Grey economy, second line of defence

There are three types of economy: White, black and grey. The last one is much more potent than the other two. The grey economy can facilitate a country to use it as second line of defence in case that country faces business warfare or geoeconomics pressure from outside. Let me give a bird’s eye view

Needless to say white economy is perfectly acceptable as it is legal, open and subject to regulation & control of the state. Whole transactions are recorded and thereafter reflected in the national accounts be it from private or public sectors.

Opposite to the white stands black economy which relates to a country's economic activity generated outside the purview of the state or contrary to the rules & regulations applicable to that activity. It can be legal in a sense but concurrently illegal in other ways. For example, horse racing is legal but batting cannot be regulated fully as punters would know how to make it without reporting to authorities. By the way, punting can be formal or informal. There is a variant such as trading in contraband that is totally illegal.

Grey economy is entirely different kind of creature. This relates to a country’s legal economic activity by the state or by the private sector that is not accounted for in official records. By extension the GDP of the country. The size of this grey economy could not exceed the sum total of the official figures declared as GDP. Yet, it could range as highest as 67% in the case of Azerbaijan and lowest as 10% in Japan. Quite a number of calling names are there for grey economy: ‘informal economy’ is where legal transactions take place without the oversight of the state.  ‘Under the table” is where illegal transactions occur unknown to outsiders.

Let me come to the topic of potency of grey economy. At any time the state together with the private sector may undertake grey economy operations where  the benefits accrued to the country as a whole is immense and help the country to fight back in any business warfare or geoeconomics offensive. Amidst the plethora of sanctions, financial and otherwise imposed on Russia, she goes steady like Johnny Walker because of the power of grey economy guesstimated as 40% of the Russian GDP.

On the contrary notion of western propaganda rubbing salt on Russia as failed economy, Russia is reportedly is in much more stronger & liquid position than America led West in international transactions in trade & finance.

Need you more to prove the power of grey economy? Look at Iran which is the second most sanctioned country in the globe. An estimated one third of the quantum of GDP being generated via grey economy Iran can mend and bend the ‘rule based international order’ in progression towards advanced military technology as well as in the civil supply of feeding her teeming population.

Both Russia & Iran have demoed how grey economics can be used as business warfare tool and as a counter to geoeconomics pressure tactics!

 

Cheers!

  

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist