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Drugs and the United States
The economic effect of a change in drug policy
Steele Huss
12/8/2008
The war on drugs is and has been an economic boom for organized crime around the world. The government of the United States attempted its first foray into the legislation of morality in 1920. At this time the government outlawed the manufacture, sale, and distribution of alcohol. This was mandated in the eighteenth amendment. (Wikipedia) This attempt lasted until 1933. During this time there was a large increase in organized crime. While liquor may have been illegal in the United States, it was not illegal in the neighboring nations. Distilleries and breweries in Canada, Mexico and the Caribbean flourished. Most of the increase in business to these foreign companies can be attributed to the illegal import of alcohol into the United States by organized crime. Characters such as Al Capone and Bugs Moran were the leaders in their industry.
As the federal government stepped up its efforts to control this fledgling business it developed task forces to take out these entities. As these task forces began to interfere with the alcohol racket it became more difficult for organized crime to distribute their product. This interference was exactly what the crime syndicates needed to kick them into gear. As supplies of alcohol became harder and harder to acquire, they were able to sell it for a premium. With this higher price came more profits for the syndicates, which then allowed them to increase their capability. With the new found profits the crime syndicates outfitted their men with better and more powerful weapons, faster cars and better ways of concealing their cargo. The federal government did not seem to realize that the approach that they were taking was just adding fuel to the fire. The more the government pushed and the better they got at stopping the shipments, the more profit the crime syndicates made and the better they were able to outfit themselves. Also, the government had put themselves into a situation in which as the criminals made more profits, the government had less tax revenue to work with. The government would spend millions of dollars every year to fight the alcohol problem, and the more they fought the more money the criminals would make.
Eventually, in 1933 the government finally repealed the Volstead Act and ended prohibition. The great depression has been said to be the catalyst that finally ended prohibition. (Wikipedia) The massive economic downturn in the United States and around the world lead policy makers in Washington to try and find new sources of tax revenue. After some research, the government realized that the loss to the federal coffers during the thirteen years of prohibition amounted to approximately five hundred million dollars annually. This number only shows the direct cost of lost taxes on alcohol and its consumption. This does not account for the cost of an added agency just to fight this crime or all of the peripheral costs that accompanied this. As I move through this paper I will make it clear what the costs of the “War on Drugs” really are and whether or not there may be a better approach.
The war on drugs began in earnest in the 1960’s, the returning veterans from Viet-Nam found drugs to be an escape from problems they were ill equipped to deal with on their own. The 60’s youth counter culture used drugs as a way to protest against a government that they felt did not serve nor even listen to them. Politicians realized that there were many people in their respective constituencies that were afraid of drugs and more aptly put afraid of the people that they saw using drugs. Young people in the sixties did not look like their parents and certainly did not act like their parents. Many of the veterans returning home were minorities and in a society that was, and to some extent still is, segregated, lead to an up swell in fear throughout most of suburban America. Politicians grabbed hold of this issue like a pit bull and began to preach the horrors of drug use and the absolute necessity for drug control legislation.
During the period of time between the late 1960’s and the late 1970’s the drug war focused on the drugs of choice for this era, Marijuana and LSD. Government realized almost immediately that they were ill-equipped to deal with the size of the issue they were facing. In July of 1973 Richard Nixon created an agency specifically designed to combat the drug trade around the world. This agency is known as the Drug Enforcement Administration. In its first year the DEA had a budget of 75 million dollars and had just over 1400 agents. (Drug Enforcement Administration) This was what Nixon touted as the beginning of the end of drug trafficking in the United States. Obviously, Richard Nixon and all of the incompetents in Washington had learned nothing from the governments failed attempt to control alcohol just fifty years earlier.
As with alcohol, the government increased its capability to combat drugs and made it more difficult for drugs to get into the country. Legislation enacted laws that imposed strict penalties on the people convicted of these crimes. These increases in capability by the government lead to the price of these drugs increasing and the profits for the drug traffickers increasing. This is simply supply and demand, government economists should have been part of the discussion when laws were being created. Legislators hide these things from the voting public when they tout the number of arrests made each year. Again and again the people of this country listen to what they are told rather than searching for the truth and understanding what the real costs and benefits are.
So, what are the actual costs of the war on drugs? By the end of 2008 the federal, state and local governments of the United States will have spent approximately 50 billion dollars on this year’s contribution to the war on drugs. This number has ranged from 20 billion in 1980 up to its current level. (US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,) Currently there are 249,400 inmates incarcerated on drug related charges, the department of correction states that the cost of housing a prisoner is $67.55 per day, this equates to $16,846,970 per day just to keep these people incarcerated. These are all direct financial costs, but what are the social costs of the drug policies of this country. This is a point which is hotly debated, but many laws have been enacted over the years which encroach on individuals rights as outlined in the constitution. How many times are searches performed based more on the color of a person’s skin or the neighborhood they happen to be driving through rather than an actual suspicion or better yet probable cause? Thousands of people are killed each year in an attempt to stop the proliferation of drugs. Does the social benefit of removing a drug dealer from the street outweigh the social cost of the death of that individual? Are there more costs involved in that person’s death? Does the death of that person cause the members of the community to rejoice and take comfort in the action of law enforcement or does it cause them to become bitter and scared of law enforcement? Where does the majority of the money go that is spent on drug policy in this nation? Through all of this spending of taxpayer money over the years, what has happened to the drug traffickers? They are currently making more profits than any other time in history. The value of the drugs sold in the United States in 2003 is larger than the Gross Domestic Product of 88% of the countries in the world. There must be a better way.
In any business, if your own actions were causing your costs to go up and your competitor’s profits to rise at a staggering rate, you would conclude that there was a flaw in your business plan. Why then does our government continue down a reckless path that is so obviously not working? Some believe that the government has a vested interest in keeping this fear alive. Fear gathers votes, when we are afraid of something we elect people who we feel will protect us from what we are afraid of. If we are no longer afraid the government loses power and if they lose power they lose control. So, what can be said for the economic impact of the war on drugs? It is a disaster; it has cost the tax payers of the United States trillions of dollars, imprisoned thousands of otherwise harmless people and spanned thirty years. All of this and in 2007 there were more drugs in the United States than in any other time in our history. What does this prove? Only that the course of action being taken is the wrong one and at a time when our country is reeling from economic hardship we need to find a better use for our money and our human capital.
Is there a better way? Can these policies be reworked into a coherent system that not only has good intentions but also has good outcomes? Yes, first and foremost education and prevention must receive much more emphasis. Under the current system less than one third of the money spent on the war on drugs goes towards education and prevention. (Pawlowski) This amount includes all of the money spent on rehabilitation. If we focus on educating people about not only the dangers of drug use, addiction and proliferation, but the consequences as well we will be able to stop much of the problem. Unfortunately, our current policy relies primarily on apprehension and incarceration. In all other aspects of our governmental policies we contend that pre-emptive strikes are the most effective way of defeating an enemy, but when it comes to the war on drugs we constantly wait until there is a large problem and then try to put a stop to it with a rather half hearted effort. This has proven itself to be absolutely ineffective and economically draining on our country, while at the same time enriching our enemies. Politicians talk endlessly about freeing ourselves from the chains of oil so that we will no longer be enriching our enemies, but, our enemies have nothing to fear if we attack that problem in the same way we have attacked the problem with drugs. In fact, our enemies will continue to grow wealthier.
The second facet of this plan is to legalize some of the drugs that are currently outlawed. This is the portion of the plan that will meet the most resistance. We cannot make all drugs legal. But there are some that make up the vast majority of the drugs in use today that have been proven to be less addictive and less harmful than many things that are currently approved by the FDA. Certainly there would be a need for regulation, as there is with tobacco and alcohol, but imagine if you will, the effect of bringing a new industry into the United States that at the moment it starts would be generating over four hundred billion dollars annually towards our GDP. What kind of tax revenue might this industry bring?
There are many benefits to a plan like this, but the most important is the social benefit. We would now have people who had formerly been running organized crime syndicates running drug companies. These people would be making astronomical sums of money, legally. This would mean that all of these companies would be registered, which would allow for regulation and oversight. This would also make these companies less likely to engage in the proliferation of drugs that were not legal for fear of losing the lucrative business that they had. Drug crime would be reduced, the majority of drug related crimes are between members of the illicit trade battling over turf. (US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,) This would be a thing of the past because with regulation and registration the DEA would have a list of suspects almost instantaneously. The same thing that currently keeps these people plying their trade illegally would keep them doing it legally if this plan was enacted. With the vast amounts of tax revenue generated from a plan like this, the government would be able to make decisive pre-emptive strikes at young people with education campaigns that might actually connect with them and help to keep them off of drugs.
The next benefit to this program is social as well as economical. If the import of drugs from other countries was limited to raw, unprocessed drugs, we would be able to create many jobs. We would have to build factories to process the materials. This would create construction jobs. Once the factories were built, labor would need to be employed to operate the factories. Management would be needed to oversee the production. A whole new retail sector would develop which would spawn even more jobs. With all of these jobs the government benefits with more tax revenue that can then be employed to fight against the proliferation of drugs that actually do cause harm such as amphetamines and barbiturates.
If, with regards to this problem, we as a country go back to our constitutional origins of belief in freedom and choice we could very easily turn what has been a thorn in the side of the people of this country and an economic drain into the boom that it has been for those pursuing this course of action illegally for the past thirty years. The basics of good economic policy say that you need to produce what the people want for the least possible cost. This plan not only does that, but it also takes into account the moral hazards of this problem and rather than deciding that morality lies in prosecution, this plan states that morality lies in education. An educated population will, given enough time, take actions that are in the best interest of the population as a whole.
Works Cited
Drug Enforcement Administration. U.S. Drug Enforcement Administration. 2008. 10 December 2008 .
Pawlowski, Michael. Michigan State University. 2007. 10 December 2008 .
"US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,." National Research Council (2004): 781-782.
Wikipedia. 10 Dec 2008. 10 December 2008 .
The economic effect of a change in drug policy
Steele Huss
12/8/2008
The war on drugs is and has been an economic boom for organized crime around the world. The government of the United States attempted its first foray into the legislation of morality in 1920. At this time the government outlawed the manufacture, sale, and distribution of alcohol. This was mandated in the eighteenth amendment. (Wikipedia) This attempt lasted until 1933. During this time there was a large increase in organized crime. While liquor may have been illegal in the United States, it was not illegal in the neighboring nations. Distilleries and breweries in Canada, Mexico and the Caribbean flourished. Most of the increase in business to these foreign companies can be attributed to the illegal import of alcohol into the United States by organized crime. Characters such as Al Capone and Bugs Moran were the leaders in their industry.
As the federal government stepped up its efforts to control this fledgling business it developed task forces to take out these entities. As these task forces began to interfere with the alcohol racket it became more difficult for organized crime to distribute their product. This interference was exactly what the crime syndicates needed to kick them into gear. As supplies of alcohol became harder and harder to acquire, they were able to sell it for a premium. With this higher price came more profits for the syndicates, which then allowed them to increase their capability. With the new found profits the crime syndicates outfitted their men with better and more powerful weapons, faster cars and better ways of concealing their cargo. The federal government did not seem to realize that the approach that they were taking was just adding fuel to the fire. The more the government pushed and the better they got at stopping the shipments, the more profit the crime syndicates made and the better they were able to outfit themselves. Also, the government had put themselves into a situation in which as the criminals made more profits, the government had less tax revenue to work with. The government would spend millions of dollars every year to fight the alcohol problem, and the more they fought the more money the criminals would make.
Eventually, in 1933 the government finally repealed the Volstead Act and ended prohibition. The great depression has been said to be the catalyst that finally ended prohibition. (Wikipedia) The massive economic downturn in the United States and around the world lead policy makers in Washington to try and find new sources of tax revenue. After some research, the government realized that the loss to the federal coffers during the thirteen years of prohibition amounted to approximately five hundred million dollars annually. This number only shows the direct cost of lost taxes on alcohol and its consumption. This does not account for the cost of an added agency just to fight this crime or all of the peripheral costs that accompanied this. As I move through this paper I will make it clear what the costs of the “War on Drugs” really are and whether or not there may be a better approach.
The war on drugs began in earnest in the 1960’s, the returning veterans from Viet-Nam found drugs to be an escape from problems they were ill equipped to deal with on their own. The 60’s youth counter culture used drugs as a way to protest against a government that they felt did not serve nor even listen to them. Politicians realized that there were many people in their respective constituencies that were afraid of drugs and more aptly put afraid of the people that they saw using drugs. Young people in the sixties did not look like their parents and certainly did not act like their parents. Many of the veterans returning home were minorities and in a society that was, and to some extent still is, segregated, lead to an up swell in fear throughout most of suburban America. Politicians grabbed hold of this issue like a pit bull and began to preach the horrors of drug use and the absolute necessity for drug control legislation.
During the period of time between the late 1960’s and the late 1970’s the drug war focused on the drugs of choice for this era, Marijuana and LSD. Government realized almost immediately that they were ill-equipped to deal with the size of the issue they were facing. In July of 1973 Richard Nixon created an agency specifically designed to combat the drug trade around the world. This agency is known as the Drug Enforcement Administration. In its first year the DEA had a budget of 75 million dollars and had just over 1400 agents. (Drug Enforcement Administration) This was what Nixon touted as the beginning of the end of drug trafficking in the United States. Obviously, Richard Nixon and all of the incompetents in Washington had learned nothing from the governments failed attempt to control alcohol just fifty years earlier.
As with alcohol, the government increased its capability to combat drugs and made it more difficult for drugs to get into the country. Legislation enacted laws that imposed strict penalties on the people convicted of these crimes. These increases in capability by the government lead to the price of these drugs increasing and the profits for the drug traffickers increasing. This is simply supply and demand, government economists should have been part of the discussion when laws were being created. Legislators hide these things from the voting public when they tout the number of arrests made each year. Again and again the people of this country listen to what they are told rather than searching for the truth and understanding what the real costs and benefits are.
So, what are the actual costs of the war on drugs? By the end of 2008 the federal, state and local governments of the United States will have spent approximately 50 billion dollars on this year’s contribution to the war on drugs. This number has ranged from 20 billion in 1980 up to its current level. (US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,) Currently there are 249,400 inmates incarcerated on drug related charges, the department of correction states that the cost of housing a prisoner is $67.55 per day, this equates to $16,846,970 per day just to keep these people incarcerated. These are all direct financial costs, but what are the social costs of the drug policies of this country. This is a point which is hotly debated, but many laws have been enacted over the years which encroach on individuals rights as outlined in the constitution. How many times are searches performed based more on the color of a person’s skin or the neighborhood they happen to be driving through rather than an actual suspicion or better yet probable cause? Thousands of people are killed each year in an attempt to stop the proliferation of drugs. Does the social benefit of removing a drug dealer from the street outweigh the social cost of the death of that individual? Are there more costs involved in that person’s death? Does the death of that person cause the members of the community to rejoice and take comfort in the action of law enforcement or does it cause them to become bitter and scared of law enforcement? Where does the majority of the money go that is spent on drug policy in this nation? Through all of this spending of taxpayer money over the years, what has happened to the drug traffickers? They are currently making more profits than any other time in history. The value of the drugs sold in the United States in 2003 is larger than the Gross Domestic Product of 88% of the countries in the world. There must be a better way.
In any business, if your own actions were causing your costs to go up and your competitor’s profits to rise at a staggering rate, you would conclude that there was a flaw in your business plan. Why then does our government continue down a reckless path that is so obviously not working? Some believe that the government has a vested interest in keeping this fear alive. Fear gathers votes, when we are afraid of something we elect people who we feel will protect us from what we are afraid of. If we are no longer afraid the government loses power and if they lose power they lose control. So, what can be said for the economic impact of the war on drugs? It is a disaster; it has cost the tax payers of the United States trillions of dollars, imprisoned thousands of otherwise harmless people and spanned thirty years. All of this and in 2007 there were more drugs in the United States than in any other time in our history. What does this prove? Only that the course of action being taken is the wrong one and at a time when our country is reeling from economic hardship we need to find a better use for our money and our human capital.
Is there a better way? Can these policies be reworked into a coherent system that not only has good intentions but also has good outcomes? Yes, first and foremost education and prevention must receive much more emphasis. Under the current system less than one third of the money spent on the war on drugs goes towards education and prevention. (Pawlowski) This amount includes all of the money spent on rehabilitation. If we focus on educating people about not only the dangers of drug use, addiction and proliferation, but the consequences as well we will be able to stop much of the problem. Unfortunately, our current policy relies primarily on apprehension and incarceration. In all other aspects of our governmental policies we contend that pre-emptive strikes are the most effective way of defeating an enemy, but when it comes to the war on drugs we constantly wait until there is a large problem and then try to put a stop to it with a rather half hearted effort. This has proven itself to be absolutely ineffective and economically draining on our country, while at the same time enriching our enemies. Politicians talk endlessly about freeing ourselves from the chains of oil so that we will no longer be enriching our enemies, but, our enemies have nothing to fear if we attack that problem in the same way we have attacked the problem with drugs. In fact, our enemies will continue to grow wealthier.
The second facet of this plan is to legalize some of the drugs that are currently outlawed. This is the portion of the plan that will meet the most resistance. We cannot make all drugs legal. But there are some that make up the vast majority of the drugs in use today that have been proven to be less addictive and less harmful than many things that are currently approved by the FDA. Certainly there would be a need for regulation, as there is with tobacco and alcohol, but imagine if you will, the effect of bringing a new industry into the United States that at the moment it starts would be generating over four hundred billion dollars annually towards our GDP. What kind of tax revenue might this industry bring?
There are many benefits to a plan like this, but the most important is the social benefit. We would now have people who had formerly been running organized crime syndicates running drug companies. These people would be making astronomical sums of money, legally. This would mean that all of these companies would be registered, which would allow for regulation and oversight. This would also make these companies less likely to engage in the proliferation of drugs that were not legal for fear of losing the lucrative business that they had. Drug crime would be reduced, the majority of drug related crimes are between members of the illicit trade battling over turf. (US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,) This would be a thing of the past because with regulation and registration the DEA would have a list of suspects almost instantaneously. The same thing that currently keeps these people plying their trade illegally would keep them doing it legally if this plan was enacted. With the vast amounts of tax revenue generated from a plan like this, the government would be able to make decisive pre-emptive strikes at young people with education campaigns that might actually connect with them and help to keep them off of drugs.
The next benefit to this program is social as well as economical. If the import of drugs from other countries was limited to raw, unprocessed drugs, we would be able to create many jobs. We would have to build factories to process the materials. This would create construction jobs. Once the factories were built, labor would need to be employed to operate the factories. Management would be needed to oversee the production. A whole new retail sector would develop which would spawn even more jobs. With all of these jobs the government benefits with more tax revenue that can then be employed to fight against the proliferation of drugs that actually do cause harm such as amphetamines and barbiturates.
If, with regards to this problem, we as a country go back to our constitutional origins of belief in freedom and choice we could very easily turn what has been a thorn in the side of the people of this country and an economic drain into the boom that it has been for those pursuing this course of action illegally for the past thirty years. The basics of good economic policy say that you need to produce what the people want for the least possible cost. This plan not only does that, but it also takes into account the moral hazards of this problem and rather than deciding that morality lies in prosecution, this plan states that morality lies in education. An educated population will, given enough time, take actions that are in the best interest of the population as a whole.
Works Cited
Drug Enforcement Administration. U.S. Drug Enforcement Administration. 2008. 10 December 2008 .
Pawlowski, Michael. Michigan State University. 2007. 10 December 2008 .
"US Drug Control Policies: Federal Spending on Law Enforcement Versus Treatment in Public Health Outcomes,." National Research Council (2004): 781-782.
Wikipedia. 10 Dec 2008. 10 December 2008 .
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