"We call it the White Economy," said Big Al. If you are not familiar with him, Big Al is the hardy, football-player-sized, working-class, Yorkshire character in Alan Plater's 1984 comedy/mystery, The Beiderbecke Affair. I like the phrase "White Economy" so much I wish I had coined it, but I didn't. Let's give credit where credit is due and shake Alan Plater's hand and do our best to bring it into general circulation. After all, its about time to give a less pejorative name to private initiative, entrepreneurial energy and a pure market economy than Black Market.
Big Al has such an eminently sensible, down-to-earth view on life that you wish he lived next door to you, was your uncle or at the very least was running the Federal Reserve or the IMF. He was made redundant (laid off) from what we can only suppose was one of those heavy labor manufacturing or building jobs that had been the backbone of the industrial north of England for decades. Although he looks the part of a construction worker or steel mill operator, he doesn't talk the part. We don't hear anything about unions or unemployment benefits or capitalistic pigs or greedy owners in their poncey suits. Big Al is one of a dying breed of men who take care of themselves.
Not content to sit around and lick his wounds or blame others, resourceful Big Al starts his own business, a private, door-to-door catalog sales organization made up of the good deals that individual people get through their own friends and coworkers, a sort of eBay without the Internet. He stores the goods in the basement of his parish church. Big Al can sell his goods for less because he has minimal overhead, pays no sales (VAT) taxes, no payroll taxes, unemployment insurance taxes, has no licenses, permits or other scraps of useless paper that the government requires before someone can use his own energy, ideas and initiative to run a business – hence the White Economy. "It was those same people in Whitehall that made me redundant. The system told me I was of no further value to society. This is me saying bullocks."
Big Al created a market that is doing exactly what a market should do: bring goods that people want to buy to the people who want to buy them. What makes it a White Economy is that it is not doing what a market should not be doing: being involved in social engineering, reforming human character, funding idle bureaucrats, supporting other's good causes, providing welfare for people who don't work, protecting favored industries, giving benefits to certain groups, enforcing quotas, employing inefficient workers or any of the other duties that have been piled on the wagons which bring goods to market for sale.
Economics 101 tells us about the irrefutable Law of Demand. It is quite simple really: the more something costs, the less we buy of it. When the real price of something is drowned under the added costs of government and its plans, we buy less. Government spokesmen assure as that we are getting a lot for our money – essential services like police, firemen, schools and things like that. They don't mention the hundreds of thousands of other useless, frivolous expenditures, the waste, fraud, patronage and vote buying that goes on with the largess that is extracted from people who buy and sell things by people who have not earned that money.
A great deal of harm is done to the economy by the government actions which increase the price of a good without increasing its value. Oscar Wilde said it almost correctly when he quipped, "Americans know the price of everything and the value of nothing." It would have been completely correct if he had attributed this particular ignorance to bureaucrats instead.
Economists measure the harm done to markets by comparing the decreased amount of goods sold as the price is raised through the visible and invisible taxes and other government costs, to the amount that sells at the "real" un-governmentized price. As bad as that is, there is more bad news. The government doesn't even get all the benefit it extracts from the market. This loss of market activity costs more, often much more, than the gain of benefit to the government. This difference is called, appropriately enough, Deadweight Loss. A market contaminated by government costs is the real "Black Market" because so much of its profits disappear down a big government deadweight black hole.
For example, a dollar collected by the government could cost the market $1.30 in lost transactions. That 30 cents is the extra cost for the dollar, except we get nothing for it. You might as well go down to City Hall and give them $1.30 and take only a dollar in change, before you give them that dollar in taxes. When we add up all the deadweight losses from all the taxes, fees, licenses and other non-productive costs, it is no wonder that the market crawls instead of sprints. Have you ever tried running to the goal line with a 60-pound pack of bricks on your back and a concrete ball chained to your ankle? You think not? If you own a business, work in a business or buy from a business, you are doing the equivalent every day.
Big Al formed his own White Economy in 1984. Do you remember how things were 19 years ago in that George Orwell year? That was the time when personal computers were rare, the Internet was barely a gleam in its founders' eyes and we all wish we had been buying Microsoft and Intel stock. How prescient Big Al was with his small enterprise flying under the government tax radar screen. From that humble beginning, we now have our own enormous, supercharged, turbo White Economy. All of this market activity has such a significant economic impact precisely because it can operate as a White Economy. No more do sellers and buyers, not wishing to pay such exorbitant costs added to goods for the non-productive activities of non-producing people, have to know that secret friend of a friend of a friend or sneak behind warehouses in the dead of night to buy tax-free cigarettes or watches or cameras or shoes or any other goods. Each of us can simply log on to any one of millions of web sites and buy just about anything we want, mostly tax free, and from businesses, many of which are license free and located in areas where the other involuntarily added costs are minimal.
Bureaucrats, long accustomed to the easy pickings of the captive audience of businesses, are squealing. Maybe it is their turn to know what it feels like to be made redundant. "Tax the Internet" is their clarion call and the topic of many meetings in every jurisdiction across the country, and even the world. They just haven't found a way to do it yet, but I suspect in their heart of hearts they are beginning to realize what the rest of us have known for a long time now; the White Economy is here to stay and won't be as easy to plunder as market activity has been before.
I recall a story told by Joseph Ricketts, the founder of Ameritrade, the innovative company that revolutionized on-line stock trading. It was not long after its arrival on the scene that its phenomenal success and prosperity came to the attention of Mr. Rickett's state's legislators. I can just imagine them pouring over the company's prospectus with visions of sugarplums dancing in their heads. A bill was introduced proposing some type of new business tax that, although it did not mention Ameritrade by name, was aimed at them specifically. Joseph reminds me a lot of Big Al and did what he probably would have done. He picked up the phone and called his state senator, casual-like, for a chat. He mentioned that being an on-line company, he could pick up and move his entire operation to another state for much less than the proposed tax would cost him each year, and he would not hesitate to do it. The bill suddenly disappeared. This is only one small aspect of the White Economy's power to resist attempts at plunder.
Big Al had read an article in a financial newspaper that warned (in typical Chicken Little fashion) that "all of this sort of thing was undermining the Whitehall economy and could bring the whole of civilization toppling to its knees." Big Al's reply was not so prescient, "I don't see that, personally. It is not going to happen just because me and Little Norm are selling hedge cutters." Yet, that is exactly what it is doing – to the "Whitehall civilization"!
There are many wonderful scenes in The Beiderbecke Affair about free enterprise, privacy, government intervention, personal initiative, crooked police, city counsel members on the take and other surprisingly timely issues of freedom. If you haven't joined the White Economy already, buying this film through an Internet company that sells video products would be the most tantalizingly appropriate way to join in.
January 23, 2003
Linda Johnston, MD, DHt (send her mail), a graduate of the University of Washington School of Medicine and certified in Homeopathy by the American Board of Homeotherapeutics, is in private practice in Los Angeles. She is the author of Everyday Miracles: Homeopathy in Action.
