Illegal_Markets__the_Economics_of_Drug_Distribution_and_Social_Harm

Illegal markets: the economics of drug distribution and social harm The concept of a market: There are 2 different meanings of market: - The abstract market is an abstract relationship between the buyers and sellers without specific places (for example, transaction through the Internet) - The marketplace is a physical place where transaction occurs Local law enforcement agencies tend to think of marketplaces for illicit drugs, rather than the abstract market for drugs. There key traits of drug markets: organizational form, price and product quality Organizational form: Illicit drug distribution is not carried out by large drug-dealing organizations such as cartels, syndicates organized crime, etc., but by the majority of individuals. Instead of an organization or firm, the drug market is operated through a network. Drugs are produced and distributed by the collective efforts of literally millions of individuals and small organizations that operate in a highly decentralized manner. No one is in charge. Indeed, most people in the network only know the identities of those with whom they interact directly. The less individual know, the better the situation is for all of the other dealers. These networks place many intermediaries between the users and retail sellers (who are most vulnerable to enforcement) and the high level dealers (who sell large quantity). Most of the more important drugs (cocaine, heroin, imported marijuana, etc.) are distributed through long chains of participants. The chain starts with the farmer and then moves through local trader, regional trader, heroin refiner and exporter. The number of people who buy the raw opium and refine it into heroin is very small compared with growers as well as retail sellers. Price: There are 2 general characteristics of drug distribution that lead to high price: (1) structural consequences of product illegality and (2) compensation for non-monetary risks Illicit drugs are very expensive relative to any commodity in regular commerce per unit weigh, even gold. Retail prices of drugs are also different in various nations. Heroin and cocaine prices are higher in higher income countries because the residents are richer and these countries are, on average, father from the producing regions. The wholesale prices of drugs can depend on geography matters. In the U.S heroin is 2 to 3 times more expensive than cocaine. In Asia and Eastern Europe, the ratio is reversed. In Western Europe, prices are much close to parity. A striking feature of drug markets is the huge market from production to final sale. In 2007, 10 grams of opium cost only 85 cents at Afghanistan farm gate, while it is sold 240 USD on the streets of London. Most of the price increase stems from payments to the lowest level distributors. These retailers and lower level wholesalers do not earn large sums, but there are very large numbers of such distributors. The markups usually occur as the drug crosses international borders from the producer countries but the largest absolute price increases occur inside the rich consumer countries. Some of the markup is achieved by the addition of diluents Product quality: Illicit drug markets deliver low quality and services, primarily because of the inability to enforce contracts through normal means. A user can hardly complain to a consumer protection agency about receiving substandards heroin. Sellers themselves often do not know the quality of the product they offer. For street drugs in particular, the pure quantity of drugs obtained in a purchase size varies enormously, at least in the U.S and Australia. Assays of street-level heroin in NY city found that many different types of adulterants had been added to produce heroin. Impurities are not confined to the US, to heroin, or to retail level transactions, but research reports the similar findings for other nations like Germany, Italy, the U.K. Adulteration can clearly cause harm and even dilution can harm users if it increases variability in purity. Not all diluents create problems; indeed, some helps the user to achieve the desired experience. There are other important market-related harms to users such as: the lack of safe injection equipment, putting users in impoverishment, consuming money and time. Effects of production and trafficking on source and transit countries Production of some substances, notably cannabis, is widespread, but a small number of nations produce the bulk of the world’s raw materials for cocaine and heroin, the two drugs that account for most of the international drug trade (by value). Production of some ATSs is also highly concentrated. According to official estimates by UNODC in 2006, three countries: Bolivia, Columbia, and Peru account for entirety of commercial coca production, small amounts of coca are produced in Brazil and Venezuela. Afghanistan and Myanmar accounted for over 95% of global production of opium in 2004 (4570 out of 4850 tons). Second-tier opium producers include Columbia, Laos, and Mexico. Pakistan, Thailand, and Vietnam comprise the third tier. Most coca is currently produced in Colombia. Many rich nations supply a high fraction of their own consumption such as: the U.S, Canada. Production in the Netherlands accounts for a large share of cannabis consumed in Europe. Morocco and Mexico supply substantial quantities of cannabis resin and cannabis herb to Western Europe and the U.S. Synthetic drugs are produced in both developed countries (ecstasy in The Netherlands) and poor countries (Myanmar) There are myriad harms surrounding production such as: leading to corruption, undermining the legitimacy of the state, etc. As the government decide to ignore the violation of law and take no action, systemic corruption, in which a whole agency is corrupted, is essential to undisguised growing. The greater corruption comes from processors and traffickers within the production nations. For example, trafficking organizations in Mexico have corrupted the highest level of government. All of the major coca- and opium producing and trans-shipping countries have chronic corruption problems. In a few countries, drugs generate a large share of all potential revenues for corrupt officials. Heroin trafficking revenues in Tajikistan are equivalent to 50% of recorded GDP. Drug production and trafficking can contribute to political instability and violence. In some nations, the government essentially becomes part of the trafficking system itself or such as: Colombia, Afghanistan, Bolivia. Apart from corruption, ecological damages stem from coca growing, processing and/or eradication. However, in very a few countries like Afghanistan, earnings from opium production and heroin trafficking accounted 30% of total national legitimate GDP. Market harms in rich countries Some but not all retail drug selling is place based, including “street markets”, “crack house” or “tinny houses” (terms used in the Netherlands). They are physical places where illicit drugs are routinely sold. In the U.S, “beeper sales” (drug users using cell phones to send messages or call suppliers to arrange to meet at a specific place for selling) are common. Drug markets generate several harms regardless of where they are place based, virtual, or social network. But, the more prominent market-related harms stem from physical market places. They include increasing order of severity, disorder, property crime, and violence. Studies in Australia and the U.S estimate that approximately a quarter of all property crime nationally is committed to finance the purchase of illicit drugs. Still, the most notorious and severe consequences of drug markets may be the promotion of violence at least in countries like the US. There are 3 types of drug related crimes: (1) “psycho-pharmacological crime” due to the drugs’ effects on the user, (2) “economic compulsive crime” committed to finance drug purchases, and (3) “systemic crime” related to drug market and distribution. In the U.S market related systemic crime accounts for fully half of all drug-related crime. Another harm of place based markets is increase availability of drugs. Corruption is another market-related harm in consumer countries, just as it is in producer and trans-shipment countries. Police in such nations are willing to take bribes from drug sellers and users. There is a long standing concern that drug distribution generates a distinctive kind of criminal enterprise called “organized crime” such as Mafia organizations in Italy, Russia, or syndicates in Colombia, etc.