estimating that perhaps one dollar in every ten of
income has gone underground, and is not reported for tax purposes. Suddenly we
have a full-scale social problem."
* January 9, 1980 -- "Money, a Question of Give and Take," subtitled "Tax Man
Cheated Out of Billions" (Part IV, Page 5), leads off with "'I feel wonderful
about not paying taxes,' says R. M. Jones. 'I don't like to support a
paper-tiger government and I don't like taking care of people on welfare.'"
* April 2, 1980 -- "Evasions of Billions of Dollars In Income Tax Feared,"
subtitled "U.S. Concerned Over Unreported Funds Flowing Into Overseas Bank
Accounts" expands the concept internationally. "The abuse of so-called
"offshore' accounts by wealthy Americans bent on tax evasion -- as well as by
narcotics traffickers, corporate bribe-payers, and others -- has reached
unprecedented proportions, according to many experts."
* April 7, 1980 -- "On the Side of the Lawless," subtitled "Americans' Tolerance
of Underground-Economy Tax Cheats Costs Them Billions," is an editorial attack
by Times editorial writer Ernest Conine. Says he, "Most Americans are inclined
to wink at such goings on. That isn't very smart, to say the least. The fellow
who cheats on his income taxes, whether he's a carpet-layer or a
multimillionaire businessman, is stealing from honest taxpayers just as surely
as if he stuck a gun in their ribs."
* April 17, 1980 -- "More and More Refusing to Pay Taxes," subtitled "Resisters
and 'Patriots' Insist U.S. Has No Right to Levies" does not mention the
"Underground Economy" anywhere (Part 1-C, Pages 7-8). Yet it begins, "A growing
number of Americans are refusing to file income tax forms or to pay Uncle Sam
another penny. Most of us spend several months a year working for the federal
government, but the tax resisters have told the government, 'I quit.'" More on
this anomaly later.
* April 18, 1980 -- "Biggest Tax Swindle of Them All" headed a letter column in
the Times responding to Conine. Six missives were printed, all critical of
Conine's defense of taxation, though two supported taxation by offering an
alternative, the Value-Added Tax or VAT. Two others contained this one-word
sentence in riposte to Conine: "Nonsense!" Another said, "Conine's inept
suggestion that we hire more auditors is asinine!"
* August 18, 1980 -- "IRS Acts to Curb Rise in Tax Rebels," subtitled "Ranks
Swell Despite Convictions," again does not mention any "Underground Economy."
(Section l, Page 1)
* January 10, 1981 -- "Churches May Be Auctioned Off," subtitled "15
Congregations Refusing to File State Tax Forms" expands the issue again from
individuals and organized tax rebels to churches (Page 30, Part I). "At least 15
California fundamentalist churches involved in a growing revolt against filing
tax forms are in danger of having their properties auctioned off by the State."
Yet again, no "underground economy" is mentioned.
Nor is this confined to the L.A. Times or U.S. News. Jack Anderson's column
of December 29, 1979, begins, "Honest American taxpayers are being ripped off by
an ever-growing economic 'underground' of tax chiselers whose unpaid taxes must
be made up by the law-abiding population. Estimates vary on the size of these
tax guerrillas' annual depredations, but some experts believe that their illicit
tax-free transactions make up as much as one-third of the total American
economy. Perhaps the most alarming feature of this shadowy army of cheaters is
that many of its recruits are not hardened underworld figures, but respected and
seemingly respectable citizens."
Columnist Sylvia Porter, "Your Money's Worth," devoted three columns (November
10-12, 1980) to the "'Invisible' Underground Economy." She concludes
apocalyptically, "Compliance must be the answer if we are to avoid the danger
that our whole system will fall apart."
Perhaps her vision is not unwarranted. Zodiac News Service, August 1, 1980,
sent out the following story:
(ZNS) The Internal Revenue Service recently decided to run a check on its own
employees by auditing the personal income tax returns of 168 of its own
auditors, who were selected at random.
The IRS reports that 110 of those audits are now complete, and that exactly half
of the Service's own auditors made serious errors in their own personal returns.
Of the 55 inaccurate returns, 13 overpaid their taxes by an average of $129.
The remaining 42, however, underpaid Uncle Sam by an average of $ 720. This
$720 figure, incidentally, is more than double the public's average underpayment
of around $340.
The IRS was going to expand its audit of its own auditors, but has since
canceled that plan after the auditors labeled the scheme "outrageous," and
"very, very unfair."
And the "threat" is not limited even yet. Thomas Brom, for Pacific News
Service, November 28, 1980, in the article "America's Booming 'Outlaw' Economy
-- Jobs for Many, Protection For None," begins with this dire warning as an
"Editor's Note": "The 'outlaw' or 'underground' economy, where cash pays the
bill and the IRS is shunned, is growing by leaps and bounds, according to recent
estimates. It has come to function as a kind of shadowy catch-all survival
system and unofficial welfare program for the growing legions of unemployed.
But while it offers survival for many, it provides little welfare and no worker
protection, and it represents a serious threat to American unions, reports
Thomas Brom, PNS economics editor."
Finally, nothing is a popular phenomenon if it's not reported in People
magazine. So September 1979, page 30, a full-page photo of the General
Accounting Office's Richard Fogel, captioned "If the government doesn't take
action, the integrity of our whole tax system could be threatened," is headlined
"A New U.S. Study on Tax Evasion Is Another Reason To Shout: I'm Mad As Hell
And I'm Not Going To Take It Anymore."
Something is going on here. What it does not seem to be is the "tax rebellion"
of the amateur constitutional lawyers. What it does seem to be is highly
successful and most irritating to the State, its Establishment, and their
defenders.
What The "Underground Economy" Is
"Underground Economy" conjures up a vision of some subsociety internal to the
general society at large, with consciousness, structured organization, and a
subculture of customs, traditions, and perhaps even art and literature. The
picture of the underground shopping center in J. Neil Schulman's Alongside Night
(Crown, 1979) would fit. But that's set in 2001 -- speculative fiction -- and
no one claims such a subsociety exists today. Furthermore, Schulman's talking
about the Counter-Economy, something containing a lot more than tax evasion. So
what is the current "Underground Economy" and what is its relation to the
Counter-Economy, if any?
The U.S. News & World Report gives the broadest definition of the above sources
and the most examples: "In brief, the underground economy involves all the
economic activity carried on every day that, for a variety of reasons, escapes
tabulation by the nation's official economic pulse takers -- from moonlighting
and roadside fruit-stands sales to high-level corporate chicanery and
multimillion-dollar skimming operations at gambling casinos." So far, it is
broad enough to encompass the Counter-Economy. But then, U.S. News narrows it:
"This 'work force' is dominated by the self-employed -- from lawyers, doctors,
and accountants to shopkeepers and tradesmen -- and by the working poor. But it
includes many from other slices of society, too -- those who, among other
things, pad tax deductions or underreport interest, dividend, rental, or royalty
income."
Counter-Economics includes everyone. (See later chapters for a proof.) That is,
a counter-economic activity is any human action that takes place without the
approval of the State. And since laws cover almost every human endeavour, often
prohibiting both the action and its corresponding inaction, everyone to at least
some small degree must bend or break laws simply to exist.
U.S. News sees considerably fewer people in its "Underground Economy." "In ways
small and large, 15 to 20 million Americans probably are involved, says Allen R.
Voss, who supervised a study of the problem by the General Accounting Office.
Of these, as many as 4.5 million derive all their support from subterranean
income, according to Peter M. Gutmann, an economics professor at City University
of New York." In short, the "Underground Economy" is the most hard-core
committed sector of the tax-law breakers of the Counter-Economy.
Who are the taxless? Several examples, from housecleaning widows to housewife
tailors to roadside vegetable-vending farmers are given. This one may be
archetypical: "A struggling 24-year-old actress in New York City holds down
three jobs to make ends meet: She works as a bartender, a job that pays her $30
to $35 a day, including tips; helps out at her father's jewelry shop on
Saturdays, and appears occasionally in her own cabaret act at a Greenwich
Village night spot.
"All her jobs are off the books. Her employers, in other words, don't withhold
any taxes from her pay and don't contribute toward Social Security or
unemployment insurance as they are required to do. 'I'm completely
underground,' she says. 'There are no records of anything I'm doing.'"
She exhibits no guilt or repentance over her failure to account to the State for
her action. One wistful note is struck by the housecleaner. "'As I get older,'
she says, 'I'm starting to think, maybe I should have had my people pay on
Social Security for me. But this way I pay no taxes, no nothing.'"
While the "Underground Economy" concept is heavily weighted toward tax evasion,
the interconnectedness with other counter-economic activities such as Social
Security evasion, labor regulations avoidance, health and safety inspection
noncompliance, and illegal immigration is obvious
The "Underground Economy" as defined by the IRS, et al., at most includes our
actress and her employers. But remember, anyone who deals with her and is aware
of her illegal activities is an accessory and co-conspirator. Thus, all her
friends, relatives, co-workers and probably many of her customers, fellow
thespians, and even barflies are involved in the Counter-Economy. This "ripple"
effect is characteristic of Counter-Economics; one need not belabor its effect
on the majesty and authority of the State, its agents, and bureaucrats, on those
even peripherally involved.
Every non-statist job or enterprise is capable of some degree of
counter-economizing. Some industries seem to have a higher affinity for
Counter-Economics than others. U.S. News delves into those commercial sectors
which, to maintain the metaphor, have a tendency to "submerge." Leading the way
is that heterogeneous set of employment opportunities known as moonlighting.
"A whole panoply of moonlighters toils away in the underground economy. One
such man, a young New York musician earned $7,500 -- almost all of it in cash --
by giving guitar lessons last year. But he declared none of it on the joint
return he filed with his wife. He didn't list the income, he says, partly out
of need and partly out of anger. His parents paid high taxes for years, he
says, yet he was denied government loans and grants available to others to help
with his college expenses because his parents' income was too high." The
connection between anti-state resentment and counter-economic motivation is
indicative of the implicit libertarianism of Counter-Economics; the fact that it
remains unfocused -- currently -- might well interest libertarian strategists.
"A moonlighter in Indiana works in a machine-tool shop during the week and
oversees a private trash-disposal facility on weekends, where he takes in about
$100 in unreported income each week." While hard-core counter-economists are
more common than expected (e.g. the actress and musician above), most people
are partially counter-economic.
"Millions who work at regular jobs but are not subject to withholding taxes --
teachers, taxi drivers, door-to-door salespeople, pollsters, insurance agents,
and real-estate brokers, among them -- are accused by officials of being a major
element in the underground economy. Some 47 percent do not report their
earnings, the IRS claims." Interestingly, U.S. News fails to mention waitresses
and waiters anywhere in their article; a surprising omission considering the
size of that Amazon Army (largely female) with largely unreported tips.
How The Counter-Economic Taxless Do It
How does it work? Fundamentally, as the Internal Revenue Service admits in its
ironic way, the income tax is based on voluntary compliance. Where the
compliance occurs, it obscures over, is in the information about, not the
collection of, its plunder. To put it simply and bluntly, you have to turn
yourself in (or have someone you trust do it for you) to get taxed. Breaking
down the State's access to information about its victims is a general principle
of counter-economic mechanics; the other method involves letting them know when
they are impotent to act -- which does work in certain fields but is hardly
"underground."
This then is the real meaning of "underground" in this context -- out of "sight"
of the eyes of the State's informants and enforcers. How does this work in
day-to-day practice?
Nearly all the examples given use cash -- and complicity. Cash is untraceable;
in effect, even if the State suspects, as long as they have the present legal
system they cannot prove or convict. They need records -- and testimony. The
complicity is, of course, bought outright with a discount. (In a few rare
cases, especially with artists, artisans, and special drug smugglers, complicity
may be purchased by the uniqueness of the product; i.e., you can't get it except
by underground agreement.)
Another method, however, operates by the obverse method -- no cash. Says U.S.
News, "Barter transactions are thought to be another sizable source of untaxed
income. A Flint, Michigan, attorney was given a $300 antique credenza by a
local resident he represented in a child-support matter. The attorney often
swaps services with his clients but does not report as income the value of the
items he receives. 'I don't feel guilty about what I do,' he says. 'The
government is ripping me off.'" Again we see the anti-state resentment
justifying illegality -- and the ripple effect in this one lawyer's
"contamination" of a whole town full of clients with counter-economic
complicity.
"Another man, a self-employed commercial illustrator and copywriter in Chicago
who is fed up with high taxes, says he does little cash business but a lot of
bartering. He writes advertising copy for a liquor store in exchange for
alcoholic beverages he needs for entertaining, and does illustrations for an ad
agency in return for typographical services. He figures that the bartering
accounts for 5 to 10 percent of his business." Underground enterprise -- like
the overground type -- seems limited only by ingenuity. Of course, the
"overground economy" is also limited by the State's control and regulations.
Oh, yes, how does this artist feel about his outlaw activities? "'These trades
happen so frequently, on a low economic level, that I can't keep track of how
often I do it,' he says. Hiding it from the tax collector would have bothered
him a couple of years ago. No longer. 'Now I think of it in terms of economic
survival. Taxation has become legalized theft.'" He sounds like an ideological
libertarian.
Besides these two methods of keeping income "off the books" to keep it from the
tax men, another method is to manipulate the books themselves. One group of
retirees collect winnings at race tracks for big-time bettors, then turn them
over to their backers who avoid high-bracket income levels. Expense accounts
can and do absorb all sorts of transactions to be kept off the personal income
books. "Skimming" is nearly universal in small storefront businesses, shops,
and taxis: keeping a portion of each day's take without recording it. A jeweler
interviewed by U.S. News does $10 million worth of business a year, 25 to 30
percent of it in cold cash. "He says he thinks 10 to 20 percent of all the
income generated 'on the street' goes unreported." Massive. And he sounds like
Ayn Rand: "I started with nothing and built up a business of millions. The
government started with billions, and they keep going in debt. They just waste
the money."
And finally, one can simply double the books, one for you and one for the State:
"A Houston barber keeps two sets of books, one for herself, one for the IRS.
Most business is in cash; she pockets about a third of it, or $200 a week,
without reporting it."
One last U.S. News example puts it all together. "A California merchant who
boasts that he hasn't paid 1 percent of income tax in five years offers this
how-to-do-it advice on skimming: 'The most important thing is consistency. If
you skim, skim the same amount each year. If you let one year go by without
taking anything off and then take 20 percent the next, you're going to get
caught.
"'Even an IRS audit doesn't mean the end of the world. You are usually notified
in advance. All you have to do is buy some new receipt books and make them fit
your figures. As long as the receipts are numbered consecutively, and the
figures jibe, you're O.K. In fact, the year I cheated the government was the
year I was audited. The upshot was the inspector ended up congratulating me on
what fine shape my records were in. Cheating the government is so easy it's
pitiful.'"
What Causes The "Underground Economy?"
The Counter-Economy exists because the State exists. Every intervention by the
State in the free market dislocates supply from demand. Besides being the
coercive curse that libertarians denounce, each intervention creates an economic
opportunity for an entrepreneur to figure out how to supply demand that the
State prohibits or cheaper than the State allows.
In the special case of the taxless "Underground Economy," every tax is a
challenge. Let's take a look at New York City. Says U.S. News: "New York
City's black market in bootleg cigarettes, which by some estimates accounts for
up to half of all sales of the tobacco product in the city now, could be denying
the city and the State 'hundreds of millions of dollars a year' in revenue, says
David Durk, assistant commissioner of enforcement for the city's Department of
Finance. The reason for the burgeoning bootleg market: The high excise tax,
which totals 23 cents a pack."
Unique? Read on. "New York City's relatively high sales tax of 8 percent poses
another problem. It is common for merchants to skim 20 percent of it, says
economist Gutmann." And only in New York? "A sales-tax expert, John F. Due, an
economics professor at the University of Illinois, says that from 3 to 5 percent
of total sales taxes due nationwide, or as much as 2 billion a year, escapes
collection."
A second U.S. News article, directly following, "Cheating on Taxes -- A
Worldwide Pursuit," documents similar figures and adjusted for local cultural
practices, around the world. Schwarzarbeit in Germany, travail noir in France,
"fiddlers" in Britain, and morocho in Argentina are terms coined to deal with
black labor and black money. "Italy's underground economy is growing so rapidly
that the government now includes it in economic planning." Argentine government
officials "estimate that up to 40 percent of all business is involved." Japan,
Sweden, and Canada are covered, and "Economists in Thailand throw up their hands
when asked to estimate what uncollected taxes are costing the government. 'Who
knows?' is the response given most often." We'll look at the International
Counter-Economy in detail next chapter.
Should There Be An "Underground Economy?": Critics and Defenders
There is a Counter-Economy, in particular the sector involved with tax evasion,
and it's vast. It was "discovered" and named by this author, speaking to
radical libertarians, in 1974. Now the "underground" part, at least, has been
discovered by others and they do not approve. While leaving the theory and
justification to the end as promised, I think I may whet the reader's appetite
by previewing the debate between libertarians and the Establishment writers on
just the tax question.
Both camps agree that a perfect society would not have a Counter-Economy, or any
part thereof. What they disagree on is that the libertarians see the
Counter-Economy as that perfect society in embryo struggling to hatch; the
opposition sees it as a blight and unsightly tumor on the more-or-less
acceptable body politic.
Welfare state defenders and planners don't like it. Says U.S. News:
"governmental programs are upset by the underground economy. Because of
unregulated jobs and income, the readings of government statisticians -- whose
numbers can trigger automatic cost-of-living raises or pump billions of dollars
of fiscal adrenalin into the economy when unemployment goes up -- may be out of
phase with what really is happening. Unemployment, for example, actually may be
almost a half percentage point lower than the official figures indicate, says an
economist who has studied it, and the number of poverty-stricken somewhat
fewer." Libertarians would point out that perhaps the Counter-Economy could
absorb all the unemployed, especially when the State breaks down in runaway
inflation or catastrophic depression -- which result from the State's own
controls.
Ernest Conine of the L.A. Times puts it this way: "In a perfect world, all
inequalities would disappear. Pending that unlikely day, however, the
complaints that all of us have about government hardly add up to a valid excuse
for cheating on taxes." Perhaps not, but what does Conine think is wrong with
it? "After all, when a house painter or a lawyer reports only half his income,
he isn't hurting David Rockefeller, the Pentagon, Jimmy Carter, the U.S.
Supreme Court or the big-time tax evader." Why some or all of them should be
hurt would be very enlightening, if explained by an editor of the Los Angeles
Times. Alas, no: such analysis is given. And, on top of that, Conine is
factually wrong, 180deg out of whack. Since all those except the "big-time tax
evader" live off the State's taxes, there's that much less a pie for them to
divide. If all the economy went "underground," all the aforementioned would be
bankrupt.
Who is the counter-economist hurting, according to Conine? "He is hurting the
guy down the street who works for a straight paycheck and has no way of avoiding
taxes, even if he wanted to, and thus must pay both his share of the tax burden
and that of the tax cheat as well." Again Conine is wrong; if his economic
theory holds, then if everyone avoided taxes but one unlucky stiff, he or she
would support the entire tax burden. There is some "elasticity" to tax "supply"
but nothing on the order of 20-30% of the economy. The State is simply
collecting fewer taxes -- period.
Conine blames "tax cheating" for higher taxes and concludes, "Somehow, though,
this is a case where too many people instinctively side not with the cops but
with the robbers... Most of us seem determined to go right on looking on
small-bore tax cheats with bemused tolerance -- even playing their game with
off-the-books cash payments for services rendered -- in blithe disregard of the
fact that they are placing their fair share of the tax burden on our shoulders."
Further in the book, the "guy with the straight paycheck" will find more ways,
if he hasn't picked up several already, on how he can join the taxless. One
chapter will deal with Brown of Pacific News Service's fear of illegal alien
exploitation and lack of security, the large literature already extant on
free-market economics answers Sylvia Porter's fears of the collapse of society,
and the collapse of the State in society, that is, how the Counter-Economy can
expand to overwhelm the State's economy and create a free society, and sell it
to an oppressed, angry people already fighting back to the limits of their
understanding, will be dealt with in the final chapter of the book.
What a fair share of the tax burden, if any, is takes us into the theory, which
is being put off. Suffice it to say here that if Conine believes a relatively
free society of people have the right to choose their own taxation level, with
or without representation, then he should welcome those who are effectively
making that choice. But it's not only the relatively free people in the United
States who are able to make that choice via Counter-Economics. Now we shall
turn to the rest of the world.
Back to TOC
Chapter Two:
International Counter-Economics
Having established the existence of at least the taxless part of the
Counter-Economy and at least in this continent, one has two directions to expand
the concept -- other fields in this continent and Counter-Economics abroad.
There is also the combination of the two -- the counter-economy across the
borders of this continent and those of others.
In a free market, there are no borders. There are geography, space to be
crossed with goods and information, and obstacles to be overcome all affecting
the price. When the State imposes imaginary boundaries and real enforcers such
as customs inspectors, immigration officers, and treasury agents -- not to
mention armies and navies -- the market splits. The white market sees
obstacles; the black market sees opportunities. To counter-economists, a border
is just another obstacle to moving goods and services to be dealt with
efficiently and competitively.
Some of the goods smuggled include people, money, and things -- the last known
as contraband and can be anything from jeans to cocaine. Another field of
border-avoiding commerce is transporting information. That can range from
"pirate broadcasting" to industrial and political espionage. There is even a
tactic of moving legally acceptable goods across borders to take advantage of
different tax breaks and export incentives.
This may be the best time to point out that there are places with virtually no
counter-economy (though counter-economists from other areas may be operating
here only): space, the high seas, and the free ports. The rapid militarization
and nationalization of the first two is generating Counter-Economics and will be
covered later. The third category describes areas where the States of the world
have contracts (treaty) to refrain from control -- though that is revocable at
any time, as Danzig and Tangiers found out. Even Hong Kong and Singapore were
briefly occupied during World War II. One can draw what lessons one wishes from
these places which have no economic intervention and no counter-economy, and
standards of living far higher than their surroundings.
Almost every major country, by the way, has free-trade zones at airports and
seaports to allow transfer of goods from international carrier to international
carrier. New York City has one on Staten Island. Prominent pedophiliac Roman
Polanski, subject to arrest on sight in the United States, landed at Los Angeles
International and took off again en route from France to Tahiti. He was not
molested, though he wisely remained in the plane throughout. Such areas of free
trade are hardly the result of State benevolence or laxity; should a State
eliminate such boons to trade, another State in the "international anarchy" will
offer the service and increase the share of business.
What about the "underground economy" of tax evasion? Does that exist abroad?
In many places, taxation is worse than in the United States, so expecting the
more Counter-Economics the more the intervention, we should find plenty.
The International "Underground Economy"
The term Schwarzarbeit in West Germany and travail noir in France both mean
"black labor." "Whatever this hidden market is called, in Europe it means that
workers evade income tax, social security, and often other taxes by failing to
report their full earnings to the government. Employers dodge social-welfare
taxes, and, in some countries, value-added levies. They also avoid paying
higher wages to regular employees for overtime." How many are involved?
"Experts at the International Labor Office in Geneva estimate that in Europe 5
percent or more of the total labor force may be involved in the hidden
economies. That means 7 to 8 million workers!"1
Outside of the Warsaw Pact, the most socialist -- statist -- country is usually
considered to be Sweden. "Sweden, the most heavily taxed nation in Europe, has
a hidden economy that is estimated to total at least 10 percent of the national
output -- and to cost the government taxes amounting to 15 percent of the
budget." Labor barter seems to be the main method, and the Swedish State is
trying mightily to suppress counter-economic labor "and tighten its tax
controls, already among the toughest in Europe. But authorities seem to be
fighting a losing battle..."2
"Italy's underground economy is growing so rapidly that the government now
includes it in economic planning. Official estimates put income from hidden
labor at around 10 percent of the gross national product -- or about 24 billion
dollars -- in 1978. But a recent study said it is much greater, as high as 43
billion dollars in 1979."
Counter-economic labor marketing benefits both employer and employee, cutting
across class lines even in class-obsessed Europe. Why? The black laborers of
Italy "usually receive lower wages, put in longer hours and have no
social-security or other fringe benefits. But they pay no taxes."3 Those who
wish to argue that labor wants to avoid risk and trusts the government to
protect it from exploiting entrepreneurs, will have to deal with this
inconvenient existence: "More than six million workers, one-third of Italy's
labor force. are secretly employed." And for the Italian employers,
Counter-Economics "lowers their labor costs, gives them a flexible work force
and enables them to require employees to work overtime when needed."4
Has only Italian labor acquired counter-economic consciousness? "The owner of a
clothing factory -- staffed with illegal workers -- may sell his product to a
middleman. The middleman, operating from a delivery van, sells to a retailer.
The retailer does not register the purchase and thus can sell at a discount
because he has not paid the value-added tax."5 Note how layers of economic
activity form between the initial producer and the final consumer and these
layers form counter-economic steps in the "capital pyramid."6 No step of
production seems safe -- for the statist.
"Yet, why is it that you seldom hear a peep about deregulation under the blue
skies of the sunny Mediterranean? ... The realization dawns first on the
autostrada. On roads marked 100 km/h, the only vehicle observing the speed
limit is a lone Morris Minor with British licence plates and a flat tire. On
the zebra pedestrian crossings in the piazzas you can see bicycles, motor
scooters and oxcarts -- but no pedestrians. They are darting in and out of the
lanes marked 'Buses Only,' where even the oldest Italians do not remember ever
having seen a bus. Currency regulations are strict but stores or toll booths
accept anything from dollars to Swiss francs and then give you change in gaily
wrapped bubble gum to compensate for a shortage in minted coin. A doorman at
the Ciritti Palace Hotel in Venice explains why water taxis are charging three
times the official tariff. He proudly points to the computerized income tax
forms the government in Rome sends everybody. 'The Americans showed our
government how to do it,' he says."
Our observer, Ms. Amiel, sees the answer quite counter- economically. "Suddenly
the coin, or perhaps the bubble gum, drops. Of course there is little talk
about deregulation in Italy. Why fight the paper tiger? The marvelous
Mediterranean spirit, the Italian genius, the wise, vital flow of brio, has
solved the problem without it. The Italians have cut the Gordian knot.
"They can have all the rules and regulations in the world; they will simply not
observe them. The Italians have raised civil disobedience to a fine, subtle
art. They have made regulations what most of them deserve to be -- the dead
letters of someone else's desire."7
France has less tax oppression and the travail noir is estimated at -- only --
800,000 workers and five billion dollars, though that is undoubtedly an
underestimate. "Most hidden work is in plumbing, painting, roofing, electrical
installation, and other home repairs. But dressmaking, auto and truck repairs,
hairdressing, and carpentry are also popular." So far no one had checked out
data processing there.
The ranks of the government itself are not immune. "Even such civil servants as
policemen moonlight at night or on weekends." More on that in a bit, How about
welfare cases? "Some persons who draw high unemployment benefits prefer
full-time underground jobs to working legally."8
Union statism adds incentive to West German Counter-Economics. where lower
taxes might otherwise depress motivation. (Artificially high wage rates create
a barrier to entry leaving jobs undone.) Schwarzarbeiters combat the
artificially high wage rates. "Plumbers and bricklayers, who charge $17 to $25
an hour if employed openly through a contractor, can be hired secretly for half
that price."9 It's impossible to assign market value without recording
transactions, but German officials estimate twenty-five billion dollars of
untaxed work a year costing their State four billion in taxes -- which assumes
it would even have been performed if taxed.
Insidiously and erroneously, "a state labor ministry says 230,000 West Germans
could find work if Schwarzarbeit were eliminated." The millions of black workers
who would be unemployed are of no consequence to the labor ministry.10
Fines of $380,000 were imposed with one worker in Stuttgart fined $5,000 and
taxed $112,000 for earning $250,000 in seven years. "But fines do not seem to
help."11
"In Great Britain these underground workers are called 'fiddlers.' It is
estimated that one of every eight Britons earns a minimum of $2,200 a year by
moonlighting and does not pay a penny of tax on the unofficial income. By one
reckoning, the black economy accounts for close to 8% of Britain's gross
national product."12 Those who fear for the stifling of British incentive under
social democracy may take heart. The British are counter-economizing with the
same techniques as the American and European, but there are a few unique cases.
"One fiddle that is hard to bring under control is taking place on the oil rigs
in the North Sea. Many British companies and subsidiaries of foreign firms
cooperate with the government's pay-as-you earn plan and deduct taxes from
employees' pay, But some drillers refuse to do so... up to now, about 8,000
workers have paid no taxes on earnings of about 90 million dollars."13
Earlier, cross-border Counter-Economics for purposes of tax evasion was
mentioned. Some spectacular cases of Swedish movie stars and English rock stars
are well known. Here's the testimony of a lumpenbourgeoisie: "If I worked at
home, I might make as much as $400 a week, out of which I'd have to pay rent,
buy food -- and pay taxes, But, doing the same work in Germany or Holland, I get
$700 a week plus meals and a place to live. I take my money in cash and don't
pay taxes to anybody."14
On to the Third World: Argentina calls it black money -- morocho -- that is tax
free, and estimates 40% of all business is involved.15 "The head of a
construction company sums up the situation this way: 'You won't have a hammer
swinging anywhere in this country unless you are prepared to pay black money."'
And in the higher classes, "A banker in Buenos Aires reports: 'The apartment
next to ours was sold a few weeks ago for $360,000 -- all in cash and all black
money. There were no taxes, no real estate commission, no anything except
$360,000 in cash.'"16
While tax evasion is relatively minor in Japan (so far), Counter-Economics
enters where the monopolist State education system creates artificial "barriers
to entry" (the economist term which one will be seeing a lot of here). To enter
the more prestigious universities requires the payment of "backdoor" admission
fees. "Parents have paid the yen equivalent of from $4,600 to $460,000 to
school officials in order to get their children into their chosen university."17
Thailand, near the black-market haven of Burma, makes up for Japan's
law-abiding. "The tax-policy division of the Finance Ministry estimates that
less than 10% of the country's 19-million-member labor force files tax
returns."18 That's 90% who do not file tax returns. Somebody must be watching
those 10% like hawks. Just to make sure the incentive is to play and not fink,
"an auto salesman offers a prospective customer a 'friendship price' of from 10
to 30 percent off the list price if the buyer pays in cash and agrees to forget
any paper work that could be used by tax collectors to trace the sale."19
Returning to Italy for a bit, one finds a counter-economic effect even more
threatening to the State. It seems the majority of that six million (1979
estimate20) or two to four million (1977 estimate2l) are the government workers
themselves! Working from 8 A.M. to 1:30 P.M., the Roman bureaucrats are well
positioned for afternoon second jobs.22
"'Yes, I know I'm taking up a job someone else needs,' says a bureaucrat in the
Italian Finance Ministry who supplements his $400 a month government salary by
working in a real estate office in the afternoons and by skipping his government
job in the mornings if a big deal comes up. 'But I've got to look out for my
wife and three children.'"23
The rise of British CB and smuggling of various goods such as drugs, guns, and
people will be taken up in their appropriate chapters. Still, remember that the
business generated is tax-free: "The Coast Guard estimates that six to eight
billion dollars in illicit weed was successfully smuggled by ship into the U.S.
last year."24 That's just one product and one method of shipping.
And yet, "you ain't seen nothing yet." Let us turn now to the Eastern bloc, the
Warsaw Pact and other nations laboring under Marxism, Leninism, and variants
thereof.
Counter-Economics Under Communism
Argentina, ruled mostly by a military dictatorship, seems to have a thriving
counter-economy as we have seen. Is there a substantive difference between
"authoritarian" regimes of right-wing statism and "totalitarian" regimes of
left-wing statism -- at least in this regard? A drug haven like Colombia or
Bolivia, riddled with corruption, may have a booming counter-economy but what
about Third World countries cleaned up and reformed by Marxist-Leninist
governments? Perhaps the most important question in this area is, can the power
of the State get so great that the counter-economy, rather than growing in
response, gets crushed?
Viet Nam could answer all these questions. After all, were there not dire
predictions of catastrophe, nay, apocalypse, when the free-enterprise Americans
were driven out by the Communist North Vietnamese? Would anyone making the
distinction between authoritarian and totalitarian states deny post-1973 Viet
Nam is the latter? Is not Viet Nam both "Third World" and "Second World?"
Back in July of 1976, this author noticed a report on Viet Nam and wrote it up
as follows; it is printed in its entirety.
The "corruption" which so tainted the Thieu-Ky regime and the U. S. sergeants
has infected the Lao Dong (Communist Party) cadre in "liberated" Saigon,
according to reporter Patrice de Beer in a two-part article in the weekly
English edition of Le Monde, the famous French daily.
"Not a dollar has dropped into Saigon's empty coffers since April 30, 1973, not
a bag of American rice has come to alleviate the crop shortfalls," reports Beer.
Elsewhere, he describes the scene in the present Saigon.
"Yet the city streets are crowded with cars and motorized bikes. Swarms of
prostitutes ply their trade in the old To Do street, and the thieves' market
offers piles of stereo sets, fans, and other American goods brought out from
heaven knows where. I was even held up for a quarter of an hour in a traffic
jam while trying to drive out of the city."
Beer goes on to describe the problem of the new society "Some members of the new
ruling class (a very tiny fraction, I was assured, but quite conspicuous) are
following in the footsteps of their predecessors, providing the prostitutes with
a new clientele, especially in the centrally situated Miramar Hotel, occupied by
cadres. Waiters in the posh restaurants complain that the 'bodoi' (soldiers of
the People's Army) are not good customers because they don't have any money.
'But the "canbos" (cadres) are good customers. They are rich and give fat
tips.'"
Now Beer describes what a libertarian would call a full-blown counter-economy:
"Exit visas are rumoured to be going for hundreds of dollars, gasoline intended
for arms and government use finds its way into the black market, and civil
servants or persons posing as civil servants are alleged to solicit bribes from
families for freeing a husband or brother sent to a re-education center. Some
of the leaders live in requisitioned villas, and have cars, buy furniture,
television sets, and let themselves be corrupted by the old bourgeoisie, which
knows in the long run its fate is sealed, and is not therefore inclined to be
optimistic. Those who have decided to stay are spending everything they have.
This accounts for the rush on expensive restaurants and a frenzied buying spree,
which is fueling an inflationary flare-up."
Students of Austrian economics will smile at Patrice de Beer's reversal of cause
and effect on his inflation analysis, and note the classic description of a
"flight into real goods."
Beer goes on to report the vicious gossip about the "bodoi" and "canbos", the
investigation by the Lao Dong of corruptions, the hostility between Northerners
and Southerners.
"As for the Northerners, they are dazed at the sight of the South's apparent
prosperity, for they have been told their compatriots were short of everything.
"The demobilisation has just begun and a number of 'bodoi' have been assigned
jobs in the economy. They are still being asked to make sacrifices to help
their 'brothers in the South,' though in their eyes the South Vietnamese don't
seem so badly off."
Being a Communist country, Viet Nam naturally has a Five-Year Plan. But it
sounds strangely like something from Ford or Carter: "The south's so called
policy of 'five economic sectors' -- state, co-operative, mixed, capitalist, and
private -- should continue for some time more to come. As Nguyen Huu Tho
pointed out, the state must 'use capitalism's qualities and curb its negative
tendencies.' ... He added it was necessary to be 'flexible, very realistic, and
be able at times to fall back a little.' Principles couldn't be bent any further
in a situation where officially the country is headed towards a socialist type
of economy. It ought to be mentioned that even in the North there is a lively
private sector nicknamed the 'under-the-counter sector.'"25
That was 1976. Surely, that was too close to the end of the war with the United
States. Things must have changed, say, four years later?
"The economy is strictly black market. Privately run shops remain open, but
they are musty places full of cheap, imitation lacquer dishes and mind-numbing
political treatises, all at outrageous prices.
"There also are government shops where civil servants and government enterprise
employees buy their monthly food rations.
"A laborer is entitled to 13 kilograms of rice a month -- just under one pound a
day -- and the scale goes downward to the office clerk, who is allotted less
than one-quarter pound a day.
"There is rarely enough rice to go around. There also are limp vegetables and
the occasional piece of pork or beef." A miserable scene is observed after seven
years of communism, as predicted... except for one thing.
"The black market is called Cho Troi or 'sky market' because goods are displayed
outdoors. Here, in the side streets and the central marketplace with its
satellites throughout the city, is the collective economy of Ho Chi Minh City.
"Prices are fearsome, but the market is the only place such exotic items as
razor blades, soap that makes suds, fresh food, tape cassettes, and decent cloth
are available.
"Gasoline at more than $15 a gallon may be the most expensive in the world.
That tiny razor blade is $5 and the highly prized Lux brand American toilet soap
$11.
"In a place where official salaries average less than $100 a month, such
luxuries as electricity and a telephone have become virtual objects of
curiosity.
"The black market thrives on the official 'intershop,' which is open to all
foreigners and accepts major currencies of the world -- but not the Vietnamese
dong, worth 43 cents at the official rate."26
Perhaps seven years after the Revolution is not enough. How about the People's
Republic of China, twenty-one years after its Revolution? "In a dragnet of
Shanghai, China's largest metropolis, the police have arrested nearly 200 black
marketeers in recent weeks and confiscated valuables ranging from television
sets and tape cassettes to marriage manuals and 'pornographic materials,' the
Shanghai newspaper Wen Hui Bao reported."27
How does one conduct Counter-Economics in such incredibly crowded conditions?
"Privacy is nonexistent here; so even an illicit business must be conducted in
the open, but the black marketeers are more subtle than most. On bustling
Zhongshan Road the other day, a huge crowd of youths surrounded an older man who
was playing a brand new Sanyo tape recorder. They listened awhile, then
disappeared into a side street cafe. One young man returned, the tape recorder
tucked under his arm, It had obviously changed hands in the cafe.
"Another favorite device is for people hawking sunglasses from abroad to keep
the foreign sticker on one lens, attesting to the place of origin. Foreign
sunglasses, the latest status symbol for China's young, sell on the black market
at tremendous markups, typically $25 for a pair that costs $5 in Hong Kong."28
The Chinese Counter-Economy is limited neither in scope nor in geography.
"High-quality consumers goods, available here only in small quantities and in
government control, account for most of the illicit trade, but there are exotic
items, too. Black marketeers have been nabbed here for selling a
Chinese-language sex manual, A Guide to a Happy Marriage. And heroin is
smuggled into Guangdong province from Hong Kong.
"Black market activities thrive in this pace-setting city, where 11.6 million
people seem a bit more prosperous and decidedly more stylish than most Chinese,
but the more staid places are not immune.
"In a so-far unsuccessful drive to stop illegal trading in Beijing, perhaps
China's most tightly controlled city, capital police have repeatedly raided the
black market on Dongdon Street. Yet on many Sunday afternoons, young
speculators still gather in the same spot, less than a mile from the Public
Security Ministry, to swap goods."29
Nevertheless, all regions of China are not equal, counter- economically. (All
regions of, say, the U.S., are not equal economically, either. ) The areas
bordering on "capitalist" countries seem, naturally enough, to have a better
counter-economy, at least in terms of availability of goods. "Because it lies
next door to the British colony of Hong Kong, Guangdong province in South China
appears to be the entry point for black market goods. It also boasts what
Chinese sources believe to be China's largest black market, in Fatshan, a
20-minute bus ride outside Guangzhou.
"Fatshan is so well-stacked with watches, radios, tape recorders, calculators,
television sets, and other luxuries that it is a magnet for people from all over
China.
"Even official purchasing agents from rural communes, under orders to buy scarce
goods for collective use, turn to Fatshan when supplies at the government stores
are depleted."30
One would probably, at this point, expect the area close to the Republic of
China on Taiwan to be riddled with marketeering. "Quanzhou, which lies on the
coast of Fujian province opposite the Nationalist-held island of Taiwan, is
dotted with vendors selling Dunhill, Viceroy, and other Western cigarettes for
65 cents to $1.30 a pack. Squatting on the dusty roads, they display their
wares openly, but fold up shop and hurry off when approached by cameras.
"Other sidewalk stalls display tapes recorded by Teresa Teng, a Taiwan torch
singer whose romantic ballads are hits throughout China though she has never set
foot on the mainland. Like the other merchandise, the tapes were smuggled in
from Hong Kong, one vendor acknowledged."31
Smuggling will be covered in a chapter coming soon but there is one thing we
ought to check on. After all, there is far more repression of it by the
anti-market Communists than the freedom-loving Nationalists, right? "Although
arrests have been made on both sides, the Nationalists appear to be far more
concerned than the Beijing government about stopping the trade. A special
investigation force was organized last month in Taipei to probe the smuggling
rings, a government spokesman said, and further arrests are anticipated. Under
Taiwan's strict martial law trading with 'the enemy,' the Communists, is a
traitorous act punishable by long prison sentences."32
If there is any place which might have the free market utterly stamped out, it
would have to be Cambodia, after Pol Pot and the additional devastations of the
war driving him out.
"The black market stretches from Bangkok, Thailand's capital, to Ho Chi Minh
City, formerly Saigon, in southern Vietnam. Its hub is this dirty town of
war-gutted houses and tin-roofed shacks swollen by transients from almost every
province in the country.
"Sisophon is about 30 miles from the frontier, where Thai merchants have set up
open air supermarkets to which the Cambodians flock despite occasional robbers
and fighting en route and guerrillas who take a cut of the trade."33
Can nothing stop the Counter-Economy from its activity? Nope. "It all starts
with gold exchanged at the border for Thai currency, the baht. The Cambodian
trafficker uses the baht to make his purchases, which are then resold here,
usually for gold again. But this is only the small loop of a seemingly
haphazard, but in fact highly effective, distribution system.
"Armies of bicyclists, averaging 30 miles a day, set out from here along the
country's major roads, especially routes 5 and 6 to Phnom Penh, the capital.
Bulging sacks and boxes are lashed to the bicycle seats, and bolts of cloth
sometimes dangle and flap behind as the dealer pushes the bike along.
"Some travel between their homes and the border; others drop off their goods at
the 'free markets' which thrive in almost all the towns. Bike repair shops and
refreshment stands dot the roadsides for benefit of the traders who also move on
foot, ox-carts, motorcycles, military and civilian trucks, and the train from
Phnom Penh to Battambang, 25 miles east of the frontier."34
We all know of the lack of production in Democratic Kampuchea... or is it the
government's lack rather than the people of Cambodia? "The 14-month-old
government has been able to give little else but rice from foreign donors to the
general population, and has difficulties distributing it. So most, including
most government officials, must shop on the free market where medicines,
watches, clothes, cigarettes, and even Japanese-made radio-cassette players and
motorcycles are available."35
No starvation in Phnom Penh, evacuated by Pol Pot and reduced to basic,
primitive communism? "At Phnom Penh's bustling old market one can, thanks to
unbridled free enterprise, sit down to a good roast duck and vegetables, canned
Australian or Japanese beer, and international-aid rice that has seeped into the
system."36
Of course there was privation in Cambodia and many people died. But the
Counter-Economy survived and burgeoned. And the Counter-Economy, let one never
forget. is human action -- that is, humans acting. Some in Cambodia retain
their incentive and produce against the worst threats a government can issue and
in the face of all the examples of the death threats carried out. They are
those greedy, heartless, cowardly, profit-gouging,
couldn't-care-for-their-fellow-man speculative enterprisers -- who, by all
accounts, alone keep Cambodia from total starvation imposed by the people-loving
Communists of Pol Pot and his equally Communist opponent, Heng Samrin.
Perhaps the final irony is that not only does right-wing Thailand's market
supply the Cambodian Counter-Economy, but also Samrin's ally's Counter-Economy
-- Viet Nam itself! "Although most of the trade is with Thailand, there is also
a sizeable two-way commerce with Viet Nam. Consumer goods such as tea, soap,
fruit, and bicycle parts make their way to Cambodia. But the Vietnamese,
sometimes coming by truck to deliver aid or supplies for their forces, also haul
back Thai goods which they purchase from the Cambodians with gold."37
Counter-Economics In The Second World
There's one last possibility one must exclude before concluding that the
Counter-Economy cannot be suppressed but rather will thrive under even greater
statism. Perhaps all Asiatic or South American (Cuban) Communist states are too
new, too Oriental (by which is usually meant prone to corruption) or Latin, or
just too weak to stand up to the mighty wealth of world capitalism. If anywhere
answers these objections, it is the nations of the Warsaw Pact -- the Eastern
bloc, where the Union of Soviet Socialist Republics holds far more sway in the
name of Marx and Lenin than does capitalist NATO and its running-dog lackeys.
Poland is considered anomalous because of the rise of Solidarity, so it will be
accepted as a poor example for our proof. Solidarity's rise, however, must then
be credited to the counter-economic case since it organized and struck in
defiance of all Polish laws. In fact, most unions even in the United States
began counter-economically. (What they turned into and why is left for later.)
In 1976, Poland experienced a mass upheaval which subsided until Solidarity's
rise. "The prime minister of Poland ordered price increases of staples, food,
clothes, etc., in the state-owned stores. Immediately, demonstrations of
consumers hit the streets, similar to those which toppled First Secretary
Gomulka and brought in present dictator Edward Gierek. Within 24 hours,
Gierek's prime minister suspended his own orders.
"One factor not mentioned in most press coverage was that these same goods were
available to some extent in a number of private stores allowed and in the
widespread black market. The Guardian noted that the counter-economic price was
higher than the state price even after the official price increase, yet business
is brisk."38
So how free is the stable Eastern bloc from Counter-Economics? "Romanians,
unlike Poles, are not officially allowed to possess foreign currency, but this
does not stop the inevitable money changers from accosting foreigners on the
streets. The black market rate has rocketed since the Polish crisis began and
is now five times the official rate, or more, the most coveted currency in
Romania is a packet of foreign cigarettes (preferably Kents). In a practice
that constitutes the thin edge of the wedge of bribery and corruption -- an
integral part of East European life -- a packet of cigarettes is slipped to the
head waiter, and food and drink, which were off the menu five minutes before,
miraculously reappear. A foreign businessman, who lives in Romania but drives a
foreign-registered car, is stopped by the police. A packet of cigarettes, and
documents that were suspect a moment before are suddenly in order. Those
packets of cigarettes change hands again for under-the-counter food supplies for
quality clothing, for house repairs. And they oil the wheels of bureaucracy."39
Actually, much of the Counter-Economy of the East works like that of Western
Europe described earlier: "The system involves second and third jobs, many
performed for Western currency, which in turn may be used to buy luxuries. In
Hungary, Poland, and Czechoslovakia, the second economy has grown so dominant
that many workers have come to devote more of their time and energy to that
sector than to their regular jobs.
"Construction workers in Czechoslovakia and Hungary are rarely found on their
regular jobs past the noontime lunch break. They are off on their second or
third jobs."40
Want to buy a car in Hungary but the State says no? "A housekeeper in Budapest
hotel told how, despite recent police crackdowns, she was still able to order a
new-model Soviet-built Lada automobile from a local underground supplier,
delivery in one month, for a price 50 percent higher than the official price,
cash in full on delivery.
"Her supplier, to whom she cautiously introduced a Western correspondent, said
that the system operated with the connivance of official dealers. They find
customers who have been on a waiting list for two or three years, but who are
willing, for a price, to give up their new car and begin the wait again."41
Some Eastern counter-economists seem to have it better than "Free World"
workers, beating inflation (but actually Westerners are also
counter-economically fighting inflation, as we shall see in Chapter Five).
"When consumer prices rose 50 percent or more in Hungary this summer, a
carpenter in a tractor factory said he could easily cope. His salary went up
less than 10 percent, but his fees for fine cabinet work he produces nights and
weekends doubled."42
Hungarians have their entrepreneurial laborers, their travail noir and
schwarzarbeiters. "Then there are the 'sparrows,' a term used in Hungary for
the highly skilled workers who flit from job to job, increasing their wages by
steady increments as demand shifts from one enterprise to another."43
And in competitive education, depending on the Counter-Economy, the Easterners
may well be ahead of the West. "In Poland it has taken on a new dimension, with
'flying high schools' spreading forbidden subjects. These range from the rule
of terror by Poland's Stalinist-era leader, Boleslaw Bierat, to the economics of
Milton Friedman and Paul A. Samuelson."44 As always, we ask how it works.
"While such lectures may reach only a few thousand of Poland's 100,000 or more
university students, the influence of these ideas is much wider. Several young
men and women were taping a lecture by an underground historian, Adam Michnik,
held at a blacked-out suburban Warsaw apartment.
"'My roommates are too scared to come,' one of them said. 'But they want to
hear it, so I tape it and they listen later.'"45
Why does and how can Mother Russia allow this rampant free enterprise in her
closely-guarded satellites? Or has the Counter-Economy beached the innermost
Iron Curtain as well? That story deserves a chapter unto itself.
Back to TOC
Chapter Two Footnotes
1. The underground economy: How 20 million Americans cheat Uncle Sam out of
billions in taxes. (1979, October 22). U.S. News & World Report, p. 53.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Bohm-Bawerk, E. V. (1890) Capital and Interest. New York: Macmillan & Co.
7. Amiel, B. (1981, July 13). The subtle art of disobedience. Macleans
94(28), p. 52.
8. U.S. News & World Report, op. cit., p. 53.
9. Ibid.
10. Ibid., p. 54.
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.
15. Ibid.
16. Ibid.
17. Ibid.
18. Ibid.
19. Ibid.
20. Ibid.
21. Hoagland, J. (1977, September 18). European tide of "black labour."
Manchester Guardian Weekly, Washington Post section.
22. Ibid.
23. Ibid.
24. The marijuana smuggling war is heating up on the high seas. (1981, January
5). Zodiac News Service.
25. Counter-economy in Viet Nam thrives. (1978, August 1). New Libertarian
Weekly 3(34), pp. 1, 4.
26. Los Angeles Times, Wednesday, July 23, 1980, Part IA, page 5.
27. Mathews, L. (1980, June 7). Black marketeers, smugglers move in as China
opens trade door to the world. Los Angeles Times, Part I, 6-7. (The headline
is inaccurate as the article proves that there is a black market, not that it
moved in from anywhere.)
28. Ibid.
29. Ibid.
30. Ibid.
31. Ibid.
32. Mathews, L. (n.d., c. 1980) China, Taiwan crack down on smugglers. Los
Angeles Times.
33. Gray, D. D. (1980, April 13). Black market net funnels consumer goods to
Cambodia. Santa Ana Register, p. D15.
34. Ibid.
35. Ibid.
36. Ibid.
37. Ibid.
38. Free market cracks red regimes. (1976, July 25). New Libertarian Weekly
3(33), p. 1.
39. Masterman, S., and Koene, A. (1981, August 24). A nation embarked on a
perilous ride: Eerily reminiscent of Poland, growing tension threatens the
oppressive Ceausescu regime. Macleans 94(34), p. 11.
40. Second society grows in Europe. (1979, November 2). New York Times.
41. Ibid.
42. Ibid.
43. Ibid.
44. Ibid.
45. Ibid.
Back to TOC
Chapter Three:
Soviet Counter-Economics
A major premise of counter-economic theory is this: the more government
intervention in the economy, the larger the Counter-Economy. Indeed, as we have
moved from the "limited governments" of North America to the "mixed economies"
of the rest of the world, counter-economic activity has certainly not receded.
Counter-Economics, moreover, predicts that totalitarian states should conduct
nearly all economic activity -- in fact, all non-political and even much
political human action -- outside the area sanctioned by the State. So a
positive test of our theory would be to check out a totalitarian State in some
detail and observe the degree of counter-economic activity.
A minor qualification is in order, though we shall see it is scarcely needed for
our test. The economic theory which forms the most basic level of our
understanding predicts that no state can achieve totalitarian control. In fact,
Counter-Economics was discovered by this author when I followed that idea to
further conclusions. But all the so-called totalitarian states -- Third Reich,
Soviet Russia, People's Republic of China, even Cambodia -- actually allowed and
continue to allow some "private" property and some freedom of trade.
Nonetheless, most observers will grant there is considerably more state
intervention in, say, the Union of Soviet Socialist Republics than in the United
States. Therefore, there should be more Counter-Economics, as well.
Let this point be belabored a little more. American conservatism predicts that
entrepreneurialism should be almost snuffed out under a totalitarian communist
state, except for a few Bible-smugglers. Liberalism and democratic socialism
might predict some resistance to communism but that it would take the form of
intellectual dissenters and underground unions surfacing into "Charter 77" and
"Solidarity" organizations. Even what passes for libertarianism these days
predicts less, rather than more, "free market" activity in endarkened U.S.S.R.
than in relatively enlightened U.S.A. So if Counter-Economics contradicts all
these ideologies' predictions -- and it does -- one has a quick scientific
decision in respect to their respective validity.
What does reality say? We've seen a strong indication in our last chapter
looking at Eastern Europe, China, and Indo-China, but we need a much longer,
more detailed look at one such country. And if the Counter-Economy is booming
in the Soviet Union, the "hardest case" for our theory, then where are the
millionaires? Save for a corrupt Commissar or two -- even the Communist Party
line will allow for such imperfection -- who has heard of Russian capitalist pig
millionaires in the 1980s?
Consider this: "A few weeks ago the Manchester Guardian Weekly reported that
several counter-economic millionaires were arrested in their Black Sea resorts
and dachas. Nearly all the government officials in Armenia were also pulled in
and broken by the Communist Party and denounced by the press. The Armenian
bureaucrats had been involved in a major black and grey market 'ring.' (Armenia
had somewhat looser regulations and more private ownership allowed than in
Russia.)"1
Armenia, it may be argued, is not Russia proper, though a "Soviet Socialist
Republic." Then again, the Armenian counter-economists were arrested. How about
neighbouring Georgia?
"The parallel market represents a huge economic structure, simultaneously
independent from and associated with, the official Soviet economy. This private
sector penetrates every segment of Soviet society. People active in the
parallel market vary, from petty speculators selling fashionable clothes to
people of real influence and wealth, such as the famous Georgian underground
capitalist Laziashvily, whose connections include quite a few top officials."2
What about Russia itself? "I particularly recall one such spirited client,
Abram Aizenberg -- a massive man whose every movement expressed self-assurance.
He was about 70, and he owned two factories manufacturing hosiery and underwear
that brought him an annual income of several hundred thousand rubles. Over the
years he had amassed capital that the investigators estimated at three million
rubles."3
"After World War II, the three Glazenberg brothers were demobilized, returned to
Moscow, and soon realized that they could not bank on their being veterans to
help them find a good job; they were Jews -- banned from all prominent posts in
the party and state apparats. Even Jewish engineers had a hard time finding
employment in industry." While some may question the ethnic purity of the
entrepreneurs in question, this is Moscow our Russian reporter is talking about.
"The Glazenberg brothers went into underground business. Upon discharge from
the army they each received the large sum awarded to demobilized officers --
about 5,000 in today's rubles -- and acquired a single workshop in a factory to
produce artificial-leather shopping bags.
"They turned out to be talented businessmen, and in a few years their company
owned at least ten factories manufacturing artificial leather,
artificial-leather goods, and all sorts of synthetic-fiber products."
Of course, knowledge of their activities comes from their public exposure,
arrest and prosecution. "A firm operating on such a large scale could not
escape the notice of the Moscow DCMSP (Department for Combatting
Misappropriation of Socialist Property, the arm of the Soviet police charged
with fighting economic crimes). Indeed, the DCMSP with its well-developed
network of secret informers, kept a special dossier on the Glazenbergs'
company."4
How did these Russian entrepreneurs last so long as to get successful in the
first place? "For some while, this in no way inhibited the busy entrepreneurs
-- for they were paying off the top people in the DCMSP, offering a monthly balm
of between 5,000 and 10,000 rubles." And how did they get caught? "One day,
however, a lower DCMSP officer leaked the story to a well-known journalist at
Izvestia, who began sifting through the material on the brothers' company. In
these circumstances the DCMSP chiefs were powerless to save the Glazenbergs --
beyond warning them immediately of the danger impending, so they might have time
to secrete their money and valuables."
So how did the ruthless, inhuman, infamous, Soviet secret police deal with these
bloated capitalists? "Buffeted by the contrary pressures, a top DCMSP official
decided in Soviet Solomonic style that 1.) the incriminating dossier would
disappear from the DCMSP files and 2.) the youngest Glazenberg brother, Lazar,
would have to be sacrificed, at least partly because of his playboy lifestyle --
reflected in his two dozen suits and the wardrobe of his wife, a ballerina in
the Bolshoi theater."
One supposes, at this point, whether the proletarian masses would revile or just
ignore this exposed bourgeois. "On the first day of Lazar's trial, the
courtroom was packed with curious onlookers, dying to glimpse a millionaire.
What they saw was a tall man of about 40 with handsome features and a mane of
completely gray hair. Lazar Glazenberg walked, as prisoners are meant to walk,
between two escorts, with his hands folded behind his back hobbling along on the
artificial leg that replaced the limb he had lost in the war. But he affably
greeted friends and relations among the crowd."
Nonetheless, as all have agreed, the U.S.S.R. is a particularly interventionist
and repressive society. Our Horatio Alger-ov was sentenced and shot, no?
"Three months later he walked out of the courtroom just as calmly, having heard
his sentence: 15 years in strict-regime camps." This is the home of the Stalin
purge trials, where the top communist officials -- the new Russian aristocracy
-- are regularly rounded up and shot.
A hardier entrepreneur might have survived and considered himself ahead. Alas,
Lazar Glazenberg had "served his country" one limb defending the Motherland.
"It is almost impossible for a person with one leg to survive 15 years in such a
camp. He died seven years after his trial."5 Before one reaches for the
handkerchief over this typically ironic Russian tragedy, remember the rest of
the family got away with their wealth and obviously enough capital to keep
going.
So were the Glazenbergs an isolated example? Even if one assumes most are not
caught and not reported, there still are plenty who were. That is, there are
plenty more where they came from.
"Among other important underground family companies, the Bach clan ranked high
in Moscow, because of both the scale of its activities and the amount of its
assets. The eldest member and head of the clan was Isaak Bach."6
All the proletariat's representatives have to do is liquidate the exploiting
class to be free of them, says Marxism. "Here was a businessman of the old
generation: before the Revolution, he had savored the joys of legal commerce in
his father's company. During the New Economic Policy after the Revolution, when
private enterprise was permitted for a short while, his commercial abilities
were fully developed. The notions and ladies' underwear shops of Bach & Sons
were then located on Moscow's Kuznetsky Most street, amid the city's most
expensive and fashionable stores. But the New Economic Policy soon liquidated
the company, confiscating its merchandise and sending its head to the camps on
the Solovetsky Islands."
That's the end of Bach's incentives and capital, right? "When Bach returned
from the camps in the mid-1930s, he set about creating a new family company --
this time, illegal. By the late 1940s, Isaak Bach, nominally a humble workshop
supervisor in a zipper and safety-pin factory at 160 rubles a month, was head of
a company owning at least a dozen factories manufacturing underwear, souvenirs,
and notions, and operating a network of stores in all the republics of the
Soviet Union. He held assets assessed by the prosecution expert at
approximately 87 million rubles."7
No shortage of Russian millionaires seems to be evident. In fact, like poker
players, we can "see the 87 million" and "raise to 200 million," topping example
with example.
"In the 1960s, two of the younger generation of that clan -- Boris Roifman and
his cousin Peter Order -- were seized by the KGB. Both had been in underground
business for about ten years. One turned over about 200 million rubles' worth
of valuables to the authorities, and the other about three-quarters that
amount." See and raise the 200 millions? "If three comparatively young members
of the Roifman clan had amassed 350 million rubles, what might the whole
family's fortune amount to, after decades in business?"8
Nor did these robber barons of the Russian 1960s lack any style or panache
compared to their 1880s U.S. forebears. "The chief investigator of the KGB
Central Office asked the wealthier of the two, 'What did you need 200 million
rubles for?' Peter Order replied, with a show of bravado, 'Only 200 million! I
had wanted to make 220 million -- one ruble from each Soviet Citizen.'"9
Returning to Russian millionaires later, and how they manage to dispose of their
income, the real question for an economist -- counter or otherwise -- is where
do they find their market?
The Russian Real Market
The Counter-Economy thrives in North America mostly in "forbidden fruit" areas
and those taxed to death. In Europe and Asia we can also add the overcoming of
restraint of trade of otherwise legitimate foreign goods -- protectionism and
its complement, smuggling. But in the Second World of Communist states, two
other sources arise: consumer black-ward goods' quality and reliability and
their availability, something most North Americans take for granted.
"The parallel market offers not only better, usually foreign-made, clothing or
rare editions of popular authors, but also provides Soviet citizens in a
position to pay with better medical care, better education and training, better
vacations, better interior decorating for their apartments, better babysitting
facilities, better transportation, even identification papers, diplomas, and
other documents. More than that, not only private individuals but governmental
firms, agencies, and collective farms frequently use services of the parallel
market in their efforts to obtain equipment, spare parts, manpower, and
professional expertise."10
Consider the problem -- as it is in the U.S.S.R. -- of driving an automobile.
Remember, while reading the following portrayal, that cars are in short supply
to begin with and probably require a bribe to obtain. Now try driving it --
without the Counter-Economy.
"There is a shortage of service stations in the Soviet Union and those which
exist just don't have spare parts. A friend of mine spent a month in an effort
to buy a windshield for his Moskvitch. All in vain."
Unlike police, there is usually a counter-economist when you need one. "Finally
he came to a small street, near an automobile plant in Moscow, where he was
approached by somebody who introduced himself as a worker at this plant and
promised to deliver the windshield the same day for a reasonable compensation --
even less than the official price. Needless to say, the worker kept his
promise."11
One also gets what one pays for in the Counter-Economy, so reliability is
important in attracting consumers. (Of course, the governments in all countries
spend fortunes on propaganda to convince you of the unreliability of black
marketeers -- and the unfailing reliability of government services.) Examples
abound here. "A car owner in Armavir in southern Russia sent a letter to a
driver's magazine, reporting that he was refused help at a service station.
'But then, a worker standing nearby chimed in: let him bring it in, he said.
I'll fix it quickly.' And the 'sharp-eared' mechanic carried out the job on the
spot, pricing it at six rubles. 'Five rubles for me, and one for the till.'"12
Six rubles would be cheap at a U.S. garage.
And again: "Another driver, from the Crimean city of Yevpatoria, complained
that, although he parked his car first at the service station, attendants did
not pay any attention to him and started to inspect other autos, which arrived
later, presumably because their drivers had promised good tips. His protests
did not help and according to the letter from this customer, the things he saw
and heard there made him wonder whether it was a state enterprise or a private
concern."13
Obviously it was the latter. Some may find it encouraging that there's a
paradise where the masses know how to scorn an economic law-abider... though
Russia may not have been where they thought to look for it. But an important
point in the first example is missed if one ignores the necessity of conducting
the business counter-economically.
"Thousands of business executives have been put in jail for alleged violations
of the Soviet legislation. Many of these trials would look rather peculiar to a
foreigner. The thing is that, in quite a few such cases, even the prosecution
did not insist that defendants took a penny for themselves. The accused were
stealing, selling at the parallel market, and buying stolen goods, not in order
to make a fortune but just to get necessary supplies for their enterprises and
collective farms."14
That last statement, to be sure, is devastating. If true, the reality of the
market has smashed the facade of communism, as Marxists like to put it,
objectively. And this reality penetrates to the finest details.
"Literaturnya Gazeta tells about two collective farm chairmen, convicted for
buying stolen property from thieves. One purchased desperately needed pipes for
a crew-shed; the other, boxes to pack apples. Significantly, no personal profit
was involved in either case. Both collective farm chairmen, presumably, did not
have a chance to get pipes and boxes through normal state supply channels. One
of these chairmen later asked in desperation: which is more criminal -- to pay
thousands of rubles to thieves or to lose a harvest? This was the real
alternative he faced."15
In a showdown between the objective forces of the market and the subjective
forces of statist ideology, the former is as inexorable as the "forces of
history" are supposed to be to a Marxist. "There was a meat store close to a
place where I used to live in Moscow. For many years, this store was known for
having an unusually good choice of meat. But, suddenly, steaks, lamb legs, and
other rare items disappeared. Salesmen told the story of an old director, a Jew
without a high school education but well-adjusted to unofficial rules of the
Soviet trade, who was replaced by a Plekhanov's Economic Institute graduate.
The new director declared that he would not tolerate any violations of law in
his store. He refused to bribe district warehouse officials and, consequently,
supplies of meat were almost cut off. The salesmen could no longer make a
living by taking fees from grateful customers for whom they used to save good
pieces of meat. Previously, they had shared their underground income with the
former director, providing him with much-needed reserves of unregistered cash.
Now the practice was stopped. But, without free cash, the director was unable
to pay truck drivers for unloading their trucks and the drivers refused to do it
free."
And so the market responded to the director's ideological pronouncements. "Both
truck drivers and salesmen, angered by the new regulations, began to complain to
district party committee. The former director would easily take care of such
charges, merely bribing the district committee officials. But the new one found
himself in real trouble. More, without supplies of good meat, his store was
failing to fulfill the plan. Everyone was sure that, soon, the director would
be dismissed." A happy ending to this tale? "But it did not happen. On the
contrary, steaks, lambs, partridges reappeared in the store. There was no need
to ask how it happened. It was clear that the young economist finally learned
the real rules of Soviet trade that he had not been taught at the Plekhanov
Institute."16
How It's Done
The simplest of economic studies informs us that one needs customers, labor, and
capital goods. One can use one's own labor, take goods available -- say, on the
factory where one ostensibly works, and find customers in passersby, relatives,
and friends. This is done in the Soviet Union, as it is everywhere else. But
the more interesting cases, which document the activity of large-scale
counter-economic activity, need distribution networks, hired laborers, and trade
with others for capital goods (production). How is that done in Russia today?
One can buy an existing business, but even that is not simple "when the
owner-sellers have no rights in law."17 One actually buys a network of
connections and the trust of those counter-economists. But it can be done, with
the all-important acceptance of reasonable risk, and is done.
"The prospective purchaser obviously has no way of previously assessing the
enterprise's potential production, sales, or income. Buying and selling
underground enterprises thus can succeed only in an atmosphere of complete trust
among all parties and respect for the unwritten laws of the milieu. In this
atmosphere, the purchaser hands over to the seller, with no receipt and no
witnesses, tens -- often hundreds -- of thousands of rubles. In a case where
the parties do not trust one another, the money is transferred to a third party
trusted by both principals, and he passes it on to the seller only when all
conditions of the sale have been met."18
Those even superficially acquainted with Western business may note that, save
for the increased risk from a hostile State, the method is similar to that
practiced in the West. In fact, all economic activities can be practiced
counter-economically when the risks are acceptable.
The fascination of Counter-Economics, besides that arising from its freer nature
than that of approved, regulated, and controlled business, comes from the
modification to standard business practices whatever they are, as they change in
time and space. As we have seen and will see, it is quite possible that the
modifications to reduce risk or even outright scofflawing may be cheaper -- far
cheaper -- than submission and compliance. The implications of that will be
dealt with at the end of the book.
Delving into the inner machinery of large-scale counter-economic business is
difficult. Existing ones have little incentive to "blow their cover" even in
Western publications, which, after all, are readily available and scanned by the
KGB, if not the DCMSP. But the Lazar Glazenberg case did reveal the workings of
that medium-size operation which, although finally broken, operated successfully
for a long time. The Glazenberg brothers, by the way, even had a board of
directors.19
Here, in lengthy detail, since the core of our case is being demonstrated, is
how it worked:
"The position of those officially in charge of the factories housing the
Glazenbergs' enterprises was unusual: they exercised no control over the
production and economic activities of their enterprises, this control being
assumed by the Glazenbergs or their appointed managers. The official directors'
functions were purely decorative and boiled down to liaison with party and state
organs. Through trusted agents, the Glazenbergs normally paid them 500 to 1000
rubles a month, depending on the size of the enterprise and the usefulness of
the director. One of their operations was run under the cover of the
Fisherman-Sportsman Sporting Goods Co. in Moscow, and they paid its director
1,500 rubles a month because he held the important title of Hero of the Soviet
Union."20
So much for the "bosses." How about the working class? "Obviously, the
complicity of many blue-collar workers is also required in the manufacture of
left-hand goods. It is almost impossible to recruit an entire labor force on
the basis of total trust, but the Glazenberg system contrived its own
incentives. The laborers knew full well that goods were being produced off the
books, but they were interested in the extra money paid for left-hand production
-- higher than the official rates and not subject to taxation."21
And how about the capital goods needed? "The Glazenberg brothers cooperated
with other underground businesses: clasps for handbags, buttons for leather
jackets, and labels were all manufactured to their specifications by underground
enterprises in Moscow, Vilnius, and Riga. But the main source of materials --
and here the Glazenbergs were no different from other underground enterprises --
was the factory itself: materials saved from what the factory received for its
official production -- that is, materials stolen from the state."22
The Soviet State was particularly interested in this alleged theft; after all,
it uses remarkably similar means, morally speaking, in acquiring those goods in
the first place (as do all states). We may thank the diligent prosecutor for
the rest of our information.
"The quantity of off-the-books merchandise produced from these 'saved' materials
provoked the major arguments between prosecution and defense during the trial.
The point was vital to the defendants, for the quantity of materials saved for
left-hand production would determine the gravity of the judgments against them
-- from 15 years in prison to death.
"The prosecution was able to prove that reserves were prepared in advance to
yield secret surpluses. In the planning stages for production of a new product,
the Glazenbergs would negotiate with the people in laboratories or institutes
responsible for setting the factory's norms for new materials needed as well as
for allowable wastage. In return for large bribes, these technicians
deliberately inflated the usage and waste norms, thus allowing the creation of
huge surpluses for manufacture of merchandise off the books.
"Other sorts of secret economies were made during the manufacturing process.
Expert witnesses testified in court that they had measured coats and jackets
legally manufactured at the factory, and the measurements did not tally with the
sizes on the labels, because the factory's cutters had reduced the size of each
pattern piece. Chemists testified that they had analyzed the artificial leather
legally produced by the Glazenberg factory: the quantities of dyes and other
ingredients fell short of the official specifications."23
Finally, let us stick with the Glazenbergs a little longer and solve the last
and crucial problem: distribution.
"One would think that in a country like the Soviet Union, where trade and both
the wholesale and retail levels is a state monopoly, the large-scale marketing
of left-hand merchandise would simply not be feasible. The Glazenbergs proved
otherwise. When the brothers were beginning in business and their only product
was shopping bags, it was easy to solve the problem of how to sell the left-hand
bags. Employers of shops selling the factory's output were quite willing to
accept for sale a certain quantity of illegally produced bags as well. Of the
proceeds, one-third went to the shop employees, two-thirds to the Glazenbergs.
"As the business grew and the range of their wares broadened, the Glazenbergs'
sales outlets had to grow too. Through friends and family connections, they
added to their network stores that had not been supplied with their factory's
official merchandise. In time, even this network of retailers proved too small
for the Glazenberg empire. So a special marketing group was established -- to
travel the country and in short order to organize sales outlets in 64 towns and
regions."24
Counter Reaction to Counter-Economics
"The Soviet regime scarcely can feel comfortable with the huge scale of the
parallel market activities. First of all, a totalitarian state, by its very
nature, cannot appreciate any initiative coming from outside the institutional
system. It sees such initiatives as a threat to its control over the economy
and the people. A totalitarian state does not like it when some of its citizens
become, at least partly, financially independent from the regime -- when their
fortunes do not totally depend on the State."25
Dropping the words "Soviet" and "totalitarian" in the above paragraph changes
nothing. No State appreciates initiative by its citizens outside its control.
See chapters one and two to begin with. What is significant here is the
helplessness of the State toward counter-economic activity and the potency of
the individuals. This is not just "power to the people" but power to the
individual person.
And the most totalitarian expression of collectivism cannot crush it. Worse,
the Counter-Economy corrodes, corrupts, splinters, and ultimately smashes the
State. Besides winning away its citizens and restoring "public goods" (tax
plunder) to the "private sector," "The black market also causes serious economic
distortions and interferes with official economic plans. From the point of view
of governmental economic agencies, equipment and supplies, which are obtained at
the parallel market by some energetic managers, could be needed more and could
be used more effectively by other firms and enterprises."26 But that "need" is
in the judgment of the State's planners; the people have spoken,
counter-economically, that the need -- demand -- is otherwise and overruled the
entire Soviet State.
"Moral considerations are also a factor here. Underground activities with their
secret operations create far-reaching psychological consequences for large
sectors of the Soviet populace. And private enterprise is absolutely
inconsistent with an official communist ideology."28 The mighty Soviet State
must not only put up with the Counter-Economy but put up with its encroachment
on its territory and people.
Far worse. The Soviet leadership itself is not free of counter-economic taint.
"It is fair to say, while authorities are basically opposed to the parallel
market, they are forced to live with it and, sometimes, do not hesitate to use
it."27 Both Pravda and Literaturnya Gazeta report authorities ordering
underlings to seek out face-saving (and other-saving) parts and other capital
goods in the Counter-Economy. "Literaturnya Gazeta tells about officials,
pressuring collective farm chairmen to go to the parallel market. According to
the paper, these officials suggest to the chairmen whose farms are short of
spare parts for agricultural machinery to fish for parts 'at the bottom of the
sea' but to fulfill plans. They even promise chairmen their sponsorship in case
of any trouble with the police. The story carried by Literaturnya Gazeta also
tells about construction managers who did not get nails but were advised by
their superiors to fulfill plans at any cost."28
It should be stressed here that it is not only the segment of the
Counter-Economy that the U.S.S.R. considers illegal, or, segments that, say,
the U.S. allows that is involved, but all the Counter-Economy. A lurid example
is provided by Simes that could apply to U.S.'s CIA, France's Deuxieme Bureau or
SDECE, and Britain'ss MI6.
"Prostitution is illegal in the Soviet Union. But the KGB co-opt many
prostitutes dealing with foreigners, and prostitutes paid in foreign currency
surrender part of their earnings to the KGB cashier."29 The official people's
pimp?
And it should be stressed that the free market does not grow because government
gets more liberal (or libertarian); rather, the counter-economic defiance of the
people forces the State's retreat in order to hang on to what power it can.
"Generally speaking, during recent years some kind of tolerance, if not
approval, has developed in the Soviet Union regarding certain kinds of parallel
market activities."30 Next thing you know, we'll hear Izvestia will give
counter-economists a sympathetic hearing and Leonid Brezhnev will call for
repeal of economic laws.
"In an editorial introduction written by Izvestiya to an article about two
engineers who get in trouble with authorities for precisely such actions,
editorial writers have clear sympathy with the people who were forced to break
the law in order to do 'their important job' properly. Both article and
editorial as well as numerous other statements made by Soviet journalists and
officials, including General-Secretary Brezhnev, call to eliminate 'unjustified
limitations and small-minded regulation' imposed on the economic management."31
What more can one say?
The One Failure of the Counter-Economy
There is a problem and a question yet left to be answered about the massive
Soviet Counter-Economy, and the answers will bear strongly on the analysis and
study of the rest of the world's Counter-Economy. Before answering, one should
point out that only a narrow definition of economics has been dealt with so far
and much of the Soviet Counter-Economy, the underground intellectuals, the
famous "dissidents" in all the arts and humanities, have been shortchanged here.
Still, they have much more coverage in the Western media than strictly-business
activities, which have only the pitifully few sources footnoted here.
Nonetheless, all appropriate human action will be covered by Counter-Economics,
and the Eastern dissidents will be covered near the end of the book in
"Intellectual Counter-Economics."
Smuggling and refugees also have a chapter to themselves. Other references to
the rich -- counter-economically speaking -- material and example source of
Communist-controlled countries will be found sprinkled in the remaining
chapters, which are categorical rather than geographical. Geographical
divisions are, counter-economically at least, largely irrelevant. At least
politically, counter-economists are determinedly, defiantly, even scornfully,
international.
The problem cited is this: What do the wealthy counter-economists do with their
wealth? There are two answers to that, and the second bears on the question yet
to be asked, which is "Why doesn't the Counter-Economy become the Economy?"
First, the wealthier Eastern counter-economists may sometimes be able to leave
with their money and enjoy the pleasure spots of the rest of the world. Even
Russia has Riviera-like areas on the Black Sea, but ostentation in the latter
requires explanation to officials.
True, and more often than many would think, making the wealth, reinvesting it,
and making more is a prized end in itself. James Garner's character in the 1963
film The Wheeler Dealers expressed it as "making money is just a way of keeping
score" and that's in relatively free, wide-open Texas. Even so, millionaires in
the West are legendary for concealing their wealth -- Getty, Hughes, Koch, and
other reticents are as common as the ostentations of Hearst, Hunt, and Hammer.
The Western official confiscator has only a slightly shorter leash than his
Eastern colleague.
Still, blowing a wad in Brezhnevland is the pits. "The Soviet underground
millionaire's principal aim it not to spend money, but to conceal it."32
Georgia, homeland of Stalin and privileged, is not too bad: II But the range is
enormous: the underground millionaire's lifestyle in Moscow or Odessa, for
example, is very different from his counterpart's life-style in Georgia.
"One Georgian client of mine, Golidze, who was tried by the Georgia Supreme
Court, openly and legally owned two magnificent houses. Both were luxuriously
furnished with antiques bought from dealers in Moscow and Leningrad. During a
search, authorities confiscated his wife's jewelry, and 45,000 rubles in cash --
which Golidze explained to me was just lying around at home to cover day-to-day
expenses."33
So things are tighter in other Red lands? "The Georgian life-style is not
remotely appreciated by underground millionaires in Moscow, the Ukraine, and the
Baltic Republics. Forsaking the communal apartment bought under his own name,
where he can enjoy expensive foods without having to hide them from the
neighbors ... buying a modest dacha under a relative's name ... or taking a
trip to a Bulgarian resort on the Black Sea ... all this is about the extent of
pleasures that a millionaire of the older generation dare allow himself. His
principal entertainment is getting together with male colleagues in private, and
the eternal male need for a bit of fun outside the family circle is satisfied by
several salons maintained by women with social or business connections with the
underground milieu. The attraction of these salons is gambling rather than
sex."34
One can readily see that providing entertainment for the fun-loving, wealthier
counter-economists is itself logically, a counter-economic enterprise. "During
the 1960s and 1970s, the salon of one Elizabeth Mirkien enjoyed great popularity
in Moscow. Her husband had been in the employ of one of the large underground
companies and was at the time serving a prison sentence. In the spirit of the
unwritten laws of the milieu, the husband's partners were providing Elizabeth
with a decent sum of money each month, but she also had an income from the salon
of her small two-room apartment. Middle-aged businessmen liked to assemble
there. Everything was to their liking: the head of the house herself, a
handsome and affable lady; excellent meals; and, above all, the card tables and
roulette wheel. The stakes were very high, for games of chance occupy a very
important place in the life of a wealthy underground Soviet businessman. Only
at the card table or the roulette wheel in some house such as Elizabeth's are
they able to risk huge losses, feel the euphoria of spending recklessly, feel
rich."35 And yet, save quantitatively, is that a different attitude from that
found in Monte Carlo or Las Vegas?
Why does the Counter-Economy not become the economy? The one failure of the
Counter-Economy so far, is on the mental-spiritual-psychological level -- the
abstract level. As we shall see, the scientists and engineers of abstraction,
the intellectuals, have failed so far to analyze and justify the
Counter-Economy. Thus Counter-Economists operate under the dead weight of
unearned guilt. The effort to change this around, to provide the
Counter-Economy with a full-blown, self-justifying philosophy -- agorism -- has
just begun.36 We shall see what form it must take in the final chapter of this
book.
Nonetheless, the guilt and self-inhibition is evident in Russia as in the West.
"The older-generation millionaires, beyond indulging in such pleasures, try to
shield their children from the risks of the underground world and make them into
academics, doctors or lawyers."37 That is to say, the children are to be made
respectable and above-ground. This thinking and the failure to generate, so
far, a supply of pro-market ideology, is the failure of the Counter-Economy.
The Hope of the Future
But the children, the second generation counter-economists, are showing signs of
appreciating the innovation and courage of their forebears -- more than the
forebears did -- and may themselves conclude the liberation. Their parents try
to get them out and into Communist acceptability. "Despite this, many children
-- after university degrees, even doctorates -- reaffirm the family tradition
and enter underground business. These second- and third-generation underground
businessmen are not content with the lives of their fathers. They become
habitues of expensive restaurants, whose waiters and managers know them by name,
treat them as honored guests -- and report their binges to the DCMSP. They are
not afraid to make large bets at the races, watched by DCMSP agents, or too
timid to buy cars and dachas at prices equivalent to 20 to 30 years of their
official salaries. They openly visit fashionable resorts, spending five years'
official salary on a month's vacation."38
Nor is their defiance and "coming out" folly or self-destructive bravado. From
their parents' knees, these New Counter-Economists know what they are doing, and
their ingenuity surpasses their teachers.
"This does not mean that the younger generation of underground businessmen are
lunatics prepared to trade one year of high living for many years in the prison
camps. They all try to be prepared to justify their expenditures by pointing to
some sort of legal income. A common way is to buy a lottery ticket or
government loan bond that has had a big win. The biggest of the younger
businessmen retain paid agents among bank employees who persuade winners who
come to pick up their money to sell the lucky ticket for two to three times the
amount of the win. But the main insurance for the younger generation remains
the bribing of DCMSP officials -- at which they outdo even their parents."39
When everyone is linked by self-interest to their fellow counter-economists, in
whole or part, in Russia or anywhere, and they are fully aware of this, the
Counter-Economy will inescapably succeed. The base is there. "According to the
Soviet Writers Union weekly, Literaturnya Gazeta, during only year, occupants of
new Moscow apartments paid ten million rubles to private tradesmen for
'additional improvements to their apartment.'"40
Them And Us
Confirmation of this state of affairs in the Union of Soviet Socialist Republics
comes from the most Establishment of sources -- The New York Times Russian
correspondent, Hedrick Smith, observed: "Corruption and illegal private
enterprise in Russia, 'creeping capitalism,' as some Russians playfully call it,
grow out of the very nature of the Soviet economy and its efficiencies --
shortages, poor quality goods, terrible delays in service. They constitute more
than a black market, as Westerners are accustomed to thinking of it. For
parallel to the official economy, there exists an entire, thriving
counter-economy which handles an enormous volume of hidden or semi-hidden trade
that is indispensable for institutions as well as individuals. Practically any
material or service can be arranged nalevo [nalevo means 'on the left,' but
comes across as 'on the side' or 'under the table'] -- from renting a holiday
cottage in the country, buying a raincoat or a good pair of shoes in a state
store, getting a smart dress made by a good seamstress, transporting a sofa
across town, having the plumbing fixed or sound-proofing installed on your
apartment door, being treated by a good dentist, sending your children to a
private playschool, arranging home consultation with a top-flight surgeon, to
erecting buildings and laying pipe in a collective farm."41
As we have seen in the first two chapters, Westerners are rapidly becoming
accustomed to thinking of a far wider counter-economy. All the sources
mentioned in this chapter convey this feeling of difference -- which is valid --
but with an implication of qualitative rather than quantitative difference.
"Setting aside such sensational cases of abusing official positions, only a
small part of the operations of the Soviet counter-economy would be considered
criminal in the West. To be sure, the Soviet Union has embezzlers, car theft
rings, prostitutes, narcotics traffickers, armed bank robbers, and an occasional
band of extortionists posing as police units complete with uniforms, handcuffs
and documents, shaking down the innocent -- offenders who would be criminals
anywhere." Including, it must be added, in the Counter-Economy itself. Smith's
list is the red market of violence and coercion, not the peaceful, state-dodging
black market. He continues, "But much of the private hustling on the black
market would not be illegal if Soviet Communism permitted the kind of small
private trade sector that exists legally under Hungarian, Polish, or East German
brands of Communism."42
Such naivete is interesting for the many things it tells us. While it's true
that releasing some of human action as is done in the other East European
countries would reduce the counter-economy slightly, Smith seems unaware how
vast it is there. Furthermore, he is unaware, it seems, how vast it is in New
York City, his home base. Because New York is more highly regulated than the
rest of the U.S. in many respects -- taxi medallions, higher tax rates, for
example -- it swarms with gypsy cabs, unlicensed food vendors, non-union
carpenters and movers, tobacco bootleggers, or "buttleggers," and dealers in all
illicit substances and prohibited copies (computer programs to records).
Perhaps, like the New Class of Communist aristocrats he portrays in their
closed-off suburbs away from the suffering Moscow masses, he belongs to a class
which avoids such street contact.43
Smith does perceive, at least dimly, the revolutionary possibilities. "But the
regime faces a dilemma: As one Russian, echoed by many others, observed to me,
'Everyone in the Soviet retail trade is a thief and you can't put them all in
jail.'" And yet he confuses reform with revolution near the end. "The Party
knows, he reasoned, that people who are chasing after illegal goods in the
counter-economy are not worried about reforms. Moreover so long as the public
takes the counter-economy as a necessary and desirable fact of life, there is
scant hope of collaboration for strict enforcement."44
The resolution in the Russian -- and Western -- mind of this dichotomy could
well end the statism in favor of a complete Counter-Economy. Of course, it
would then be the economy, a free market. Smith has an anecdote which
illustrates the confusion of economic efficiency and freedom with anti-social
inhumanity.
"A medical scientist who emigrated to America in 1974 after working at one of
Moscow's leading medical institutes praised Russian doctors as 'more humane'
than profit-oriented private physicians in America and endorsed the concept of
socialized medicine. 'But you cannot imagine how poor is the general quality of
medical service,' he said. 'In Rejazan (a city of 400,000) where I grew up,
they have very bad equipment. They lacked very simple things -- medicines for
example. The qualification of the doctors is much lower than in Moscow. But
the worst problem in the system is poor organization and bad nursing service.
The nurses do sterilization very badly. After operations, even in our institute
which is one of the very top ones, we had a lot of sepsis, festering wounds,
infections, and suppuration. The nurses were not clean enough. They made
mistakes in operations. Our institute director became very angry because he
would do beautiful operations, and then there were those infections. So often,
you know, the middle-level personnel do not receive good pay and they are not
reliable, not competent. Once I was in Kharkov and I had to be operated on for
appendicitis in an ordinary district hospital. It was so dirty that you cannot
imagine it. The sheets were grey from such long use. The clothes of the
hospital workers were not clean enough. They took special care of me because I
was from this important institute in Moscow. Still I got an infection and so
did others. I saw one man die in my presence after an appendicitis operation
because of this problem."45
This is the overground economy in the most statist area in the world. Small
wonder people seek cold, profit-seeking marketeers who turn out clean, precise,
antiseptic operations in mass production cheaply -- or if they are prevented,
they will seek out black marketeers who will do it less cheaply but give the
customer what he or she wants. Says Dimitri Simes, "The parallel market is a
vital part of the Soviet way of life. And only fundamental economic and social
reforms can wipe it out of existence."46 But can they be fundamental enough,
that is, will the State abolish itself?
The forces of the market, overwhelming the Marxist-religious Forces of History,
may leave no choice. Although Konstantin Simis implies corruption --
counter-economizing the statists themselves -- is avoidable, his conclusion
speaks for itself in reply: "And there appears one final revealing absurdity.
Obviously, the Soviet state and the whole structure of underground enterprise
are pitted against each other in absolute conflict and contradiction. Yet these
adversaries are weirdly allied. They are bound by corruption. There could be
no vast labyrinth of lawless enterprise -- not for a year, not even a month --
without the complicity and the venality of the equally vast Soviet apparatus
charged with enforcing the laws against economic crime. This official
criminality is all-pervasive, from the lowest officialdom to the highest elite
-- a cancer plaguing not just the state but all of Soviet society. This is the
awesome cost of a system dedicated to stifling the most basic impulses of
personal freedom."47
That system is not Sovietism, or even Communism, but statism. It exists and is
growing in North America. In the next few chapters, we shall see how North
Americans -- and, now and then, the rest of the world, deals with a world of
bureaucracy and nalevo -- of legal plunder and illegal production. First we'll
look at the biggest network of small entrepreneurs in the Counter-Economy, the
drug market in all its aspects and definitions of what drugs are, and then the
biggest problem of Counter-Economics in East and West alike: money and its
control and the ravages of inflation.
Back to TOC
Chapter Three Footnotes
1. Free market cracks Red regimes. (1976, July 25). New Libertarian Weekly
3(33) p. 1.
2. Simes, D. K. (1975). The Soviet parallel market. Washington, DC: Center
for Strategic and International Studies, Georgetown University, p. 25.
3. Simis, K. (1981, June 29). Russia's underground millionaires. Fortune, p.
37.
4. Ibid., pp. 38-39.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Ibid.
10. Simes, D. K. op. cit., p. 70.
11. Ibid.
12. Ibid., p. 7.
13. Ibid.
14. Ibid., p. 16.
15. Ibid., p. 17.
16. Ibid., p. 18.
17. Simis, K. op. cit., p. 40.
18. Ibid., p. 41.
19. Ibid.
20. Ibid.
21. Ibid.
22. Ibid.
23. Ibid., pp. 41-42.
24. Ibid., p. 42.
25. Simes, D. K. op. cit., p. 21.
26. Ibid.
27. Ibid.
28. Ibid., p. 22.
29. Ibid., pp. 23-24.
30. Ibid., p. 24.
31. Ibid.
32. Simis, K. op. cit., p. 49.
33. Ibid.
34. Ibid.
35. Ibid.
36. See, for example, J. Neil Schulman's novel, Alongside Night (Crown
hardcover, 1979; Ace paperback August 1982).
37. Simis, K. op. cit., p. 47.
38. Ibid.
39. Ibid.
40. Simes, D. K., op. cit., p. 1, footnote 1.
41. Smith, H. (1977). The Russians. New York: Ballantine Books, pp. 112-113.
Chapter Three is entirely devoted to Counter-Economics in Russia, and Smith is
the first person after myself I have found to use the term "counter-economy,"
although he does not use "Counter-Economics" or "counter-economist." A
communication with him revealed no knowledge of my prior use from February, 1974
(before an audience of the Free Market Forum in California, and subsequently in
hundreds of libertarian publications). His book, by the by, is recommended.
42. Ibid., p. 132.
43. While Smith lived in Russia, the author lived in New York's East Village in
a cluster of apartments of hard-core counter-economists and worked
counter-economically with New Zealand and Australian illegal aliens, during the
period 1972-1975.
44. Smith, op. cit., p. 133.
45. Ibid., pp. 94-95.
46. Simes, D. K., op. cit., p. 25.
47. Simis, K. op. cit., p. 50.
Back to TOC
Chapter Four:
Drug Counter-Economics
To many people, illicit drugs and black market are strongly connected. The case
for the existence of the counter-economy of drug consumption, production,
agriculture, distribution network, financing, transportation, and smuggling, and
even its use as an alternate currency has been made in the popular press from
High Times to the New York Times.
Rather than making the counter-economic understanding of the drug market easier
to convey for the author, the preconceptions and prejudices involved make it the
most difficult chapter in the book. Nonetheless, the issue is best tackled
forthrightly and immediately. The problem is not the mechanics -- though that
is often misrepresented, as we shall see -- but the intense irrationality
surrounding the subject. Drug abuse is a term in great need of disabuse.
Drug Disabuse
If we discussed the marketing of acetylsalicylic acid to beat Bayer Aspirin's
monopoly prices, few would be disturbed. Can we abuse "aspirin?" Medical
experts suggest that an excess causes stomach bleeding, so it seems possible.
Acetylsalicylic acid is a pharmaceutical item, sold in "drug stores." Where is
the "aspirin abuse problem?"
Let us look at tobacco. While heavily restricted in marketing by
anti-advertising regulation and taxed higher than anything else, it remains
"legal." Nicotine, tobacco's most active ingredient, is rated somewhere between
caffeine and tetrahydrocannabinol (coffee and pot) in social acceptance, and is
as much a "drug" as either. Today it is still legal and a much-maligned
non-problem.
Should the final step toward outlawing of cigarettes and pipes be taken
tomorrow, it would undoubtedly touch off a civil war in North America. While
smokers have been "taking it," in the form of constant nagging in the media and
petty harassment at cocktail parties as long as they could get their "fix," they
would flagrantly and massively disobey any laws stopping them from obtaining it.
Remember, a majority of people -- not just adults -- of both sexes and all races
outside the most poverty-stricken parts of the world smoke tobacco.
One step from aspirin to tobacco, another to alcohol. Booze was slightly less
popular and slightly more "powerful" (disabling when over-consumed) and actually
did meet with an era of Prohibition.
Prohibition was not defeated by political reform, organized revolution, or even
street activists -- though all were around in the United States in the 1920s.
What is almost universally known is that it was abundantly and easily available
at a price little different from the legal, taxed price, and the "cost" of
entering this market -- in terms of additional risk -- was so low that one often
drank in front of senators and even sheriffs with impunity.
The failure of Prohibition to prohibit was the most spectacular triumph of
Counter-Economics in the United States. Alcohol "in moderation" (whatever that
is) is now almost completely acceptable.
Alas, it is almost totally "white market" and taxed to death, second only to the
taxation of tobacco products.
Let us take one more step to marijuana along the drug spectrum.
Tetrahydrocannabinol, at least as found in joints (as opposed to hash oil) is
less powerful than alcohol. Yet its popular acceptance is lower; that is, its
use is not enjoyed by a majority in the democratic countries. Hence, it is
illegal.
The Counter-Economy sector connected with marijuana is so large that it touches
nearly every man, woman, and child in North America (and much of the rest of the
world). This claim will be backed up in the next section; a different point is
being made here.
Let us skip over one drug spectrum step: what about arsenic and cyanide? These
substances are not only not illegal but not even all that controlled. Is there
any proscribed drug as capable of harm with as few "redeeming" side effects ?
Why are not cyanide and arsenic the most persecuted drugs of all? People do
take them. But in almost all journalese you will never hear about "another
arsenic-related death" Or "cyanide abuse." The usual term is suicide.
Whatever the potency and "threat" of heroin, opium, lysergic acid diethylamide,
or amphetamines -- and they lie between alcohol and arsenic by anyone's estimate
-- they are something "special" in the eyes of a large sector of society with
considerable political clout. Is it a Puritan hatred of pleasure, then? How
about the prohibition of Laetrile (which is also faltering at the time of this
writing)?
Drugs are not a poison unless chosen for that use. They are not a cure unless
chosen for that use. They are not agents of pleasure or escape or stimulation
unless chosen for that use. In short, the chemicals are irrelevant to any "drug
problem" -- drug abuse is choice abuse.
What one should choose is a religious problem, in the broadest sense of the
term. Choosing the wrong drugs (and almost everyone chooses some, however
"mild" or innocuous) is exactly like choosing the wrong religion a couple of
centuries ago -- you are an infidel, heretic, or heathen and you will be hunted
down and persecuted. You will also be aided, befriended, and even hidden from
your persecutors by sympathizers with your beliefs.
There is one major difference between most commonly understood religious
practices and the use of drugs: the trade in physical goods. While there is a
giant market in religion, outlawing associated material goods merely pinches the
believers a bit and often hardens their convictions.
Outlawing drugs discourages a few marginal buyers but just as often hardens the
users and deepens their commitment. Would there exist the marijuana-based
counter-culture or laetrile-based, mostly right-wing, movement if the State had
not suppressed their drugs-of-choice?
And, of course, the line between drug culture and religion has actually been
crossed many times: peyote-based Indian and neo-Indian hippie sects, the
marijuana (ganja)-based Rastafarians, and the numerous "accepted" religions that
use wine (persecuted during Prohibition) or food rules and dietary restrictions
(Orthodox Jews and fundamentalist Christians).
One's choice of religion has become, largely, and in most countries, no longer
the business of the State. At least in the more enlightened countries of the
West, one's choice of drugs is being perceived more and more as a question of
individual conscience. Until this view prevails, the drug market is the
greatest single recruiting and consciousness-raising sector of the
Counter-Economy, with the exception of tax avoidance (see Chapter One).1
The Drug Capital Pyramid
To understand the vastness of the interconnectedness of the drug market, one
needs to introduce an important concept of economics, and to discard a
misconception mostly spawned by the propaganda of the Drug Wars fought by
several levels and agencies of the State. The latter is the myth of the mob or
"organized crime;" the former is the concept of the capital pyramid. One is, in
a sense, the mirror-image or perversion of the other.
The term "organized crime" says too much. If you and your neighbors work
together to beat taxes or the draft or distribute and consume drugs -- anything
the State considers a crime -- you are a "conspiracy;" that is, by not working
solo, you have committed an additional crime. You are organized criminals and
the organized government (some would say disorganized government) dislikes that
even more. The degree of formality of this organization can be very slight
indeed. You may not even know personally those with whom you deal; you may
simply meet, transact, and possibly never meet again.
The marketplace spontaneously organizes supply and demand, regardless of
commodity. People need not add any ties or fondness or supportiveness to these
ephemeral links but, being people, they do, and we shall delve into this
awareness expansion or consciousness raising later in this chapter. The
construction of a giant superstructure across many borders and in minute detail
on every street of agriculture, processing, shipping, refining, wholesaling, and
distribution requires no long-term conspiring or formal organization such as a
syndicate or "Mafia."
Gangsters, the Mob, whatever they're called, are not the drug market or even
part of the Counter-Economy; rather, they are the State within the State. They
prey upon the counter-economists by collecting "protection" taxes, regulating
trade, and fighting wars. The Cosa Nostra and the Purple Gang and such serve no
function in the Counter-Economy save that of parasite in exactly the same way
the official government does in the market. In certain backward communities and
neighborhoods, usually some elder ethnic culture, such groups are tolerated or
even supported by frightened people as real protectors, just as such
authoritarian governments are accepted by the people of unenlightened countries.
Yet in the "hot" drug markets of the American university campuses and Southern
California in particular, such mobsters simply do not exist.
If the Godfather doesn't direct the black market, who or what does? Rather than
some Sicilian's Black Hand, the market is directed -- without government
interference or in spite of it -- by Adam Smith's Invisible Hand.
Someone realizes that people are willing to pay for drugs and that someone
realizes that the price will get him or her a profit sufficient to make it worth
his or her effort. Another realizes that there are these dealers who will pay
well for a large amount of a drug -- and will break it up for retail, marking it
up to make it worth their effort. Yet someone else sees the opportunity in
setting up a chemical laboratory to refine drugs and deliver them to a few
wholesalers and another sees the profit in smuggling in drugs to a few refiners.
And still another sees the value in supplying smugglers in their homeland from
farmers in their area looking for a few extra dollars, pesos, or bat. And
farmers see the value in dodging or paying off the government officials to grow
a little extra of a forbidden crop.
This "vertical" market structure -- from layers of producers to a base of
consumers -- was discovered, as an economic concept, by Eugen von Bohm-Bawerk,
the greatest Austrian economist next to Ludwig Von Mises, and called the Capital
Pyramid. One of Bohm-Bawerk's theories states that the more "progressive" the
market, the higher the pyramid grows; that is, the base narrows and the height
grows more layers. More and more wealth is transferred to earlier stages of
production -- yet the end product has finer quality and/or, lower price. The
Capital Pyramid of the drug market rivals that of space-shuttle production --
and it is growing, against a literal army of government agents, armed to the
teeth and shooting.2
If anything can prove the unstoppable nature of the Counter-Economy, the triumph
of the drug market's Capital Pyramid against the armed might of the State
should. So here is some proof.
The Second World War -- Against Drugs
It's been said that if Man will not learn from history, he is condemned to
relive it. Two World Wars may still not have cured us of world war, but at
least there's been a longer gap between them. In the 1920s, the United States
imposed a Prohibition on the drug ethyl alcohol in all its forms even as various
provinces in Canada were repealing local prohibition as failures. In 1933, the
First World War -- and it was fought across borders and on the high seas --
against Demon Booze ended in surrender with the Repeal of Prohibition. Soon
after, the State in all countries stepped up its suppression of thousands of
other chemicals ingested by humans for pleasure, escape, or stimulation and held
it seemingly at stalemate. Then came the 1960s and the new philosophies, and
the rise of psychedelic drugs. A new war was declared by the State against
lysergic acid diethylamide and peyote and STP, and the old one with cannabis
sativa and amphetamines and tranquilizers ("uppers and downers") was redoubled.
"War" is not a metaphor here. "The U.S. Coast Guard reports that on two
separate occasions in recent months, U.S. gunboats were forced to fire shots
directly into the hulls of ships carrying marijuana. Coast Guard officials say
this is the first time since Prohibition -- almost 50 years ago -- that
smuggling boats have actually been fired upon and hit by Coast Guard ships in
the process of making arrests.
"Commandant John Hayes says that until the two recent incidents, seizures at sea
have required, at the most, a warning shot or two across the bow to force the
vessel to surrender. Neither of the shooting incidents resulted in injuries.
Hayes says that more and more ships are trying to outrun Coast Guard cutters
because marijuana has become a big business, with single cargoes worth millions
of dollars. The Coast Guard estimates that $6 to $8 billion in illicit weed was
successfully smuggled by ships into the U.S. last year."3
The United States, largely through the Drug Enforcement Administration, has
opened up fronts on the war throughout Central and South America, both ends of
Asia, and Western Europe, a true World War. Yet, "home-grown" remains the
biggest source of raw drug material, as our look at California and Hawaii will
reveal. There's nothing foreign or alien about drug-dealing, but the market is
completely international.
Colombia is described by United Press International as a "Pot Empire." Riohacha
"is the capital of La Guajira state and the hub of Colombia's biggest illegal
industry -- growing and smuggling marijuana in the United States. It is also a
key outpost in the government's battle to reduce the drug traffic, which
threatens to overshadow all of the country's legitimate business."4
How big can this one sector of its Counter-Economy be? "Estimates of the total
Colombian drug business vary, but it is generally put at around $2 billion
annually. A good part of the 'pot' lands in the hands of international dealers
based in the United States."5
Colombia is also a distribution and processing center for different drugs from
different countries; it also maintains one of the largest single labor forces of
the Counter-Economy "Colombia also is one of the countries where cocaine from
Peru and Bolivia is processed for shipment to the United States, mainly by gangs
operating out of the cities of Medellin and Cali. However, the white powder
accounts for less than half the dollar value of the marijuana trade and involves
a much smaller labor force than the 150,000 persons involved in 'pot'
trafficking."6
To really get a feel for the large scale of this particular industry, one needs
to absorb an eyewitness description. "At an army base outside Riohacha,
soldiers in T-shirts and fatigue trousers stack scores of large bales wrapped in
burlap bags. Tons of 'Santa Maria Gold,' prime marijuana from the slopes of the
Santa Maria Mountains, are being prepared for a bonfire of destruction after
being seized in the latest army operation.
"A dozen trucks confiscated in the action are parked in a row. A few yards away
are the mangled remains of a small plane that crashed on the highway near the
army base presumably when on a marijuana mission.... Through the end of June,
the armed forces had seized 80 airplanes in northern Colombia, nearly all of
them registered in the United States. They include a DC-7, a DC-6, a Convair,
and three venerable DC-3's, along with many small twin-engine planes. Of that
total, 23 planes had crashed while attempting dangerous landings on makeshift
runways. A total of 72 boats, 308 vehicles, and 879 firearms were also
confiscated.
"In the same period, 1,169 suspects were arrested. Of the 186 foreigners among
the arrested, most were Americans. The army says it destroyed nearly 38,000
tons of marijuana, including 50,000 bales ready for shipment and the estimated
yield of 25,250 acres. It also grabbed 2.2 million amphetamine tablets ready
for export and 74 pounds of cocaine apparently by marijuana smugglers outside
the main cocaine route."7
That massive drug bust must certainly have set back the Colombian drug business,
right? "'We figure we have got our hands on less than 10% of the total
production,' an army officer said grimly."8 Note that 10% is lower than taxation
rates in most countries.
See, in our present example, how a counter-economic Capital Pyramid builds a
large community of common interest in defence of a black market. "The root of
the problem is money -- the dollars and pesos that convince the farmers to run
the risk of raising the illegal crop and that tempt ill-paid police, soldiers,
and even judges to collaborate with the drug traffic. La Guajira has long been
known in Colombia as an economically depressed area where dealing in contraband
is considered a normal way of life. The local populace welcomes outsiders with
the same open-hearted warmth that Tennessee mountaineers reserve for internal
revenue officers."9 The comparison, as we have noted, is highly apt.
"Ernesto Samper, president of a national federation of Colombian financial
institutions ... estimated that 150,000 Colombians depend on marijuana for a
living and said nearly all are small farmers and their families [are] low-level
drug runners. If Colombia had legalized production, he said, it could have
collected nearly $146 millions in taxes last year instead of spending a
comparable amount on enforcement."10 Another solution to the taxes spent on
enforcement can be found in the previous chapters.
This zealous state crackdown on the drug trade is atypical. Moving from the
Latin American theater of this World War to the Middle Eastern theater -- where
Israeli, Arab, Christian, and UN soldiers abound -- we see another attitude.
"Not far from where the harvesters were at work, soldiers were lazily waving
cars on down the highway. To them, hashish was just another crop. Some say
this is among the best hashish in the world. They call it 'Lebanese Red,'
'Lebanese Blond' and other names. It is made from the marijuana plant -- Indian
hemp, it is called in this part of the world -- and it is marketed as oil or in
flat pieces that look like the soles of heavy shoes."11
Except for the military attitude, the Colombian scene is repeated. "It goes out
by truck and boat and plane, and is widely thought to account for as much as a
third of all the money that comes into Lebanon. Lebanon has only a semblance of
government, but its banks are thriving and hashish is one of the major reasons.
"'I think we can say that without a doubt "hash" is the biggest industry in the
country,' a Western diplomat who tries to monitor the drug traffic here said.
Exact figures are hard to come by, but it is estimated that 80% of the Bekaa
Valley is given over to growing hashish. So much land is in Indian hemp that
the valley, one of the richest farm areas in the world, can no longer produce
all the fruits and vegetables Lebanon needs."12
Most legal industries are nowhere near this size. Can this one drug industry be
so vast and yet prohibited by the State? "And although growing hashish is
technically illegal, the harvest comes in every year right under the nose of the
law -- or what is left of the law. The soldier directing traffic on the road,
who cannot fail to notice that the hashish is being harvested, said: 'Growing it
is illegal, but it is not our job to stop it.'"13 The bureaucratic response is
given to the unstoppable free market.
And the market replies. The reporter of the above scene interviewed a nearby
farmer.
"He was standing at the edge of his crop, which in a few days would be harvested
and then dried in a small shed. Then it would be picked up by the man who had
come out earlier to inspect it, to assess the quality of the plants before
agreeing on a price. 'This is the best way to feed my family,' the farmer said.
'Without hashish, I would be a poor man.'"14
While some may describe Lebanon's government as having broken down, there are
certainly plenty of armies -- most made up of religious types with strong
anti-drug tenets -- marching up and down the country. Even with far more
governments than most people face, the Counter-Economy survives. "The story is
told of a grower who keeps two military vehicles -- tanks -- to protect his
fields. It may be an exaggeration, yet it is true that the fields are virtually
never disturbed. Too many people have an interest in the crop. And it is
generally accepted that the growers pay protection money to the many armed
militia groups that operate in the area."15
The interlocking network spreads out at all vertical levels of the Capital
Pyramid horizontally as well. "One expert said that some hashish is flown to
neighboring Middle East states, and that some is trucked through Syria to
Turkey, then on to Europe. The chief client there is said to be the
Netherlands. Most of the hashish, however, is consumed in the Middle East.
Egypt is the biggest buyer."16
The drug counter-economy includes high finance, right up to the international
banking system. "The farmers and middlemen are often paid in U.S. currency
that has been 'laundered' a number of times before it reaches Lebanon in an
effort to throw drug agents off the scent. One source cited the example of a
buyer who took an Amsterdam bank draft and deposited it in a Swiss bank. The
money was transferred to Venezuela, to Taiwan, and then to a bank in one of the
Persian Gulf states before it finally arrived in Beirut.
"Lebanese authorities estimate that $250 million came into the country last year
in connection with the hashish trade. This year, the estimate is for twice that
figure.... 'The banks are filled with money,' a Western diplomat said..."17
Over in the Far Eastern theater of our World War, we find a few differences on
specifics but the counter-economic basics remain comfortably familiar. "Stashed
in airliner restrooms, sewn inside baseballs, or taped to the bodies of
smugglers, Pakistani heroin is reaching U.S. and West European cities in
ever-increasing quantities and causing international concern, U.S. and
Pakistani officials say. Opium cultivation has dropped sharply in this valley
and other major poppy-growing areas of Pakistan. But what remains is apparently
more than ample for a string of underground laboratories that began producing
the country's first heroin in the past year."18
Remembering that the Counter-Economy recognizes no state borders, we're not
surprised to find full market cooperation among those of different nationalities
and religious denominations up and down this Capital Pyramid. "At least five
Iranian chemists were known to be in the semi-autonomous tribal territory of
North West Frontier where the infant heroin industry is located and where law
enforcement officers have no jurisdiction."19
"Heroin is much easier to transport -- and conceal -- than raw opium extracted
from poppies, and it pays to make the conversion. Ten kilograms (22 pounds) of
raw opium in the currently depressed market here costs about $300 and yields a
kilogram of heroin. This amount of heroin sells for about $10,000 in Pakistan,
at least $45,000 in Western Europe, and $175,000 on the U.S. East Coast, a U.S.
Embassy official said. Once in the hands of U.S. dealers, the heroin is cut
and sold in packets. The income to such dealers runs into the millions of
dollars from a single kilo."20
The Counter-Economy is invulnerable to the State, not by using the State's
concepts of attack and defence, but by market methods -- a way of thinking alien
to Statists. It takes governmental actions into account, along with supply and
demand.
"There is a glut of opium in Pakistan because of low prices arising from
disturbed conditions in the traditional 'golden crescent' markets in Iran and
Afghanistan. Guerrilla warfare has made shipping raw opium through Afghan
mountain passes too risky and the death penalty imposed by the Iranian
revolutionary regime on drug dealers has dampened their enthusiasm for the
trade: Filling the gap, Pakistani narcotic entrepreneurs secured the refining
know-how and either used Persian Gulf sea routes or the numerous direct air
links with the West to smuggle out the heroin, the sources said."21
The interchangeability of methods in the Counter-Economy is highly useful to
entrepreneurs. Those who find the drugs involved unsavory might still learn
valuable techniques for risk reduction. Within the drug industry, one product
line may be instructive to another.
"'A number of Iranians operating independently have been picked up in the past
year through sheer inexperience,' in the United States, said an American
official. 'But the Pakistanis have been smarter by using networks which they
had established earlier for hashish.' Pakistan lacks the domestic consumption on
the scale of Iran in the past. But as heroin refining expands here,
drug-enforcement officials fear that demand for opium will pick up."22
In 1980, economically depressed Jamaica threw out the socialist government and
installed Edward Seaga. Part of Jamaica's problem was its chronically negative
balance of payments -- a balance which, naturally, did not include
counter-economic exports. Seaga threatened to legalize the ganja trade and
count marijuana in the balance of payments, which, nearly everyone agreed, would
have given Jamaica a positive balance and gotten the International Monetary Fund
bankers off its back.
Rather than accept a return to sound accounting practices and an extension of
the free market -- the U.S. could have always claimed a concession to the local
large Jamaican religion, the Rastafarians -- the U.S. hiked foreign aid and
extended loans. The Rastafarians, by the way, constitute a third force in
Jamaican politics, but are largely anti-political, undoubtedly from their
continuous contact with the reality of the marketplace. (Rastafarians have a
distribution network throughout the U.S. and U.K. thanks to the present
popularity of reggae, their sect's music, which is allied to punk rock.)
The American government does not hesitate to overthrow or destabilize other
States that are on the wrong side of the Second World Drug War. Bolivia's
anti-communist junta, which overthrew a democratic government in 1980, was
destabilized by the DEA and CIA. General Torres' problem was not his cavalier
disregard for democracy and "human rights" (no government respects human rights)
and certainly not his opposition to Bolivian socialism; alas, he was suspected
of being the main military "protection" of the Bolivian drug industry.
A counter-economic head of state being a contradiction, General Torres did not
need much additional instability. Still, the extent to which this story was
accepted at face value by many respected magazines and newspapers indicates the
credibility; those reporting from Bolivia and encountering its Counter-Economy
are convinced it could have happened.
While the Drug Warriors lose Colombia, Lebanon, and Pakistan, and break even or
hold the line in Bolivia and Jamaica, where the war will be decided is on the
Home Front. Unlike the World Wars, where U.S. soil was untouched, the American
statists are powerless to prevent a massive invasion of the continental United
States, not to mention a massive defection to the "enemy" of much of its
citizenry.
Drug Wars: The Home Front
"Federal officials say that the state of Florida would suffer a serious economic
blow if the United States could halt the expanding cocaine market in the U.S.
The U.S. Drug Enforcement Administration estimates that three-fourths of all
the coke entering the U.S. today comes through the state of Florida; and that
the street value of Florida's cocaine alone exceeds $10 billion a year.
"The Journal of the Addiction Research Foundation says that so much coke-related
cash is generated in Florida that numerous Florida banks have become dependent
on the illicit coke market. According to one federal official quoted by The
Journal, the real estate market in Florida would "fall flat" if cocaine traffic
were suddenly halted, allegedly because a high percentage of Florida's purchases
of land and houses involve money stemming from the cocaine trade."23
The same Capital Pyramid, the same horizontal networking, and the same
operational modes and risk-reduction methods as we saw around the world are
evident at home in the United States, that government in the world most
committed to crushing Devil Weed and Killer Coke. Still, Florida is a
marketplace; surely keeping out those nasty foreigners with their filthy habits
(see Chapter Ten on immigration) would end the Drug Menace? Even Hawaii, the
state of lavish marijuana plantations and a futures commodity market in pot
crops,24 would be cut off with a tight naval blockade?
Unfortunately for those willing to fight on the beaches, to fight on the shores,
and to fight on the landing grounds, the homeland has fallen. The largest U.S.
market -- California -- is also largely self-contained, literally from the
ground up.
"In the remote hills and trackless valleys of northern California, it's time to
bring in what they call here the 'happy harvest.' The grass is as high as an
elephant's eye in the shimmering noonday heat. But the casual visitor rarely
spots the tall, saw-toothed plants tucked away in camouflaged, booby-trapped,
and guarded plots. This fall it's a bumper crop, worth somewhere between $500
million (U.S.) and $1 billion -- probably the most valuable cash crop in the
golden state, food bowl of America. And a lot of people -- small-time pirates,
the Mafia, police in helicopters, posses of sheriffs' deputies, federal
narcotics agents -- want to snatch it away from the growers."25
California drug agriculture is moving up to the level of King Cotton or "flowing
oceans of golden grain;" we're talking counties, boy.
"The crop is common hemp, cannabis sativa -- marijuana -- and in the past three
years it has transformed the social and economic life of a vast five-county area
of northern California, which stretches from San Francisco to the Oregon border.
It is, of course, illegal, but in this 16,000 square miles of rugged country,
smallholders find the risks well worth the annual tax-free income of $200,000
and up that a diligent farmer can earn."26
Politicians are not necessarily "bought off." There are places "the potvilles of
northern California, oddly named backwoods towns -- Willits, Garberville, Ukiah
-- where conservative old-timers and sharp, young university-educated
entrepreneurs have an uneasy alliance. They want the law and the political
bosses in Sacramento, the state capital, to stay out of their business: in this
area, long-depressed by a timber industry slump, pot is a godsend." Still, the
politicians try to jump on the bandwagon. "State Senator Barry Keene announced
that he was pushing a bill to decriminalize cultivation. The physical ill
effects of pot were not proven, he said, 'and right now what I see is a
multimillion-dollar business in the heart of my district.' Some 'very
responsible members of the Chamber of Commerce' had asked him if it didn't make
sense to decriminalize pot. Would it not 'diversify the economy, broaden the
tax base, and create jobs in this high-unemployment area?'"27
Whether or not the IRS could catch any more taxpayers is debatable, but the
Counter-Economy is already diversified and creating plenty of jobs, not only
without government intervention but in spite and in defiance of it.
And, as always, we see the Capital Pyramid and the horizontal networking of the
Counter-Economy, as exemplified by the drug market. "Marijuana is not merely a
good crop. 'It's sent land values skyrocketing,' says realtor Roy Johnson.
'It's not my job to fink to the Internal Revenue Service, to ask where these
guys get their money. Hell, it would be discrimination if I refused to sell
them land.' So, in Garberville, there are more real estate offices than saloons
on the main street."28
One politician seems to be ready for another Prohibition-surrender of 1933 in
the Drug Wars. "Mendocino County's agricultural commissioner, Ted Eriksen Jr.,
recognized the industry's status by listing county production last year at $90
million. A higher authority ordered the entry deleted. Amiable, easy-going
Eriksen, whose forebears have lived here since the turn of the century, says: 'I
guess it's one thing to make money from moonshine, another to advertise the
fact. Back in Prohibition days my daddy used to ship wine grapes out of the
state in a box labeled DON'T CRUSH THIS. IT MIGHT TURN INTO WINE. I just don't
see much difference in what's happening today. Pot is this county's No. 1
agricultural product. This harvest, it'll bring in more than $100 million.
People who refuse to recognize that are burying their heads in the sand."29
Fortunately for those who wish to see the market untaxed, unregulated, and
counter-economic, the Holy Warrior hawks against drugs shall smite such
compromising, realistic doves: "Next year [1982] is election year in California,
so ambitious state politicians don't quite see it Eriksen's way.
Attorney-General George Deukmejian, running for governor, wants the commissioner
fired and is taking court action to remove him."30
California is high-tech and technology comes in near the top of the Capital
Pyramid. "Thanks to the curious sex life of cannabis sativa, California's young
marijuana millionaires have been able to develop a strain of the weed that
outclasses Colombian, Mexican, and even such specialties as Hawaii's fabled Maui
Wowie in potency and popularity. Cultivation today calls for both science and
tender loving care. It involves force feeding with fertilizer, chemical and
organic, and above all 'selective breeding' -- the systematic removal of male
plants from the neighborhood of the female. Deprived of male companionship, the
ungerminated heads of the female plant ooze a dark resin that contains 10 to 12
times as much tetrahydrocannabinol (THC) as do other varieties. THC is the
active agent that gives smokers their high.
"The result is sinsemilla -- literally, 'without seeds' -- the most powerful
strain of grass in the world, priced at $1,500 to $3,000 a pound, selling on the
street for $200 an ounce."31
The Drug Warriors strike from the sky with liquid death -- and the
Counter-Economy simply accounts for the attack. "Helping to force up the price
is the success of Mexico's paraquat spraying program, urged by the United
States. Once it seemed that nearly every bag of 'weed' sold was purportedly
Mexico's Acapulco gold. Today, the great fields south of the U.S. border are
devastated annually with pesticides, and Mexico's share of the U.S. marijuana
market has fallen to an estimated 10 per cent."32
Could not the Holy Spraying Inquisition hit the home-grown heretics? "Now some
California legislators want to use paraquat on the northern plots. 'Why should
the taxpayer pay for armies of drug enforcement agents to go in there and seize
the stuff when paraquat could do the job quickly and easily?' asks Los Angeles
Police Chief Daryl Gates.
"The answer is that growers, with heavy popular support, are taking an
over-our-dead-bodies stand against spraying (which kills forest underbrush as
well as pot plants). They helped push through a local ordinance that forbids
aerial spraying, then handed frustrated police another setback when one county
voted against accepting a federal grant to help pay for a 'sinsemilla strike
force' set up by California's attorney-general."33
Most counter-economists don't stoop to politics for their risk-lowering. "Many
farmers try to avoid risks and cut costs by planting on other people's land.
National parks -- where vast forest stretches off the beaten track rarely see a
tourist -- and other federal properties are much favored. Says one narcotics
agent in Ukiah, the county's seat, 'We've found farms in a dozen national
forests, at Big Sur, even on the Hunter-Ligett Military Reservation (a huge
military training ground).' Others simply grow it in their own backyard. A
55-year-old grandmother, Jane Schimpff, recently arrested with a crop worth
$50,000, said she had grown her 60 plants as 'a hedge against inflation.'"34
More on inflation eounter-economics next chapter. But Ms. Schimpff's action is
quintessentially counter-economic, whatever the market. "Had she known her
plantation was so valuable, 'Why heavens, I'd have covered it up better.'"35
Surely. And her associates know this well and live by it.
"Two years ago Attorney General Deukmejian launched an all-out war on the farms,
leading his agents personally into the fray, followed by TV crews. Armed with
helicopters and an array of electronic warfare gadgets the strike force seized
and destroyed tonnes of weed worth millions of dollars.
"But despite the huge hauls, agents say they probably seize less than 10 per
cent of what is grown in this area."36 Where have we heard this before?
By the way, Florida is not so innocent of dope agriculture anymore. "An aerial
survey has uncovered at least 155 marijuana fields in 41 north and central
Florida counties, the authorities reported yesterday. Federal and State agents
have seized 51,189 plants since the surveying project began June 1, the Florida
Department of Law Enforcement said. The clandestine fields included one in Levy
County that contained 13,500 marijuana plants up to 12 feet tall."37
The Network
It does not matter which way the State goes in the near future. Should it
legalize "grass," "coke" and "dust" and "horse" will take up the slack in the
labs and distribution nets and farmers will "rotate their crops." Some marginal
producers will move out, maybe into tax-evasion counseling. On the other hand,
should the State prohibit something new -- thousands of drugs are discovered
every year -- or old, like tobacco, the market will expand, and a few more
marginal cases who were thinking about growing, trucking, or dealing will enter.
The State cannot win -- though some statists, making a career out of the Drug
Menace, can. And the Counter-Economy cannot lose, though the poor risks will
get weeded out by arrests. And the Capital Pyramid keeps growing with new
technology and techniques.
The drug market reminds us of what we have seen in the Soviet Union (Chapter
Three), much as that may irk anti-communists who enjoyed that section. Perhaps
it will help them to accept it if they realize that a Red takeover of the U.S.
would find an intact Counter-Economy ready to spread out into newly-controlled
fields.
Two concepts introduced in this chapter will be referred to heavily for the rest
of the book: the Capital Pyramid and the horizontal network. Before we leave
drugs, the latter lesson has yet to be absorbed in fullness. Let us walk up the
side of the Capital Pyramid and see just how much this one sector of the
Counter-Economy touches lives (we noted a similar phenomenon in Chapter One, you
may recall).
First, the consumers at our base. Every family's got one or more, even remote
Utah Mormon communities or withdrawn Brooklyn Hassidic neighborhoods. No point
in belaboring this save to note that every person who knows of a family member
using any illicit substance is guilty of conspiracy. That is, they're the
"organized" part of organized crime without even touching anything illegal.
(Who said we don't have Thought Police yet?) At this point, nearly the entire
population of North America is involved already.
But every dealer has friends, relatives, and acquaintances who "cover" for him
or her, perhaps provide him with safe places and stashes -- maybe a college dorm
roommate, maybe a fraternity brother or sorority sister. And there are the
people in the street or campus quad or Malibu cocktail party who see the
transactions and let it happen, perhaps even spontaneously warning the
entrepreneur of the passage of law enforcement.
This libertarian network, which some might consider an entangling web of
corruption, spreads through the rural farming communities as farmers or their
hip offspring diversify the crops blackly. Scientific labs get a little
moonlighting action and silent lab assistants and cooperative technicians join
the network without membership cards.
"Federal drug enforcers are 'falling behind' in the fight against secret
laboratories in this country that illegally produce stimulants, depressants, and
hallucinogens, congressional investigators said Friday. The General Accounting
Office said in a report that these non-narcotic, dangerous drugs killed more
than 3,200 persons in 1979 -- more than five times the number killed by heroin,
the drug enforcers' primary target. Most of the synthetic drugs are produced in
clandestine laboratories or diverted from the legitimate drug distribution
systems the report said.
"A few DEA field offices have achieved 'an impressive increase' in the number of
secret lab seizures -- from 33 in 1975 to 234 in 1980 -- but the illicit labs
continue to flourish, the report said."38
Garages may find they're providing and repairing a lot of vehicles paid for in
kilos rather than dollars Or at least in cash; in any event, you don't fill out
any papers on their jobs and don't ask why they have hollow bumpers or hidden
doors. Hangar techs at airfields and dock workers at yachting marinas find
silence may be Acapulco golden. And then there's their families and friends who
find out, accidentally or casually, where that bonus came from and, rather than
report it promptly as required by law, they join the network.
At the top of the Capital Pyramid, we may well find the network extends out from
bankers who know where their big depositors came from but -- officially -- not
their money... and their family and friends at the country club and social
register, including campaign donors, lawyers... and judges. At this point,
vested interest seems an appropriate term for the strands linking the network.
Up and down, spread out across all of society, from bohemian artists to research
chemists, from skid row to the boardroom, and from Watts to Beverly Hills, the
network grows, losing a few leaves, branches and roots, but always sprouting
more. The affinities and confidence that fill out this skeletal structure may
be extended to tax resistance, draft evasion, inflation protection (next
chapter), and all the other forms of Counter-Economics this book covers.
Often Drug Counter-Economics is the first contact Western youth has with what
their Eastern counterparts contact from birth (and with the Home Birth movement
-- see Chapter Thirteen -- that may change, too) the "left-hand goods." Nalevo.
It is a lesson that will serve them well as they run into network after network
in the market that really serves the world: the Counter-Economy.
"America's appetite for marijuana appears insatiable. At least 11 tonnes a day
go up in smoke, and consumers demand ever more potent Strains of the drug.
Former White House adviser and drug authority Dr. Peter Bourne estimates that
the marijuana industry is among the top half-dozen money-makers in the nation,
totaling around $50 billion. Bourne, an advocate of smaller penalties for
possession (but not of legalization), calls marijuana 'the country's most
difficult drug problem, a politician's nightmare.'"39 And a counter-economist's
delight.
One problem that these networks have is a problem in using money; that is, using
the State's monopoly currency. "Four million dollars, in small bills, is a bit
like a St. Bernard: nice, but hard to hide. So when federal agents burst into
the office of a Miami drug ring last August, they found a pile of money the size
of a small refrigerator. The $4-million haul represented two days' cash flow
for a smuggling operation, posing as a currency exchange firm, that authorities
said had been operating in south Florida for 15 months. The bust represents a
new emphasis on an old law-enforcement tool -- catch crooks by tracking their
profits. Few drug dealers accept MasterCard or Visa, so wholesalers quickly
accumulate boxes, bags, and suitcases full of 10- and 20-dollar bills.
"'It's a very severe logistical problem for criminals to move that much cash,'
says William Meglen, director of the Custom Service's currency investigation
division. 'I mean, we're talking bulk.'"40
But the Counter-Economy is nothing if not innovative and ingenious. "Frustrated
criminals sometimes try to transfer the money in unusual ways. Maria Rojas of
Bogota, Colombia, was arrested at the Miami airport last year carrying $1.5
million in eight 'factory-sealed' Monopoly boxes. In Florida, stories of
customers paying for luxury automobiles with shopping bags of money are common.
One suspected cocaine dealer paid cash for various parcels of real estate, a
Rolls-Royce, and a 60-foot yacht.
"Miami has become well-known as the Wall Street of this underground cash.
Federal authorities point to what they call the 'grotesque' amount of currency
flowing into the Miami Federal Reserve Bank -- where deposits jumped from around
$471 million in 1974 to over $4 billion in 1979."41
What the substance-of-your-choice vendors need to learn is what our tax rebels
are learning: how to get out of the State's money system, at least partially.
And an additional reason, which they all share with the rest of the economy, is
the State's depreciation of the forced medium of exchange -- inflation.
And so, as we have come to expect, the market responds with inflation
Counter-Economics.
Back to TOC
Chapter Four Footnotes
1. The author is particularly indebted to the famous psychiatrist Dr. Thomas
Szasz (e.g., Ceremonial Chemistry) and Jeffrey Riggenbach (especially in
Libertarian Review) for stimulating his evolution but he is responsible for his
own views. For those checking on vested interests, the author confesses to be a
social drinker and pipe smoker. This area is one of my rare cases of
moderation.
2. Bohm-Bawerk, E. V. (1890) Capital and interest. New York: Macmillan & Co.
We'll be seeing more of the Austrians all through the book.
3. The marijuana smuggling war is heating up the high seas. (1981, January 5).
Zodiac News Service.
4. McReynolds, M. (1981, September 7). Uphill fight against trafficking --
Colombia coast region a 'pot' empire. Los Angeles Times, p. IA-10.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid.
11. Kennedy, J. M. (1981, October 17). "Petroleum of Lebanon" goes to market:
Hashish harvest is a profitable fact of life in war-torn country. Los Angeles
Times, p. IA-1.
12. Ibid.
13. Ibid.
14. Ibid.
15. Ibid.
16. Ibid.
17. Ibid.
18. Pakistan opium flooding west. (1981, October 11). Los Angeles Times, p.
I-5.
19. Ibid.
20. Ibid.
21. Ibid.
22. Ibid.
23. Federal officials say that the state of Florida would suffer.... (1980,
April 14). Zodiac News Service.
24. The author had personal contact with an agent of this futures market in
1975 but it has passed into other hands since.
25. Scobie, W. (1981, October 12). Pot luck in the high hills. Maclean's
94(41), p. 11.
26. Ibid.
27. Ibid.
28. Ibid.
29. Ibid., p. 14.
30. Ibid.
31. Ibid.
32. Ibid.
33. Ibid., p. 17.
34. Ibid.
35. Ibid.
36. Ibid.
37. 155 marijuana fields found in aerial survey of Florida. (1981, November
17). New York Times, p. 12.
38. Ostrow, R. J. (1981, November 14). Drug agents face overdose of secret
labs: GAO accuses enforcers of losing battle against non-narcotics. Los Angeles
Times, p. I-10.
39. Scobie, W. op. cit., p. 11.
40. Grier, P. (1981, October 29). Paperwork used to do in drug dealers:
Profits traced as federal agents press drive against cash-laden criminals. Los
Angeles Times, p. IC-1.
41. Ibid.
Back to TOC
Chapter Five:
Inflation Counter-Economics
Inflation: The Great Counter-Economizer
Inflation connects and interacts with all of Counter-Economics from taxes to
drugs (as we have just seen and will see more of presently) and beyond. Its
effects, and the recent attempts to comprehend its nature and workings, have
been a great radicalizer of North Americans. Europeans of East and West and
Third Worlders have been as much if not more affected by inflation, and taken
counter-economic measures against it (most spectacularly in Poland and the most
inflationary Latin American countries) but consciousness-raising there has not
matched that of North America, where an entire genre of non-fiction books
emerged in the early nineteen-seventies predicting further, more catastrophic
inflation, advising measures to be taken against economic ruin (mostly practical
measures for individuals and families) and, most spectacularly, anticipating
correctly the surge in gold price.
Inflation touches -- or contaminates -- so much of economics (and
counter-economics) because money is involved in most transactions in a developed
economy. The exceptions are easily listed: "psychic" profit of emotional gain
and barter. But even many things -- if not most -- done for love involve costs
in goods and services, and "above-ground" bartering is far more expensive than
the equivalent market transaction with some form of money. (Counter-economic
bartering is another concept entirely, as will soon be shown.)1
The shock of sudden awareness of an inflation victim who discovers what money is
and how his or her government manipulates it compares closely to that of a
comfortable patriot facing a draft notice and discovering that this war is
meaningless. Or the shock of a conservative businessman finding out that the
taxes which will destroy him not only were justified by his beloved Constitution
but that the Federalist government first organized under the Constitution
promptly crushed the Pennsylvania Whisky Tax rebels.
Yet war and taxes are often lightly felt by some victims and harshly by others.
Inflation is the great counter-economizer: it plunders all without favor --
though, it should be stressed, that plunder goes somewhere to someone. Widows,
orphans, the handicapped, and the devout religious retreatists are exempt from
war and taxes -- but not inflation.
The very study of Counter-Economics and its development by this author began
with the great Gold Bug Wave of 1972-73. Harry Browne in particular, along with
Harry Schultz, and later Douglas Casey and John Pugsley and many others, took a
long step from the old free-enterprise economic movement largely identified with
the political Right. Where these anti-inflation activists departed from
conservatives was by advocating and demonstrating where individuals could take
concrete actions to opt out of the general economy and protect themselves.
Conservative free-enterprisers continued to urge support of a different
government which would roll back the State through any of the political parties:
Democrats, Republicans, Libertarians; even the leftist Peace and Freedom Party
was considered as the vehicle for a time (1974).
Harry Browne took yet another step beyond the How You Can Prosper From The
Coming Collapse genre with his How I Found Freedom In An Unfree World. Browne
discovered loopholes in the State's network of regulations not just in
inflation-protection but throughout the market. That is, one could legally --
or at least not illegally -- evade all taxation, inflation, and controls. Of
course, this freedom had a high price in an unfree world.
The flaws in Browne's positions (see Chapter Seventeen) discouraged some of his
large readership but encouraged others to take the next step. One of the flaws
of Browne's living-in-the-interstices was that one was forced to go where the
State inadvertently directed. There was a further risk involved in that the
government could change its mind and clamp down -- and usually would as soon as
someone (like Browne) made these interstices public and popular.
And so the final step was taken by this author and a few others in 1973: why not
apply the lessons of evading the State's regulations and controls to evading the
State's enforcement of controls? To the surprise of most of us, we theoretical
types found a fully flourishing market already there -- without awareness of why
they should be doing what they were doing.
Gold was the catalyst and that was no accident. Several libertarians who were
involved in smuggling gold and then publicly displaying it, defying the American
States to arrest them and give them a test case, found that they were left
largely unbothered. The idea expanded: if the State was largely impotent to
suppress gold when it was illegal, then what was really stopping us from
replacing the paper money of the United States with gold -- at least in our
transactions?
And so it came to pass that a gold bank (under an assumed name, of course)
developed and is flourishing today. But to grasp the implications of this event
and just how apocalyptic it is, Counter-Economics is going to have to review a
little basic economics.
The Nature of Inflation
The word inflation is used in two ways, which adds to the considerable confusion
on the subject. Most often, it conjures up rising prices. The original and
proper definition is much clearer and will be used here. Inflation is the
increase of a fiat (government-created) money supply. One of its consequences
is a general increase in prices (though individual prices can go counter to the
trend).
Money is a medium of exchange. As many who have experimented with the recent
bartering fad have discovered, having something popular to trade, or to trade
for, greatly facilitates finding trading partners. Someone may want your oil
paintings very much but you need shoes, not the music concert they're offering.
Maybe a shoemaker likes music enough...? If half the trading partners smoke,
tobacco will (and often does) become a medium of exchange. Even non-smokers
will accept it, knowing plenty of smokers to trade with.
People historically went through several different media of exchange. The more
universally accepted the commodity was, the better money it made. Durability
was useful for savings; who wanted their nest egg to spoil? And such things as
easy divisibility for change, compactness, and consistency of quality all
enhanced the monetary aspect. For good solid chemical reasons, one substance
became the obvious and unique choice -- and its closest cousins in the chemist's
periodic table of the elements were the favored alternatives.
Gold, silver, copper, platinum, and palladium -- these are the material forms
chosen to embody the highly useful abstraction of money. In French, the word
for money is silver (argent). Gold is synonymous with money in Danish (geld).
Pounds sterling were pounds of silver, even the dollar defined a (Spanish)
measure of precious metal.
Fiat money is money imposed by the State. Sometimes the king merely ratified
the prevailing currency and was satisfied to put his royal or imperial likeness
on a measure of coined precious metal to "guarantee" its value. Actually, the
value was rubbing off in the other direction; how many rulers were as "good as
gold?"
Rather than guaranteeing the value, beginning at least in the Roman Empire, the
rulers debased the coins by alloying with base metals or "clipping" the edges of
the coin so that less-than-expected weight (mass, actually, for the sake of
purity) was tendered in exchange. Without going over the long history of money
in detail, it is fair to say that the relationship between State and money is
corruption and fraud. If money is the root of evil, the root of evil money is
government.2
Fiat money is money imposed by fiat. It is neither voluntary nor spontaneously
generated in free trading between consenting adults. The United States alone
has had several severe inflation bouts through fiat money, beginning with the
"Continentals" of the Revolution. There is also a strong link between war and
inflation: the Continentals, the Greenbacks of the Civil War/War Between The
States, severe inflation of World Wars I and II, Korea, and Viet Nam. This is
not a coincidence, Inflation is a form of taxation and fighting wars needs lots
of taxes.
Like taxation, inflation must be enforced. The mechanism of imposition of fiat
money is the legal-tender law. One must accept the debased government paper
certificates allegedly representing money or face legal penalty.
In Nationalist China, just before the collapse of its control over the mainland,
the inflation of currency was so severe (to finance the Chinese Civil War) that
merchants defying the monetary and price controls were lined up and shot by
officials of Generalissimo Chiang Kai-Shek. Mao Tse-Tung promised gold and won
over the small "capitalists" to his Communist regime.3
If traders would risk death rather than take inflated fiat money, then the link
between hyperinflation and revolution (or at least drastic changes in
government) is not coincidental. Failing a general upheaval, the
Counter-Economy is strongly stimulated by strong inflation. (Price controls,
often used to combat inflation -- like holding down the mercury in a thermometer
to combat fever -- turn almost the entire market into a black market overnight.)
Gold hoarding is common among even poor people in European and Latin American
countries with repeated bouts of hyperinflation.
North Americans are the most complacent people on the globe about accepting fiat
money as real money. One of the reasons is that the last collapse of the
currency was two hundred years ago in the U.S. But the current escalating
debasement of the American dollar is shaking that trust and the flight to legal
gold, foreign assets and foreign currency, and counter-economic substitutes is
accelerating.
Although there are a few secondary factors (which can be mostly eliminated by
long-term averaging), the "price of gold" has not gone drastically up. Gold is
the most stable medium of exchange possible. The price of the dollar in terms
of gold has dropped drastically. In terms of the original gold weight
definition of the dollar (used throughout the prosperous, mostly hard-money
century from 1814-1914), today's dollar is worth three cents to a nickel. If
any of you remember that at the turn of the century a beer with a free lunch
cost four cents, you can see the price ratio is still in line.
It is fairly obvious that if people are free to choose their own money as some
economists have recently suggested4 -- that is, people are free to refuse one
form of money and contract for payment in another -- then either the government
will behave itself and simply superfluously certify the measure of the money
(which can always be checked by physical and chemical means) or government money
will be discounted and Gresham's Law will take over.
Gresham's Law has usually been stated as "bad money drives out good." (The
"good" money is being hoarded and the "bad money" is given in payment and thus
predominates in circulation.) This ends with the "Crack-Up Boom" when the "bad
money" is worthless and only "good money" is left.
The nature of inflation, then, is that it is a form of theft by the rulers of a
country. The money supply is first controlled by the government, and then the
State increases the number of units by various bookkeeping manipulations.
More dollars chasing the same amount of goods is inflation in a nutshell. It
does have other effects, but, save for a privileged few, they are overwhelmingly
negative to most values of most people. In order to realize the apocalyptic
nature of inflation and the growingly counter-economic survival movement, a
quick sketch of the long-range, cataclysmic effects are needed.
Inflation and Survivalism
Inflation causes depressions; depressions motivate greater inflation. The
spiral repeats until a critical point at which the money system collapses -- the
"Crack-Up Boom" of Ludwig Von Mises. A recent dramatic example was Germany in
1923. The discrediting of the governing political parties led to the National
Socialist takeover and the Third Reich, an event most would consider
cataclysmic.
It seems paradoxical that many apparently level-headed investment advisors,
market analysts, gold bugs, and such are heavily committed to "end of the world"
doom 'n' gloom scenarios. The above sketch explains why.5
Survivalists see a general, world-wide runaway inflation and collapse of the
money supply. Extrapolating present conditions along historically verified
economic lines proves them right. And so they store gold, silver, and
commodities in out-of-the-way foreign places or in the North American
wilderness.
The Survivalists are often willing to evade and break laws and controls. After
all, if the end of the world is coming -- and the government is responsible --
why should the State be obeyed? And so they take the step into the
Counter-Economy.
Typical counter-economic acts by Survivalists are tax evasion (of course),
currency-control evasion (to store their money safely and undisclosed in foreign
banks), building-regulation evasion (for survival retreats), gun-control evasion
and drug-control evasion (to stock their retreats), contraband smuggling (if
they wish a foreign retreat), and evasion of all compulsory disclosure laws.
This last one is necessary; if the government can reach you, your money, and/or
your survival retreat when the crunch comes, what good were your preparations?
No survival results.
By laying in gold and goods -- and even the poor can do it6 -- the move to a
counter-economic money system was facilitated. It only took someone to realize
that one need not wait for the eventual collapse to replace the money that the
gold bugs and survivalists (now in the millions), at least, realized was
forcibly imposed, intentionally debased, and far less preferable to top
commodity alternatives. And so the Gold Bank was introduced. And since some of
its operations -- even with Browne's intersticing -- skirt the laws, and all of
them will be declared illegal when the inflation goes runaway (judging by most
historical accounts), the Gold Bank must be counter-economic. And it is.
There is always the possibility that the government will come to its senses and
stop inflating. That hope was, at least for North America, crushed by the
election and "sell-out" of Ronald Reagan as president, generally considered the
hardest "hard money" advocate who could possibly get elected to power. His Gold
Commission refused to back a gold standard for the American dollar, and, as this
is penned, the money supply of the United States is being pumped up for the
next, higher than ever, turn of the spiral. The demoralization of the moderate
gold bugs may actually be enough to set off the flight into real goods at this
cycle. (See footnote 5.)
It may surprise some to find that the Counter-Economy actually offers
considerable hope. The money supply could be replaced -- illegally but
peacefully -- before the severest dislocations of the Crack-Up Boom. How it is
being done (and how you can participate) will be spelled out from the real-life
example after one last preliminary.
Counter-Economic Money
Ordinary people need protection against inflation. It hits everyone (no one can
actually obey all laws since many contradict each other). Counter-economists
(those described in previous chapters and following chapters) need a safe
currency. What does that mean?
"A banker and three others were convicted Tuesday of participating in a scheme
to launder drug money through Garfield Bank.... A federal jury deliberated less
than two days before finding the four guilty of conspiracy and failure to comply
with laws requiring banks to file reports on deposits of more than $10,000."7
All counter-economists need ways of conducting financial transactions free from
the prying eyes of government in order to lower their risks considerably. In
order to evade income disclosure, most are tax evaders as well. Some solve the
problem by buying banks.
"John A. Gabriel, a former president of the [Garfield] bank and chairman of the
board, was indicted along with the others in July. He pleaded guilty on charges
of failing to report nearly $500,000 in currency transactions. Gabriel and the
bank have paid the government nearly $2.3 million in fines."8
Owning a fiat bank operating counter-economically is useful, but not much more
risky than operating a gold bank. Gold also has the advantage to drug dealers,
smugglers, and all sorts of foreign-operating counter-economists, of being a far
more universal medium of exchange than even the dollar.
"Black market gold in Moscow now brings prices equivalent to $2,400 an ounce --
close to four times more than current world rates, according to sources familiar
with the trade. In other parts of the country, such as Soviet Central Asia,
prices are reputed to be even higher."9
Soviet fiat money is the most rigidly controlled. Is the ruble inflating?
"Inflation also hits the black market. One source said a five-ruble Czarist
gold coin that cost the equivalent of $100 on the black market in the 1960s now
goes for close to $400. Even gold tooth fillings can be unloaded at premium
prices."10
In other words, all the reasons for counter-economic money in North America
applies to darkest Russia. "People who have acquired money illegitimately are
understandably reluctant to put large sums in state-controlled banks for fear of
unpleasant questions. Keeping huge stores of money at home is also dangerous.
Since the 1917 Bolshevik revolution, the national currency has been changed
several times -- with the 'old money' becoming worthless after every reform....
"'Anyone who doesn't want to have to account for how he got his money might well
tend to put his money into gold,' said a Moscow writer who asked not to be
identified. 'That way, it's always safe'... The black market offers
no-questions-asked confidentiality."11
The collapse of Cambodia shows both the universality of gold and its function of
redeemer during economic collapse. "Despite a ban by Thailand on cross-border
trade, the river of gold that began flowing from Cambodia in 1979 with the first
wave of starving refugees continues, fueling a black market that distributes
scarce goods across Vietnamese-run Cambodia and pumps millions of dollars into
the Thai economy. 'Business is better than ever,' one Cambodia trader said of
the unofficial 'metals market' operating at Nong Chan, one of several unofficial
refugee settlements straddling the border."12
The relationship between risk and profits -- the basis of Counter-Economics (see
Chapter Sixteen) -- is starkly visible from the relation between gold price and
distance (to perceived danger). "At tiny stalls in Nong Chan and similar border
camps, such goods as soap, flashlight batteries, pens, and rice sell for only
slightly more than they do at the nearby Thai market-town of Aranyaprathet. As
the goods travel deeper into Cambodia, the prices rise accordingly, observers
said....
"'It's a dangerous trip back (into Cambodia) so these people want a good rate of
return,' [one Western diplomat] said, adding that some of the goods actually
find their way to Vietnam."13 Perhaps the Counter-Economy has its own version of
revenge.
Earlier it was put forth that inflation is a good consciousness raiser -- or
counter-economizer. How about the monetary-collapse-caused black market of
Thailand ? (We know the Cambodians are radicalized. )
"Thai government efforts to stop the black market have angered Thai villagers,
who say the trade is as active as ever but is reserved for the military. 'If
you go to the border to sell to the Cambodians and the soldiers take your
things, sell them and pocket the money in front of you, how can you feel?' one
Thai trader asked. 'Before the black market, people liked the soldiers,' he
said. 'Now 90% of the people fear and dislike them.'"14
Even with all this gold, banks are used. "...the diplomat said recent daily
fund transfers from Aranyaprathet to Bangkok at one Thai bank had risen from a
pittance before 1979 to $500,000."15 One needs banks for two reasons:
conveniently to handle large sums of wealth and to interface with the
above-ground or white market.
Actually, there are other ways of handling large wealth counter-economically.
Drugs such as cocaine and gems are easy to smuggle and conceal. The interface
with the rest of the market is far more valuable to most large-scale
counter-economists. The rich ones simply bribe their way into seemingly
legitimate banks.
So what does the poorer and middle-class counter-economist do?
Convenient Gold
Fences, money-changers, and other middlemen have dealt with the problem of
"laundering" black money into white. When money itself is the problem, one
needs to keep most of one's money black (in illegal or soon-to-be-illegal hard
money). One can sit on contraband goods, taking the additional risk, and
converting one's assets when the time comes. Many survivalists find that fits
nicely into their plans.
Suppose you could deposit fiat money in what appears to be a bank. This
counter-economic bank converts your deposit into gold and holds the deposit in
gold, safe from government ravages. Got a bill to pay? Write out a "check" and
the Counter-Economic Gold Bank (C-EGB henceforth) turns gold into dollars at
today's price and sends along an ordinary bank check with your paperwork. Got a
counter-economic bill to pay? Write out a gold check to your trading partner
who can collect gold from the C-EGB or have it deposited to their gold account
without going through dollars at all or having any external evidence of
transaction.
Such a description is not only a full counter-economist's dream but that of any
part-time retreatist, survivalist, gold bug, or even inflation-ravaged widows
and orphans. It's here already, at least in ahead-of-its-time Southern
California.
The Counter-Economic Bank
The Counter-Economic Gold Bank is an honest-to-God innovation. Many, if not
all, of those designated "the world's oldest profession" are counter-economic,
but C-EGB is really something new. The rise of Information Counter-Economics
(see Chapter Six) has something to do with it, but to a large extent it owes its
existence to greater understanding of economic theory combined with
counter-economic action (see last three chapters).
Banks -- or even near-banks -- are tricky to get going. Confidence and trust
must be earned, painfully and slowly. Since the consciousness increase of 1972,
several have tried and failed. One, however, has succeeded and after 16 years
of continuous operation is now the financial center of several "free-market
businesses" including printers, typesetters, leather goods manufacturers,
computer consultants, and several new businesses starting up at any time. We
will return to this "Agorist Community" near the end of the chapter and in more
detail on its operation near the end of the book.
This particular Counter-Economic Gold Bank will be called A&Co. Because of the
laws concerning bank chartering (the government keeps tight rein on banks),
A&Co. never calls itself a bank in its introductory literature but simply
refers to itself as "A Free Market Business Trust" and operates openly but not
obtrusively.
A&Co's main explanatory booklet of its operation has some euphemisms but
straightforwardly calls the book Current Gold Accounts: A Free Market Money
Instrument. After two pages of introductory economics of inflation, Current
Gold Accounts gets right down to specifics. Money is defined in grams of gold
(one troy ounce equals 31.10 grams). Up front, A&Co wants a contract signed
with the account holder. (See Chapter Fourteen: Justice Counter-Economics) .
The mechanics are simple and precise. "The deposit-payment exchange rates for
current gold accounts are:
currently determined once a day, when gold markets are open, at 1:45 P.M. When
our volume permits, we'll determine the rates more often during each business
day;
maintained at a l% spread and
based on the lowest premium gold coin available, which sometimes produces
deposit rates at a discount from gold bullion and payment rates at a premium
over gold bullion.
"Current gold accounts presently earn 1.0% pa [per annum], payable monthly, on
balances between 100 grams Au (Au is the chemical symbol for gold) and 400-gms
Au; amounts over 400 gms-Au do not earn interest at this time."
A&Co explains they accept deposits in gold pieces, federal reserve notes
(dollars), postal money orders, and "dollar instruments (bank checks, money
orders and so forth)." A of A&Co and others have personal checking accounts
(they explain freely) to deal with the instruments.
Deposit slips are simple and one can either fill out gold directly in grams (if
that is what is what is deposited) or in dollars and A&Co will insert the
exchange rate, convert the dollars to gold grams, and send you your receipt with
the final figures.
Gold may be deposited in any form. Gold will be paid out on demand in Austrian
100 Corona coins (30.5 gm). Since it is difficult to get "small change" in
gold, one of the obvious advantages of a C-EGB is to poorer people who can now
"speculate" in gold by depositing it in an A&Co account in dollars for
conversion, and converting it back at a later price and time. Any and all
dollars are acceptable.
(In case it is not yet obvious, paper money benefits the rich with government
connections. Gold is the primary defense of the powerless poor. Long-standing
propaganda to the contrary is clearly self-serving to certain interests. It is
strongly in the interests of the rich and powerful beneficiaries of inflation to
make gold difficult to obtain and transact.)
By the eighth page of Current Gold Accounts we are half-way through and the most
complicated procedure is explained. The checks of the gold bank itself are
called "transfer orders" and one may write one to another member of the bank to
transfer either gold or dollars. The only complication is, as was mentioned in
the previous section, in transferring payment to the "outside market," that is,
interfacing. A&Co, quite reasonably to gain consumer interest, undertakes the
effort involved. One sends A&Co the transfer order and bill and they send out
an ordinary, regular-bank check with your paperwork.
"When sending instructions to us to make payments from your gold account,
include:
an invoice, bill or some other form of explanation of the payment,
a transfer order for each payee with full instructions, such as name of payee,
amount of payment and form of payment if different from commercial bank check
and
an unsealed envelope stamped and addressed to payee.
"If any of these items is missing, we'll still process the payment but charge a
reasonable fee for the extra handling."
What could be simpler? Examples are then given, including the gold-to-dollar
calculations. A&Co points out that it may take them one to three days to handle
the more complex transactions. It is next noted that accounts are turned over
once a month (usual for most banking type operations).
The remainder of this simple booklet gives examples of procedures, sample
calculations, and a list of benefits. One benefit is avoiding capital gains
penalties for those reporting income. This deserves a little more coverage. If
one has bought 20 grams of gold for $200 and later sells it for $400 to pay some
debt, one could (if reporting it) end up paying taxes on the gain of $200. But
since the dollar declined to half its value in reality rather than gold doubling
its value, one actually preserved one's wealth, nothing more. Yet one will
still be liable for taxes on this illusory capital gain. Although hard-core
counter-economists would not report themselves to taxing powers, soft-core or
grey-market counter-economists might wish to "cover themselves." A&Co gives a
service, then, to these halfway people as well.
Privacy is another benefit with obvious counter-economic implications. A&Co
also mentions their minimal charges, paying interest in gold, and having a
simple way to buy gold without the high premiums charged by coin dealers for
small purchases. Characteristically, the last benefit they mention is "support
of the free market."
A regular newsletter issued by A&Co is the Free Market Advertiser, which
publishes the gold/dollar exchange rates they use over a month, publicizes
associated counter-economic businesses, and publishes their reports to
shareholders. A&Co also maintains a small stock exchange for these businesses.
These people know what they are doing and why. Economic and ideological
articles and editorials on the virtues of the pure free market and attacks on
the immorality of State taxation and regulation abound. Their consciousnesses
have been raised.
Problems of the Counter-Economic Bank
Many will find it amazing that something as organized and sophisticated as a
bank (not to mention embryonic stock exchange) can operate as if in anarchy --
with no government. The high probity of the principals of A&Co -- non-smoking,
non-drinking, and so on -- certainly belies the black-market image, yet they do
not discriminate against "looser" counter-economists.16 As long as they add
their bills properly and pay them, all are welcome. Needless to say, the bank
is a main source of investment capital for local counter-economists.
A theme that should have been noticed already in this book is of the relative
impotence of government. Law-enforcement is helpless in even the most
totalitarian dictatorship when laws are not strongly accepted and enforced on
people by themselves. Even when everyone -- including counter-economists --
agrees with the wrongfulness of an act (such as murder or theft), the State's
own statistics of apprehension hit a high of only about 20%. (That is, over 80%
of true criminals in the worst crimes get away from the inefficient government
apparatus.) This will be covered deeply in Chapter Fourteen: Justice
Counter-Economics.
One important factor in minimizing the risk of state interference in one's
activities is the tacit or stronger support of everyone involved. In the case
of the Counter-Economic Gold Bank, it gives strong, continuous benefits to those
with whom it does business. This is at least as important as ideological
exhortations to remain loyal and the potential ostracism of one's trading
partners and customers, should one report the activities to the State. Perhaps
the State could offer a high enough reward to convince some to turn stool-pigeon
but that has yet to happen after seven years and hundreds of people aware of the
nature of the activities. And as this free market expands, the benefits
involved in it grow, and the reward or bounty needs to get higher and higher
until the State can no longer raise enough to crush a significant part at all.
A particularly sensitive problem for Inflation Counter-Economics, though common
to all, is the flow and storage of information. Publicity and advertising is
good for business; regular financial disclosure builds trust, confidence and
more business, yet the more information about counter-economic activity is
disclosed, the greater the risk that even Keystone Kops will accidentally trip
across it, realize what is going on, and act to stop it.
Fortunately, at the same time that the counter-economy is getting more
financially sophisticated, information technology is experiencing breakthroughs
in storage and transmittal which are now completely free of unwanted intrusion.
The next chapter looks at the rise of Information Counter-Economics. If
Inflation is the Great Counter-Economizer, then the Information industry
explosion is the new shining, white-knight defender of the Counter-Economy.
Barter Counter-Economics
Bartering has become a recent fad and its motivation is largely tax avoidance
and inflation evasion. (Several case histories were related in Chapter One.) A
recent book actually claimed that openly trading without money was the new
"underground" or "subterranean" economy. The truth is almost the opposite.
Reported bartering is taxed. Most of the new, big, barter networks with
computer accounting and high-profile advertising disclose their transactions to
the Internal Revenue Service or its equivalent in other countries. The IRS
assigns a value to the goods exchanged and demands taxes on the income. Sales
tax may or may not be collected in the various localities and so on. Even where
taxation is avoided in part, the governments at the appropriate level can pass
new taxes on the transactions whenever they wish.
There are other advantages to open bartering such as those for cash-poor
companies but as we have seen at least sketchily earlier in the chapter, the use
of some form of money to mediate exchange is highly profitable. It is no
accident that businesses keep discovering that they have barter credits, yet
can't find what they need to purchase while many goods offered go untaken.
Counter-economic bartering has quite a different function. The current dollar
(or gold or whatever) value of the goods are acknowledged by the trader and cash
often changes hands surreptitiously to make change.
The Barter Book of 1979 spells out several straightforward rules for engaging in
barter, all common-sense, but two in particular are blatantly counter-economic:
"They [barterers who are named] use direct exchange. They never get involved
with third-party barter. They have heard of barter-credit systems and barter
clubs, but they are not interested. If the premium were on efficiency, they
would use money.
"They reap tax advantages. They do not record their loose, unstructured,
friendly wages."17
Without high taxation and ever-higher inflation of paper money, the
inconvenience and expense of abandoning the medium of exchange would quickly
rule out bartering for most busy people. The 1981 "free-enterprise scare" of
Ronald Reagan's election and early administration -- with people anticipating
(wrongly) a fall in taxes and inflation -- caused barter exchanges to fail or
suffer loss of customers. Vigorous, publicized IRS attacks on them quickly
wiped them out.
Counter-economic bartering goes on but as a better way becomes apparent
(gold-banking convenience) it will make way.
Still, even barter Counter-Economics would be immensely facilitated and approach
the fine-tuning convenience of money-use with the introduction of computer nets.
"Money is information" has already become a cliche. If everyone joined at least
one computer network which linked with all the others, it would, at least in
theory, work as fast and conveniently as using money. And the rise of
Information Counter-Economics may allow just that.
Even in that ideal outcome, there would be no reason not to run the accounts in
units of gold mass simply to include all the hold-outs and curmudgeons and those
without computer hook-up or between such hook-ups.
Preliminary negotiations have begun with A&Co to issue the first
counter-economic credit card (a Bank AnarchoCard ?). It is no coincidence that
those offering the service are computer consultants and programmers.
Back to TOC
Chapter Five Footnotes
1. A recent book, How To Prosper In The Underground Economy by Larry Burkett
with William Proctor (William Morrow & Company 1982), completely misses this
point. There is nothing "underground" -- or at least counter-economic -- about
barter dealings when books are open to the Internal Revenue Service.
2. A lot of literature has recently been published on the nature and history of
money, from strident pamphlets to exact but opaque economic analyses. One of
the most precise, easy, and enjoyable to read is still What Has Government Done
To Our Money? by Dr. Murray N. Rothbard, a former student of Ludwig Von Mises
and a rare economist not serving the interests of any government or would-be
government.
3. As related to the author by Economist-Historian Professor Murray N.
Rothbard, PhD.
4. Nobel-prize-winning Austrian economist Friedrich Von Hayek now suggests
competing currencies be allowed and money "denationalized" by the State.
5. Most Austrian-economic-based writing has explained the business cycle in
detail since the landmark publishing of Von Mises's doctoral thesis: Theory of
Money And Credit (1910). It explained the Great Depression 19 years before it
happened.
Here's a longer sketch for those who wish to avoid looking up references:
Increasing the money supply gives the first recipients in line (government
rulers, banks, contractors with the government) more purchasing power. They bid
up certain resources at the old prices and signal the producers to produce more
because the producers think they can make more money. Eventually there is a
general price rise, people find they can afford much less with the same money
and cut back on their spending. Over-invested businesses that had increased
production now get signals to reduce output, and liquidation ("fire sales" to
"going out of business sales") and layoffs occur. This unemployment and capital
loss is called a depression (or recession or other euphemism such as "rolling
readjustment").
It could end there but the panicking bankrupt businessmen and unemployed
laborers call for more money to solve the problem. The government obligingly
prints more. But, to trick the market again into the first boom (or another
like it), it has to print more than expected. (After all, everyone's already
seen the prices rising, assume they will continue to rise at the same rate, and
discount the money accordingly.)
Eventually, the people catch on that they will be tricked again and anticipate
any hike. At that point, the money is spent as fast as it is received (what
Mises called the "flight into real goods"), workers are paid two or three times
a day, debts have to be refinanced daily or even hourly.
Finally, people throw away the worthless money to use foreign currencies,
barter, and gold. This is the Crack-Up Boom ending runaway inflation. There
are several historical examples of it and it sounds inevitable. Chile broke the
cycle by means of a severe military dictatorship in 1973.
For a fast-paced fictional account of a Crack-Up Boom in the United States in
the near future, see Alongside Night by J. Neil Schulman (Ace Books, 1982; Crown
1979). Schulman is in full understanding of the theory of Counter-Economics
(agorism) and his plot is resolved with the upbeat ending of agorist triumph.
6. See The Alpha Strategy by John Pugsley for useful details.
7. Morain, D. (1981, December 16). 4 guilty in money-laundering scheme. Los
Angeles Times, p. II-3.
8. Ibid.
9. Kent, T. (1980, September 4). Black market in gold thrives in Russia.
Associated Press.
10. Ibid.
11. Ibid.
12. Wary gold dealers fuel black market: Thai sellers often dress in rags.
(1982, January 10). Los Angeles Times, p. II-7.
13. Ibid.
14. Ibid.
15. Ibid.
16. Hargis, A. L. (1981). Current gold accounts: A free market money
instrument. Costa Mesa, California: Anthony L. Hargis & Co., A Free Market
Business Trust.
Editor's Note: SEK3 obscured the name as "A&Co." at the time of writing to
protect ALH&Co. from unwanted state interest. Alas, the activities of ALH&Co.
came under scrutiny in 1996; in 2004 the company's assets (i.e., customers' gold
and regular-bank deposits) were seized by the IRS. Anthony L. Hargis was
imprisoned for contempt of court after refusing to turn over his records. See:
Kristof, K. M. (2004, March 10). U.S. sues O.C. man in tax scam. Los Angeles
Times. Retrieved from
http://articles.latimes.com/2004/mar/10/business/fi-taxscam10.
17. Simon, D. A. (1979, October). Bartering: The tricks of the trade.
Cosmopolitan, p. 226.
Back to TOC
Chapter Six:
Information Counter-Economics
Information exchange divides the Counter-Economy from the Establishment white
market. Consider the elementary difference between a street deal with and
without the watchful eyes of State agents. Or consider a ship docking,
unloading its goods, accepting payment, and sailing off. In one case, the forms
were filled out and the imports registered with the government; in the identical
case physically -- but not informationally -- no papers were filed with the
State and its agents remained unaware of its existence. At the stroke of
information exchange, contraband was created and the crime of smuggling occurred
(see next chapter).
Control of information is a battle over the State's very ability to function.
If you could cut off all information flow to the government, it would be unable
to act. Strangely, the United States government recently threw in the towel
over information-industry regulation. And yet conflict remains around the
fringes, especially over the powerful computer programming method known as
public key cryptography.
Should cryptography succeed, the long-awaited dream of workable anarchy has
arrived. To understand the full impact, let us look at how the State works, or,
rather, how it steals.
Plunder Through The Ages
In the beginning, the State was a gang of bandits, terrorizing the countryside.
Taxation was simple; the horde seized anything that looked valuable, ate
anything that looked edible, and raped anything that looked appealing. To beat
the barbarians, the smart peasant hid his gold, his daughters (and sons), and
his livestock. To discourage this cut-off of information, the horde often
burned down the villages when they had taken all they could find.
Where the plunderers settled down to become a proper government, they restrained
their appetites and exacted tribute that left the peasant with just enough to
live on and grow another crop next year. Priests were bought to convince the
producers that the State had divine approval. And by the Middle Ages the Lords
settled for only the first night with the peasant bride (droit du seigneur).
The main form of tribute evasion remained underreporting of assets. But as the
market grew more complex, some business activity underreported its very
existence.
The informer is looked on with greatest disdain and fear from the schoolyard to
the prison yard. The "stool pigeon" receives an automatic death sentence from
violent gangs (themselves embryonic states); nevertheless, informers are shunned
by moral, peaceful counter-economists.
American society of the twentieth century is riddled with informers. Just to
keep some perspective, anyone in the USSR not an informer is being informed on.
And even the informers are informed on. One's safest course is to discover
one's informer and then select their information carefully.
The drug industry is riddled with DEA and local police informers. Gun-runners
run free until the BATF gets an informer in their midst. Political dissidents
often have more dues-paying members from the Federal Bureau of Investigation
than from committed members. The Federal Trade Commission depends on sore-loser
competitors to denounce a company for anti-trust violations.
And above them all, with a network of spies, informers, disgruntled competitors,
vengeful spouses, spurned lovers, and straight-out bounty hunters, stands the
Internal Revenue Service. No legal agency of state enforcement excites the
dread and fear as that of the IRS.
The IRS is the raised sword and mailed fist of the State. While the rest of the
State camouflages itself with the appearance of good works, attempts to
cosmeticize the taxman inevitably fall flat. A popular bumper sticker says it
all: "IRS: It Really Steals."
How Taxation Works...
In the modern world, IRS agents cannot, much as they may wish, mount their
sweat-soaked stallions, draw their morningstars and maces, and ride shrieking
through the peaceful suburbs in search of wealth for the Director. Then again,
they have an advantage over their spiritual ancestors of three millennia ago.
Their victims turn themselves in.
Three thousand years of mystification pay off every April 15 in the U.S. (April
30 in Canada, various spring days in other countries). American citizens are
asked to send in the very information the State needs to know. The exact amount
doesn't matter; the deductions are window-dressing.
The stark truth is that, without that volunteered information, the State would
have no idea where the wealth is.
It is no new observation that if everyone stopped sending in their 1040 forms
the State would dry up and blow away. The counter-economic insight is that
anyone can (and does) do it without waiting for everyone else. The technique is
to control the information flow about oneself; in particular, the information
flow from you to the State.
Visibility and Profile
There is not just one way to use information to free one from State predation.
There are three ways. Two of them assume you are acting relatively alone, the
third assumes the opposite.
Most people are familiar with Low-Profile tactic of being "invisible" to the IRS
and other government agencies. The rest of this chapter will focus on that
method. What should not be forgotten are the other tactics, especially as they
have higher payoffs (and correspondingly greater risks).
High-Profile Counter-Economics deals with a particular area of State coercion by
calling attention to his or her victimization. The more noise, the better. The
famed Chicago 8 used publicity to keep themselves out of prison for years --
even after their convictions.
Civil disobedients trust public pressure to keep them out of jail or to minimize
their penalties. Indeed, the State's enforcers are wary of creating martyrs.
The very concept of martyr exhibits the power of Information; what is a martyr
but a corpse with a good story?
High-Profile Counter-Economists have higher risks because they are so easy to
detect. They gain the advantage of additional information flow -- from
themselves to the rest of the market. To the extent they succeed, they become
inspirational.
Actually, this author has proven that it is possible to pursue the advantages of
both High Profile and low visibility simultaneously. The trick was to create a
third category: The Counter-Economic Community. (This is defined, for technical
precision, as agorist condensation, and is dealt with in the latter chapters of
this book. )
One may pursue any degree of notoriety (or, to put it another way, freely
advertise one's services) within the community of fellow counter-economists
while not informing the State, its agents, and, of course, its informers. To do
that, one needs to control the flow of information about oneself.
Information Flow
Ever notice that after you order something by mail, or contribute to a charity
or politician, your mailbox is suddenly flooded with associated solicitations?
You have generated outward information flow and were rewarded by an inward
torrent.
Information is the raw resource of a burgeoning industry, including data
processing and much of computer programming. Information theory is a hot
academic field. This is such a fast-changing business that the American
government threw up its hands in its attempt to regulate it.1
Setting the discussion of higher technology to the side briefly, there are two
obvious ways to escape the State's notice: don't exist; if you do exist, don't
tell anyone about it. (There is also the agorist procedure: tell only fellow
counter-economists who have as much to hide.)
Some counter-economists go that far. They cut themselves off from contact with
anyone who might get to know them, get and stay off all mailing lists, operate
through cash and never use banks, and even avoid legal residences, living in
trailers as nomads or on neglected land in caves or makeshift structures.
Briefly, in the 1960s, these early self-conscious counter-economists
(protoagorists, one might call them), were organized enough to publish a
newsletter, Vonulife. (Vonu, they said, was invulnerability toward coercion,
and that is what they sought.) They had some obvious problems with maintaining
contact and have largely vanished today.
But not before they had made rudimentary attempts at solving the problem of
beating the State and remaining part of society. After all, the State and human
society are natural enemies; it should be possible to use society as an ally
against the State. (Remember the social standing of snitches?)
They called the concept of interaction with the rest of society (those not
"vonu") interfacing. This was brought up last chapter in our explanation of
counter-economic banking, and that was one set of examples.
One way to interface with the rest of the economy, especially the White Market
or Overground or Establishment Economy, is to create another identity. Let this
fictitious individual take the risks; you can drop the identity when it appears
to be near apprehension.
There are some serious problems with The Paper Trip2 approach. To put it
simply, if the State's agents are closing in on this alter-ego, as long as you
wear the guise they are closing in on you. Also, once you "shed the skin," you
lose everything that went with it: accounts, contacts, acquaintances, and
property stored under that name. It is a smaller loss than arrest and possible
imprisonment, but it is no solution.
Multiple identities -- if you can keep them straight -- are an improvement.
The answer is not to abandon secondary identities nor to depend upon them. The
technique is best used as a back-up -- anti-arrest insurance. And using some
sort of dummy company or identity is inescapable for counter-economic real
estate.
This leads to the natural categorization of information flow into a system of
layers. With each layer, there are appropriate counter-economic techniques,
some long-standing and successful, others yet to be developed by bright young
innovators.
Inner-Layer Information Flow
The innermost core of information about you is made up of you and your
intimates. Some people need work on themselves -- learning when to say what to
whom. (See Chapter Fifteen, Psychology Counter-Economics.) And selection of
one's spouse and family on the basis of their discretion may appear a bit
unromantic or biologically restrained. Fortunately, a long-standing tradition
in many families of keeping sensitive information "in the family" works in one's
favor here.
The next layer is that between you and your friends and distant family. Notice
how inquiries about income and business practices are considered bad taste
socially. Perhaps that is an indication of society's natural evolution toward
agorism.
The final inner layer may be the most risky: customers, clients, suppliers, and
partners who not only know something specific about you but, if you get too
close to them, they are in a position to have the "second two" to put two and
two together.
There are two useful techniques to control this information flow; one is to
follow the useful social rule against mixing business and pleasure. This must
be done carefully so as not to excite suspicion that you're hiding something --
a tantalization that few can resist probing. This technique leads to putting
your commercial associates in the next layer.
But there is another technique: swap risks. If you have something on them, you
are far less worried about them finding out something on you. This is a form of
swapping of intimacies, so, as in romantic relations, choose your associates
carefully.
"You mean you're Counter-Economic, too?" may well be the most common sigh of
relief in the 1990s.
Middle-Layer Information Flow
Innermost of all commercial information are your records. Who, besides you,
should see your books? If all goes well, no one should.
Nor, with all the trust in the world, is there a good reason to give others so
much access to your information flow that they are able to piece together your
books like a jigsaw puzzle (e.g., forensic accounting). It is possible you may
need to open your books concerning a specific venture or one of your business
enterprises if you involve others in investment; this can be handled
counter-economically. (See Chapter Fourteen, Justice Counter-Economics.)
Such enterprises are useful for distancing yourself from unfriendly information
gatherers by adding an extra layer for their penetration.
The middle layer (a mesosphere, the scientists would call it) of information
flow is the interesting part. Here is where your casual interactions with
others lie.
An obvious virtue or good habit to develop is never to reveal information
pertaining to your counter-economic activities, or -- before you do -- you
consciously consider the consequences. "Talk to you tomorrow about that, Jane;
I've got to check something first," gives you 24 hours of risk-weighing.
Still, if you are going to deal with the rest of the world, you must reveal some
information: that you have a product or service, how much it will cost, what you
will accept in payment, how you can be contacted, and when are you or it
available. If there are multiple payments, credit arrangements, repeat
business, and post-sale follow-up involved, still more information must flow
from you.
And toward you as well. Another good technique is the information swap. As you
reveal something, you learn something from your supplier or customer.
If you discover your counterpart is also counter-economic, keep the relief
somewhat contained. You still need to find out how counter-economic. After
all, there are counter-economic cops and even IRS agents! Everyone breaks laws
some of the time; it is impossible not to.
But that works for you more than against you. For if it's not obvious that your
client or tradesman is counter-economic, you have to make the step yourself to
cross the line. And since everyone is somewhat counter-economic, it is not
obvious that you are suggesting anything out of the ordinary except in this
limited case.
This is far easier than it sounds. Hundreds of times this author has gone to
printers and suggested they don't waste receipt papers and drop the sales tax.
Refusal came only when the mistake was made of talking to a non-decisionmaker.
Beware even the smallest bureaucracy. Cabbies in New York will offer to leave
the flag up if you don't look too much like a law enforcer -- and if you ask
first, jump at the offer.
At least at present, North American society has pressured the government court
system to frown on entrapment. It will change, but while it's in effect, it is
a great boon for Counter-Economists breaking the ice.3
Personal contact has the advantage of allowing a counter-economic courtship
rite. But there is a corresponding giveaway of information about you by
allowing another's observation. It's a trade-off. As always in
Counter-Economics, you must weigh the risks against the benefits in each
particular situation.
Consider, then, the benefits of impersonal contact from advertisement and word
of mouth, correspondence, delivery via (possibly counter-economic) couriers, and
payment by mail, courier, or even through counter-economic banks (as in Chapter
Five). At this point, it's time to haul out the computer.
Computers for Counter-Economics
Consider the following scenario: Someone in the market for, say, custom
footwear, consults a list of products. Seeing the category of footwear, she
calls up a list of suppliers. One of them happens to offer fancy work and gives
an access code. The code is activated.
A list of offerings appears. She requests something not quite on this list,
say, a pair of high deerskin boots with elvish runes stitched in, suitable for a
fantasy convention or Society for Creative Anachronism gathering. A sketch
appears of such boots, with specification numbers and costs, depending on type
of trim.
The order is placed and a deposit agreed upon. The deposit is transferred via
the counter-economic bank (or maybe to a mail drop). The boots are delivered,
found satisfactory, and the balance paid. Neither party to the transaction has
revealed herself to the other.
Anyone familiar with today's computer technology knows that not only is all this
feasible but already exists, in whole or in part, in most major cities and
university towns.
Imagine further that you can keep your records in books under a complicated code
that would require more trouble than you're worth to crack. And that you can
advertise on the computer bulletin board with similar codes and contact and be
contacted through such codes.
Again, the technology is available, or, as the hackers say, "on line" It's a
dream come true for Counter-Economists: a nightmare in the making for the IRS
and the government's regulators and controllers.
The "key" is Public Key Cryptography. The National Security Agency (NSA,
colloquially known as "The Puzzle Palace") hates it and is working on cracking
the systems and getting businesses and bureaucracies to agree to a standardized
system they can easily crack.
It should be kept in mind that cryptography is a dynamic, evolving system. It
is a non-violent form of an arms race where one side cracks the code and the
other develops a new system to top the old one. Those considering using this
should check the current literature and talk with computer-hip friends. (The
usual problem is to keep them on a narrow subject.) A popular source, available
in most libraries, to keep you current in public-key cryptography is Byte
magazine.
You and your correspondent(s) define a cryptosystem. The sender has an
encryption key; the recipient has a decryption key. They are not identical.
The normal message may be called plaintext and the encrypted form ciphertext.
"Cryptographic keys are analogous to the house and car keys we carry in our
daily lives and serve a similar purpose. In many modern systems, each key is a
string of digits. For example, keys defined by the Data Encryption Standard of
the National Bureau of Standards consist of 64 binary digits, 56 of which are
significant."4
How does it work? "To encrypt a message, a key and the message are somehow
inserted into an encryptor, and the cryptogram that emerges is a jumble of
characters that depends on both the message and the key. To decrypt the
message, the correct key and the cryptogram are inserted into a decryptor, and
the plaintext message emerges."5
This is quite simple with conventional coding. The keys are the same, must be
closely guarded, and you must visit your correspondent to exchange keys. But
using public keys, the problem of meeting and secrecy is solved.
"These keys... have remarkable, almost magical properties:
for each encryption key there is a decryption key, which is not the same as the
encryption key
it is feasible to compute a pair of keys, consisting of an encryption key and a
corresponding decryption key
it is not feasible to compute the decryption key from knowledge of the
encryption key."6
You and your correspondent, say, Mary, can counter-economically contact each
other on a "public" bulletin board. Agreeing to exchange information, you set
up your encryption.
"To set it up, you generate a pair of keys, and send the encryption key to Mary
by any convenient means. It need not be kept secret. It can only encrypt
messages -- not decrypt them. Revealing it discloses nothing useful about the
decryption key.... To allow you to send private messages to her, Mary must
similarly create a pair of keys and send her encryption key to her."7
You may publicize your encryption key with no fear that anyone but you can
decrypt the message. "Any two people with directory entries could then
communicate privately, even if they had no previous contact."8 Exactly what
counter-economists want.
A Touch of Tech and a Knapsack
Before leaving this subject, let us touch briefly on the technology. One may
look up the programming in the cited source and, in a world of adventurous
hackers, no one should find great difficulty in getting a programmer to set up
whatever one needs on one's home system.
What one requires from Information pyrotechnics and arcane-seeming codes is a
reasonable confidence and qualified respect. Unfortunately, many whom I have
witnessed coming across this field bounce from awe and feeling that the State is
defeated to depression and resignation when they hear a particular system has
been cracked. Let us try to immunize you against both.
The awe arises from statistics like the one published about the
Rivest-Shamir-Adleman (RSA) cryptosystem. The amount of time required to crack
the code is the factoring time; assuming your key length is 50, it could be
factored in 3.9 hours at one computer operation per microsecond. But doubling
the key length to 100 digits kicks up the factoring time to 74 years and
tripling it to 150 digits makes it one million years to factor! By the time we
get to 250 digits, we're exceeding the estimated lifespan of the universe.
Small wonder NSA wants to standardize key length at 60 to 70 digits.
A 77-digit key was recently available for $165 for the common z80 system.
"...message encryption and decryption take about one minute plus the necessary
disk access time. The time needed to generate the encryption and decryption
keys ranges from 15 minutes to 4 hours.... The author of the system, Charles
Merritt of PKS, Inc., has received estimates of the time needed to break the
system ranging from three uninterrupted days on a Cray-1 to one year."9
In fact, newer and faster computers than the Cray-1 are up or on the way, but
one can easily outpace them by increasing the number of digits in the RSA key.
Still, one should be aware of the state of the art when playing this game.
An alternate to the RSA, the Knapsack Scheme, seemed preferable because of
faster encryption and decryption. The name comes from a mathematical puzzle
where if one knows the total weight of a knapsack and its contents, and the
weights of the individual items that may be in the knapsack, one deduces which
items are packed inside. For a numerical code, the items are a collection of
numbers and the knapsack is their sum.
Martin Hellman of Stanford University and Ralph C. Merkle used the technique to
devise a public-key cryptosystem in 1978. Merkle offered a reward for anyone
who could break the scheme and the game was afoot.
"In 1982, Shamir made the first successful attack in the simplest form of the
knapsack cryptosystem. He found that certain information about superincreasing
sequences is not well disguised by a modular multiplication trapdoor. In
addition, that information could be secured rapidly by solving a special kind of
mathematics problem (finding a short vector in a lattice). Shamir's method
became practical with the invention of an algorithm for solving this problem
quickly. Soon after, using a similar approach, Adleman broke another form of
the knapsack cryptosystems known as the Graham-Shamir knapsack."10
Shamir collected the $100 prize but Merkle offered another $1000 to anyone
breaking the more complex iterated knapsack. Ernest F. Brickell of the Sandia
National Laboratories in Albuquerque, New Mexico, went after the prize in the
summer of 1984. In October, "Merkle conceded that Brickell had won the prize
and Brickell received his check.... Says Merkle 'I think the breaking of
iterated knapsacks is quite surprising and indicates a degree of insecurity that
had not been suspected at all.'"11
Is it time for information counter-economists to panic? No, and this is why
they need to maintain awareness of the fast-changing field: "However, this
doesn't rule out the possibility that a secure knapsack cryptosystem exists.
Brickell adds, 'What this says is that if you use one, you have to use something
other than modular arithmetic for hiding it.' ... Of course, cryptologists
can't resist the challenge of coming up with a cryptosystem that circumvents the
flaws pinpointed by Brickell's decryption technique. At Crypto '84, Rivest and
Benny Cho were ready with a new knapsack public-key cryptosystem based on
arithmetic in mathematical structures called 'finite fields.'"12
While computer cryptographers play the game of better mouse vs. better
mousetrap, Adi Shamir raises the stakes and offers hope that a
counter-economically invulnerable (within reason) cryptosystem may be developed
-- or at least the cost of it can be rationally calculated.
"'The most intriguing question is whether you can develop proof techniques that
will show the security of cryptosystems,' says Shamir. 'If you could do this,
it would be the biggest breakthrough in cryptography because at last you would
be able to show that concrete cryptosystems just will not be broken in the
future unless there is a certain amount of time.'"13
As in all Counter-Economics, the risks need to be rationally calculated and the
pay-off traded off against the potential profit. With computers and
counter-economic programs, this can be accomplished simpler, easier, and faster
than ever. Add to this the potential of inexpensive high security of records
and message exchange, and one need not ask for miraculous invulnerability to the
State's authorized robbers.
But something like that miracle may be provided by the market anyway, and fairly
soon.
Having moved information successfully in the Counter-Economy, the next trick is
to move physical objects as safely and efficiently. Fortunately, as we see in
the next chapter, the market has a very long history in successful shipping
Counter-Economics, that is, Smuggling.
Back to TOC
Chapter Six Footnotes
1. But not entirely. In December 1984 the National Security Agency announced
plans to develop a new-generation system, with greater speed and capacity than
existing ones. See the later section on Public Key Cryptography for the prime
reason why.
2. Reid, B. (1971). The Paper Trip. Fountain Valley, California: Eden Press.
(A well-known counter-economic text, with updates such as The Paper Trip II,
1977, The Paper Trip III, 1998, and [now with non-Roman numerals] The Paper Trip
4, 2015.)
3. An irresistible aside. Americans have a clear-cut double standard on
entrapment which is joy to the Counter-Economist. Entrapping businessmen --
even big businessmen like John DeLorean -- is a no-no; yet entrapping
politicians (arch-statists), such as those caught in FBI's Abscam, is proper.
The difference is this: the politicians have no legitimate business with any
special interest group; or, to put it more strongly but still in the American
tradition, "all politicians are crooks" and assumed to be (potentially, at
least) up to no good.
4. Smith, J. (1983, January). Public key cryptography. Byte 8(1), p. 198.
5. Ibid., p. 199.
6. Ibid., p. 200.
7. Ibid.
8. Rivest, R. L., Shamir, A., & Adleman, L. (1978). A method for obtaining
digital signatures and public-key cryptosystems. Communications of the
Association for Computing Machinery 21(2), pp. 120-126. doi
10.1145/359340.359342.
9. Smith, op. cit., p. 216 (Editor's Note).
10. Peterson, I. (1984, November 24). The unpacking of a knapsack. Science
News 126(21), p. 331.
11. Ibid.
12. Ibid.
13. Ibid.
Back to TOC
Chapters Seven through Ten
These chapters are rumored to exist in digital format somewhere in the
cyberverse. When they are located, they will be added to an updated version of
Counter-Economics. The remainder of Counter-Economics -- Chapters Eleven
through Eighteen -- was not completed before SEK3's untimely death. He left an
outline of all the chapters, which is included to demonstrate the breadth,
depth, and social import of the science of Counter-Economics.
###
Back to TOC
OUTLINE
Counter-Economics: How YOU Free Yourself ... and Society, Too
[From SEK3's original typescript outline.]
Part One
Preface (Optional)
To be written by "name" writer or writers such as Doug Casey, Harry Browne,
Murray Rothbard, Thomas Szasz, Karl Hess, John Pugsley, and so on.
Introduction
Written. Summarizes complexity of the theme of the book in simple terms.
Promises enjoyable survey of this strange, new field with economic theory in a
back section and ideological explanation at the very end. Up-front about
intention but soft-sell and low-key in presentation.
Chapter One: Tax Counter-Economics
Written. Very detailed survey of the American "underground economy," the
taxless part of the whole Counter-Economy. All examples are taken from
well-known, "Establishment" news sources. Critics of mass tax evasion quoted
and they are very sketchily answered, to tantalize the readers for later theory.
Chapter Two: International Counter-Economics
Written. First third or so of this chapter hops around the globe, Western
Europe, and the "Third World," with a tax Counter-Economics approach. Second
third covers transitionally Marxist-Leninist Third World countries and
corresponding increase in counter-economic activity. The final third moves into
the "Eastern bloc" and follows increasing shift of total market to black,
underground, or left-hand. Zero in on the U.S.S.R. do we as the last hope for
the State to crush the Counter-Economy.
Chapter Three: Soviet Counter-Economics
Written. This chapter is closest to a single view of the scope and depth
possible in a society that has gone almost completely Counter-Economic. The
helplessness of the Soviet State is stressed and shown by repeated examples.
The possibilities of Counter-Economics beyond narrow fields of business are
introduced to whet the reader's appetite for the rest of the book. Russian
millionaires are exhibited to prove points.
Chapter Four: Drug Counter-Economics
Written. This chapter is obligatory as "Drug Connections" and the corresponding
network are the most popular view and popular understanding of black-market
activities. Therefore, readers' expectations will be played against. First,
the size and scope of the market, up to taking over governments when convenient,
is shown. Second, a brief sketch of how the market works from producer to
dealer.
Twist: the latter part of this chapter will use the drug market to show the
interconnectedness of nearly everyone in society, complicity of casual
customers, friends, colleagues, relatives, even passersby -- a social conspiracy
against the government. This is then compared to the Prohibition Era for
historical continuity and to Laetrile-dealing to show its expansion outside
"vice" drugs. "What's a drug?": who says and why. The drug business is treated
as a counter-economic paradigm, with similarities and differences to "regular"
business.
Chapter Five: Inflation Counter-Economics
Written. Begins with heavy reference to existent doom-and-gloom writers such as
Browne, Casey, Schulz, Pugsley, etc. The Survivalist Movement is tied in with
inflation and its Counter-Economics. Some theory snuck in here to explain
inflation and contrast it with rising-price phenomenon. The Austrian business
cycle is sketched to give a basis for doom 'n' gloom.
Gold gets a special section, both legally and illegally owned and traded, and
other precious metals, commodities, "Alpha Strategy" purchases, right down to
retreats and stashes. The historical gold standard, its return (possibly) and
State's fear of it will lead to the next section. The final section deals with
some innovations in the grey market such as 100%-gold banking offered by
underground "banker" and detailed description of his activities. The value of
counter-economists trading with other counter-economists is explained here.
Modern computers make barter accounting and underground resource transfer
feasible on larger and larger scale.
Chapter Six: Information Counter-Economics
Written. Rapid rise of computer industry, individualistic nature of freelance
consulting, computer privateers and pirates are chronicled. Government has
thrown up its hands at regulation of this industry. Discussion is then divided
into two types of counter-economic computer and information activities.
Counter-Economics for Information Industry
Wheeling and dealing, under-the-table trading, and various dodges by
counter-economists from researchers and consultants to keypunchers and
programmers to owners and franchisers, will be covered. Mass-media examples
will be given for convincing the readers.
Information Industry for Counter-Economics
Data encryption and new techniques of libertarian examples. Carl Nikolai is
introduced with his original work in this field. The applications of
state-proof data processing for tax evasion, inflation-evasion, dealing and
other sorts of marketeering are shown, both those already working and those
which are immediate possibilities.
Back to TOC
The Lost Chapters
Chapter Seven: Smuggling Counter-Economics
Biggest smugglers may come as a surprise to the readers: nearly everyone at
Customs check-ins; this will open the chapter for reader identification.
Statistics will be given, brightly and spritely as usual.
Money & Currency Smuggling
This section begins with references to previous six chapters worked in here;
they will remind readers of what they have learned (in a subtle way). Currency
control ties into tax evasion, drug dealing, and the Red (Communist) black
markets, and even information processing.
Historical Smuggling
This will be a historical tour and brief description of the classic,
stereotypical concept of smuggling and its modern hangover is dealt with, mostly
to dispense with it and contrast it to...
Border-Crossing For Profit
This will deal with how most international companies move goods across borders
(or say they do) to beat taxes, tariffs, Value Added Taxes, Sales Taxes, import
quotas, and so on (also done by small businesses and individuals). Crossing
state lines to avoid sales tax and other controls is also covered here. This
section ties in nearly all businesses of every size to the Counter-Economy.
Contraband Counter-Economics
What is and isn't legal varies widely from State to State (and state to state
and province to province and county to county and...). The concept of
entrepreneurship is explored here using "moving goods from low-price to
high-price areas" as starting point for the idea. This is a subtle introduction
of some real economics.
Rhodesian Paper Chase
How the oil embargo of Rhodesia was beaten by Mobil Oil: multinational industry
smuggling will be spelled out in adventurous detail. Example illustrates
large-scale end of counter-economic operations, acceptability among the "higher
circles" of finance, and its potential to shake governments.
What Isn't Smuggling?
Trade in violation of regulation could even cover deals between neighbors,
carrying favors for friends, even private mail delivery. This section
emphasizes universality of smuggling. Smuggling Bibles and religious material
is mentioned. Smuggling "people" is introduced, to be used in the "Human
Counter-Economics" Chapter, with underground railway of the Civil War period.
Tie-in to information industry (Chapter Six) and transportation problems
(Chapter Eight).
Chapter Eight: Transportation Counter-Economics
The need to move things is basic. Methods will be listed: foot, private
vehicles, commercial transportation, and government-controlled public means;
examples of counter-economic use of all will be given.
Citizen's Band Counter-Economics
This wild section will tell how CB beats traffic laws and increases profit for
truckers. Actual (simple) economic calculations will be made. Statistics will
be given on the size of the market. Why is agricultural trucking exempt from
most trucking regulation and how is that used ? Lurid examples of
counter-economic trucking and how it was romanticized by C&W music, movies and
TV, and radio. Is this a model for spreading other forms and kinds of
Counter-Economics? The rise of British CB use, completely illegal, is covered.
Moving People Counter-Economically
New York Gypsy cabs triumph over the regulators. Also covered will be jitneys;
"Grey Rabbit" buses; private car-pools that evolve into underground busing and
taxiing; "hippie" airlines -- why it took off and why it failed; and even
hitchhiking.
Ocean Counter-Economics
Small boat owners beat controls in various examples. Potential and actual usage
of boats for counter-economic purposes are also covered, such as barges of
marijuana along the Florida coast. Smuggling is tied in, of course. A bit of
futurism will be added with a discussion of the Sea-Bed Treaty and
counter-economic implications for Ocean-Bed mining, ranching in the seas, and
even ocean habitats.
Air Counter-Economics
Freddie Laker takes on regulations and the recent airline deregulations as
examples of responses to airlines' "bending" the rules -- Counter-Economics!
There will be examples of plane use for drug smuggling, diamond smuggling,
courier activity, nearly everything on both private planes and commercial air
traffic.
Space Counter-Economics
OTRAG will kick off this chapter, the private space industry both aboveground
and underground; movement in various popular space groups away from NASA and
government monopoly of space. Both actual and speculative cases will be
surveyed.
Chapter Nine: Energy Counter-Economics
First, energy sources will be surveyed as to counter-economic and establishment
use: tapping public lines, faking stocks, private sources kept and exploited.
Survivalists and ecologists are moving together out of regulated power grid for
converging reasons. Both high-tech and low-tech alternatives to the market will
be covered. The sham of government "incentives" for small-scale energy
alternatives and solar will be exposed as actually protecting monopolistic power
companies. This will lead in to an explanation of history of government
regulation and its causation of nearly all current pollution and energy waste.
Some speculation will be added at the end to indicate how a powerful
counter-economy (and weak state) would handle pollution and conservation. This
will tie-in with the Justice Counter-Economics chapter.
Chapter Ten: Human Counter-Economics
This chapter should eliminate any lingering doubts about Counter-Economics being
cold and heartless. Sections will cover Illegal Aliens, especially Mexican
border, but also Asiatics, Canadians, Australians, and Europeans; labor as a
counter-economic good; Underground Railway slaves moved counter-economically,
variants of it still in use; Refugees covers Counter-Economics of freeing people
from greater tyranny but should they even bother leaving their existing
Counter-Economy? What is a free country (a little more theory snuck in here)?
Minority groups are covered here first, how they survive in hostile societies,
and the sub-societies they form, usually overwhelmingly counter-economic -- a
hint of possible communities for hard-core counter-economists will be introduced
here but developed near the end of the book.
Back to TOC
The Unwritten Chapters
Chapter Eleven: Dissenters and Intellectual Counter-Economics
This chapter should grab the academics and the more intellectual critics.
Underground political, religious, and academic activity and the marketing of
that dissent in North America, South America, Europe, the Third World, and, of
course, Eastern Europe, will be exemplified. Underground newspapers and
underground publishing. A separate section may be developed on education
alternatives, the difference between public schools, private schools, and
independent schools and then out-and-out underground schools will be detailed.
A little more theory can be safely spelled out here.
Chapter Twelve: Sex Counter-Economics
"Everybody's doing it" will be the theme here, with statistics on violation of
sex laws; lists of those laws in various states and countries, and various
attitudes will be given, too -- nearly everything is illegal and nearly no one
cares.
Pornography
Definitions vary and these will be noted. Business methods of dealing with
local codes will be spelled out. Classified advertising in street-sold sex
newspapers in Southern California will be cited and exhibited as a model for
other types of counter-economic business transaction and advertising needs.
Prostitution
"World's oldest profession" is counter-economic: women, men, adolescents --
everyone -- and it's admitted by authorities to be unstoppable everywhere.
Amusing anecdotes about bondage- and dominance-fantasizing politicians will be
told for spice and to make a point. Where does one draw the line between
cohabitation and prostitution will be asked and answered. Morality and ethics
of the business will be discussed but it will lead into following chapters:
Psychological self-awareness and freedom of expression leads directly to the
next two chapters.
Chapter Thirteen: Feminist Counter-Economics
This will begin with a review of the sex laws of the previous chapters but with
a slant on sexual discrimination and how counter-economic activity gets around
the State.
Home Birth Counter-Economics
The Home Birth Movement, largely illegal in the 1980s, is covered in some detail
-- the Midwife as Counter-Economist. History of smuggling and contraband of
birth control information fits in here.
Equality of Counter-Economic Opportunity
This can be considered general for all minority groups, but women are the
largest and thus will be focused on: how the Counter-Economy is sex-blind,
color-blind, and creed-blind; the segment further develops the theme of
sub-societies embedded in society-at-large. Aspect which will be developed is
how minorities use the Counter-Economy to break out of ghettos, barrios, and
menial employment in North America and abroad. Gays will be covered here and in
Chapter Twelve. The futility of the ERA and such laws will be shown and give an
opportunity for a little theoretical explanation.
Chapter Fourteen: Justice Counter-Economics
This chapter will, in some senses, tie in with nearly all the other chapters
because it will answer the burning question in the readers' minds: how can
justice and contracts be maintained without government; in fact, with government
as an active enemy of both contract and justice?
Failure of Government Justice
Why the government cannot deliver protection or justice leads off this section.
Lots of examples, mostly in modern-day America, will be cited. The "climate of
fear" and the perennial "crime problem" of "law and order" as a political
football will be exploded.
Protection Business
Why catching criminals is too late for most people's good, though the
Counter-Economy will even provide that service. The technology of protection
and defence will be handled in great detail right up to the latest devices and
their market popularity, and even ones yet to be introduced, right up to
science-fiction possibilities.
Natural Law and Its Enforcement
The concept of Natural Law is introduced. The spontaneous order of the market
will be explained, heavily illustrated both in "straight" transactions and
counter-economic dealings. The stigma of "finking" as a more general concept
and is validity will be developed. Finally, the reader will be given
counter-economic law enforcement and criminal apprehension procedures. The
"protection racket" is explicitly excluded but "loan sharking" will be dealt
with as more complex and deserving of some sympathy.
Arbitration and Counter-Economics
Arbitration is already big in the aboveground and cases like the Johnny
Carson-NBC contract dispute resolution will be cited, as well as statistics from
the American Arbitration Association. Beginning of a Libertarian Arbitration
Association will be delineated, and tying it in with "blacklists" and "white
lists" will develop a working concept of Counter-Economic Justice.
Chapter Fifteen: Psychology Counter-Economics
The theme of this chapter is the reinforcement of psychological "good health",
that is, self-reliance and taking responsibility, with objective actions --
which turn out to be counter-economic.
Authoritarianism
Research on this subject, especially as compiled by Dr. Sharon Presley, will be
presented showing the links between obedience-conditioning and statism.
Human Potential Movement
All the various aspects of the New Psychology will be shown compatible with
counter-economic activity, and even congruent. Not only Presley, Thomas Szasz,
and Nathaniel Branden, but even psychologists not identified with libertarianism
will be cited.
How It Works
Concrete cases, anonymous, of course, will be summarized here for illustrating
counter-economic psychology.
Mutual Reinforcement
Going beyond individual self-reliance and self-acceptance, the concept of
individuals working together counter-economically, developing trust and honest
interdependence, will finally be developed (after popping up briefly all over
the book). Beyond relationships and affinity groups, we come logically to the
idea of an active sub-society and/or Movement of Counter-Economists -- and that
brings us to Part II.
Part Two
Chapter Sixteen: Understanding Counter-Economics
"Why am I so smart?" theme kicks off this chapter. "How come the author
understands all this when the rest of society has 'caught on' only in part, at
best?" will tease the reader into finally diving into the theory. Answers: (1)
There is a well-worked, proven theory that has done wonders in predicting human
action and describing it in a scientific manner (this chapter) and (2) There is
a strong vested interest -- the strongest in all history -- to confuse the issue
and distort your information to save its privileges (next chapter). The value
of understanding economics to immunize one from "con games" will be stressed to
pull the reader along.
Praxeology: The Study of Human Action
Fairly simple (non-academic) but still rigorous presentation of basic concepts
of Austrian Economics such as subjective value, marginal utility, time
preference (originary rate of interest), regression (money's origin), the
capital pyramid of Eugen Bohm-Bawerk and the business cycle of Ludwig Von Mises.
Both everyday examples for reader identification and counter-economic examples
will be used to maintain reader interest.
Why Counter-Economics Works
Kicking off with the distinction of profit from "rate of return,"
entrepreneurship is reintroduced and then applied to all aspects of daily life.
(This ties in with the previous chapter -- self-reliance, but now acceptance of
risk is stressed.) The key to understanding and practicing Counter-Economics is
now spelled out: trade risk for profit. The whole experience of the book is
linked to back this.
How Counter-Economics Works
A formula will be given, simple algebra, which can be used for day-to-day
business calculations, using readily available data, to calculate risk taken to
see if it is acceptable -- maximum estimated risk, at that! A few caveats about
embarking on a counter-economic lifestyle and disclaimers that the author is
"advocating lawbreaking" closes out this chapter.
Chapter Seventeen: Opposing Counter-Economics
The second answer to why Counter-Economics has not yet become the Economics is
finally given here. The nature of the opposition will be spelled out.
The Origin and Nature of The State
History and sociology of the State will be sketched out here, quickly bringing
the reader to the present time with increased awareness.
Establishment Economics
Ruling classes -- the king and his court intellectuals -- are explained to show
why the science of economics is constantly bent into fraud and con games by
political "necessity." The popular myths of the day will be listed with brief
descriptions .
Dead Ends
Conservativism, liberalism, socialism, anarchism, varieties of libertarianism,
pacifism, "dropping out" and retreatism will all be trotted out, defined,
sketched, and refuted as means of achieving a free society -- again, drawing
heavily on the reader's experience of the rest of the book to keep it short and
sweet -- or quick and deadly. Once all the other options are eliminated, that
will leave the final chapter:
Chapter Eighteen: Social Counter-Economics
The promised final chapter spelling out the full integration of libertarian
theory and counter-economic practice is presented. This section will eventually
be expanded to a full volume with a heavier, academic style and the book will be
promised to readers for a follow-up (a sort of Counter-Economics II for sequel
lovers). The book will end with a veiled -- to cover liabilities -- exhortation
to live one's theories and fulfill one's dreams. We could close with a
description of the author's ten years in the Counter-Economy to show he
practiced everything he preached (or leave it to a back-panel biography).
Bibliography & Index
Recommended reading for further interest in the various topics. An index is
probably a good idea but would double the time on finishing the book. The Table
of Contents could list sub-topics instead.
NOTE TO PUBLISHERS:
The fact that this subject touches almost every field, and hence will be in
demand as a reference in History, Sociology, Economics, Feminism, Eastern
Studies, Russian Studies, Psychology, and Political Science, and is to date the
only such work available, is not accidental but inherent in the nature of the
subject. Thus, it has the rare quality of being both popular and academic in
appeal... and with a little luck, so will the sequel. -- SEK3
Back to TOC
Appendix:
Counter-Economics --
From the Back Alley to the Stars
Make the following connections: a dope-dealer to an immortality formula
distributed in six-packs; a gun-runner to future homes safe from burglars,
street gangs to tax collectors; a smuggler to space colonization; a moonlighter
to abolition of bureaucracy; a black marketeer to revolutionary heroism.
There's a connection here, a logical progression, and it's from the neglected
science of economics. It's the newest (and oldest too!) field of economics, and
the most exciting of this supposedly dismal science. Although it's been
practiced since man had money and a government to take it away, it was only
named in 1974, resulting in a proliferation of social consciousnesses whose
explosion has yet to peak.
Counter-Economics was a natural name for the study and practice of this process.
This author used the term at the Free Enterprise Forum in February, 1974, in Los
Angeles; two years later, Hedrick Smith in The Russians coined it independently
to describe conditions on the other side of the globe. The term and discussion
of the idea has spread from political journals (Reason, New Libertarian) to
business newsletters (International Shortage Reporter, Inflation Survival
Letter) to futurist publications (Claustrophobia) to science-fiction fanzines.
Yet the area of thought with which Counter-Economics most overlaps is
Psychology. It describes the economic results of self-oriented,
raised-consciousness ethics; the elimination of guilt for self-liberating
activity is fundamental to "actualizing" Counter-Economics.
Counter-Economics sounds like counter-culture; indeed, the term was chosen with
that in mind. Where the Counterculture rejected an Establishment "culture" and
its values in the 1960s, the counter-economists reject the Establishment
economics as just as corrupt. Much of the counter-culture was counter-economic,
much of it was not. Anti-economics is not Counter-Economics; in fact,
Counter-Economics as theory was developed from what could be called an orthodox
revolt against an heretical, impure, Establishment economics.
Counter-Economics: What You Do
If you do what you want, is it Counter-Economics? Well, yes and no. This is
where we call on the psychological overlap. If you perform an action regardless
of command, you are acting freely. If you perform an action against your will,
you are controlled, regulated, under command. One can conceive of someone
joyfully and willingly paying taxes -- but an institutional mechanism of force
exists to compel it. Not paying the tax may be a free act, but it's
counter-economic. No compulsion exists to force you to breathe or not to (yet),
so it is simply free.
Is any action committed in spite of threat, in spite of compulsion to the
contrary, counter-economic, then? No, there remains the case of the uneconomic
act of coercion itself. Compelling someone else -- violation of contract,
fraud, theft, assault and battery, murder -- is uneconomic and not
counter-economic, no matter what your wish. Notice, however, that this is less,
rather than more, complicated. The counter-economist lumps all non-coercive
acts (and free acts in general) on one side as Counter-Economics; the acts of
coercion and their economic consequences (Establishment economics) are lumped on
the other. Everybody -- even regulators and thieves -- acts
counter-economically at times. In fact, everybody must act
counter-economically. Why is this the case? It's the case because the planet
is regulated by government everywhere to the point where survival is impossible
without breaking laws.
Examples of Counter-Economics
Some Counter-Economics is extremely popular. Violation of sex laws (what
position and with whom) is not just widespread, it is nearly universal. In the
United States there are antitrust laws and legal decisions which prohibit
charging more than your competitors (it's proof of monopoly), less than your
competitors ("cutthroat competition" violates "Fair Trade" laws in most states),
and the same as your competitors (Sherman Act, proof of price-fixing)! To
charge anything leaves you open to prosecution.
The "double-nickel" speed limit of the 1970s was observed in the breech; CB
radio and Fuzzbusters are ancestors of a high-level technology that has grown up
to service the counter-economic act of exceeding the statist limit. The
economic reality to truckers -- that if you make eleven runs a week at
fifty-five miles an hour, you can make fifteen at seventy-five -- provides a
tremendous incentive in cold, hard cash.
None of these acts is coercive. Whether or not counter-economic acts are
unsavory or self-destructive is irrelevant as long as the exchange itself is not
coercive. Thus, dealing drugs is counter-economic; so is ingesting them, for
that matter. Prostitution is counter-economic; pimping (agenting prostitutes)
is as well -- but not beating up prostitutes for control over them or their
earnings. Hijacking drug shipments is no more counter-economic than busting
dealers.
Running guns is counter-economic; carrying them in violation of gun laws is
counter-economic; using them for robbery and assault is not; arresting
possessors of illegal guns (at the point of your legal gun) is not.
Midwifery is largely illegal in the 1980s but certainly non-coercive and is in
high demand, especially among modern feminists. Trafficking in contraceptives
where outlawed is counter-economic. In many places in the world, merely
instructing women in feminist principles and practice is illegal and hence
counter-economic.
When gold was illegal in this country, possession and trade in it was
counter-economic. Violating currency regulations and speculation controls still
is.
Tax evasion (and outright tax rebellion) is always counter-economic. Ignoring
the millions of regulations on business -- from alleged safety requirements to
the reporting of transactions to the avoiding of tariffs and customs duties --
is counter-economic.
These more obvious economic transactions are not only not limited to
big-business types, they are far more common in small businesses and co-ops. No
"Mom and Pop" store could afford a battery of corporation lawyers, accountants,
and consultants to comply with all the regulations on business in this
supposedly free-enterprise country, let alone in socialist and communist
countries. What freestyle co-op could withstand a thorough government
investigation of its business practices and its books?
Black Market
Excluding murder "contracts," con games, "protection" rackets, burglaries,
muggings, and hijackings, what is called the black market in most countries is
really the Counter-Economy. From black-market baby adoptions to black-market
money-changing, smuggling of goods and illegal immigrants, gambling and
unlicensed bookmaking on forbidden bets, even running Bibles behind the Iron
Curtain (in the 80s) or into fundamentalist Islamic states in the 21st century
are "black" acts, yet non-violent and counter-economic. The Soviet Union was
mainly fed on black market food from private plots, not the collective farms.
In fact, the real economy of countries such as the Soviet Union, Burma, Cuba,
Venezuela, and China was and is counter-economic. The Establishment economy
cannot feed, clothe, or shelter the populace efficiently or adequately. Bribery
is rife throughout not only communist countries, but is a way of life in most
Third World nations, all of which are highly regulated and officially
controlled.
American blue jeans were a hot black-market item in Eastern Europe. Of course,
genuine Cuban cigars were an excellent black-market investment for sale in the
US after 1960. The thaw in US-Cuban relations may cause the collapse of Cuban
cigar prices, but not while FDA regulations impose onerous requirements: cigar
smuggling will continue to maintain the counter-economic supply line.
Jobs are "black" in much of the world, from undocumented workers in the United
States to the moonlighting and daylighting of civil servants in Italy, France,
and much of Western Europe. Recently, the Italian and French press has been
filled with articles covering the massive tax losses of government employees who
work until maybe one or two in the afternoon on their official jobs, then spend
the rest of the day at undeclared jobs in the private sector. The Eastern bloc
had a large service industry of appliance repairmen who are entirely under the
counter.
Getting better jobs in communist countries, although the jobs themselves may be
legal, is often achieved counter-economically, since merit counts for little in
a bureaucracy. Bribery, blackmail, and "friends in high places" are much more
useful for self-promotion. Of course, the Western bureaucracies are rife with
"pull" -- it's just that the government sector of the economy is smaller, so the
problem is smaller.
Grey Market
"Black" market is deliberately construed as unsavory (by the government trying
to stamp it out) and associated with truly coercive acts such as theft and
murder further to "blacken" the deed, and to generate guilt, social pressure,
and other forms of self-enforcement.
One can usefully speak of a "grey" market where the transactions are not
prohibited, but the method of conducting them is. Paying cash for a service and
not putting it on the books to avoid taxes is grey market. Kickbacks to avoid
price controls is grey market. Swapping and bartering without official
reporting of the transaction is grey market. Buying smuggled goods and selling
them over the counter with legally purchased goods is grey market. New York's
newspapers have run numerous exposes of "buttlegging" cigarettes from low-tax
states (such as the Carolinas) to undercut the high taxes of New York City.
Complicity
If everyone were fully law-abiding, there would be no Counter-Economics. Were
most people even so law-abiding as to report every infraction and not "look the
other way," Counter-Economics could not survive. From the above examples, it is
obvious that there is a widespread complicity among the people in society -- the
"masses" -- to tolerate, if not defend, the underground free market of the
Counter-Economy from the State: government, bureaucracy, planners, police, and
politicians. From doing things in the schoolyard forbidden by the authorities,
to jaywalking, to street-corner transactions, the populace have their own labels
to match the smears of "black market," "unpatriotic," and "anti-social." Who has
never heard of "finking," "ratting," or being a "stoolie?" The psychological
warfare is tremendous, and for every casualty in the Counter-Economy who is
busted, there is a corner cop with a blind eye or a "pragmatic" politician on
the take.
The scope of the Counter-Economy has yet to be measured and may never be. But
in the United States, the estimations by Establishment economists of the size of
the American Counter-Economy is frightening -- to the State. Estimations of
non-complying taxpayers seldom run as low as ten percent of the population;
including minor chiselers and creative interpreters of the tax laws pushes the
percentage of tax-liable citizens engaged in Counter-Economics closer to 100%.
Some South American countries collect less than 10% of the assessed taxation and
their governments simply give up, living off the revenues of printing more money
for incredible rates of inflation in the hundreds of percent per year!
Another estimate was made of the amount of cash flow going through unreported
transactions by trying to figure out how much cash was unaccounted for at the
time. The estimate ran from a tenth to a third of all available U.S. currency.
Rather than being an overestimate of the Counter-Economy, it made no account of
the banking activity mislabeled to conceal illegal transactions nor of the large
number of transactions that involve no money.
By any reasonable guess, the counter-economy of less "free enterprise" economies
than the United States' is a far higher proportion of the total economy, easily
making up a clear majority of business and personal activity that is not
sanctioned by the State. No one has yet set up a "Counter-Economic Liberation
Front" -- but such a massive, world-wide, persistent defiance of governmental
authority sounds suspiciously like a revolution.
Most disquieting to the States Of the world is undoubtedly the very fact that
the Counter-Economy has no political expression.
Politics vs. Counter-Economics
There are no counter-economic political parties -- though undoubtedly every
politician is tainted with contributions of some form from practicing
counter-economists. There are political parties espousing total free
enterprise, from the large Progress Party of Denmark to the tiny Libertarian
Party in the U.S. and Canada. But should these parties ever actually dismantle
the government, they would not put the practicing counter-economists in power,
for they are already in "power." They not only don't need the State, they thrive
on defying it.
But the recent rise of libertarianism has had a side effect much more
threatening to the Establishment of the State -- all Establishments -- than the
possibility of a new group of politicians taking over with a lighter hand and
smaller, more efficient bureaucracy. The "anarchist" aspects of radical
libertarianism, such as competing, free-market arbitration agencies ("courts"),
"police" protection, and even armies, raise the specter of the Counter-Economy
simply dismissing the State entirely by complete non-compliance and the society
taking care of itself without politicians, bureaucrats, tax-collectors, or
arrogant monopoly cops, judges, and generals.
The most dangerous idea of radical libertarianism is not any of these voluntary
alternatives to the state apparatus. Most dangerous is the moral idea that
non-compliance with the State is good; one should not feel guilty of breaking
the law to do what one wishes, one should feel proud!
The Counter-Economic Future
In case people are not reading the dryer texts of libertarian economists,
popular literature such as science fiction is mushrooming with libertarian
societies and explanations. Robert Heinlein's Moon Is A Harsh Mistress, a
best-seller, describes graphically a "rational anarchy" formed by the secession
of a colony on the Moon from Earth. Ayn Rand's Atlas Shrugged describes the
"men of the mind" going on strike in a society collapsing from too such
government. Ursula LeGuin's The Dispossessed describes a more traditional
anarchist society full of problems, but surviving on a planet nonetheless. A
new novel by Neil Schulman, Alongside Night, actually describes a plausible
mechanism for the Counter-Economy to displace the American State in an
inflationary crisis. A letter recently circulated to published SF writers
asking for libertarian stories had over twenty names on it, from Poul Anderson
to F. Paul Wilson.
Conferences discussing space colonies of the O'Neill type debate how government
can be kept out of the picture. A new educational film, Libra, portrays such a
free space colony. Even Lockheed paid for a study predicting stateless space
colonies. Such "free ports" would be superb for smuggling; in fact, smugglers
would be better models than regulated ports on Earth.
One of the leading exponents on television talk shows of life extension, Durk
Pearson, ran a libertarian magazine (Libertarian Connection) until recently
(under the name Skye D'Aureous) and raised a few consciousnesses about what
immortalists will do if the government treats the use of and experimentation
with life-extending drugs and chemicals as it does laetrile and hallucinogens.
Rather than run them through endless tests by the Federal Drug Administration
subject to legal and political blocks by vested interests, the immortalists are
considering going the route of the dope-dealers, manufacturing and distributing
the results underground -- far more reliably than through official channels.
The collapse of government police protection has led to a massive underground
gun market, not to mention an overground market in anti-burglary devices and
martial arts lessons. The evolving counter-economic approach is an integration
of legal and illegal devices and knowledge fully to safeguard home and property,
from weapons to home-computer-run monitors, to private guards and patrols, to
private arbitration agreements keeping disputes out of government courts for
fast, reliable settlements. All that remains to replace the state entirely is
the offering of a service to track down and return stolen goods. What happens
when tax collectors are treated like street hoods and burglars in "middle-class"
communities -- as government agents are treated already in ethnic ghettos, or
"revenooers" are in the rural South?
Indeed, what happens when the "moonlighters" of the European bureaucracy find
themselves having to choose between adventurous, profitable counter-economic
jobs with growing social approval and a stifling, low-gain civil service post
with growing public disaffection?
The evidence indicates that there is a tension spread throughout the entire
planetary society. On one hand is compliance with the externally planned and
regulated economic systems of the State: socialism, communism, capitalism, and
various other "isms." On the other hand is disregard of authority for internal
planning of the completely uncontrolled free market of the counter-economy.
Today, with nearly the entire educational establishment, political authority,
and mass media in all countries urging compliance with the State's rules and
edicts and heaping guilt on the transgressors, around half of the economy runs
counter to the Establishment, motivated solely by material profit or "crank"
philosophies, "cult" religions, "selfish" psychological analyses, and "way-out"
lifestyles.
In five years, "selfish" psychologies may be dominant, if not already, guiding
one to pursue one's own values. The "crank" philosophy of libertarianism has
gone from a handful of adherents in 1969 to hundreds of thousands in ten years.
The "way-out" lifestyles -- whether based on self-esteem and libertarianism or
simply picked up by imitation -- has swept Southern California and is spreading
eastward at a rate that alarms traditional easterners fearing cultural
pollution.
The counter-economy has always been with us and may always be. A fully
understood Counter-Economics arising in the 1980s may yet be the biggest future
shock of all.
[Originally published in condensed form in Claustrophobia, Vol. 7, No. 3 (Whole
Number 75), March, 1983, pp. 10-12. This full-length version was digitized
from SEK3's original typescript pages.]
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Afterword to the ePub Edition:
by Victor Koman, PhD
The author of Counter-Economics, Samuel Edward Konkin III, died February 23,
2004 at the age of 56. He left his original manuscript with me in the hopes
that a three-time Prometheus Award recipient and publisher (KoPubCo Books) would
shepherd the book to publication, much as I had with Konkin's New Libertarian
Manifesto (KoPubCo, 1983 & 2006) and the posthumously published introductory
book An Agorist Primer (KoPubCo, 2008). The latter manuscript only required a
light amount of updating, which allowed it to be published fairly quickly (by
libertarian standards) after his death.
Counter-Economics, on the other hand, proved to be a greater challenge. The
manuscript, written around 1984-85, consisted only of the first six chapters out
of twenty in his outline (although four more chapters are rumored to exist
somewhere in digital form, but have yet to be found). Moreover, extensive
quotes from contemporary news and magazine sources constituted a significant
portion of the manuscript. Because these references are now dated -- for
example, the Soviet Union's underground economy provided him with voluminous
illustrations of statist economics gone utterly awry and Venezuela, the current
poster-child for socialism's horrors, had yet to begin its collapse -- finishing
the book would have required a thorough re-application of Counter-Economics to a
world a third of a century removed from that of the original manuscript.
The world has changed significantly since 1985 (with the proviso plus c'est la
meme chose): the collapse of the Soviet Union, due in no small part to
Counter-Economics; the rise of Islamic terrorism; the return to a war-based (or,
at least, war-accommodating) establishment economy; the scattershot legalization
(but not decriminalization) of marijuana; the privatization (however meager) of
space travel; the explosion of both computer encryption power and hackers'
ingenuity; the rise of digital currency a la Bitcoin; the ubiquity of
surveillance systems; the abandonment of any vestige of mouthed support for
Liberty by the elites of US political parties, corporate boards, and governments
worldwide. All these events have only served to increase, not decrease, the
size and scope of the Counter-Economy.
In re-reading the chapters for this edition, I found echoes of the past
reverberating in the present -- it turns out that even though the references are
dated, the principals underpinning Counter-Economics are consistent and timely,
and you will see how they apply to current events and how they can resolve
today's controversies and guide tomorrow's choices in your own life and society
at large.
Scanning the manuscript in was an immensely frustrating effort (in the
mid-1990s, using OmniPage with a primitive scanner). Sam's aging IBM Executive
proportional-space typewriter had a floating "t" key that caused an OCR spelling
error in almost every word containing that letter, as well as a spacing error in
nearly every word with an "o". I spent hours and hours (as I could manage) over
the ensuing years correcting errors and making Sam's endnotes consistent with
APA 6th Ed. standards.
Because the book proposal had already made the rounds to several publishers and
been rejected, Sam never felt it worthwhile to put any more effort into a
rewrite. When Sam gave me the manuscript (probably 1993 or so), he doubted its
marketability almost a decade after its writing, but I told him I might be able
to do something with it and he gave me his permission to do so.
I knew, however, that I would not be able to complete the book by my 1990s self
without some academic underpinning. Over the ensuing 20 or so years, I
completed four university degrees, from an Associate of Arts, through a BSIS and
an MBA, to an IT PhD in Information Assurance and Security. I also published
the aforementioned SEK3 books and republished a few of my own through KoPubCo.
All that while working full time at my web-app development job, 1996-2014.
Finally, I felt ready to complete Sam's magnum opus with the scholarship and
ideological consistency it deserved.
However...
At the urging of fellow award-winning author J. Neil Schulman, I attempted to
find some reference by Sam to the Counter-Economics manuscript in my e-mail logs
for the 1990s. Searching a 32 Mb text file (saved back when a megabyte was a
megabyte!), I found several. And in them, I discovered something I had
forgotten over the decades. In one e-mail, dated 11/28/1999, Sam wrote:
Although my "unpublishable" book, Counter-Economics, was only half-written
before I gave up trying to find a New York publisher back in the early 1980s
(best reply was from one who said, "This is an example of the most immoral
writing of the Libertarian Movement..." yeah!), I have around 10 chapters I
could retype and put on the web.
In a post to the Left Libertarian List, dated 1/26/00, Sam wrote:
... I mentioned before ... that I had written ten chapters of a book called
Counter-Economics back in the early 1980s; it was turned down by a dozen
Establishment New York publishers, two citing the "extremist" ideas as the
reason and the others less honest. Each chapter described a particular area of
C-E with the effect building up chapter by chapter until the reader realizes
that it covers all Human Action.
Victor Koman apparently scanned and OCRed the manuscript pages and at Christmas
this year presented them to me as a present. If I keep getting encouragement
... I'll put them on line....
The upshot of this is that I had totally forgotten about this exchange with Sam.
All these years, I'd been holding onto the ms. in the hope of completing it
with a scholar's research and writing skills because I wanted to protect the
work's integrity, only to (re)discover that Sam had been ready to release the
manuscript as-is, 'way back in the previous millennium...
So here it is, The Incompleat Counter-Economics. I have no idea where the four
Lost Chapters may be, but I will reissue the e-book with them if/when they
become available. The only changes I made to the manuscript were the correction
of a few typos, the rewording of an unclear sentence or two, and the
aforementioned APA-formatting of the chapter endnotes. Shortly after the
publication of this e-book, KoPubCo will make available a free PDF of the actual
manuscript pages, along with additional matter such as scans of the actual
articles SEK3 referenced in this book. What you have in your hands right now,
though, is the purest distillation of Counter-Economics and proto-Agorism,
presented by the genius -- Samuel Edward Konkin III -- who went beyond Von Mises
and beyond Rothbard to provide you with the knowledge, strategy, and tactics to
free yourself, and society, too. --VK
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About the Author
Samuel Edward Konkin III was a vanguard movement theorist and hard-core activist
since the historic split between libertarians and conservatives at the YAF
convention in St. Louis, 1969. In the subsequent three and a half decades, he
served as editor and publisher of the longest-lived libertarian publication,
beginning as Laissez-Faire! (1970), then as New Libertarian Notes (1971-75),
New Libertarian Weekly (1975-77, the longest-running libertarian weekly), and
New Libertarian (1978-1990). He wrote the seminal work on agorism, New
Libertarian Manifesto, in 1980.
He has coined the following terms and concepts, many of which have turned up in
all libertarian publications: Counter-Economics, agorism, minarchy, partyarchy,
anti-principles, Left Libertarianism, anarchozionism, "Browne-out," red market,
Kochtopus, and more. He has influenced the works of authors such as J. Neil
Schulman (Alongside Night) and Victor Koman (Kings of the High Frontier), who
both had their first professional fiction sales in the pages of his
publications.
Mr. Konkin served as Executive Director of the Agorist Institute, an outreach
organization promulgating the principles of agorism and counter-economics. He
was guest of honor at science-fiction conventions and libertarian gatherings and
was a seasoned world traveller.
Counter-Economics was intended to be his magnum opus, the distillation of all
his work and research over 15 years of movement activism. Sadly, of the 18
chapters outlined, only ten chapters were written. Of those, only six were
available at the time of publication.
Mr. Konkin died February 23, 2004.
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Other Works by Samuel Edward Konkin III
Published by KoPubCo
An Agorist Primer
New Libertarian Manifesto
The Legend of Anarcho Claus
Let us know what you think on our Facebook page: @CounterEconomics
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