Bribery, black markets and the Covid-19 crisis

Professor Robert Barrington takes a look at the role of bribery in black markets, what might be heading for the UK in the coming months – and which part of the government is in charge of the response. He concludes that like the pandemic, there is a simple message. Get ahead of the curve: start planning now.

What happens when you get a restricted supply of high-demand goods, low levels of transparency about sourcing and pricing, resentment against the government and an easing back of social norms?

No guesses needed: it’s the black market. Alongside that sits a high likelihood of bribe-paying. Bribes help the dealers to obtain goods that are restricted in supply, ensure the authorities turn a blind eye to the dealers’ sourcing and trading in the goods, and allow consumers to access goods and services that they can’t otherwise get hold of.

You don’t have to look far for examples of where the black economy is much larger than the official economy, and it always – yes, that is always – correlates with higher levels of corruption. We are used to seeing that in areas of the world (Somalia, Afghanistan, etc) that are considered fragile states, or elsewhere in times of crisis (Haiti, for example).

But now, the entire world is in crisis; and production and distribution are interrupted by illness, lockdowns and poor planning. Supermarket shelves are empty while wholesale warehouses are full of food that is in the wrong place and wrong packaging for retail distribution, as it was destined for catering outlets which have now closed. There have seldom been better conditions for the global black market.

Not in Britain, surely?
Well, as with so much in the current crisis, look back to the Second World War. The black market was a well-known by-product. Did it coincide with an increase in bribe-paying? I’ve been having a quick look, and my views here are based on a quick trawl through the UK’s excellent Mass Observation archive (conveniently housed at the University of Sussex) and Mark Roodhouse’s fascinating book Black Market Britain: 1939-1955.

The general picture is surprisingly reflective of modern-day corruption in the UK: little evidence of systemic and organised corruption, some high-profile individual cases, and a widespread public perception that corruption is more serious than the establishment admits. Roodhouse quotes a Sheffield housewife whose diary entry for 1948 forms part of the Mass Observation archive: ‘We all know bribery and corruption goes on all the time.’

There were two effects at the time:

1. Tight government control of the market. The government’s objective was fairness, to be achieved through a system of coupons and rationing. It was concerned that a black market would undermine the controls it was trying to place on the supply, designed to ensure that the goods went initially to priority areas (like fuel to farmers and doctors) and then were evenly distributed throughout society.

2. Public discontent at rich people gaming the system. There was a widespread perception that people who had more money were getting a better supply, reinforced by occasional high-profile cases like the prosecution of Ivor Novello. It follows that if you have a black market, those who can afford to pay more will get more. That’s actually how the free market works in normal circumstances – the difference with the wartime black market being that the government’s policy was equal allocation and access for everyone. The advantages of wealth can work in two ways: the prices set in the black market are only affordable for a few; or people start paying (and taking) bribes for goods and services in the official economy.

Is this pandemic really like the War?
How does this relate to today? In the current context, this perception of unfairness could represent the long-term danger for the government. Our last crisis – the 2008 financial crisis – has left an enduring a legacy of public opinion feeling the rich got richer, bankers were bailed out and got away with it, while the poor suffered austerity. The Johnson Government’s reputation would be undoubtedly damaged by a resurgent, ungovernable and blatantly unfair black market. We may not be far away from people paying a supermarket manager for privileged out-of-hours access or paying inflated prices to get special access to the wholesale warehouses whose stock is stranded by the shutdown of schools and pubs. We are perhaps a bit further away from bribing an NHS official to get your child into hospital, but it has become a plausible scenario. Already in the EU before the pandemic, 19% of citizens said they had paid a bribe in the past year to access healthcare.

Alongside the wartime black market – thought of at the time as people doing illegal things and making money – sat a larger ‘grey market’ of people doing small favours for each other which was illegal but considered acceptable (think Corporal Jones the butcher slipping some extra steak to Mrs Mainwaring). Roodhouse describes this as ‘petty evasions that lay in the middle ground between legal dealings that society considered morally acceptable and illegal dealings that it did not.’ During wartime itself, the black market had some important self-regulating features, as both consumers and traders were generally governed by notions of patriotism and fairness. Do these exist today?

Learning from our current black market
It is not inevitable, but what we can certainly say about the current Covid-19 emergency is that the conditions are emerging both for a black market and for a related increase in bribe-paying. Supply is likely to be restricted as the infections and lockdowns affect both production and distribution. A black market is therefore likely to emerge over the next few months.

It’s worthwhile remembering that the UK already has a black market in some clearly identifiable areas – human trafficking (linked both the illegal immigration and the sex industry), counterfeit tobacco products, and – most obviously – the narcotics trade. This can tell us something already: that the UK is no different from other countries in terms of its propensity for black markets. It has benefited from a well-functioning official economy that allows people to buy what they need, and so no black market has been required in many goods.

There is almost no research that I am aware of that looks at the scale and prevalence of bribery within the existing black market in the UK. However, the UK Government’s Anti-Corruption Strategy and Serious & Organised Crime assessment both acknowledge the existence of the problem, and that is a good start.

Elsewhere in the world, the black market sees a thriving trade in illicit and counterfeit drugs. This might be a perfect time for those who peddle them so successfully elsewhere to introduce them into a UK health market whose practitioners and regulators are overwhelmed by the pandemic and whose patients are getting a bit restive. There are already shortages of paracetamol in supermarkets. While you are in lockdown at home, why not buy some online from a respectable looking website, even if you have not used it before? It’s only a short step – one click – away from buying those heart pills you could not pick up due to the queue at the pharmacy.

Who is actually in charge?
Who should we expect to take an overview of the corruption risk related to an expanded black market – and coordinate a response? Er…we don’t know. The UK has no anti-corruption agency; it surely cannot be the Prime Minister’s Anti-Corruption Champion, a part-time role occupied by a backbench MP, however capable he may be. Is he part of Cobra planning? No. Does he have the resources to do a risk analysis? No. Has anyone in government actually even thought about the corruption risk related to the pandemic and the black market? In all honesty, it is very unlikely.

Of course, none of this may come to pass. The pandemic may be brought under control with minimal interruption to supplies (though pictures of empty supermarket shelves give a foretaste of how quickly things can change). The black market may not expand beyond its current niche of organised crime trading in specific goods. Counterfeit and illegal medicines may still be kept out of the UK. The Government can hope for the best, or assess the risks and put in place sensible mitigation plans. Like the pandemic, the message on managing the corruption risks is the same. Get ahead of the curve: start planning now.

3 thoughts on “Bribery, black markets and the Covid-19 crisis

  1. Pingback: What we’re reading on governance & conflict – COVID-19 edition, 27th March – The Politics of … Conflict & Governance

  2. You state that: Our last crisis – the 2008 financial crisis – has left an enduring legacy of public opinion feeling the rich got richer, bankers were bailed out and got away with it, while the poor suffered austerity.

    This is not simply an opinion or a feeling. There is overwhelming evidence that these are economic facts. Those facts are readily available to anyone who cares to look . Countless economists have published the evidence in books, academic journal articles, broadsheet articles and online.

    Some of those academics are actually employed by Sussex University. A small example of what happened is the so called help to buy scheme. This overwhelmingly resulted in raising house prices and was in effect a subsidy to house builders. The evidence also shows that most home buyers who received money under the scheme were people who could already afford to buy. Not a conspiracy theory, not an opinion, not a feeling but hard fact.

    As to the bankers – as I type this I am sitting beside bookcases whose shelves are literally full of books from the lead up to the 2008 crisis to the present day that detail bankers unpunished looting of economies around the world. Why don’t you start by reading Gillian Tett’s book Fool’s Gold? You could go on to consider RBS’s GRG scam. And let us not forget the enablers such as Gordon Brown’s bonfire of restrictions on bankers during his many years as chancellor of the exchequer. Again not opinion but hard empirically supported fact.

    Reply

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