Q&A: Can governments drag the shadow economy into the light?

In the run up to our Summit on the Global Agenda, we asked you to put your questions to Jay Cziraky, from our Global Agenda Council on Illicit Trade & Organized Crime. Untaxed and unregulated: what are your questions about the state of the shadow economy, and government efforts to drag it into the light?

Questions from our Facebook followers:

Raymond von Tamiarello: If the government wished to stop the dark side, couldn’t they just stop the paper money, and make every single payment nominal?

Jay Cziraky: Wages, benefits and living standards can have a real and significant impact on the level of criminality in a community, country or region. It is important to focus on the social and economic inequities facing these communities and find links between their struggles and illicit behaviour.   More importantly, the people in power have to see how improvements to education, government and the economy can reverse this trend.

Angela Eglin:  As benefits, in many forms, are cut and wages are squeezed, how are people expected to live, except through criminality?

Jay Cziraky: Shadow economies provide a great number of challenges to the citizens, governments and businesses they affect.  Participants in these economies should not be abandoned, but encouraged to join the legitimate economy. By improving the economic standing of citizens, we can reduce illicit behavior and create a more stable society. Better understanding of the barriers between the dual economies is key to this transition.

 Questions from our Twitter followers:

@Vasco: Are our political elites in charge and creating solutions for the future or just executing third-party agendas?

Jay Cziraky: Reducing ‘cash’ transactions can make illicit transactions more challenging. However, criminal networks have many methods of overcoming and circumventing the system. Reducing illicit financial transactions requires greater transparency and participation from the support institutions that facilitate the alternative systems. Facilitation is often executed via poorly regulated banking sectors or governments, wealth management programmes and global barter/trade systems.

@Global_Renewal: How can all global development stakeholders collaborate more to end the Shadow Economy from draining needed development funds?

Jay Cziraky: One of our jobs at the World Economic Forum is to educate people about the role we can play in slowing the growth of the illicit economy. We will be launching an app called Should I Buy It, which is a relatively simple tool to allow customers to check the provenance of a product – this is one small step.

@Perspective24: I’m more worried about the shadow governments in controls of these economies. Let’s grab the problem by the root, eh?

Jay Cziraky: The shadow economy interacts with and affects almost everybody, including citizens, governments and businesses. The first thing we must do to reduce its power is to improve transparency. The second is make ordinary people more aware of how the illicit economy affects them and how they may be unknowingly participating in it. With regard to illegal drugs, we should be rigorously seeking out alternative methods for criminal reduction and enforcement, and programmes to reduce harm to society.

Author: Jay Cziraky is Member of the Board of Move One, and a member of the World Economic Forum’s Global Agenda Council on Illicit Trade & Organized Crime.

Image: A woman is seen walking inside a mall in Beijing REUTERS/Jason Lee.