The underground economy, in Spain.  From The Denver Post, Tax dodgers multiply as underground economy cushions job cuts

The production of goods and services that are lawful, though not declared, may grow the most as a proportion of total output since 2000, according to Friedrich Schneider, a professor at Austria’s Johannes Kepler University of Linz.

The shift, measured by tax analysts and economists using surveys, money-supply data and anecdotal evidence, is caused by businesses going off the books to cut costs and workers taking informal jobs to survive rising unemployment. It offers a buffer against the ravages of the crisis and may help explain why the slowdown hasn’t prompted more social unrest.

It’s not the black market:

Schneider defines the underground economy as “the legal production of goods and services, but withholding tax and social security payments.” It encompasses informal work on building sites for cash, and small textile and shoe workshops that trade off the books, while excluding crime.

Survival without government “help”:

Spain has the highest unemployment rate in the European Union, at 15 percent. It has one of the region’s largest and fastest-growing underground economies, along with Greece and Portugal, Schneider said. The country’s informal economy will expand to 19.5 percent of GDP this year from 18.7 percent, he said.

The number may go even higher, to a range of 26 percent to 29 percent this year, after shrinking to 17 percent at the peak of the boom, said Jose Manuel Saiz Alvarez, a professor at Nebrija University in Madrid who’s writing a book on the issue.

“The reason people can live here, can bear it without a social explosion, is that there’s this underground cushion that allows people to earn, to live,” said Steinko, the sociology professor. “We could call it a safety net.”

The Spanish government is not amused:

Spanish Prime Minister Jose Luis Rodriguez Zapatero started a campaign in 2005 against those who don’t pay taxes. It includes investigating businesses that may be hiring people off the books and tracking transactions made with 500-euro bills, often associated with unregistered deals.

One man’s tax dodger is another man’s John Galt.

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