Black Markets

Black markets are common in wartime, and reportedly there is a thriving one in Iraq right now. Whatever you want, you can buy--if you have the money for it. There are more antibiotics on sale in Baghdad's illegal markets than available in its hospitals, according to some reports.

General George Washington tried to repress a black market in food at Valley Forge; that was one of the main reasons why American Revolutionary soldiers wintering there were in danger of starvation; these kinds of markets arise to fulfill a need that the legal market cannot, or will not meet.

Reportedly, some of the most important items on the current black markets in Iraq are guns and ammunition of all types. Without the ammunition and explosives, the sectarian civil war might whimper to a halt.

General Khadim, who is suspected of links to Shia militias, was accused of selling off fuel and weapons on the black market in Baghdad, said Lieutenant-Colonel James Teeples, who advised the Iraqi Army in Fallujah. “He likes to take pay from his soldiers,” Colonel Teeples said. “He sells weapons on the black markets in Baghdad. He steals gasoline the coalition provides for the brigade.” How ghost soldiers are bleeding the Iraqi army of guns and money, American Security Foundation

According to Teeples, General Khadim is not an exception.

This is why the administration's claims that Iran is supplying the insurgents with arms may be disingenuous, even if the arms are captured and have all the right serial numbers and are of recent manufacture. It would be difficult to determine the route of sales in black markets, because they are illegal, but any numbers of different entities are probably involved in the cross-border and within-borders traffic of guns, ammunition and other scarce goods, such as gasoline, including Iranian groups. Why? Political or military motives may be only one factor; it may not even be the most important one. Black markets thrive because trade in forbidden or rationed goods provides high profits--if the sellers are willing to face high risks.

That's how black markets in illegal drugs work as well. High prices induce suppliers to overcome high risks and high costs, which is why the "war on drugs" has been so ludicrously ineffective. By interdicting a small portion of the total volume of sales, by rounding up small-time sellers here and there, the government is keeping supplies artificially low, and therefore prices artificially high. High prices draw more suppliers to the market.

The only way to work with the logic of the market when dealing with black market transactions is either: to reduce demand for it, thereby cutting its price and the incentives of dealers to evade the law, or to legalize the good or service, which would also cut its price and remove the incentives for selling it on the black markets.

But, with a civil war on in Iraq, there is no way to eliminate the very high incentives for black-marketeering in anything that can be used in the war--not even attacking one of the countries from which the weapons come, like Iran, or Syria (or Jordan, or Saudi Arabia). In fact, it is probable that the most effective way to reduce the availability of weapons to insurgents or militants, is for the US and its allies to withdraw, since they are probably the most abundant source of weaponry.

To really put a stop to the civil war, the US (or better, the UN) should place an arms embargo on Iraq, both for private sales and also on "security aid" to the Iraqi government--at least until the latter can guarantee effective control of its army and security forces. US and coalition forces might have a new role; enforcing the embargo from Iraq's borders.

Short of an arms embargo, the US and its allies should simply withdraw, leave no weapons or ammunition--and let the Iraqis sort out their differences among themselves. Without the constant supply of weapons and ammunition, it is even possible that the violence would diminish instead of escalating, as the administration and pro-war forces suggest.