quinta-feira, 7 de outubro de 2010

The black economy effect in an economic crisis

A few days ago I was in the esplanade of a cultural club, a kind of local “cheers”, talking with some persons about the “Legalized prostitution Yes or No1 and the related question of the consequence incomes for State budget with the taxation of the prostitution activity and the subsequent receipt obligation for the services paid, when a person near us started criticising the existence and growth of the black economy, that if he pays all his legally obligates why should others get unpunished by avoiding their fiscal obligations?

He is right; the black economy is a fraud on the national wealth and must be fight by the State and by all of us. However in moments of higher unemployment rate and specially when this unemployment is characterised for being a long-term unemployment the black economy acts as a “lifeboat” to those persons who black economy is the only option to earn some money. This reality is even more true when the country lives a serious economic crisis and even more when the State has a public financial crisis and has no capability to sustain social policies that allows the unemployed to subsist until they find a job.

But it's not just the social questions that should be considerated there is the economical ones too. In moments of economical crisis the private consume is a critical factor because in a global economical crisis exportations generally aren’t an available market with dimension to sustain the economical activity needed to stimulate the necessary economic growth. Therefore the reduction of the private consume will lead to the increase of the crisis because companies will experience a decrease of their operational cash flow and that will cause more unemployment and an escalate of the economical crisis. The black economy in such moments is good for the economy if controlled just to the necessary level for maintain the consume capability of the unemployed. It is like the oil on the engine, without it the engine will block. Without some black economy on these moments the economical activity will decline even more and the social agitation on the streets would be a reality with all the political and economical effects that are known on those periods.

1See: http://portugal-mordaz.blogspot.com/2010/09/legalized-prostitution-yes-or-no.html

1 comentário:

João Soares disse...

Estimado João Carlos Isca
Eu é que agradeço a sua adesão ao BioTerra.
Admirável o seu blogue e o que escreve.
Tenho que voltar cá mais vezes.
Um abraço