This is from the book Shantung Compound, by Landon Gilkey, on his experiences as an internee in a Japanese prison camp, in China during World War 2. So far, the book is very interesting, especially the chapter from which I took the below.
It's about the markets that developed between the prisoners in the camp, and the surrounding Chinese villagers, who traded with them. First directly, then after trade was clamped down on, indirectly through the Japanese guards. This particular chapter has lots of details about how the black market was organized.
In May, 1944, moreover, a new chief arrived. A man of force, he apparently succeeded in stopping the illegal commerce altogether. So it was with sinking hearts that we looked out over the walls one day to see Chinese laborers at work. They were digging a deep trench and rearing a high embankment fifty yards beyond the walls, and then building wire fences on the farther side. We knew that no Chinese could approach the wall without the greatest risk, and so we sadly contemplated the remainder of the war—eggless, peanutless, and dry.
I can still remember my amazement when, about July of that same year, a friend rushed into our dorm with some raw bacon. Since by no stretch of the imagination was anyone keeping pigs in camp, I knew that the black market must have started up again. In high excitement, we asked where he had got it. Our astonishment doubled, however, when he told us that it came from a friend who had obtained it through the Japanese guards. Short of cash themselves, these guards had agreed to take valuables owned by internees, such as old watches, clothes, jewelry, etc., and to trade them to Chinese merchants in exchange for goods or money. Needless to say the guards, as middlemen, were pocketing a goodly portion of the transactions. They were not interested in carrying on much of what we might call the “grocery trade,” that is, the great quantities of eggs and peanuts that had been our earlier delight. They had to confine themselves to small, yet lucrative items, and so it was jam, sugar, Chinese whisky, and above all Chinese money that they brought into camp and sold to the internees.
Illegal money was the most important black-market commodity during the latter years of the war. As time wore on, such money became vital to our existence in camp. From a camp canteen stocked by the Japanese, we had to buy many of the necessities of our life: soap, toilet paper, cigarettes, peanuts (for peanut butter), mats used for awnings or for rugs, and peanut oil for any home cooking and for our lamps at night (the electricity failed to work about one-third of the time). For this purpose “comfort money” was provided in Chinese dollars to each of us every month. This was a small sum sent through the Swiss government by our own government, changed by the Swiss into local currency, and brought into camp each month by the local representative of the Swiss state.
While we were at Weihsien camp, a fierce inflation of the Chinese currency had developed. When we came to camp, the Chinese dollar was worth about five cents, or one American dollar bought about twenty Chinese dollars. Accordingly, on the amazingly low scale of Chinese prices, a ration of ten packs of native-brand cigarettes had cost eight Chinese dollars when we went to camp. But in May, 1945—two years later—the same ration cost over five hundred Chinese dollars; which meant a rise of over 6,000 per cent.
Every other price rose proportionally, and the rate of inflationary increase seemed to accelerate all the time. Naturally the amount of “comfort money” given us each month could never keep pace with this galloping inflation, since every increase had to be negotiated between Washington and Tokyo via Geneva. More money than was legally provided was therefore essential for us, if we were to buy such necessities as toilet paper, soap, and cigarettes. From this situation stemmed the real significance of the Japanese black market.
After this commerce began, the amount of illegal money that entered the camp at any one time was enormous. For example, the total “comfort money” received legally in one month’s period for one group of fifteen persons in mid-1944 was three thousand Chinese dollars ($200 per head). I learned later from the canteen director that the same group had spent in one week at the canteen over thirty thousand Chinese dollars. At that point in camp, then, each person in this group was receiving illegally on the average about eight thousand Chinese dollars monthly.
Naturally it required an efficient organization, including both important Japanese and reputable internees, to handle all these financial transactions. As I discovered when I went searching for extra cash, there was on the internee side a formal council or syndicate who acted as middlemen between the ordinary internees and the Japanese. To no one’s surprise, this financial council was made up mostly of former bankers and stockbrokers.
It worked thus: An internee who wanted more cash might have a gold watch or a piece of jewelry to sell. Naturally, in an inflationary spiral, he would not wish to find himself suddenly loaded down with all the Chinese currency that such a valuable item would bring, amounting, say, to $200,000. Thus he would approach the syndicate, and negotiate with them until a price was agreed upon. The syndicate would sell his valuable to the Japanese, receiving from them in currency the $200,000. Having given the original owner whatever immediate cash he needed, the syndicate would then “sell” the remainder of the $200,000 to other internees in return for promissory notes in American currency. These notes would then be turned over to the seller. Such notes had to be doubly guaranteed, once by the syndicate itself and once by the corporation or concern for which the creditor internee had worked. On several occasions I borrowed about six thousand Chinese dollars on the credit of Yenching University where I had been teaching. By such means, cash was spread around the camp to all those who either had personal possessions which they could sell, or who could guarantee payment after the war. So almost all of us could—and did—avail ourselves of this service.
We were continually amused by the strangeness of this situation—with our captors subverting their own order. One day I swung around the corner near the kitchen and saw two of the guards going at each other angrily until one finally laid the other out cold with a large club. When a man who saw the incident asked another guard what had been the cause of the quarrel, the latter replied in effect: “Oh, they were just arguing about the black market. One of them had muscled in on the other’s customers. It happens all the time!”
Shortly after this, 1 heard that a guard had been in Dormitory 49 consummating a private deal with an internee. When he had finished his business, he said calmly to his client, “Would you look out the door for me to see if there are any guards about? We are not supposed to be caught doing this work for our bosses!”
It had now become clear why the new chief had so firmly and quickly stopped the old black market when he came into camp. He wanted to get this lucrative business into his own—or at least into Japanese—hands.