Microeconomic policy and principles. Discuss the Economics of the war on drugs: The global war on drugs has been a downhill battle with no apparent success, which has also hailed devastating consequences for individuals and societies around the world. Since the initiation of the UN Single Convention on Narcotic Drugs, set up in 1961, and ex U. S. President Onion’s declaration of war on drugs in 1971, billions of dollars and 10,ass’s of lives have been lost in this failing attempt to control the flow of these substances; in which the attempt to do so has also created a disestablishing effect on the world economy.
The cost of the war on drugs has been spread over a wide variety of avenues, including crystallization, rehabilitation and counter measures aimed at the producers, trafficker’s and consumers of illegal drugs, all of which have not sufficed effectively to reduce the demand for supply and consumption. Enforcers in this ever-present battle face a huge complexity in how to tackle their opponents, who are constantly updating and adapting their methods of trafficking and supplying the illegal substances.
In this essay I will discuss the arguments for and against the war on drugs, the impacts on society and the world economy after four decades of this issue. In doing so, I will critically examine the problem using the three economic principles used to assess the effects of the war on drugs, which are scarcity, gains from trades and supply and demand. This analysis is intended to raise such questions as “do governments policies create economic market of its own? Or, do the same economic principles explain government behavior?
Do any of these economic principles explain how bad polices continue with very little or empirical evidence of success? The war on drugs is arguably a tough case to take sides on. Both sides for and against tackling the matter both have heavy implications on society whether it be economically or socially. In this paragraph I will discuss the point from a pro war on drugs perspective and examine how this effort interlinks with economics. The illegal drug market accounts for billions of dollars spread around the world market, which provides a large profit for organized criminal groups to keep the drugs supplied.
For instance, it is estimated that the retail market value of illegal drugs globally is $321. 6 billion USED for year 2009. Table 1 bellow highlights the individual value of cannabis and herein in some Mounties. Table 1: Europe. E (commission report: world drug problem, ten years on) The figures mentioned is only an estimate and cannot be precise, it merely gives an insight into the magnitude of how much the market is worth. This creates huge flow of unmonitored money which moves freely around the globe and is widely untraceable, creating a massive gap in world markets.
Despite the efforts to combat this issue by law enforcement, the high and stable demands for these drugs ensure that black market prices will simply rise in response to the decrease in supply. The illegal drug industry has also created more than a billion Jobs in the black market, which accounts tort the great number to unemployment. The illicit drug industry in rural areas of many countries provides lots of Jobs in the agricultural cultivation of these drugs, many of whom are illiterate and possess limited skills and education.
The illegal drug trade also opens many other Jobs for people involved in laboratories, money launderers, wholesale distribution, retail distributors and runners. These opportunities can be important in economic terms for countries where there are high bevels of unemployment. Money laundering is also another important matter involved in destabilize economies which the war on drugs is trying to counter act. It has a corrosive effect on a countries economy, government and social well-being and also ensures the payment of their crimes by disguising the origin of their money to avoid detection and also re-invest as they wish.
One way in which money laundering through the profits of illicit drugs affects the economy is through undermining the legitimate private sector. By using front companies, criminal organizations are able to stigmatize their funds, also creating an unfair competitive advantage in the market. “Front companies have a competitive advantage over legitimate firms that draw capital funds from financial markets. This makes it difficult, if not impossible, for legitimate business to compete against front companies with subsidized funding, a situation that can result in the crowding out of private sector business by criminal organizations. In the I-J alone, the cost of money laundering amounts to EYE billion a year. According to the former managing director of the International Money Fund, Michel Campuses, money laundering amounts between 2 and 5 per cent of world gross domestic product or at least $600 million. These figures give us an insight to the magnitude of how much illicit drug money thrives in our economy. From living in Tangier, north Morocco, a drug thriving city with criminal organizations main export of hashish, I have witnessed how much the sale of this illicit drug thrives in the economy.
Allot of the main businesses such as cafe©’s, restaurants and nightclubs are used as fronts by criminal organizations; through their huge sub-profits they create an unfair environment in the market. In a report of Morocco made by the U. S. Embassy in 2009, they calculated that the involvement of illicit drugs in the economy amounts between 17 and 40% of the country’s GAP. I have also witnessed how much the illegal drug industry has affected the property and land market in this region, as a result causing a steep rise of price in this area over a short period of time.
In an article on money laundering provided by the CEO of Crime Trends Analysis in Australia, John Walker, he states “The crooks don’t pay tax, so they impose higher taxes on everyone else. They don’t mind paying a premium on legitimate property, so hey compete unfairly in the property markets. ” The illicit drug trade also has disestablishing effects in the valuing of currency rates often causing an overvalue of it due to the inflow go illegal funds reducing legitimate exports. Not only that, but it encourages investment in non productive sectors, delimiters state system and increases the severity of unequal income distribution.
All of this shows the extent to which illegal drugs are involved and therefore destabilize economies. In countries such as Afghanistan, Manner and Ala People’s Democratic Republic the presence of illicit drug cultivation amounts relatively high compared to the GAP of those countries estimating between 10 and 15 per cent. This paragraph will discuss the arguments against the war on drugs and how it is has been seen as a waste of tax payers money not making the situation any better.
I will start by mentioning a quote trot the author of ‘The case of legalizing drugs,’ Richard Lawrence Miller, “Early laws restricted drugs in order to accomplish other social goals, goals that were achieved. Because drug control was not the purpose of the restrictive laws, it is unsurprising that drug use has thrived despite them. Tightening those laws in order to diminish drug use is futile. ” In the U. S. Federal drug control budget the total cost of this project has cost $208. 8 billion USED so far if not more.
In contrast the war on dugs has only lead to a steady increase in the demand and supply of illicit drugs hailing no apparent success. The war on drug thus has only filled up international prisons with a majority of small time drug offenders and people who are least able to defend themselves. In the UK the cost per individual in prisons is E41000. This contributes to the overall expenditure of tax payers money on the war on drugs. Table 2 highlights the figures based on the US Federal Drug Control Budget.
Table 2: (2004-2012 – economics – federal drug control budget) Adding these budgets together – somewhat reflective of the total spending on drug control over the past nine years – produces a gross expenditure figure approximating one-quarter of a trillion dollars ($208. 8 billion). Rehabilitation, treatment and prevention programs seen as a necessary element in the war on drugs has been a very costly project amounting up to 40 per cent of the budget; in spite of this, that area has created a huge sub market in the pharmaceutical area for producing and strutting legal supplements for recovering addicts worth billions.