Our Right to Poison Lessons from the Failed War on Drugs
Part 3: Prices, Premiums and Demand
The Medellín and Cali drug cartels, which once controlled Colombia, have been destroyed with the help of American military aid. Nevertheless, the global trade has hardly changed. It has merely undergone a shift.
Dozens of smaller groups have now taken the place of the two big cartels. New fields in Peru and Bolivia have already replaced some of the 100,000 hectares of coca fields that Pérez has destroyed in Colombia. And the carnage committed by drug warlords no longer takes place in Medellín, but in Mexican cities instead, such Ciudad Juárez.
The drug trade is a straightforward business. The farther the product is removed from the coca plantation, and the closer it comes to some party in Los Angeles or Berlin, the higher the price. The final price has nothing to do with actual costs, which make up only a miniscule percentage of it.
Most of the purchase price consists of a sort of risk premium: the amount the dealer collects in return for the risk of ending up in prison. In other words, it includes an insane profit margin that can only exist because the product is banned.
Since the costs are irrelevant, the amount of cocaine that General Pérez confiscated is also practically irrelevant. From the standpoint of the dealers who have just lost almost two tons of drugs, this only means that, since the police are being vigilant, it's time to increase the price of our product.
The demand for narcotics is what is known as "inelastic." No matter how cheap heroin is, most people won't buy it, regardless of the price. But addicts will always pay. They have no choice, or else they wouldn't be addicts. To them, it doesn't matter what the drugs cost.
That's the economy of drugs.
Growing Resistance to the War
General Pérez has been a police officer for 35 years. He is likely to be named the head of Colombia's national police force soon. Does he believe that he is winning the war? "Of course, when we chop off one head another one immediately grows in its place," he says. "But I do believe we can destroy all coca fields."
No fields, no cocaine -- that's the equation. What does he need to achieve his goal? "More time, and more soldiers," says Pérez.
In other words, more war.
A few years ago, hardly anyone would have contradicted General Pérez. But, these days, the world is searching for alternatives.
"What is happening in Latin America is a revolution," says Ethan Nadelmann, the expert in New York. "Presidents are saying: 'Put an end to the drug war!' That was completely inconceivable for a long time."
For a long 25 years, Nadelmann was a revolutionary without a revolution. But now, all of sudden, he is in the thick of things. He met three presidents last year: then-Mexican President Felipe Caldéron, Colombian President Santos and Guatemalan President Pérez Molina. They were all seeking his advice to develop a new, more effective drug policy. "It's the best time I've ever had," says Nadelmann.
The resistance is building in Latin America, in the US's backyard, of all places. It is a part of the world where, for decades, the CIA brought down governments and helped install dictators in power. In principle, it is also a story of emancipation. Latin America is becoming more self-confident as its economies strengthen, and the fear of the Yankees to the north is subsiding. Nadelmann now wants to take advantage of "the momentum" and hopes to take the revolution around the world.
Prominent Drug-War Opponents Unite
On some days, it seems as if his plan could work. An astonishing press conference took place at the Waldorf Astoria Hotel, in New York, in June 2011. The Global Commission on Drug Policy was introducing itself.
The members of the commission include former UN Secretary-General Kofi Annan, former NATO Secretary-General Javier Solana, George Schulz, US secretary of state under former President Ronald Reagan, and former US Federal Reserve Chairman Paul Volcker. It is the most prominent collection of drug-war opponents ever assembled.
The commission presented a 20-page report, the first sentence of which read: "The global war on drugs has failed, with devastating consequences for individuals and societies around the world." Nadelmann wrote the sentence, as well as the report's entire executive summary. He advised the commission, and he also searched for high-profile members.
One of the speakers at the press conference in the Waldorf Astoria was an amiable man with glasses: César Gaviria, the president of Colombia from 1990 to 1994. While in office, he did almost everything except fight a war. Colombia was what Mexico is today: a country hijacked by drug lords.
"An irrational and pointless drug policy was partly responsible for that period," says Gaviria today.
He is standing in his office, looking out at Bogotá traffic through a bulletproof glass window. The entire office building is as heavily secured as an airport terminal. As the president who hunted down Pablo Escobar, Gaviria is used to living behind bulletproof glass.
For Gaviria, the drug war was long an incontrovertible part of policy. "We never questioned whether there was an alternative," says Gaviria. The war was simply a fact of life, as was waging it.
It was former Brazilian President Fernando Cardoso who convinced Gaviria, in long conversations, to start giving more thought to the matter. Cardoso described how the war on drugs was criminalizing politics in Latin America, and Gaviria was familiar with the power of drug money from his own experience. Drug money was used to buy police officers, judges and politicians. Escobar even bought the constitution when he used his money to bribe the government into prohibiting the extradition of Colombian citizens. And drug money was behind the attack on Gaviria that was planned by Popeye, the killer.
On Nov. 26, 1989, C4 plastic explosives brought down Avianca Flight 203, killing 110 people. Gaviria, a presidential candidate at the time, had missed the flight -- and survived as a result.
Governments are almost powerless against drug money, as Colombia was then and Mexico is today. "It's advantageous to withdraw from active politics. It gives you time to think," says Gaviria.
The Global Commission report circled the globe. It felt like a taboo had been broken. It wasn't marijuana hunters who were calling for a drug policy. Instead, it was now people like former drug warrior Gaviria and former NATO Secretary-General Solana -- people from the mainstream of world politics.