David McWilliams: The economics of the drug trade and the case for legalisation

Closing down the economy for a year in order to combat a virus comes at enormous economic, social and emotional cost, and yet this society can adjust and function under the most stressful conditions. It shows that we have the capacity to undertake a massive social experiment that no one before the pandemic thought possible.

If we can do this, consider all the other changes we could make. The pandemic should allow us to contemplate change. On almost every policy, from education and the Leaving Cert to housing and the rental crisis, as well as public health, we could ask ourselves: if we were to start again with a blank page, how would we design policy, free of inertia, vested interests and conventional thinking?

Consider the “war on drugs”. This has been one of the most spectacular failures of any policy anywhere, yet we are still wedded to it because conventional wisdom has replaced critical thinking, to the point that we are doing the same thing over and over again and expecting different results.

The war on drugs was supposed to reduce supply, leading to a reduction in drug-taking. Instead it has profoundly enriched drug lords, leading to unspeakable violence because the business is so profitable, while at the same time filling our prisons, courts and Garda stations.

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Despite all this effort to limit supply – from customs, to the drug squad, the courts and the prison service – illegal drugs abound.

The latest CSO figures reveal that there were 22,641 drug offences recorded in the 12 months to the third quarter of 2020 – about 11 per cent of all offences recorded in the State, making it the third-largest offence category behind thefts and public order offences.

Despite the pandemic and associated lockdowns, this was actually an 8.7 per cent increase on the previous year and a significant 44 per cent increase since 2016.

Digging a bit deeper into the drug offences, the vast majority (just under 69 per cent) of drug offences reflect charges of possession for personal use. It seems that it is small-time drug users, not big-time drug lords, who face the brunt of the law.

The dilemma for everyone is that privately we can acknowledge that the war on drugs doesn’t work, but publicly, for the State, it is very difficult to back down and save face, so we plough on.

Prohibition doesn’t work

We know that prohibition does not work. People take recreational drugs, they get off their heads, and that is just a fact of humanity. Whether it is booze or drugs, it’s the same human desire. We might wish it weren’t so, but it is.

The “gateway” drug to harder drugs is not illegal drugs such as weed, but legal ones such as cigarettes and alcohol at an early age.

In the US of the 1920s, the Prohibition movement was infused with all sorts of sectarian and racist agendas, as well as the well-meaning convictions of the abstinence movement. Prohibition drove the business underground, into the clutches of the mafia, smugglers and other criminal enterprises. The quality of “hooch” deteriorated as booze became whatever the local moonshiner decided to put into it.

The market for booze in the US of the 1920s shares similarities with the one for illegal drugs here in the 2020s. In 2020 the Garda Drugs and Organised Crime Bureau seized drugs valued at more than €36 million, up almost 70 per cent from €21.3 million in 2019. These seizures comprised: €15.2 million worth of cannabis (about 42 per cent) €14.6 million worth of cocaine (about 40 per cent), €3.3 million worth of heroin (about 9 per cent) and €900,000 worth of ketamine.

These seizures are only a fraction of what is consumed here, but once supply is constricted, basic economics tells us two things will follow. The first is that price goes up. Once prices go up or are kept high, the profits from being in that business go up too.

As profits go up, more criminals are attracted in to the business. As more are attracted in, the market has to be protected. Turf wars become commonplace because the “turf” is so valuable.

Imagine treating drug addiction not primarily as a criminal issue but largely as a health problem

There are no patents or laws to protect market share in the illegal drugs business, so violence and intimidation are the instruments. As profits are plentiful, there is more cash to plough back in to the business and buy more product.

In terms of the organisational structure of the business, it works like a franchise. Small dealers work exclusively for bigger dealers who work for a boss in an organised chain of command. The top dealers are the owners of a franchise, which is policed on the streets by gangs.

With such a structure, more and more drugs are supplied. For example, in the US, which has spent trillions of dollars on its war on drugs, between 2000 and 2010 “seizures of raw and prepared opium increased by more than 12,000 per cent ... To put it another way, the amount of opium seized in 2010, 57,023kg, was 126 times the amount seized in 1990.”

Health problem

US figures are more accurate than our own, but it’s fair to say that Ireland’s experience mirrors that in the US on a smaller scale. From the late 1980s to 2017, the United States government has spent a total of $1.5 trillion on its war on drugs. Yet the Drug Enforcement Agency is successful in stopping less than 1 per cent of the drugs that are destined for the United States. With such profits amid so much poverty, some people are willing to take the risk of dealing, importing and warehousing.

In Ireland the economic costs to society are widespread. We see the costs in the prisons, which are overflowing with drug-related offenders, and for the gardaí who are trying to police the trade.

It is also a cost to the retailers who must employ security all over our cities to try to stop drug-users stealing to get money for drugs, and there is the cost of maintaining the court system, which is jammed with drug-related offences.

Imagine treating drug addiction not primarily as a criminal issue but largely as a health problem. Imagine legalising and taxing marijuana as countries such as Canada and many states in the US have done. Imagine the State – rather than the criminal – taxed and administered the supply of non-prescribed drugs, as it does prescribed drugs through pharmacies, and taxed the trade?

And what about ring-fencing those tax revenues to finance drug rehabilitation?

Isn’t this more logical than allowing vicious gangs to terrorise neighbourhoods, lording it over the locals, luring young men into a life of crime? Or indeed using prisons as a skip for drug-related social failures by locking up thousands of people who need help, not punishment?

One hundred years after Prohibition saved the mafia in the US, we in Ireland need to talk about drugs and we need to talk about legalisation. If the pandemic shows us how we can respond to a virus, surely it gives us the permission to rethink a drugs policy that has completely failed.