Academic journal article Harvard International Review

Market Power

Academic journal article Harvard International Review

Market Power

Article excerpt

Markets determine the price of your morning cup of coffee and the value of your retirement savings. In ways less obvious but no less real, markets also determine your prospects of being targeted by a terrorist attack. They trade in nuclear weapons, human beings, and body organs. Unlike the market for coffee, these entail illegal activity and operate underground. But they are markets nonetheless.


The globalized world is the site of unprecedented levels of market activity, but markets do not have a built-in moral compass. For capitalism's founding father Adam Smith, the system of free exchange, through an "invisible hand," maximizes the gains of all even when individuals act self-interestedly. But does the invisible hand lead to good when someone purchases nuclear weapons intending to use them on others? How can the market justify the buying and selling of humans and their organs? If it cannot, can the law and its enforcers push underground markets above ground or out of existence?

This issue's symposium, "Underground Markets," seeks to define what are underground markets, understand how they arise, and explore how these markets are tapped for sometimes innocuous but often nefarious purposes. Further, it asks how to curb illicit market activity that does not coincide with global norms.

Ending these markets, if desirable, would be difficult. In some developing countries, underground economic activity is estimated to comprise more than two-thirds of officially measured gross domestic product. Clamping down on underground transactions may require stifling legitimate trade and disrupting the daily lives of the world's poorest persons. Intervention in market activity also tends to bring unintended consequences. Attempts to restrict terrorist financing may slow legitimate financial transactions. Screening for nuclear weapons in harbors across the world dampers global trade. Will the free-market ethic permit restrictions intended to stop the underside of the global economy?

To address these difficult questions, we have gathered theoretical material to define underground markets and selected case studies that illuminate the powerful effect of illicit markets on their participants--and sometimes on innocent by-standers. …

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