Black Market

Black Market, term designating the illicit sale of commodities in violation of government rationing and price-fixing. The term originated in Europe during World War I, when the introduction of rationing in belligerent countries tempted some people with access to supplies to enrich themselves by selling unrestricted quantities of rationed items at inflated prices.

Black markets are phenomena of times of crisis or the result of government control of the economy (as in Communist countries). They flourish only when an abnormal scarcity of essential goods may cause a government to impose rationing and price controls as a means of ensuring a more equitable distribution of supplies. At such times certain consumers will pay abnormally high prices to obtain the scarce items, and some profiteers are prepared to take legal and other risks to obtain and sell these items at high prices. Black markets flourished throughout World War II but disappeared after the war as soon as the production of civilian goods returned to normal and government controls were lifted.

Illicit currency exchanges are also sometimes defined as black market operations. These black markets develop when the official exchange rate of a currency is fixed at a level that does not reflect its real exchange value. Such a situation is an incentive for holders of foreign currencies to engage in extralegal currency exchanges rather than to use the less profitable exchanges at official rates.