The Shadow Economy
- Youth4Truth
- Jul 11
- 2 min read
Updated: Aug 18
Where the money disappears.
What is the shadow economy?
The shadow economy (aka the ground/black economy) is every sale, every purchase, and every illegal movement of money that goes under the table, and off the radar of governments. It’s used in a LOT of nations by people who don’t want to pay taxes, launder money, or get illegal stuff. They're most common in developing countries, and form an insane part of the GDP of a country.
What kinds of things happen there?
And it doesn’t stop there. The shadow economy also includes dealing in illegal drugs, human trafficking, endangered species, human organs, and stolen goods. For example, trafficking endangered species in the Golden Triangle is a huge part of the shadow economy, but hardly anyone talks about it. Think tigers kept as pets in mafia backyards, bears transported overseas for entertainment, and pangolins sent to labs for medicinal parts.
Why do young people end up there?
Poverty and few opportunities push many young people to see the shadow economy as their only option. It seems like easy money, but it feeds on exploitation. Facing dead-end jobs and minimum wages, many of them start life in a dark hole. Some hustle to survive. Others end up as victims of human trafficking. All of it lives off corruption.
Why do governments stay quiet?
Because it contributes so much to GDP (especially in places like the Golden Triangle), it often keeps governments quiet. Also, weaker institutions enable it. It’s a sad truth, but a truth then again.
How big is it, really?
On average, the shadow economy makes up about 31.9% of a country’s GDP.
The nations with the three largest shadow economies are:
Zimbabwe (60.6%)
Bolivia (62.3%)
Georgia (64.9%)
The three smallest are:
Austria (8.9%)
United States (8.3%)
Switzerland (7.2%)
What if the biggest part of the economy is the one no one talks about?
Bibliography:
Investopedia. (n.d.). Underground economy. https://www.investopedia.com/terms/u/underground-economy.asp
Australian Government Treasury. (n.d.). Shadow economy. https://treasury.gov.au/policy-topics/economy/shadow-economy
Schneider, F. (2013). The shadow economy. Institute of Economic Affairs. https://iea.org.uk/wp-content/uploads/2016/07/IEA%20Shadow%20Economy%20web%20rev%207.6.13.pdf
Economics Explained. (2023, March 27). The shadow economy explained [Video]. YouTube. https://www.youtube.com/watch?v=iCbWS-rxIkw
World Wildlife Fund. (2018). Top 10 most wanted endangered species in the markets of the Golden Triangle. https://wwf.panda.org/es/?315491/Top-10-Most-Wanted-Endangered-Species-in-the-Markets-of-the-Golden-Triangle
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