Thursday, July 29, 2010

Is Illegal really Immoral? Is the Underground Economy really a Threat to Our Capitalist Economy?

Just getting back from a 5-day solo trip through Xi'an and Zhengzhou
to see the famous Terracotta Soldiers and Shaolin Temple, I am sitting
in my living room in Shanghai downloading a game on Three Kingdoms
(got a bit hooked when I was playing it in an Internet cafe in Xi'an)
while thinking about how lucky I was to get bus and train tickets off
scalpers that made my journey such a go-when-I-feel-like-it style that
is my only enjoyable way to travel.

At least here in China, the underground economy is everywhere. The
brothels fronting as foot massage, karaoke, and dance clubs that I
talked about in the last post, of course, are the most obvious
example, but probably the only thing in this country that cannot have
underground involvement is airplane tickets. Being known as the
"world's factory floor" gives you the advantage of generating not only
illegal services (brothels, taxis, scalping tickets, you name it, but
these exist not just in China but all developing countries, and to a
certain extent, developed ones) but also illegal manufactured goods
(cellphones, T-shirts, shoes, bags...the counterfeits are often just
as good as the real ones because the real ones and the fakes are
actually made in the same factories with the same equipments...oh, the
power of brand names...)

Western economists (and many Chinese ones) argue that China needs to
shift more to the services sector to develop in a more sustainable
way, but I really wonder whether the statistics they use can come even
close to estimating the size and value of the underground economies
here, both in the services and manufacturing sectors. "Companies" (of
course, not properly registered) often depends on a network of
underground factories, scalpers (often in the form of the most
innocent looking grandmas approaching you with a smile), and hawkers
(shouting out everything from "tour buses," "dance performances,"
"brand name goods"...yeah, I've been victims of all of these at some
point or the other during my travels in China) just for their survival
on razer-thin profits (or none, just cover salary and other costs to
get by)

But, "illegal" here does not conjure up that same sense of danger, of
extortion, of adrenaline rush (well, for some people who are too
sheltered in everyday life) out in the West. In fact, "illegal"
services can and are often better than the legal ones in all possible
ways to gain more customers. Cellphone is the perfect example. The
fake copycats often packs in more memory, more functions, and more
style than the originals that they copied, and are often able to
generate trends of using illegally made yet stylish cellphones that
carried the "cellphone companies" much beyond simply copying brand
name cellphones.

And of course, for the much much cheaper pricing that the copycats
offer, people are willing to take a risk (although you do hear of
exploding cellphones once in a while...) with illegal services and
goods. If the services are not too bad (I remember getting dropped
off at the side of a 8-lane freeway once, but I probably would still
take illegal buses in the future) and the goods are not too shoddily
made (cellphones that don't explode are good enough, I suppose...well,
increased cancer risks should be considered too, i suppose) people are
willing to go for the illegal stuff again in the future...why? As they
say in economics, this is classic market segmentation. When the price
of the legal stuff can only be so low, something need to be created to
capture the market below that.

So, it seems that illegal provision of certain goods and services can
be considered part of the bigger economy, here in China and many other
places...(of course, I am not saying the illegal ones are all safe,
after all, if bad things happen, "the companies" can just
disappear...the problem of their not being registered) but what about
in the case where money is circulated but no goods or services are
provided? I am talking about begging...which in China is (and have
always been) quite a normal and ever-present phenomenon. In fact,
reading martial arts novels, the so-called "gang of beggars" was often
one of the biggest NGOs (to use a modern world) throughout history.
It takes care of the poor and attacks the rich (besides just
begging...which explains why they know martial arts).

The modern beggars are not quite as elaborate and sophisticatedly
organized as the ones in the martial arts novels, but small gangs of
them still do exist (or rumored to exist). The gang leaders teach
young ones skills in begging (look poor, appear sick to gain sympathy,
making up stories, etc) in turn for cuts in their proceeds and (maybe)
"fair" distribution of all incomes among members by skills and
seniority. Some are said to kidnap young children, break their legs
(disabled kids get a lot of money), and put them on the streets of a
city far from their hometowns so that their parents can never find
them again...

Just as when you realize that the illegal services/goods you buy are
not anywhere close to what you desired (if they work at all...like the
game I just downloaded, missing files...took me an hour but I got
nothing), handing money to the beggars is probably as close as you are
going to get with getting nothing in return by paying cash...yeah,
some get a temporary peace of the mind or the feeling of having helped
the unfortunate (really temporary...I know that feeling well...you
start doubting yourself about fifteen seconds after giving away the
money). In fact, I once gave money (about 10 bucks...my big give ever
to a beggar) to a cute Chinese girl (late teens, looked like) who was
crying in front of a subway station because she lost her wallet and
can't get home...and decided to observe her for a while after giving
money (from a safe distance), and she simply continued to be there
even though I gave her much more than she needed....its sad to see
that girls like her can go so low as to use their good looks to get
money like that...

ok, I am feeling some stomach pain from drinking a bottle of fake
tea...looks like the underground economy hurt me once again...

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