Workers World, Vol. 21, No. 44
Whenever the U.S. government is about to undertake some huge and costly economic project, there is invariably a flood of big business-inspired commentaries, urgings and violent demands that it be placed in the hands of the “free enterprise system” and that it will only be successful if it is freed from government “red tape” and bureaucratic mismanagement by “hordes of government officials.”
There are never so many laudatory articles on the marvelous workings of the capitalist system as on the occasions when the capitalist government proposes some giant thrust into the economy through state capitalist intervention.
On emerging from the Camp David meeting with Carter last July, and later on a CBS talk show, Democratic Majority leader Jim Wright, himself a millionaire, implored his friend President Carter to “all the magic of our wondrous free enterprise system to do its job” without the reins and entrapments of “excessive” governmental supervision and control.
Millions upon millions of people in the United States, especially among the petty bourgeoisie, regard this kind of venal propaganda almost as an article of religious faith. It is with reason, of course, that they regard the capitalist state with mistrust. But in the absence of a powerful and widespread working class press, they inevitably fall prey to this kind of right-wing propaganda.
What does the ruling class really mean when it counterposes “government bureaucracy” to “the freedom of the marketplace,” etc., etc.? On July 18, the Wall Street Journal carried an extremely illuminating article which purports to be an analysis of Italy’s economic situation and the recurrent political crises the country has been suffering in the last few years. What makes it of such interest is that much of its theme is also applicable to the economy here as well as in a good many other imperialist countries.
The article finds a great deal of merit in the Italian government. “How does Italy do so well with so little central government?” the article asks. It advances several reasons.
“The Italian government has always been weak.” “The Italian family has always performed some of the functions of the state.” “The Italian experience has always been loyalty to the family first.” These are the “good” reasons which take up three-quarters of the article.
Now for the real reason: Italy, the article states, has an “underground economy [which] is composed of hundreds of small firms.”
The popular conception of the underground economy is usually that it is confined to the outright criminal element and its preoccupation with narcotics, prostitution, and gambling. Of course, this is not an inconsiderable element in the overall capitalist economy – but it is not really the underground economy proper.
The underground economy proper is a worldwide phenomenon in the capitalist countries, especially in the leading ones. Millions of workers who are illegally employed produce a considerable portion of the capitalist world’s gross national product.
The virtue of the underground economy, as outlined in the Wall Street Journal article, is that it “is composed of hundreds of small firms [in Italy] that operate cheaply and efficiently.” Now that is one of the most welcome recommendations to any capitalist entrepreneur and would warm the cockles of the heart of any exploiter!
But perhaps the phrase “cheaply and efficiently” is too vague and may convey a false impression. The writer comes down to brass tacks and shows the concrete elements which enter into a cheap and efficient underground economy: 1) the firm “keeps no records,” 2) it “pays no taxes,” and 3) best of all, it “provides no employee benefits.”
Also, “they seek no financial or other help from the state,” not because they wouldn’t want to, but because, as the article says with a straight face, “they can’t afford to let the government know they exist.”
How large and how widespread is this underground economy?
“Experts estimate that seven million Italians perform work in the parallel economy.” Since there are “20 million in the private and government sector,” this means that “the underground work now accounts for at least one-third of Italy’s gross national product.”
This is the magic of the free enterprise system. This is why the Wall Street Journal lauds the Italian model in spite of the “political disarray” of the government. The so-called economic achievements of the last several years are attributed to no small degree in this article to the existence of this paragon of virtue – in the form of one of the crudest forms of capitalist exploitation.
How is it possible for one-third of the national product, one-third of the nation’s economic activity engaging more than 30 percent of the workforce, to be supposedly outside the legal bounds of the capitalist framework, outside the pale of capitalist law?
When the capitalist class speaks about “deregulating” industry, giving “free rein” to the market forces, this is what they have in mind: keep no records, pay no taxes, no unemployment insurance, no social security, no medical plan. In truth, no life for the workers.
But, someone will say, these are all small plants, each working independently, eking out an existence. They work parallel and separate from big industry, from the big banks and industrial corporations with whom they cannot compete. One is supposed to feel sorry for the petty exploiter who, as Lenin once remarked, can be far more oppressive than the big ones if given the opportunity.
But is the underground economy in Italy and elsewhere really and truly a parallel, independent form of economic activity, working outside the pale of the capitalist government and capitalist industry and finance? Of course not.
This article in the Wall Street Journal inadvertently supplies us with the answer as to where the production goes, and offers a clue to the relationship between petty and large-scale industry, between modern finance capital and the exploiting petty bourgeoisie.
The hundreds of thousands of small underground operators, says the article, “are usually small firms which export and need little from the government.” But this is a dead giveaway. Anyone who knows anything at all about exporting knows that it requires financing and credit as well as international connections with the banks. It is impossible to carry out a business of export without the active assistance of the banks and the government.
Thus it turns out that the underground economy is merely an illegal auxiliary arm of the multinational corporations and is directly supported by the big banks and the capitalist government. It is not merely the connivance of the government that is needed here, but its active support, and that comes easy given its pliability.
All the talk against “government regulation,” “government control,” “government restriction,” etc., when used by the capitalist media and other servitors of the bourgeoisie ends up meaning the advocacy of the lowest wages, hiring and firing without restraint, the bypassing of social security, unemployment insurance, and so on. Such is the free enterprise system in its “ideal” form.
Along with high praise for the “magic” of the free enterprise system, peddled by millionaire congressmen and senators alike, is the assurance by the intellectual apologists of imperialism that we are now in the post-industrial age, the age of electronics and computers, which has done away with the harsh conditions that existed in Marx’s time. That, so they say, was the Dark Age of the early capitalist system which has presumably been cast into the dustbin of history by the electronics-computer age.
But alas. We see these same conditions being revived daily, not only in Italy but in all of the capitalist world.
We need not go traipsing through all of Western Europe to find how many “guest workers” from foreign lands have been working under wages and conditions far below the standards, thereby giving an added impetus to capitalist accumulation in Western Europe and helping to revive the capitalist system there, especially since World War II. In many ways it was the unpaid labor of millions of foreign workers which did more for the capitalist recovery after the war than did its counterpart, the Marshall Plan.
But we need not look abroad to find an underground economy in which the capitalist class garners its super-profits from the sweat and blood of millions of unprotected workers. Right in the vast metropolitan center of the U.S., New York City, there are hundreds if not thousands of little cockroach capitalists who live off the sweat and blood of workers in the underground economy – so-called illegal aliens, women, youth, oppressed workers from all walks of life.
This underground economy is a formidable element encompassing not only small manufacturing plants but huge agricultural tracts and subsidiary industries.
No firm figures have yet been developed as to how many workers there are in the underground economy here, but that it numbers in the many millions is beyond doubt. The U.S. Immigration and Naturalization Service (the hated “Migra”) estimates that there are six to eight million undocumented workers in the U.S. This figure deals mainly with Mexican workers, and doesn’t adequately count many millions who come from other parts of the world. Employers who exploit undocumented workers are rarely considered part of the underground economy, since that would identify them as violators of the law.
While we may never know exactly how many are in the underground economy, getting below the legal wage and receiving no benefits, more accurate figures may come out in the 1980 census. It is said that when thieves fall out, honest men sometimes come into their own. The states with the largest number of undocumented workers are anxious to get a full count of the population in the census, since a larger population entitles them to more federal money. Some in Congress are already introducing legislation protecting the confidentiality of any statements made to the census by the undocumented.
The conditions faced by these workers are often as cruel and oppressive as in the days of peonage and semi-slavery. This summer, right in New Jersey, a lawyer investigating a migrant labor camp was brutally beaten by a company goon merely for attempting to gain access to the camp. Only a few lines were devoted to the attack in the New York times.
Several years ago, in the same area, a state legislator trying to get access to another migrant camp (which differ little from concentration camps) got his arm broken by the same company goons. Litigation to force the company to open up is still going on.
This is not an exceptional case. The underground economy in the U.S., as elsewhere in the capitalist world, is composed of a formidable number of workers numbering in the millions.
Those workers within the pale of the capitalist establishment, who are fortunate enough to have union protection and where the capitalist class cannot easily chuck overboard the safety, health, and welfare provisions which the workers have won over a century of struggle become daily endangered by the existence of the underground economy, especially as the capitalist crisis takes on greater momentum. They must direct their organizing energies to bringing within the fold of organized labor all the workers, not merely as a measure of class solidarity, not just out of abstract humanitarianism, but as a measure in the self-interest of all of the workers.
The champions of the free enterprise system are intent on using the advantages of the computer-electronic age not to better the conditions of the mass of the population but to better garner in super-profits. Their road to super-profits leads them to the underground economy, the ideal form of the free enterprise system.
Finally, what is the objective overall social and political effect of the growth and development of the underground economy so far as the class struggle is concerned?
Carlo de Benedetti, the chief operating officer of Ing. G. Olivetti and Co., is quoted in the Journal article as saying that the underground economy functions “as a sort of shock absorber during crises, as a safety valve for social tensions, as an instrument of restoring mobility and elasticity.”
Translated into the language of Marxism, this means that the objective role of the underground economy is to moderate the class struggle, to take the guts out of it, to stifle social and political class struggles by which the working class undermines the efforts of the ruling class to go beyond the established norms of capitalist legality.
Benedetti admits, however, that this is only a “short term” solution. Indeed. Galloping inflation is still the order of the day in Italy and unemployment is still on the increase. Since the capitalist economic crisis is of a worldwide character, no extraordinary measures, such as Italy’s effort to improve its foreign trade position through slave labor export subsidies via the underground economy, can be of any lasting significance. All the underground economy accomplishes is to undersell foreign competition on the world market for a period of time. Italy’s foreign competitors are just as predatory, just as avaricious, and can regain the advantage by employing similar “export subsidies.”
Such is the vicious cycle of capitalist monopoly decay.
Last updated: 11 May 2026