Pubdate: Sun, 3 Jan 2010
Source: Sunday Star-Times (New Zealand)
Copyright: 2010 Sunday Star-Times
Contact:  http://www.sundaystartimes.co.nz
Details: http://www.mapinc.org/media/1064
Author: Nick Smith

THE ECONOMICS OF DRUGS

The Government Action Plan on Methamphetamine is working by at least
one measure - price. A gram of P, according to one Auckland drug
dealer, now costs around $800, whereas a year ago the same amount set
users back about $300-$400.

The doubling in price tells a supply side-story. Prime Minister John
Key launched the plan in early October and, among other measures
designed to restrict supply, made the important precursor drug,
pseudoephedrine, prescription-only.

Also, in the two months to early December, Customs intercepted a total
of 230kg of pseudoephedrine at the border. When commodities become
scarce, consumer demand drives the price up.

The government is, says Key, winning "the fight against
P".

But if "we" are winning the fight, what will success entail? An
exhaustive account of the global cocaine trade (The Candy Machine, How
Cocaine Took Over the World, by Tom Feiling) suggests all of the
efforts by government and its agencies will make not a jot of
difference and may even generate a worse social outcome.

It will not mean an end to drug-related crime - when costs become
prohibitive, crime rates usually soar as users resort to desperate
measures to acquire cash to feed their dependency, as Feiling shows.
Look to the burglary and robbery figures for the March 2010 quarter.
Nor will success strangle an important revenue stream for gangs, many
of which are major suppliers of methamphetamine.

What usually happens is consolidation into larger, more sophisticated
operations. Merger and acquisition is just as much a feature of
illegal drug businesses as the world of Proctor & Gamble or Merck
Sharp & Dohme.

Large organised criminal organisations, after all, are the only
entities with sufficient market heft to handle the rising financial
and human costs associated with drug dealing, whether in New Zealand
or the US.

The scarcity and rising cost of P doesn't mean an end to drug use -
history shows other drugs, potentially more harmful, become available,
such as cocaine. Anecdotal reports suggest cocaine in New Zealand,
traditionally the drug of the corporate and entertainment elite, is
becoming more widely available and cheaper, per gram, than P.

Feiling, a London School of Economics graduate, is not surprised at
the news from New Zealand. In 2004, 588 tonnes of cocaine were seized
by global authorities, the fifth consecutive yearly record-setting
bust. In 2006, the total was 492 tonnes. It is estimated these hauls
represent about 40% of global cocaine trade. New Zealand may be a tiny
market but there's a lot of cocaine to go around.

However, a police spokesman rejects this assertion. Cocaine remains a
tiny part of the New Zealand drug economy, which is dominated by
cannabis, methamphetamine and homebake (a kitchen-cooked substitute
for heroin). Methamphetamine, or P, is the primary focus of
enforcement, he says, and there are few fears supply of other drugs is
increasing to fill the gap caused by P scarcity. Its price supports
this view; if cheaper cocaine was supplanting P, the cost would not
have doubled in less than a year.

Dr Chris Wilkins, Massey University senior researcher, says there's
been slight increase in New Zealanders' "lifetime" cocaine use but
this is likely to be consumed in the UK or Australia. Kiwis are,
however, increasingly using Ecstasy, possibly because of the
perception it is a safer drug. Prohibition and "moderate" enforcement
is the best method of managing the drug economy, Wilkins says.

But the market always finds ways to circumvent regulation, prohibition
and its enforcement, Feiling counters. Consumer demand can never
ultimately be denied.

For instance, when the government banned party pills containing the
active substance, BZP, demand for Ecstasy and methamphetamine (the
drug the government is promising to stamp out) went through the roof.

"I went from selling 5000 pills a month to 5000 pills a week," a
52-year-old drug dealer explained to a newspaper about the impact the
ban had on his operation, which had generated up to $12 million in
revenue.

Wilkins says the BZP ban has driven increased use, although he
suspects leftover party pills are being passed off as Ecstasy.

For Feiling, the failure to combat the supply or demand for drugs is
an economic story, one that illustrates the futility of prohibition
and the many tragic, unintended consequences stemming from "another
war on another abstraction".

It also comes with a hefty bill, footed by the taxpayer. In the 1970s,
the administration of President Richard Nixon, who first coined the
phrase, War on Drugs, spent $US16m a year; in 2007, the annual cost of
drug policy was $US18 billion.

An economics paper by Harvard University's Jeffrey Miron (The
Budgetary Implications of Drug Prohibition) estimates federal and
state governments would save $US44.1b from drug prohibition
enforcement if drugs were legalised. Tax revenue would realise
$US32.7b from the sale of marijuana, cocaine, heroin and other drugs.

"A lot of economists have been attracted to the idea of legalisation
without even knowing much about drug culture or how best to manage the
problems that come from drug use - they see it purely from an economic
point of view," says Feiling, on the phone from the UK.

"When I've come out with this conclusion - that we should legalise
cocaine - I also had to divorce myself from a lot of the other
[intellectual] currents that have led people to that conclusion.
Decriminalisation still leaves that criminalised market place, and
that's the source of the really big problems - the violence and
corruption and so on." Even so, legalisation remains a dim prospect.

"A slight decline in drug use is taken as evidence that government
policies are finally working; a slight increase is taken to mean that
not enough is being done," Feiling writes. "Both scenarios demand more
funding. The war on drugs has become a war without end."

Yet prohibition doesn't work, famously creating several criminal
empires between 1919 and 1933 when the US banned booze. Exacerbating
the social chaos caused by illegal drug economies is the intersection
of drug policy, economic conditions, social attitudes and foreign
policy goals.

During last century's early decades, for instance, the crackdown in
the US on cocaine and opium was driven by virulent racism against
blacks and Chinese, which in turn was informed by harsh economic
conditions and high white unemployment.

The press excoriated the two drugs, leading to a 50% drop in
consumption. Instead, people started smoking pot and using synthetic
drugs such as methamphetamine and heroin.

In the 1960s, methamphetamine was the devil's drug and policing
efforts, Feiling shows, led to a revival in the use of cocaine. The
1980s saw the scourge of crack cocaine devastate American urban centres.

Its genesis, Feiling argues, lay in the global economic crisis which
ravaged Latin America and the Caribbean, major sources and conduits
for drug trafficking, plus anti-marijuana policing efforts, US urban
unemployment and the Cold War.

Aerial spraying of marijuana crops saw Colombian and Bolivian growers
switch to coca, which became the key commodity to their economies.
Meanwhile, the CIA, in an effort to fund Nicaraguan rebels, allowed
the Contras to traffic cocaine to the US, with secret government
approval, Feiling writes.

The price of street cocaine more than halved at a time when marijuana
prices were rising due to scarcity.

At the same time, deindustrialisation saw Chicago lose 60% of its
manufacturing jobs; in New York it was 58% and 64% in Philadelphia.
This created the urban environment in which the drug economy could
thrive: plenty of buyers and plenty of sellers for an increasingly
cheap commodity.

This had the effect, one major dealer told Feiling, of making crack,
the combustible crystalline version of the drug, the "McDonald's of
cocaine". By 1991, there were 1.8m drug sellers in the US.

Eventually, the US congress allowed direct funding of the Contras and
the CIA ceased its involvement in cocaine importation but, Feiling
contends, the genie was already out of the bottle.

Drug use and crime rates did drop in the late 1990s, leading the
Clinton government to claim credit. Others, such as Freakonomics
authors, Steven Levitt and Stephen Dubner, ingeniously posited that
increased access to abortion led to a reduction in violent crime.

Feiling points to the commodity prices of illegal drugs. Cocaine was
increasingly expensive and marijuana available and cheap.

The bitter fruit that US drug policy has yielded is this sobering
fact: Americans make up a quarter of the world's prison population -
more than all those jailed in Europe - and half a million of them are
serving drug-related sentences.

Use of illegal drugs in New Zealand will continue, irrespective of the
fight against P. The question is how much collateral damage will be
incurred along the way.

Something to Chew Over

Coca leaves, from which cocaine is derived, have been chewed by South
Americans, from Chile to Guatemala, since 2100 BC. It yielded more
vitamin B, calcium and iron than any other Andes plant.

Whereas European and British conquerors introduced New World
intoxicants such as tobacco, chocolate and coffee to a grateful
populace, coca was disdained, it is said, since civilised man did not
chew leaves like a lowly ruminant beast.

They were quick to employ its use in exploiting the Latin American
workforce, however, as the drug combated hunger and tiredness. When a
European chemist synthesised its active properties in 1859, it was
quickly commercialised into a variety of invigorating tonics.

By 1900, pharmacies stocked 70,000 different products containing
psychoactive substances such as cocaine.

The modern cocaine story is largely an American story because it was
the US government that set the framework for drug prohibition with its
drafting of the United Nations Single Convention on Narcotic Drugs in
1961. Just as it successfully sold a singular economic vision for
deregulated global financial markets, the US persuaded the
international community its drug policies were best.

The result was a sort of Washington Consensus but for drugs and, some
would argue, with equally disastrous outcomes.

Tom Feiling, the author of The Candy Machine, clears up a number of
public misconceptions about cocaine abuse. Crack - that terrifying and
supposedly super-powerful cocaine derivative - is in fact cocaine in
its raw crystal form, prior to crushing and dilution with
non-psychoactive substances.

The difference was the method of ingestion - smoked in a pipe.
Similarly, P is raw crystal methamphetamine that is smoked instead of
snorted, not some demon drug that drives its users insane (what does
that is the lack of sleep, as anyone who's tried to stay awake for six
days on the trot will tell you).

Both drugs deliver a quick but short-lasting high, encouraging users
to chase the next euphoric inhalation, which in the wrong, usually
urban, environment can create severe social problems.

Neither drug is, technically speaking, an addictive substance such as
heroin, tobacco or alcohol, says Feiling, on the phone from the UK.
Users who go cold turkey experience measurable physical symptoms
directly related to the body's craving for the drug that's been denied.

Cocaine and methamphetamine instead create a psychological dependence,
which is no more devastating for the lack of physical symptoms, he
says.
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MAP posted-by: Richard Lake