Gray Markets Forever!

America's economic refugees find sanctuary in gray and black markets.

In November 1993, Contributing Editor Glenn Garvin introduced reason readers to Marta, an immigrant from Ocotlán, Mexico. Marta came to the United States legally in 1971 as the wife of an American citizen. But she quickly joined the "informal" economy of Los Angeles, the gray and black markets that help meet demand for cheap, off-the-books services of all kinds.

In "America's Economic Refugees," Garvin explained that Marta started work in a garment factory but, like so many immigrants before her, soon realized she would rather be in business for herself. She sold her jewelry and used the $50 she netted to buy her first batch of ingredients for tamales, a cornhusk-wrapped savory treat from home. Soon she was so busy she had to bring a niece from Mexico to help her keep up with the demand. 

Life in the gray market isn't all pork sausage and roses, though. "You have to watch out for the police," Marta told Garvin. "They don't always make trouble for us. But sometimes they do. One day I bought a $125 urn so that I could branch out a little bit, offer my customers a chocolate drink. I bought it on Friday. On Saturday the police took it. I was sad, but what can you do?"

Not much has changed. Today the Los Angeles Department of Public Health routinely confiscates the inventory and propane-powered mini-carts of unlicensed folks selling bacon-wrapped hot dogs or other taste treats deemed dangerous by the government. Cart owners who fail to dodge the authorities must pay a fine of up to $1,000 or serve up to six months in jail.

A 2011 report from the Institute for Justice, the Washington, D.C., libertarian law firm, found that of the nation's 50 major cities, 20 ban legitimate mobile vendors from setting up near their brick-and-mortar competitors, while 19 allow vendors to stay in one spot for only a short amount of time, leaving much of the vending arena to the unlicensed. The Los Angeles proposal under consideration when Garvin wrote his article was virtually identical to the restrictions in place today: To go legit, a vendor must procure nearly $1,000 worth of permits, plus a cart that costs between $1,000 and $2,000—figures that are out of reach for entrepreneurs like Marta.

Comments

[heller]

FIST!

[heller]

Ah good, I can still sneak into articles that aren't posted on the main page.

[jacob the barbarian]

and.like.it.matters?

[The Late P Brooks]

But food prep licensing is all that stands between us and lethal dysentery. Nobody ever got sick eating in a "real" restaurant.

[cw]

To go legit, a vendor must procure nearly $1,000 worth of permits, plus a cart that costs between $1,000 and $2,000?figures that are out of reach for entrepreneurs like Marta.

The Government: "We care so much about the little guy that we have to eliminate those evil, monocle-donning street vendors."

[RedDragon6009]

What next? Are they going to start harassing little girls with lemonade stands?

[cw]

No, our betters would never come to that!

[Whiterun Guard]

Oh come on now, no one would ever go after such a vaunted and harmless American tradition.

Especially not with completely dis-proportionate, heavy handed, insane measures.

[RedDragon6009]

Whew! I was worried for a minute there.

[jacob the barbarian]

That and they will never stop girl scouts from selling girl-scout cookies. The bastards.

[Marshall Gill]

Why are regulations and taxes on "street vendors" any different or worse than taxes and regulations on brick and mortar stores? I ask because there seem to be lots of articles bemoaning the injustice to one group and indifference to the other that actually suffers considerably more from the government boot. Street vendors feel oppressed? Just imagine having to compete with them when they have a much better chance of avoiding government imposed costs.

[cw]

I believe it's because the regs/taxes turn what should be legitimate street businesses into black market vending. Sure, they escape some government costs that way, but then they have to deal with others - namely, having to constantly fear the police and city inspectors. What should be perfectly fine to most people is turned into "crime" because the government says so.

[Marshall Gill]

Yes, but brick and mortar businesses suffer the same things. Are brick and mortar businesses somehow less legitimate? They will be completely put out of business as they are not able to move into the "gray" economy.

Doesn't government make things that a brick and mortar business would do into a crime also?

I think the whole thing is utter Nanny State bullshit. I just fail to see why one collective group (street vendors) is continually singled out when their competitors, brick and mortar businesses, suffer the same jackboot.

They might have to compete under the same conditions as non street vendors? How un-libertarian!

[Brett L]

I think the point is that the BM's DON'T have to undergo the same level of scrutiny. Although, in my particular state the department that regulates such things has gone to the effort of making one standard for retail food service regardless of mobility. They also seem to have done some outreach to localities about the same.

[Marshall Gill]

Which did your State regulate first? The BM's of course. If they made one standard it almost certainly was not raising BM's to the standards held to food trucks but the reverse.

They started regulating BM's and then sought to net those who were not under their power.

[robc]

The problem is applying standards to the street vendors that dont apply to the BM.

For example, no one stops a BM from opening next to another restuarant, but, for example, Chicago just banned food trucks within 200 ft of another restaurant.

My city has a number of silly regulations wrt food trucks, and they are actively trying to encourage them. And even so, that cant help themselves from putting silly laws on the books.

[mad libertarian guy]

I think the point is that the BM's DON'T have to undergo the same level of scrutiny.

Largely because BandM locations oftentimes have a heavy hand in forming those regulations.

Read the story from a few days ago about the kid who bought a hot dog stand in order to help his sick parents. He wasn't allowed to open his stand in the only location in his small town with foot traffic because of regulations designed specifically to protect the profits of BandM restaurants in the area.

[robc]

There have been plenty of articles on the jackboot on the BMs; neck too.

Foie Gras.
Menu requirements.
32 oz soft drinks.
etc etc.

[Whiterun Guard]

Standing up for the small/medium business crowd doesn't do anything for our monocle-wearing image.

[SIV]

I much prefer illegal, unlicensed vendors to those fucking food trucks.

[robc]

What about illegal, unlicensed food trucks?

[SIV]

Illegal food trucks are fine. Those aren't the food trucks Reason has been celebrating lately.

[The Late P Brooks]

Much of the oppressive regulation of street vendors and trucks is driven by those brick and mortar restauranteurs seeking to use government force to defend "their" turf.

Lie down with dogs, et c...

[Old Mexican]

"[...] On Saturday the police took it. I was sad, but what can you do?"

Not much has changed.[...]

Tyrannical government is still - tyrannical. What else is new?

By the way, the new look has at least one thing going for it - it LOADS faster.

[aelhues]

Having played soccer most of my life, I've bought mango from a fish tank, and taco's out of a cooler mounted to bicycle handlebars. I wouldn't say, that those purchases were in lieu of a purchase at a brick and mortar. Nor would I think that they are much of a threat to permanent restaurants.

Is it fair that there are some that sell untaxed and unregulated when others have to pay those taxes and suffer the regulations? No, of course not.

Are those saying that street vendors should be regulated and taxed, also saying that bake sales should be regulated and taxed?

Licensing, in my opinion, should be optional. It should be something that shows a customer that the state has tested and certified a business. It should be a thing of value to that business, not a burden.

[robc]

Licensing, in my opinion, should be optional. It should be something that shows a customer that the state has tested and certified a business.

State? It should be like UL or Kosher certification. No need to get the state involved at all.

[Joe R.]

It never ceases to amaze me that the real-world examples we have of voluntary certification fail to convince those who believe it could never work.

[aelhues]

Agreed, no need for the state. I was just working from the idea of reducing, but would prefer eliminating.

[R C Dean]

One day I bought a $125 urn so that I could branch out a little bit, offer my customers a chocolate drink. I bought it on Friday. On Saturday the police took it

They just . . . took it? Is that a legitimate enforcement activity? Why not tell her she can't use it in her business, and let her keep it?

Or, as I suspect, did the cops just think it would be a nice addition to the station house?

[Danno]

You have not read the big new cop biz is to confiscate items whether or not a crime was committed and then sell those items for money?

[The Late P Brooks]

did the cops just think it would be a nice addition to the station house?

INCONCEIVABLE!

[Danno]

If someone knows how to make tasty food, most likely he knows how to guard against sickening his customers. After all, he probably eats that food to. Secondly, why would a business want to sicken its customers? That sounds like a bad biz plan.

[guitargeek]

Because obviously every business is just a fly by night out to screw over the general public. Duh.

[tipuasher]

Thanks for this excellent review. I knew some of these but certainly not all of them.
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