Entrepreneurship in the Underground Economy
Chapter 7: The Deterrence Option
7. The deterrence option INTRODUCTION Here, the policy approach towards underground work that has been dominant across the western world is evaluated. This seeks to eradicate the underground economy using deterrence (‘push’) measures, notably the probability of detection and the level of punishments, in order to change the cost–beneﬁt ratio confronting potential participants. To identify why its dominance has begun to recede, ﬁrst, the practicality and second, the desirability of deterring such work is evaluated. In so doing, this chapter will reveal that although eradication is a wholly appropriate goal due to the negative impacts of this sector on consumers, suppliers, formal businesses and society, deterrence is not the appropriate means of achieving this objective. THE DETERRENCE APPROACH TOWARDS UNDERGROUND WORK Like other approaches towards underground work, the objective of the deterrence approach is to eradicate such work. The difference between this approach and others, however, rotates largely around how it seeks to achieve this. In this approach which has dominated public policy in most western countries, driven by a view that underground work is largely exploitative work conducted by off-the-books employees and has purely negative consequences, the belief is that eradication can be achieved by using tougher regulations and more punitive measures so as to deter people from participating in such work. First, therefore, it is necessary to outline how it views underground work along with what it considers to be the major consequences arising from its existence and following this, its approach to dealing with such...
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