How Black Markets Shaped America

In advance of the premiere of VICELAND'S 'Black Market Dispatches,' we talked with author Peter Andreas about the history of black markets in America.

Aug 16 2016, 2:43pm

As documented by the VICELAND shows Black Market and its companion Black Market: Dispatches (premiering tonight at 10 PM—check out a trailer for the show above), the illegal-business underworld has grown astoundingly myriad and complex. It's easier than ever to access illicit goods and services under the radar, and the informal economy of unlicensed and untaxed business has also ballooned. There are estimates that various forms of unofficial commerce collectively make up the second-largest economy in the world, and they employ half of the global labor force too.

Black markets have also accompanied modern governance for centuries, and there's evidence to suggest that the United States wouldn't have become the superpower it is today without its earliest citizens trading in black markets. Peter Andreas is a professor in international studies and political science at Brown University, and he's also the author of Smuggler Nation, a book about America's long relationship with black markets and how they've played an inexorable role in birthing American wealth, as well as how black markets have become economic behemoths the US government obsessively struggles to contain. VICE spoke with Andreas to get more insight on the timelessness of black markets in America.

VICE: How did black markets originate in early America?
Peter Andreas: Black markets were even more important back in the founding [of the United States] than they are today. In New England, much of the economy was based on smuggling—particularly [of] molasses, which was the key raw material for rum production. Rum was the most important export of the New England colonies, but the vast majority of [molasses] imported from the Caribbean was smuggled in violation of British trade laws. You can trace part of the rebellion against the Crown to disgruntled merchants who were unhappy with the crackdown on their business practices. It's particularly ironic because, today, the United States is the world's anti-smuggling policing superpower—but its founding story is partly a smuggling story. We need to be more sensitive to our own history before we become crusaders around the globe against smuggling.

Photo via Wikicommons

You also write about the "historical amnesia" that US policymakers embody when they criticize people participating in illegal trade.
In the current debate over intellectual property theft, there's a lot of finger-pointing at China that's rightly deserved, as China's deeply involved in intellectual property theft. But it's a little hypocritical, too, given our own early industrialization story. America's early industrialization, especially in the early 19th century, was based on illicitly importing technological equipment and workers from England—they'd literally go to England both to woo artisan workers with technological know-how of the equipment and to smuggle the equipment back to the United States. Samuel Slater, who's described as the father of the American industrial revolution, smuggled himself out of England in violation of British emigration laws to come work in the US. When he first arrived in Rhode Island, he cannibalized and improved upon smuggled equipment.

How broad has participation in American black markets been over time, and which classes of Americans have benefited the most?
Most of the traffickers and smugglers we talk about today are socially marginalized characters, but in early American history, the merchants involved in smuggling were the pillars of society. Boston's Hancock family—one of the richest in New England—were well known [to possess] a fortune in part based on smuggling molasses. John Brown, a pillar of Providence's upper crust, made a fortune on smuggling. Moses Brown, who founded Brown University with John, hired Samuel Slater to create a textile mill in Pawtucket based on equipment that Brown illicitly acquired from England.

John Jacob Astor is considered America's first multimillionaire, but a substantial part of the sources of his wealth was based on the fur trade—itself not illegal, but he used alcohol to [trade] illegally with Native Americans for furs. There are also plenty of accounts of American merchants making money in the opium trade to China, which had criminalized the trade of opium, even though other countries thought it was a legitimate business practice.

When did the US evolve from tacitly condoning the existence of black markets to becoming one of the world's primary enforcers against illicit trade and piracy?
One way to trace this is [from] when the United States was trying to catch up and join the ranks of the great powers—when it most aggressively engaged in intellectual property theft. [Eventually] the norms around illicit trade shift; a lot of the activities the US engaged in early on were to primarily avoid taxes. Later, there were bans on the trafficking of slaves, alcohol during Prohibition, and various drugs like opium, cocaine, and marijuana. As the illicit economy became more based on evading prohibitions rather than taxes, the United States was less overt in its formal engagement [with black markets].

Do you think it's fair to say that some of these newer black markets formed as a result of socially discriminatory policies?
The prohibition on certain drugs was driven in part by racism and socially discriminatory policies. [There was] the Chinese Exclusion Act, which banned the importation of Chinese workers in the late 19th century. At the same time, there was a growing anti-Chinese sentiment in the country—a backlash against Chinese workers—which coincided with America's banning of opium, facilitated by identifying the drug with certain non-white populations. Marijuana [was] associated with Mexicans, and cocaine [was] associated with African American jazz musicians in the early 20th century. There are lots of examples of social stigmatization of drug use closely tied to race.

Have black markets always served a role in allowing the disempowered to create economic and political leverage for themselves?
In some respects, they provide an alternative mode of survival and a coping strategy for millions of people around the world. For entrepreneurs, black markets can serve as an alternative mechanism of social mobility wherein otherwise marginalized peoples in society can enrich themselves and aspire to join the ranks of the superrich. Those cases aren't as common as people think, but overall the global illicit economy is a cushion-and-survival mechanism for a substantial percentage of the globe's population.

Is there anything that distinguishes the black markets we see today from those of the past, other than scale and technological complexity?
There's a lot more continuity than people realize, but I don't want to imply nothing has changed. To paraphrase Mark Twain, "History doesn't repeat itself, but it rhymes." We see striking parallels to the past, but that doesn't mean there aren't important technological and political changes. Globalization is often blamed for the underside of [trade] in recent years, but globalization started a lot earlier. The technological innovations that today are considered as greatly facilitating illicit activity—such as the internet or jet travel—aren't necessarily more important than the invention of the automobile, the telegraph, the railroad, or the radio. Over time, all these inventions greatly [aided] various illicit activities, as well as the policing of those activities. We often emphasize the way in which technological innovations facilitate law evasion, but historically they've facilitated law enforcement as well.

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