This Part describes the operation of underground economies in a centrally planned socialist state, the former Soviet Union, and in a Third World developing nation, Peru.
The underground economies have had similar effects in the Soviet and Peruvian societies, in that both clearly increased the wealth of those societies.
The contributions of these underground economies to society, however, are not merely financial.
Generally, underground economies provide comparatively greater opportunities for women and other groups traditionally subject to discrimination.
We have identified the principal contributions of underground economies to the societies within which they operate as wealth creation, superior resource allocation, and an increase in economic opportunities for the poor and other victims of discrimination.
In societies of this nature, it is not surprising that large underground economies arise.
As a consequence, except for those imaginary societies whose political systems are perfectly responsive to citizens' desires, we can expect to observe underground economies universally.
For these reasons, it should not be surprising to discover the existence of underground economies even in societies with political organizations that differ substantially from the totalitarian or plutocratic states reviewed above.
Finally, the underground economies provide substantial evidence of the success of the market in contrast to politics, in terms of promoting what might be called the Rawlsian value of protecting those least advantaged in society.(97) The examples of the Soviet Union and Peru show that underground economies provide a mechanism for those without political influence to help themselves and, at the same time, to contribute to society by providing goods and services of benefit to others.
In contrast, elements of underground economies that have no positive effect on the deadweight loss from political policies cannot be morally defended.
Those who condemn underground economies seem to presuppose that all government money is spent on true public goods.