legalization will do what?

Fester over at Newshoggers proposes that we legalize all drugs and put high taxes on them in order to drive drug lords out of business. He makes an excellent point that drug lords are only becoming more and more powerful, and that Mexico is becoming destabilized, possibly to the point of becoming a criminal-controlled state, which would be a disaster for the US. This argument is good in theory, i.e., US pharmaceutical companies could make heroin and cocaine, etc., much more cheaply than the drug lords and could then drive them out of business.

What it fails to recognize is that drug lords don’t compete along capitalist lines, they compete along lines of both market and projection of violence. If big US pharmaceutical companies become competitors, then drug lords will have the executives executed, chemists murdered or kidnapped, and normal employees bullied and harassed. There will be no way the companies can provide sufficient security; they would have to secure every employee’s home. Also, if the companies have to greatly increase security, then that greatly increases their costs, meaning the drugs they produce won’t necessarily be that competitive against drug lords with established markets.

As a side note, high taxes will be counter-productive, decreasing the competitiveness of legally-manufactured drugs, as I noted earlier.

###

h/t Instapundit, who seems to like the idea.

Advertisements

3 comments so far

  1. Pete Guither on

    OK, that’s just ridiculous. Did that happen at the end of alcohol prohibition? The first day that people are able to buy drugs legally, the drug cartels will no longer have a viable profitable business, because people would rather buy through legal channels. What good will it do to kidnap chemists, unless the drug cartels can somehow kidnap every one of them in the world (and as prohibition has shown us, it’s impossible to contain drug trade). Marijuana is the largest source of illicit drug distribution, and that can be grown in your back yard. Coca leaves are already being grown legally in Bolivia and other places, and we still import large quantities (stripped of certain ingredients) for Coca Cola).

    It is the market that will doom the drug lords. As soon as the market opens up to competition, the huge profits for violent-based trafficking ends. Sure, they’ll find something else to do temporarily and the violence won’t go away immediately. They’ll probably go into theft, kidnapping, etc. But without the high profits, there will be less incentive for new thugs to join up, and with profits dying up, they’ll be less able to bribe law enforcement, and they’ll start losing their support and power.

    The more we continue with prohibition, the more we reward the most ruthless, the most violent, and the most intelligent of the illegal traffickers, as we capture the others. The stronger the crack-down, the greater the escalation of violence. Simple economics.

    Regarding taxes and production costs. It’s simple economics again. Figure that most people will be willing to pay a certain amount more to go through legal channels (when I was a smoker, saving a couple of bucks on a carton wouldn’t cause me to go illegal, while saving $20 might) and just make sure that the legal price including taxes doesn’t exceed that threshold. You still have a ton to play with. I’ve seen estimates of the markup in cocaine ranging from 50-1 to 385-1. While marijuana has a lower markup, it’s still dramatic — probably around 2,000%

  2. lumpenscholar on

    Maybe it is ridiculous. Maybe you can explain what the drug lords will do between the time legalization occurs and companies can begin putting out legal recreational drugs. I think they’ll do what every capitalist would do, which is entrench themselves in their own markets and do everything they can to drive up competitors’ costs. Unlike most capitalist enterprises, drug lords can exercise illegal options for driving up costs.

    For example, killing chemists working for competitors, along with their families. You don’t need to kill very many, just enough so that chemists don’t want to work for companies producing recreational drugs without MUCH higher wages to compensate for the danger. Blowing up labs, murdering employees at job sites, hijacking shipments (once they start rolling), any kind of general property damage, all these things will increase insurance premiums, security costs, and the cost of labor. Increased production costs equal increased prices for products. They may deter some companies from entering the market at all. Simple economics.

    On the other hand, marijuana could hit the markets pretty much immediately after legalization and production is so decentralized that drug cartels could do little about it. It would immediately take a big bite out of their profits and free law enforcement to focus on other tasks. That’s a big reason I support legalization of marijuana.

    On the taxes issue, I agree with you. What I disagree with is people who go around saying ‘put really high taxes on it’. We can tax it to the extent you suggest, and that may be high, or it may not. Let’s not go overboard with speculations of tremendous government wealth from a drug tax.

  3. lumpenscholar on

    Also, the end of alcohol prohibition is not the best example for what would happen after legalizing drugs (except in the case of marijuana). Today’s drug cartels have much more power, organization, and capability for violence than any bootlegger ever did. The dynamics of this change will be very different, I think.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: