Pubdate: Wed, 21 Feb 2007
Source: Idaho Statesman, The (ID)
Copyright: 2007 The Idaho Statesman
Contact:  http://www.idahostatesman.com/
Details: http://www.mapinc.org/media/204
Author: Edward Lotterman
Note: Economist Edward Lotterman teaches and writes in St. Paul, Minn
Bookmark: http://www.mapinc.org/pot.htm (Cannabis)
Bookmark: http://www.mapinc.org/coke.htm (Cocaine)

WE MUST CURTAIL DEMAND FOR DRUGS, NOT JUST SUPPLY

The Afghan government just announced a new crackdown on opium 
production. That country now produces 90 percent of the world's 
output. Opium reportedly is the largest single component of 
Afghanistan's GDP. Though the crackdown is laudable, history and 
economic theory tell us it will have only limited success.

The problem with trying to limit the growing of such crops is that 
any success in restricting output pushes up the price of what is 
produced. This increases profitability for the remaining producers. 
The greater the effort put into eradicating production, the greater 
the incentive for producers to somehow keep producing.

There is much history here. For four decades, the United States has 
prodded various South American countries to eliminate marijuana and 
coca growing. Such programs usually emphasize sticks - arrests and 
forcible eradication. Some efforts also included a small carrot, 
providing poor peasant growers with some alternate crop.

I worked on a U.S. foreign-aid project in Peru in 1980-1982 and saw 
such efforts firsthand. Our project, funded with a couple of hundred 
thousand dollars, helped livestock production at high altitudes. 
A-drug control project, funded with tens of millions, tried to 
curtail coca production 40 miles further east and 8,000 feet lower down.

But it was spitting into the wind. Huanuco, the regional center of 
coca production, was booming. Stores were full of TVs, VCRs and Honda 
generators to power them. Thousands of people buzzed about on 
Japanese motorbikes. Most people looked well-fed. U.S. and European 
cokeheads were lifting thousands of poor Peruvians out of poverty.

The U.S. drug-control project hired agronomists and ag economists to 
find alternative crops. The problem was that there was no alternative 
crop that was even a fifth as profitable as coca. Any coca grower who 
shifted to watermelons or rice was a chump.

And so squads of Peruvian army and police officers were ferried 
around in U.S. helicopters to grub out coca bushes here and there. 
U.S. airplanes sprayed herbicides on coca and food crops alike. To 
the extent such efforts cut coca production at all, prices for 
cocaine paste rose in response and rational peasants sought even more 
secluded places to establish new plantations.

The same will happen in Afghanistan. Opium poppies are the best way 
for Afghan farmers to feed their families. As long as U.S. and 
European drug users are willing to shell out billions to support 
their habits, poor growers somewhere will produce the raw material.

In week two of any introductory econ course, students learn that 
reducing supply raises prices. Reducing demand lowers prices. For 
various reasons, including an unwillingness to acknowledge our own 
society's role in drug abuse, we spend many times more on curtailing 
supply than on curtailing demand. Prices rise and producers respond 
just as the textbooks say they will. Nothing much will change until 
we find a way to curtail demand.

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Economist Edward Lotterman teaches and writes in St. Paul, Minn
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MAP posted-by: Beth Wehrman