Did the drugs trade keep the global financial system afloat at the height of the economic crisis?
That was the remarkable claim of Antonio Maria Costa, head of the UN Office on Drugs and Crime, in December 2009. He said that the majority of the US$352 billion of world drug profits were absorbed into the banking system and constituted the ‘only liquid investment capital’ available to some banks when they were on the brink of collapse last year. Costa’s claim is undoubtedly contested, but one thing is clear: trade in illegal narcotics has a significant, if shadowy, influence over economies.
Corruption and violence
To anyone living in countries like Colombia, Mexico, or Afghanistan, this will not come as anything new. For decades, producer and intermediary countries in the developing world have been heavily affected by the trade itself, and the ill-conceived policies aimed at tackling it. Making drugs illegal forces prices up, and means that the trade is inevitably controlled by extremely violent organisations.
In this atmosphere, the drugs trade often contributes to corruption and poor governance, and efforts to confront drug traffickers frequently lead to protracted violence, which is bad for the poor. A previous Due South blog has already detailed the damage being done in Mexico due to the government´s decision to take war to the drugs cartels.
Moreover, there is no sign that prohibitive policies are actually working. Colombia, a country frequently cited as a successful story in the war on drugs, continues to be wracked by problems related to the illegal trade. While the US government and the UN reported that the area of land used for coca cultivation fell in Colombia in 2008, there are strong reasons to believe that such gains are temporary. And armed groups which are financed by drug trafficking, while weakened, continue to re-arm and are arguably extending their control over urban areas.
The business of trafficking
Finally, there is evidence that drug traffickers can be as innovative and intelligent as any legal capitalists, and can find new ways of getting around enforcement policies. In the last few years, for example, West African countries such as Guinea have increasingly fallen under the influence of Colombian drug traffickers looking to find new ways to reach European markets.
According to UK newspaper The Times, an estimated 50 tonnes of cocaine a year, worth US$1.4bn, is said to pass through West Africa, leading to entrenched corruption and the subversion of already fragile states.
The issue is not merely that prohibition has failed in its stated objectives. Far more worryingly, it has had perverse consequences and costs, the majority of which have fallen disproportionately over developing countries.
Amid the furore over mephedrone here in the UK, old arguments about drugs policy are being revisited. Should dangerous substances be banned to discourage consumption, or legalised and regulated to take control of the trade away from illegal organisations? And what are the implications of these debates for the world´s developing countries, many of which are the producers or intermediaries for the illegal drugs trade?
Do we need a new approach to resolve these problems? Fans of the US hit programme The Wire will have seen how in series three, Major Howard ‘Bunny’ Colvin, disillusioned after witnessing decades of a counter-productive war on drugs in the deprived US city of Baltimore, decides to rebel against convention and try a new approach.
Instead of persisting with the same old policies of the ‘war on drugs’, Colvin decides to allow the selling and consumption of drugs in selected zones in the western district, while strongly cracking down on drugs-related activities in all other areas. His controversial experiment, known as ‘Hamsterdam’, leads to unprecedented falls in crime and a reactivation of local communities, for which residents are grateful.
Could such an experiment ever be applied in real life, and on a global scale, and what would that mean for the world´s poor?
As UK columnist George Monbiot noted in an article last year, the UN´s strongest argument against legalisation is that it would lead to a collapse of wholesale prices, thereby leaving developing countries vulnerable to being flooded by addictive substances. The spectre of cocaine and heroin consumption spiking in developing countries is not a joke. Consumption of legal drugs such as alcohol and tobacco is already a blight on some developing countries.
So would legalisation only encourage widespread addiction and despair? And more importantly, would any negative consequences be greater than the current damage done to poor countries by prohibition? It is hard to know. As Monbiot points out, the US Congress and UN are highly unlikely to allow funding for a comprehensive study comparing the potential advantages and disadvantages of such an approach.
Nevertheless, there is some suggestion that the effects might not necessarily be so dramatic. For starters, prices for many illegal drugs are already incredibly cheap in producer and intermediary countries. Yet people in a country like Colombia, in spite of the availability of large amounts of cheap (yes, even when adjusted for local purchasing power), high-quality drugs, and liberal laws on personal consumption, still consume far less marijuana, cocaine and heroin than those in European countries.
This is almost certainly to do with the social stigma attached to these substances. Where consumption does increase, it is not due to the price of drugs, or even because of laws, but because of cultural globalisation. As middle classes expand and become wealthier, increasing numbers of young people ignore traditional taboos against such drugs, and look to copy their peers in developed countries.
So perhaps a greater understanding of the causes of drug consumption, and more importantly, the problematic consumption that leads to addiction and social problems, may allow policies that find a much better balance between legalisation and regulation than current ones.
Of course, the chances of such a paradigm shift happening are minute. Lobby groups that fiercely oppose anything resembling legalisation are powerful in both the US Congress and the UN, and even a president as popular as does not have the political capital to push through such a change. In this context, developing countries have limited room for manoeuvre, actors that make unilateral changes in policy face the threat of becoming pariahs, as Bunny Colvin discovers to his cost.
However, there are at least some signs that developing country legislators are rethinking their approach. In both Argentina and Mexico, possession and consumption of small quantities of drugs has been decriminalised, a move which is being considered in other countries.
In Colombia, where decriminalisation happened in 1994, the relentlessly prohibitionist government has consistently failed in its attempts to reverse such progress. Of course, these changes fall a long way short of outright legalisation, and will not get close to resolving the overriding issue of drug-related violence.
However, they do show how failing paradigms can be rethought, and how developing countries can be active agents in challenging them. Surely, this can only be a positive thing.