5.6 The Underground Economy: A Survival Strategy for the Urban Poor
The Underground Economy: A Survival Strategy for the Urban Poor
What is an underground economy? And why would individuals and communities participate in one?
Venkatesh (2006) defines underground economies as “a widespread set of activities, usually scattered and not well integrated, through which people earn money that is not reported to the government and that, in some cases, may entail criminal behavior. In other words, the unreported income can derive from licit exchange, such as selling homemade food or mowing a neighbor’s lawn, and illicit practices, such as advertising sexual favors or selling secondhand guns without a permit [or selling illicit drugs].” These underground exchanges are governed by rules, or codes, to be followed and enforced, with likely consequences of actions.
For the majority of Americans, the existence of an underground economy in the U.S. may seem far-fetched. Further, it may seem unnecessary, even treasonous. But for many people living in concentrated poverty, the underground economy is a lifeline to grab when individuals, families and entire communities are in a social and economic freefall beyond the grasp of the mainstream social structures serving middle-class America.
When education systems in poor communities are lacking (largely due to policies designed to fund neighborhood schools through local property tax revenue); where much of the buildings and housing stock are either in disrepair or located in areas with high crime and/or unhealthy levels of environmental pollution driving down their value (and subsequently their tax-generating capacity and their ability to produce adequate funding streams to support strong schools); when education infrastructure and poor neighborhoods are impaired in these ways, full-time and living-wage employment becomes difficult to obtain for individuals living in communities with decades of economic disinvestment. With health insurance tied to full-time employment in the U.S., many people born into and living in poverty do not have access to mainstream healthcare, relying instead upon government programs such as Medicaid and CHIP (Children Health Insurance Program), or no healthcare at all. Recent data from 2020-2021 show, over 81 million people were enrolled in either Medicaid or CHIP (Centers for Medicare and Medicaid Services, 2021) along with 30 million people who were uninsured (U. S. Department of Health and Human Services, 2021), totaling 111 million people, or over ⅓ of the U.S. population (33.5%) either on government-sponsored healthcare, or uninsured. Further, consider the impacts of home lending practices, termed “redlining,” initiated by the Federal Housing Administration in the 1930s that actively segregated housing in cities and towns across the country by refusing to insure mortgages for properties located within and around African-American neighborhoods while denying mortgages altogether for people of color in predominantly white, middle-class communities (Rothstein, 2017).
Intersect these systemic socioeconomic factors with the stark incarceration disparities for drug crimes across racial-ethnic groups and one can begin to understand why an underground economy exists.
True Stories: In this passage from, “Off The Books: The Underground Economy of the Urban Poor” by Sudhir Venkatesh, we are shown the hard-truths of an underground economy.
Marlene Matteson was the person least likely to mourn the death of Johnnie “Big Cat” Williams, leader of the Maquis Park Kings, the local neighborhood gang. Marlene knew firsthand the destruction that gang activity could bring upon families. A mother of three, she was also a widower as a result of the gangland slaying of her own husband. “My husband died like [Big Cat] did,” she said, noting the similarities of Billy Matteson’s murder in 1992 and Big Cat’s fall on a cold, blustery morning in 2003. “Big Cat never knew what hit him. Just like my Billy. Came up on his back, shot him when he wasn’t looking. Probably didn’t feel nothing.” Both Billy Matteson and Big Cat were slain late at night, in the presence of their bodyguards, who were also injured. The killers were never found. Marlene Matteson accepted the news of Big Cat’s murder with a mixture of relief and apprehension. As the president of the 1700 South Maryland Avenue Block Club, she knew that gang activity created persistent safety problems in her area. She saw in Big Cat’s death a sign of difficult times ahead. Life was going to change, sharply and perhaps for the worse, in Maquis Park. She could no longer call on Big Cat to keep rank-and-file members out of parks in the afternoon, when kids came back from school. She could no longer wake him and demand that he put an end to the late-night carousing of younger gang members on her block. With little help from law enforcement, she wondered who would help her police the gang members who overtook public spaces with abandon and whose rhythms and inner clocks did not match those of the residents, like Marlene, who woke each morning to go to work or take children to school.
On that December 2003 morning, a week after Big Cat’s death, Marlene Matteson sat with her thoughts and with a dozen other residents of the community in the back room of the Maquis Park Prayer and Revival Center, a small storefront church on Indiana Avenue in Chicago’s historic Southside black community. She was not the only person in the room struggling to make sense of Big Cat’s death. The others in attendance were unlikely to express great sadness for a gang leader who peddled drugs and brought violence and instability to the neighborhood; but they, too, were touched by sadness, anger, and an uncertainty about what lay ahead.
“You know they’re going to be after each other now,” said Jeremiah Wilkins, a local pastor, referring to the inevitable internecine battles among local gang members to fill Big Cat’s void. “No one knows yet who’s taking [Big Cat’s] place.”
“Yeah, well, it ain’t gonna be pretty, but we been there before,” said Ola Sanders, the proprietor of Ola’s Hair Salon on 16th Street. “Someone’s going to be the leader, but it don’t matter who. We got to stay together. That’s what’s really important, okay?” “Look, whatever these brothers do, we can’t stop them,” chimed in James Arleander, a local handyman who for twenty years had been repairing cars off the books for local residents in the parking lot behind the church. “Let’s not pretend we’re sad or nothing. I mean the man was a killer! You all are acting like he’s your friend. Don’t make any sense to sit here crying. Man was a killer.” James’s voice trailed off. “I agree,” said Dr. J. T. Watkins, director of Paths Ahead, a small social service center that ran programs for Maquis Park’s youth. “Look, we got to go ahead. We all know why we’re here. I mean no offense, Pastor. We’re mourning, but we got to make our money. Do you all agree? Well, am I right or not?”
There was silence. The room was still except for Pastor Wilkins’s finger tapping the wooden table in time with the clock on the wall. For nearly five minutes, no one responded to Dr. Watkins’s question, in part because no one could justifiably dispute his contention—money was the chief reason for the group’s convening that morning. The livelihood of these community leaders was at stake. Yes, they were all concerned about the escalation in violence that was certain to result with Big Cat’s passing: other local gangs would be battling to control the Kings’ drug-trafficking territories in the neighborhood. They were all aware of the chaos that could come as a new hierarchy was chosen. But Big Cat’s death placed in sharp relief their own reliance on dangerous and illegal ways of making ends meet. They were forced to confront their own deep involvement in an outlaw economy.
Although some found it difficult to admit, everyone in the room that morning had benefited materially from Big Cat’s presence. Their motive could have been personal financial gain, political power, or a desire to do their own work more effectively, whether that be preaching or changing a tire. Big Cat not only helped Marlene to police younger gang members; he also gave money to her block club for kids’ parties, and members of his gang patrolled the neighborhood late at night because police presence was a rarity. Dr. Watkins and Pastor Wilkins would need to find a new source of philanthropy, now that Big Cat’s monthly donations to their respective organizations had ended. Big Cat’s gang ensured James Arleander a near monopoly on local off-the-books books car repair by intimidating other mechanics who tried to cut into James’s business. Ola probably would not receive $500 each weekend for letting the gang turn her salon into a thriving nightclub-the weekly “Maquis Park Dee-Jay” contest had been one of Big Cat’s favorite social activities. And others in the room that morning were no different: some received money from Big Cat, others benefited from the customers he sent their way-for everything from homemade meals to fake social security cards-and and still others were hoping to use Big Cat’s influence over two thousand young men and women to win electoral office or organize downtown protests. All of them allowed Big Cat’s gang to operate fluidly, whether that meant tolerating drug selling, presiding over funerals of deceased gang members, participating in citywide gang basketball tournaments, or “cleaning” the gang’s profits through their own businesses…
… Big Cat’s prominent position was the visible tip of the iceberg that is Maquis Park’s shadow economy. He represented a very small part of the innumerable financial exchanges that are not reported ported to the government. From off-the-books day care and domestic work to pimping and prostitution, unreported earnings wove together the social fabric in Maquis Park and surrounding poor neighborhoods. Big Cat was just one of many traders, brokers, hustlers, hawkers, and, of course, customers, who moved about in the streets, homes, and alleyways selling inexpensive labor and goods-or searching for them. He was certainly one of its most famous-and infamous-but he was just one of many who performed functions most Americans associate with the mainstream economy and the government agencies that regulate legitimate exchange. He was only one of many local stakeholders holders who resolved economic disputes because the state had no formal authority. Many other local people enforced contracts, or resolved disputes, or, for a fee, could find you a gun, a social security card, or even a job as a day laborer or a nanny for a wealthy family. Others may have claimed control over parks, alleyways, and street corners; these people would have to be paid if one wanted to fix a car, sell drugs, or panhandle at that spot. And there were many local loan sharks, besides Big Cat, who could loan you cash, or who could find you customers-for stolen stereos or drugs, for prostitutes or home-cooked lunches-in a matter of a few hours (Venkatesh, 2006).
Other Strategies for Responding to Drug Use and Misuse
Ending the “War on Drugs”
There are three videos below. The first two criticize current or past approaches to drug use and misuse strategies. As you watch the videos, consider whether you agree with the main point the speaker is making. Has the “War on Drugs” been a helpful strategy to stop drug use and misuse? Do you think punishing those addicted to drugs is the correct systemic response to drug misuse? Is there another approach that would be more beneficial to those suffering from drug addiction?
Decriminalization: The Unique Story of Portugal
In 2001, Portugal was suffering from record-breaking overdose deaths tied to illicit drug use and addiction.
Portugal is the only country that has decriminalized all drugs. Instead, in Portugal, the country put healthcare and treatment first, rather than criminalization and punishment.
