Instead, the drug market defied conventional economic wisdom and became cheaper and more widespread in face of law enforcement.
Last week, the United States attorney in Manhattan announced that a former Army sergeant has been charged with conspiracy following a federal sting operation on his team’s attempts on international drug trafficking and targeted assassinations. Joseph Hunter, 48, led a team of former soldiers — which included former Army soldier Timothy Vamvakias, 42; former member of the German armed forces Dennis Gogel, 27; and two other men charged with surveying the drug transports — toward assisting American informants that he thought were Colombian drug traffickers. The men were contracted to kill anyone who threatened the transport of the drugs, including law enforcement.
This case reflects the deteriorating state of the “war on drugs” in the United States. When President Richard Nixon declared “war” on illicit drugs in 1971, the thought was that an increased level of policing presence in enforcing federal drug laws would have an immediate and dramatic effect on drug trafficking in the United States. Nixon’s policies on drug controls were actually an experiment toward stopping the demand of drugs, with an emphasis on anti-drug education, demand reduction programs and drug treatment regimens. The United States has criminalized the use of certain drugs since 1914 with the passage of the Harrison Narcotics Tax Act.
In reality, the “war on drugs” has served to harm many Americans instead of helping them. Selective drug arrests and racially biased sentencing laws have led to a situation in which African-Americans disproportionately constitute the majority of the American prison population. More than 50 percent of the federal prison population and 20 percent of the state prison populations are incarcerated for drug charges, and in the last thirty years, the prison population has increased by a factor of five — from 330,000 in 1980 to 1.6 million today.
The continuing criminalization of drugs make them a scarce commodity — demanding high prices and drawing minority youths to abandon school and to work instead toward trying the make their fortunes “on the street.” This exploding drug market has turned the inner city into a warzone, as the number of drug-related gun crimes has continued to remain at a high level. The sad paradox of the “war on drugs” is that the harder the federal government pushes to restrict the flow of drugs, the scarcer and more expensive drugs become, making them more lucrative to sell, which ultimately floods the market with even more drugs.
Futility of a “war on drugs”
A study published September 30 by BMJ Open from the International Centre for Science in Drug Policy agrees that the “war on drugs” had no significant effect on the scarcity of drugs in America. The report states,
“In the USA, the average inflation-adjusted and purity-adjusted prices of heroin, cocaine and cannabis decreased by 81%, 80% and 86%, respectively, between 1990 and 2007, whereas average purity increased by 60%, 11% and 161%, respectively. … The temporal relationship between drug supply indicators: an audit of international government surveillance systems … Similar trends were observed in Europe, where during the same period the average inflation-adjusted price of opiates and cocaine decreased by 74% and 51%, respectively. In Australia, the average inflation-adjusted price of cocaine decreased 14%, while the inflation-adjusted price of heroin and cannabis both decreased 49% between 2000 and 2010. During this time, seizures of these drugs in major production regions and major domestic markets generally increased.
“With few exceptions and despite increasing investments in enforcement-based supply reduction efforts aimed at disrupting global drug supply, illegal drug prices have generally decreased while drug purity has generally increased since 1990. These findings suggest that expanding efforts at controlling the global illegal drug market through law enforcement are failing.”
Drugs tend to defeat traditional economic models of supply and demand. Under a typical supply/demand cycle, increased police intervention on a commodity’s use makes the supply scarcer, raising the price. The price hike scares off buyers who would feel “priced out” under the new market conditions, shrinking the buying pool. Ultimately, increased external pressure would push the market to a point that demand no longer supports the cost to secure supply and the commodity’s market collapses.
Drugs, on the other hand, have a built-in price moderator: addiction. Increased police intervention on drug use temporarily restricts supply, raising prices. But as addiction forces most addicts to purchase the drug at any price, there is no “pricing out,” meaning that demand does not shrink. Supply will eventually catch up with the persistent demand, prices will equalize and the post-law-enforcement-intervention market resembles the market before intervention, leaving the communities where the drug trade proliferates — poor, urban neighborhoods — to absorb the collateral damage with no progress on drug control to show for it.
“The facts are overwhelming. If the global drug trade were a country, it would have one of the top 20 economies in the world,” wrote Virgin Group founder Richard Branson in 2012 in an op-ed for CNN. “In 2005, the United Nations estimated the global illegal drug trade is worth more than $320 billion. It also estimates there are 230 million illegal drug users in the world, yet 90% of them are not classified as problematic.
“In business, if one of our companies is failing, we take steps to identify and solve the problem. What we don’t do is continue failing strategies that cost huge sums of money and exacerbate the problem. Rather than continuing on the disastrous path of the war on drugs, we need to look at what works and what doesn’t in terms of real evidence and data.“
This research is just the latest voice in the continuing chorus about the futility of the “war on drugs.” “Vast expenditures on criminalization and repressive measures directed at producers, traffickers and consumers of illegal drugs have clearly failed to effectively curtail supply or consumption. Apparent victories in eliminating one source or trafficking organization are negated almost instantly by the emergence of other sources and traffickers,” read the 2011 Report of the Global Commission on Drug Policy. “Repressive efforts directed at consumers impede public health measures to reduce HIV/AIDS, overdose fatalities and other harmful consequences of drug use. Government expenditures on futile supply reduction strategies and incarceration displace more cost-effective and evidence-based investments in demand and harm reduction.”
That report continued:
“In the 50 years since the United Nations initiated a truly global drug prohibition system, we have learned much about the nature and patterns of drug production, distribution, use and dependence, and the effectiveness of our attempts to reduce these problems. It might have been understandable that the architects of the system would place faith in the concept of eradicating drug production and use (in the light of the limited evidence available at the time). There is no excuse, however, for ignoring the evidence and experience accumulated since then. Drug policies and strategies at all levels too often continue to be driven by ideological perspectives, or political convenience, and pay too little attention to the complexities of the drug market, drug use and drug addiction.
“Effective policymaking requires a clear articulation of the policy’s objectives. The 1961 UN Single Convention on Narcotic Drugs made it clear that the ultimate objective of the system was the improvement of the ‘health and welfare of mankind’.”
The “drug war” and the profit motive
The hard reality behind this is that in the United States, drug criminalization is big business. In 2006, a DC-9 jet was intercepted by Mexican officials at Ciudad del Carmen. The jet was carrying 5.7 tons of cocaine valued at $100 million. In a 22-month investigation from the FBI, the IRS, the DEA and others, the drug money that was used to buy the jet was found to be laundered through Wachovia Bank, an American bank that is now part of Wells Fargo.
The federal agents discovered that Wachovia laundered billions in wire transfers, traveller’s checks and cash shipments to the Mexican drug cartels. While criminal charges were brought against the bank as a whole, the case never reached court, with the bank settling under a “deferred prosecution” agreement that expired with the bank only paying $160 million in forfeitures and fines.
“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said Jeffrey Sloman, the federal prosecutor. Wachovia paid less than two percent of its 2009 profits for laundering $378.4 billion — one-third of Mexico’s gross national product — into cash accounts.
HSBC, Western Union, Bank of America, JPMorgan Chase and Citigroup have all been accused of allegedly not complying with American anti-money-laundering laws.
With the proliferation of the private prison industry and the influence this industry has had in drafting sentencing-heavy drug legislation, and with the increase of foreign buyers on the American housing market — which is leading many to suspect that American housing is being used as a makeshift money laundering scheme — few among the nation’s power-brokers actually want drug legalization. Legalization would radically reduce the prison population, shrink the amount of drug money flowing unobserved in the country and reduce the amount of gun violence in the inner city — especially considering how a “tough on crimes” image can prove voter-friendly.
This trillion-dollar failure, however, continues to subjugate entire classes of people for the limited gains it achieves. “[The] drug industry has two products: money and suffering,” said Martin Woods, a senior anti-money laundering officer at Wachovia Bank during the time of the federal investigation. “On one hand, you have massive profits and enrichment. On the other, you have massive suffering, misery and death. You cannot separate one from the other.”