The Costs of the War on Drugs

Richard Stevenson

Twenty five years ago, President Nixon declared war on drugs. Since then, heads of state and senior ministers in dozens of countries have identified illegal drug use as the most pressing pubic policy issue they face. Yet, by just about every measure, drug problems have intensified and proliferated.

In the early 1970s, illegal drug use was mainly an American sport; now it is global. All indicators, imperfect though they are, suggest that demand continues to rise. On the supply side, drug seizures have increased. But, in the absence of any long--term upward trend in prices, it must be supposed that the enforcement agencies are not keeping pace with the productivity of drug producers and distributors.

One aspect of global drug policy which would seem remarkable to anyone unfamiliar with the passion and prejudice attached to psychoactive drugs is the ludicrous proposition that it is possible to buck the market in commodities which account for about 8 percent of world trade. The drug trade is sufficiently large to have macroeconomic implications. Most people are used to the notion that market forces are powerful and, if suppressed, will tend to be reasserted in unanticipated and frequently undesirable ways.

The cost of unanticipated consequences

A very large part of the cost of drug use is found in these unanticipated consequences of well--intended legislation. As such, prohibition and most drug problems constitute a tragic example of government failure.

One aspect of global drug policy which would seem remarkable to anyone unfamiliar with the passion ... attached to psychoactive drugs is the ludicrous proposition that it is possible to buck the market in commodities which account for about 8 percent of world trade.

Those who believe that drug problems would be better handled in a legal framework distinguish between the cost of illegal drug use, and the cost of drug law. The cost of drug use in a legal system would be borne very largely by users and their families, with external costs spilling over to health systems. The direct cost of drug law is readily observable mainly in law enforcement agencies, legal proceedings, and prison services.

It is, however, in its external costs that drug law is believed to be especially pernicious. No one doubts that illegality makes drug use more hazardous than it need be. In clandestine markets the nature and purity of drugs is unknown. Users are reluctant to seek medical advice, except in emergencies, and are driven towards the more dangerous methods of ingestion in unhygienic settings.

Drug laws boost cost of drugs

Drug law, apparently ineffective in reducing consumption, is highly effective in increasing the prices of drugs. In the UK, the National Health Service pays about 6 pounds per gramme for diamorphine (pharmaceutically pure heroin), which might be expected to fetch 30 times as much on the street. In consequence, some users are driven to acquisitive crime and prostitution to finance their habits.

The cost of drug law also spills over in all manner of ways to innocent third parties—not least the taxpayer. Costs are found in (sometimes aggravated) burglary, the fear of theft and violence, and the costs of averting theft.

Estimating the cost of drug abuse

Various attempts have been made to estimate the cost of drug abuse. In 1994, the British Labour Party put the costs of illegal drugs in the UK at about 114 pounds per family per year. By different methods, a recent Canadian study put the annual cost in Ontario in 1992 at nearly $500 million. All these sums are, of course, small compared with those borne by the citizens of the United States.

Cost studies are of considerable interest, but it seems unlikely that they will be decisive as arguments in support of changes in the law. Notions of the “opportunity cost of drug law” (say, in terms of extra health care or education) give pause for thought, but it will always be possible for a critic to claim that this money is well spent, and that even larger expenditures could be justified.

This article therefore stresses another sort of cost, not readily quantifiable, but perhaps in the long--term more important than all the rest. This cost is sometimes described as the “wear and tear on institutions” which tends to undermine the authority of the law and ultimately threatens political institutions.

The illegal drug trade is not only large but is also highly profitable. Where profits are so high, there will always be people sufficiently desperate to risk any legal penalty.

The cost of an illegal market

World governments have handed profits worth billions of dollars annually to criminals, but there is a catch. Criminal firms are denied the use of normal corporate strategies. One would not wish to express strong sympathy for drug dealers, but consider their predicament. In illegal trades, contracts do not have the backing of the law. Disputes cannot be settled, and debts cannot be recovered by appeal to the courts. Firms cannot compete by normal means. Drug dealers cannot use the media to advertise new products, special offers or “spring sales.” Illegal drug firms are not quoted on stock exchanges so the “dawn raid” takes on special meaning. In the absence of normal competitive processes, firms protect and expand their markets by the use of violence, or the threat of violence.

In illegal markets, violence or a credible threat may be regarded as a factor of production from which criminals earn “economic rent.” In competitive markets, drug profits would be reduced to some normal level. This does not happen in illegal markets because in this and other ways prohibition protects the profits of criminals by preventing competition from law--abiding business people.

Some of those who favour legalization regard illegal drug money, and the power it confers on criminals, as more dangerous than drugs. Certainly this is the opinion of many who have more experience of the horrors of prohibition than we have in the UK and Canada. All over the world policemen are killed, and in the US half of all murders are said to be drug--related. As Milton Friedman puts it, “all of these atrocities occur because the United States and other Western countries pass anti--drug laws which they cannot enforce.”

This threat to democratic institutions and the rule of law has caused some to argue that the first priority of drug policy should be “getting gangsters out of drugs” and that legalization would be the surest and swiftest means of achieving this objective.

Conclusion

Prohibitionists have never accepted the burden of responsibility for the wickedness generated by drug law, and have not constructed an intellectually respectable case for prohibition. This leads me to believe that we have won the argument. Sadly, it seems that more young people must die from avoidable overdoses, and more policemen will be killed, before governments are prepared to reconsider.

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Last Modified: Wednesday, October 20, 1999.