The Rules of Surviving a Black Market Economy
by Fabian Ommar
Author of The Ultimate Survival Gear Handbook
In almost every prepping and survival forum, you will find discussions on bartering in great lengths and details. However, the surge of a black market economy will come long before bartering becomes a thing in most SHTFs. Every prepper seems to have their ideas and pre-planned strategies for bartering when the SHTF. But I don’t see the black market discussed that much, even though it’s a lot more common and even likely in all but the most extreme SHTF scenarios.
Selco narrates many of his bartering events during the Balkans conflict and provides valuable advice on making safer transactions in fully collapsed places. Many books about everyday life during wartime, especially WW2, which was a global event with widespread repercussions, also provide real-life insights into the workings of black markets.
I haven’t been through a quasi-Mad Max SHTF like Selco, or even a serious and long-lasting one like Jose (who I’m sure can also provide great insights on these topics). But I can share a thing or two about slow-burning SHTFs, and informal economies of exchange tend to thrive in those situations too.
Black markets exist in most places, even during normal times.
Below is Investopedia’s definition of the black market:
A black market is any market where the exchange of goods and services takes place in order to facilitate the transaction of illegal goods or to avoid government oversight and taxes, or both. [source]
Anyway, that’s how people get access to prohibited or heavily regulated goods. It can be anything from guns and ammo, unapproved medications, currency, and unfortunately, also drugs, products of criminal activity, wild or exotic animals and birds, exploited children, and other atrocities. Black markets, in general, are a lot less profitable and thus a lot smaller in countries and places with stronger, more vibrant, and exceptionally less regulated economies. Why would someone risk the black market if they can get access to something in the regular economy?
But where there’s demand, there will be supply.
Still, there will always be something people want that’s prohibited or regulated. Therefore, people and the market find a way. The black market is an escape valve, a way to circumvent restrictions and regulations.
And shortages and limitations become quite common during SHTFs. Even ones in which there’s still some institutional order in place. And this concerns us as preppers and survivalists.
When people want something or need something, someone will find ways to provide. It’s possible to suppress and highly regulate a market but not to kill it. If life goes on, so does trading.
“Market reserve”: when governments interfere with the economy and things don’t go according to plan.
Before we dive in, here is a short story to show how things are connected. During the 1980s, when computer technology started to take on the world, Brazil remained closed to international trading.
Importing was heavily regulated and taxed, absurdly bureaucratic, and expensive. At the time, the military administration thought that keeping the market closed to make the local industry independent and developing was a good strategy.
Governments think that “market reserves” work, but control policies only hurt the people.
It’s stupid and counterproductive. Companies stay in the Stone Age because there’s no incentive to compete. Protection and safety are illusions, and only competition and the free market can provide actual progress and wealth distribution. (Keep that in mind as these concepts are vanishing in the current insane world).
Anyway, it failed, and we fell behind in the technological revolution that brought significant advancements and wealth and modernized so many first-world nations. Only in 1991 the “market reserve” was extinct, and we started having access to PCs and other stuff.
Enter the black market economy
I tell that story because the black market for computers, electronics, and the like thrived in Brazil during this period. It supplied consumers and industries, and other businesses that felt they couldn’t stay on the sidelines and did what was needed to stay alive.
And it wasn’t just tech stuff: the “market reserve” was applied to most other consumer goods too, from cars to food, games, clothing, almost everything. People resorted to the black market to have access to stuff that was prohibited.
I’m not advocating the black market or celebrating its eventual advantages. I am telling a real story of how things work whenever there’s a distortion in the economy, whether caused by stupid policies, cycles, or even natural events. Because that’s how it is.
Black markets are common even during normal times.
I have many other stories from Brazil about black markets. The informal economy is big here. Many cities here have unregulated markets that sell all kinds of unregulated and illegal products in broad daylight. For instance, stolen smartphones and counterfeit fashion items from famous brands are hot items.
There’s a different black market in places like the favelas and outskirts of Rio de Janeiro and other cities. The violent militias that dominate these areas work as “providers” of utilities (electricity, cable TV), gas, and water to the population. It’s something more akin to the mafia, but it’s as unofficial, unregulated, and as “black” as it gets. No one can source any of that stuff from the official providers or other suppliers (who aren’t even allowed to exist, really). Or else.
There’s been a resurgence in black and bartering markets.
Argentina is once again in a deep economic crisis, and the population has a long experience in the black market (and even bartering). It’s back big time there.
After the recent Zuma riots, South Africa also saw a rise in the black market due to the looting, destruction, and economic collapse it is causing (unemployment exploded to 34% of the population, and SHTF ensues).
The black market is a staple of the Cuban economy and any other “closed” economies. It’s also growing in Lebanon and other places where the currency is collapsing. While, it’s still early, be on the lookout for the black market to flourish in the U.K. and other developed countries suffering from shortages and slowing economies.
My direct experience
As I said, though not exactly in a fully collapsed scenario, I took bartering as an exercise. I describe how I got food and goods in exchange for services in my street survival training book. I’ve also scavenged, and I still do those things occasionally as part of my urban training.
Anyway, after some time, I started frequenting (and even trying a hand) in places where the trading is less regulated. I mean, a lot less. I went to different black markets to see how it works. It’s a very nuanced and complex thing. However, I’ll try to provide some insight for those not familiar with it. As I said many times before in my articles here at The Organic Prepper and in my books, the partial collapse of the system is the kind of SHTF I believe is the most likely to happen, at least in the short and midterms. So this is what I try my best to prepare for.
The black market economy will come before bartering.
Whatever happens – shortages, disruptions, inflation or deflation, market crashes, currency collapses – people will still need stuff, and black markets will be the way for many. As the crisis worsens and prolongs, many formal businesses will also become a shadow economy for survival.
With all its disadvantages (I’ll list some below), it’s still a good deal safer than direct bartering in a broken-down society. That said, I still think it’s crucial to heed Selco, Jose, and others on bartering during full-on SHTF. I do, and if things come to that point, well, I’ll have to find my way around it.
But getting more familiar with the black market is a step in that direction, especially for folks living in highly advanced, civilized nations, more used to regular and stable economies where you can easily find everything in the official market.
How black markets are supplied.
Crime has a close relationship with black markets. It is, after all, an illegal activity. There are levels, but it’s important to keep in mind that it’s essentially an outlaw environment in general.
Still, not all black markets revolve around a criminal activity or even violent criminal activity (though usually various illegal activities are interlinked). Anyway, to better understand this universe, here’s a glimpse of the most common ways black markets are supplied.
Smuggling is very common and perhaps the main form of supplying illegal markets anywhere. I’ve personally seen prohibited stuff being sold even in highly civilized and orderly (and unsuspected) countries. Even those places have prohibitions and humans – who just happen to love forbidden stuff. (For example, a locally restricted caliber or firearm, a fruit or vegetable, special tobacco (like Cuban “puros”), seeds, spices or herbs regulated by some agricultural rule or something, items from some embargoed countries, whatever.)
Counterfeiting is also huge. Fake art is one of the biggest commerces globally, and it all happens in the black markets (for the most part, at least). The actual statistic exists somewhere, but I’d hazard a guess that clothing and fashion items come second (discounting drug trafficking, of course). We find counterfeit stuff in the streets of any city in any country. No exceptions.
Scavenging and Second-Hand
In scavenging markets, we find the true meaning of “one man’s trash is another man’s treasure.” I’ve been there and done that because I wanted to have a glimpse (without getting involved with crime, of course). Scavenging markets in my city are smaller, usually a section of bigger black markets. They are larger and more common in underdeveloped, collapsed economies where new things are unattainable luxuries to 99% of the population.
Together with scavenging, second-hand is perhaps the least illegal form of supplying a black market. Many places even regulate second-hand. Second hand, refurbished, recovered goods become widespread during downturns.
Official manufacturers and merchandise deviation
Brands also supply black markets everywhere. They do this for many reasons (tax evasion, dumping, etc.) and through many channels (legal or illegal), representatives, etc. As I said, the black market is an escape valve. Not only the criminals take advantage of it.
I’ll illustrate this with another real story: Late in the 90’s I worked at the construction of one of the major smartphone manufacturing plants here. When the plant was just starting to function, a group armed with semi-autos broke in with trucks and stole millions in phones, chargers, and batteries. Shortly after, these products started trickling into the market. There was a rumor it was planned and ordered by the company. There’s no way to tell if it was true or not, but what really matters is that these things do happen: merchandise deviation is huge everywhere, also for tax evasion and other illicit finalities.
Black markets aren’t regulated, but that doesn’t mean they don’t have rules.
It’s important to understand about SHTF that there’s no such thing as a total absence of rules or power. That’s anarchy, a no-mans-land, and life’s not even possible in such regimes or environments unless we’re back to the population density of the Paleolithic.
There’s no vacuum in the universe. As soon as something disappears, something else takes its place. Look at what just happened in Afghanistan. Someone always rises to the top and takes the helms.
The same applies to the black market. Some basic rules allow the shadow system to work: sellers, buyers, suppliers, and everyone else must abide by. Or else. And be sure that there will be some instance present and overseeing to make sure of that.
These rules may vary.
These rules may vary according to the context, place, type of market, and some other factors.
That’s why it’s hard for me to make much comment on this specific part. I know some people like to be taken by hand and babied through every detail. Those may feel disappointed, but the most I can do is provide some tips on a general approach.
The first thing I’d advise is to do your own research. My research taught me about the ways of the local black market. And I’ll be the first to admit there’s still a lot to learn. I don’t pretend to be an expert on the topic (that’s not the idea anyway).
Second, we must change our thinking, conditioned by years (or decades) of dealing in the “normal” market. But even though there are some basic rules, it’s a very different setting, with very different people. Many are criminals, most are ruthless, and there are all sorts of scams, schemes, tricks, swindles one can imagine.
Basic rules for the black market
You don’t come back to complain: That’s not a deadly sin, but a misstep or mistake can cost dearly. Karen would have a really tough time screaming for the manager in the black market economy.
Customer service varies wildly: Everyone is there to do business. But sellers and buyers are very, very efficient at evaluating people. They’re very wary of everyone and must be aware of everything: competitors, scammers, undercover agents. That means dealers are also good at evaluating customers. Beginners and unaware buyers can get easily swindled.
Bargaining and negotiating is OK: It’s expected even. Refer to the above, and remember there’s no fixed pricing policy. Competition exists, but dealing illegal stuff, for the most part, or goods that have no price reference (which is the case with second-hand/used or scavenged stuff).
Keep an eye on the merchandise you’re purchasing at all times: There are so many ways of being scammed that I wouldn’t be able to cover a third of it in an article entirely devoted to it (even if I knew half of it). So this is just a general pointing towards how you should act in general when dealing in the black market. Also, be aware of everyone and everything going around you.
Other risks of the black market economy
Some risks are immediate, i.e., the dealing moment. But there are other risks involved with trading in the black market, some even to our safety Situational awareness is vital in physical markets. Special skills are also necessary when dealing with the virtual black market, where it’s perhaps even easier to get scammed.
Live transactions revolve around cash. However, there are exceptions. Virtual black markets exist too, and the virtual universe is vast. I won’t go there because it may seem that I’m providing guidance on how to deal in the black markets. I’m just trying to show how it works with a perspective in prepping and survival.
Unrecorded transactions: This is, in essence, what defines the black market. Some purchases will provide a receipt, or proof of purchase, depending on the market, the vendor, and other things. The shadier and “blacker” the market, the less those things are to be expected (of course). Either way, none of that is in any way “official,” and attempts to claim anything (replacements, warranties, refunds, etc.) will not only not happen but may ensue retaliation.
Don’t be a fool and naïve: If any black market transaction is brought to the formal justice, you will be charged by the system yourself – and most likely not get anything resolved in the way of your complaint. That may seem obvious but judging from some stuff I’ve seen, it’s not. If the situation gets to this point and you’re in the black market, know who you’re dealing with and act accordingly.
There’s a lot more that I could write about black markets. Either way, none of this is to be taken as a promotion of the informal economy in any way. It’s just one of those things that exist and will exist regardless. We’re imperfect humans living in a flawed system, plain and simple. We must be aware and perhaps do our best to learn about it if things go the undesired way in our corner of the land.
What do you know about the black market? Is there an underground economy in your area? Have you considered this in your preparedness plans? Share your thoughts in the comments.
Fabian Ommar is a 50-year-old middle-class worker living in São Paulo, Brazil. Far from being the super-tactical or highly trained military survivor type, he is the average joe who since his youth has been involved with self-reliance and outdoor activities and the practical side of balancing life between a big city and rural/wilderness settings. Since the 2008 world economic crisis, he has been training and helping others in his area to become better prepared for the “constant, slow-burning SHTF” of living in a 3rd world country.
Fabian’s ebook, Street Survivalism: A Practical Training Guide To Life In The City, is a practical training method for common city dwellers based on the lifestyle of the homeless (real-life survivors) to be more psychologically, mentally, and physically prepared to deal with the harsh reality of the streets during normal or difficult times.
You can follow Fabian on Instagram @stoicsurvivor