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Field notes from the underground

A firsthand account of the vast "underground economy"and what an off-the-books mechanic can tell us about the health of our inner cities

ON A COLD FEBRUARY DAY on Chicago's South Side, two men are having an argument in a church parking lot. One is a local hustler who fixes cars and does his work wherever he can. This month, he is paying a local pastor to use the church parking lot. The week before, he paid a nearby store owner to work in a back alley.

On this day, he has just fixed the car of a local resident who is not happy. His customer thought the cost to repair his rusty 1986 Cutlass Ciera was $20, but the mechanic insists that his estimate was $30.

The dispute quickly gets out of hand. The mechanic refuses to return the keys to the car. The car's owner throws the mechanic to the ground, punches him repeatedly, takes the keys and drives away in his repaired vehicle. Bloodied and angry, the mechanic pursues him.

The mechanic makes his way to his customer's apartment building, where he begins yelling for him to come out. In full view of the neighbors, as well as the local block club president, he grows frustrated, breaks into the apartment, and walks out with a TV and VCR in hand. He utters a profanity, shouts "You better believe I get my money," and marches off.

One of the block club president's responsibilities is addressing safety issues on her block, and her constituents quickly remind her of this, beseeching her to call the police. But she instructs them to calm down. "Let me take care of it my own way," she pleads. "I'll call the police at the right time."

At the right time? I wonder. If a physical assault followed by a break-in and burglary is not the right time to call the police, when would be a more appropriate occasion? In my suburban southern California neighborhood, police would have arrived by this point.

In the inner city, however, a community's first recourse isn't always to turn to the authorities. For more than a century, many poor and working class residents of America's inner citiesin particular those black Americans who were confined to urban ghettos by segregation and economic disenfranchisementhave been forced to hustle to make ends meet. And they've also developed their own mechanisms for resolving conflicts when a hustle goes bad.

These residents live in what the University of Chicago sociologists St. Clair Drake and Horace Cayton called the "shady world." Coined in the mid-20th century, their phrase describes the vibrant social life that arose around making money off the books. Then and now, not only residents, but churches, block clubs, stores, and other organizations have played a part in a shadow economy that most Americans neither see nor encounter.

Today, social scientists see the shady world as largely criminal. But this is only partially correct. Examine the underground economy and you will see signs of strength as well as indices of social problems. An incident like the one I observed between the mechanic and his customer hardly seems a positive exchange. How the neighborhood came to resolve the dispute, however, might change your perspective on how inner cities work.

. . .

I stumbled upon Chicago's underground world in the early 1990s when I was writing a dissertation on public housing. I ended up living with families in the ghetto to acquire a firsthand perspective on their lives. After about five years, residents saw me enough to know I wasn't a cop, and they started recruiting me into service as a local arbiter. (So as not to endanger any of these residents, I've avoided using their names.)

I was often the only neutral party around. I wouldn't help pimps, drug dealers, or car thieves. But I would settle a pricing dispute now and then, or mediate a conflict between a store owner and a local homeless person who claimed not to have been paid for shoveling snow or catching shoplifters. I began to see a new world: a vast network of dealing, trafficking, bartering, and hustling. All underground.

The idea of off-the-books work was not new to me. Most of us could probably identify hidden economic activity in our own communities and indeed in our own homes. Inner cities have their crack dealers, but the shady economy can also include kids selling lemonade, bars that host poker games, carpenters who work under the table, neighbors who offer day care. In fact, trying to uncover each and every unregulated exchange would seem implausible.

Academics and policymakers continue to try, however, in large part because the costs of unregulated and hidden economies are so high. The tax coffers are depleted when income is not reported. Many underground workers are working for less than minimum wage, and most are failing to report their income. And when we throw in drugs, sex work, and guns, we are of course forced to consider even greater social problems.

How big is the underground economy? The General Accounting Office and the Internal Revenue Service produce estimates every few years that differ widely, but one government study calculated that $500 billion in income fails to be reported each year. Another estimate, based on consumer behavior, suggests that 4 out of 5 Americans turn to the unregulated world for goods and serviceswhich would raise the $500 billion figure appreciably.

But the underground economy is more than just a set of cash transactions. Cash, as it turns out, isn't necessarily the preferred medium of exchange: on Chicago's South Side, barter is just as common. I interviewed the owner of an auto body shop who threw out his cash register because customers were paying their bills in kind. They offered him cellphones, microwaves, furniture, and IOUs. He, in turn, started selling these goods from the back of the store, and now auto repair constitutes only a fraction of his income.

Of course any transactionlegitimate or shadyrequires certain rules and safeguards, and it's in looking at how the underground economy regulates itself that we find a window onto life in the inner city.

When you purchase a product or service and something goes wrong, to whom do you turn? In the mainstream world, there is all manner of recourse: exchanges, refunds, small claims court. But what about the plumber who fixed your sink improperly? If you paid under the table, you likely gave up the resources of police and the courts.

In inner cities, breaches of contract, pricing disputes, fights over access to street corners and other public spaces, and differences of opinion over quality of service are ever-presentand given the nature of the transactions, the parties must find a way to resolve the conflicts themselves. Watching how these communities self-regulate, I witnessed sophistication and creativity not usually associated with neighborhoods of concentrated poverty. But I also, alas, began to understand why it is so difficult to offer assistance and remedy to these areas.

. . .

To see this dynamic at work, let's return to the mechanic's fight with his customer. The matter is resolved when the block club president, in her capacity as a spokesperson for residents, meets with the local pastor and a Chicago police officer who walks the neighborhood as part of his beat. An empathetic and articulate young man who grew up in the neighborhood, this officer not only understands the economic needs of its residents, but believes firmly that police can never entirely rid the area of shady activity. "My job is to make sure things are handled before they get out of control," he tells me.

The three meet at the pastor's church one afternoon, as they have been doing for nearly two years when there are shady dealings to be adjudicated. After talking in private, they invite the mechanic and his customer to join them. As a set of jurists might do, they tell the mechanic to return the stolen goods to the police station and, in return, the car owner must pay him $20 for the repair. He must also agree to patronize the mechanic's business two more times.

By formally responding to the break-in and retrieving the stolen goods, the police officer and the block club president secure their legitimacy in the eyes of the neighborhood. Though the car owner agrees to drop the burglary charges (and the mechanic the assault charges), residents still come away feeling that the police are responsive and, as important, continue to see their block club as effective and worth supporting.

This resolution challenges the notions that the urban poor are lazy, unthinking, dependent, and disorganized. Borrowing from the work of Harvard sociologists Robert Sampson and William Julius Wilson, these residents, who are socially isolated from the mainstream, are displaying "collective efficacy" by working with each other to combat crime and restore social order.

Wilson and Sampson believe that even in blighted areas, if residents stick together and show trust, they can reduce crime. By this definition, the residents of the neighborhood not only belong to a basically healthy community, but they are exemplary Americans: They debate, elect spokespersons, do not rely on the government, and achieve consensus through dialogue. The mechanic and his customer, who respected the rulings of the third-party mediators, are yet another sign of democratic spirit.

. . .

The problem, however, is that this kind of democratic spirit does little to help inner cities rebuild and prosper. Like many who work in inner-city churches and social centers, the block club president I came to know through my research spends her days kicking drug dealers out of the park and making sure minor incidents don't explode. She has little time to organize children's activities, respond to parents' requests for programs, or lobby for city services.

What's more, shady skills don't necessarily transfer. Being an effective diplomat in the shady world isn't something you can put on a resume. Similarly, there are hundreds of men and women like the neighborhood mechanic who have tremendous skill but will always be a credit riskas well as a risky hire for a legitimate business.

In the end, the underground economy can be both a lifeline and a noose. The skills that enable residents to survive never really help them build up trust, confidence, and relationships with the outside world.

But residents have few choices. The block club president and the pastor I came to know had both spent decades calling the police, only to be met with slow and ineffective responses. Like their parents and grandparents, they can sit back and complain or they can fight for better services. And, as they wait, they must address the problems in their neighborhoods themselves, with whatever resource is at hand. Such is life in the shady world.

Sudhir Alladi Venkatesh is professor of sociology and African-American studies at Columbia University. This article is adapted from "Off the Books: The Underground Economy of the Urban Poor" (Harvard), which has just been published.

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