Pubdate: Mon, 17 Sep 2001
Source: Business Week (US)
Section: Economic Viewpoint
Copyright: 2001 The McGraw-Hill Companies, Inc.
Author: Gary S. Becker


The Bush Administration appears determined to continue the war on drugs 
that has been actively pursued by all U.S. governments since the Nixon 
Administration. I believe this is a serious mistake because that approach 
has failed badly.

Legalizing marijuana, and even some hard drugs, may be a more effective 

Defenders of the war on drugs often throw in an economic argument: It has 
been successful because it curtails use by raising street prices. It does 
this because suppliers have to be compensated for the risk of imprisonment 
and other punishments.

It may be true that high prices have reduced the demand for drugs, but the 
fact remains that most illegal drugs remain popular and available, 
regardless of price.

More important, any reduction in the number of addicts and other users has 
come with an enormous price tag. The U.S. alone spends almost $40 billion 
annually fighting the drug war, and other countries also spend big sums.

The war is fought by seizing and destroying drugs and by apprehending and 
imprisoning suppliers.

Large numbers of Americans were jailed on drug convictions during the 1980s 
and '90s, so that they now account for more than 30% of all inmates.

A depressing fact is that the U.S. imprisons a larger fraction of its 
population for drug-related offenses than European nations do for all crimes.

The high prices due to the war have provided huge profits for cartels and 
others who evade detection and punishment. Estimates place the world market 
value of illegal drugs at several hundred billions of dollars--in the same 
league as the markets for cigarettes and alcohol.

To protect their profits, criminals battle police and bribe officials all 
over the world.

Some cartels have become more powerful than the governments that oppose 
them. The economy of Colombia, the world's biggest exporter of cocaine and 
a major producer of heroin, has been wrecked by the conflict between drug 
cartels and government efforts, financed by the U.S., to eradicate 
production of cocaine and heroin.

These efforts have had only modest success.

Competing American gangs intimidate and assault, and sometimes murder, 
anyone who opposes them as they fight over the large illicit profits from 

This has helped devastate many inner-city neighborhoods because poor blacks 
and Hispanics in these neighborhoods are the main foot soldiers in drug 
supply networks. They earn what may appear to be pathetically little, given 
the risks they take, but their earnings often are higher than what they 
could get in legal jobs. And there is also a small chance that they will 
make a big score.

Legalizing drugs is far from a panacea for all the distress caused by 
drugs, but it will eliminate most of the profit and corruption from the 
drug trade.

Ending Prohibition almost immediately cleaned up the liquor industry.

To be sure, legalization will increase drug use by, among other things, 
lowering street prices, but that can be partially offset through sizable 
excise taxes on producers.

In many nations, retail prices of cigarettes, alcohol, and gasoline are 
several hundred percent higher than their wholesale prices because of large 
"sin" taxes on them. The revenue collected from large taxes on drugs could 
be used to treat addicts and educate youngsters about the harmful effects 
of many drugs.

Although some drug production would go underground to avoid high taxes, 
experience with liquor, gasoline, and cigarettes shows that most producers 
would operate legally.

They would want to use the courts in order to settle contract disputes, to 
raise funds on financial markets, and to avoid the penalties associated 
with criminal production. In addition, many consumers would prefer legal 
suppliers of drugs because they provide better control over quality and 
safety, considerations that are even more important for drugs than for 
cigarettes and gasoline.

Although legalization would make drugs cheaper and more readily available, 
sales to minors could be discouraged by harsh punishments and by 
restricting legal sales to designated shops. The present system has not 
been effective in discouraging drug experimentation by the young in part 
because suppliers are subject to punishments whether they sell to adults or 

And anyone who drives or works while impaired by drugs should be subject to 
severe punishments because they are a menace to others. A good example to 
follow is the tough approach that some nations take toward drunk drivers: 
They lose their licenses, pay fines, and frequently receive stiff jail 

Since legalizing drugs is a venture into the unknown, it may be wise to 
proceed in steps.

But sooner or later, the human and other costs directly due to the 
continuing wars on drugs will force a new approach. So far, no one has 
devised a better alternative than legalization of drugs combined with a 
high "sin" tax on users, safeguards against sales to children, and severe 
punishments to anyone who drives or works while impaired by drugs.
- ---
MAP posted-by: Beth