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January 30, 2007

Addicted to the Drug War

The war on illegal drugs engenders corruption, terrorism, and family breakdown, weakening America while strengthening our enemies. By Robert Leeson.


The post–9/11 assault on terrorist assets was organizationally impressive. As former U.S. Treasury undersecretary John Taylor documents (Global Financial Warriors, 2007), 172 countries and jurisdictions issued freezing orders, 120 countries passed new laws and regulations, and 1,400 accounts were frozen. But the stock of frozen assets (U.S. $137 million) looks meager compared to the annual flow of U.S. $380 billion generated by the illegal drug industry (about 8 percent of total international trade).

Agents of organized political violence are often beneficiaries of these illegal flows: FARC (the Revolutionary Armed Forces of Colombia) receives $300 million a year from the sale of cocaine, and the PKK (the Turkish-based Kurdistan Workers’ Party) is believed to be responsible for most of the narcotics seized in Europe.

Those who associate being “tough on drugs” with righteousness will only reluctantly admit that their policies have been “doing the devil’s work.” The evidence, however, is clear: The war on drugs has left some terrorists smelling of poppies, if not roses.

Afghanistan produces 92 percent of the world’s opiates. The Taliban and Al-Qaeda take a cut at all stages: production (institutionalized taxation at 10 to 20 percent of the yield), processing, and transporting. From 20 to 30 percent of Al-Qaeda’s bucks for bangs may derive from drugs.

Partial supply-side “victories” in the war on drugs are doomed to be illusory. According to the United Nations’ counternarcotics agency, the export value of the 2004 Afghan opium crop was $2.8 billion (about 60 percent of Afghanistan’s GDP). In 2005, an internationally funded $860 million blitz cut Afghan production by an estimated 21 percent. Yet, given the nature of demand, any cut in supply will cause a more than equivalent increase in price.

The war on drugs has left some terrorists smelling of poppies, if not roses.

Afghan farmers responded predictably to the incentives provided by this “victory”: The United Nations’ 2006 Opium Rapid Assessment Survey reported an increasing trend in poppy cultivation in 13 provinces but a decrease in only three. Ninety-six percent of growers offered market forces as the primary explanation for their decision to ignore the fact that opium poppy cultivation is illegal and considered to be prohibited by Islam.

Those who lead the fight against terror, crime, and drugs have not grasped the interrelationships between the component parts of this unholy alliance; nor do they realize that their war on drugs has created a common interest between these groups. President Bush correctly states that “trafficking of drugs finances the world of terror”—but how accurate is former House Speaker Dennis Hastert’s statement that, “by going after the illegal drug trade, we reduce the ability to launch attacks against the United States”?

The demand for drugs (as a category) is inelastic, that is, relatively unresponsive to price changes. Drug revenue can be targeted by reducing demand at any given price, reducing the price, or both. If “going after” means reducing supply, this will tend to increase prices and thus revenue for drug dealers.

To break this drug-terrorist nexus requires a major attack on the demand side and a major rethink of supply. All feasible (but less than
perfect) options must be systematically evaluated. Those who conjure up the image of a drug-free earthly paradise have forged an unintentional alliance with those who peddle the specter of a heavenly paradise to motivate suicide bombers.

Because demand creates its own supply, we must decide who is to control supply: criminals or health professionals. Many of these drugs were developed by pharmaceutical companies: Shouldn’t these companies be allowed to develop, test, and manufacture similar drugs? This alternative must be evaluated. Alcohol and tobacco—the biggest killers—are sold with appropriate health warnings. Why not allow dependency-minimized versions of currently illegal drugs to be supplied with similar warnings?

Prohibition of alcohol revealed that the costs outweighed the benefits; the current experiment reveals the same.

The alternative is that drug users will be supplied from shady sources: This is the reality of the market. Although consumption might increase with decriminalization, self-harm would be reduced with safety oversight in manufacturing. Fewer shared needles would restrict the transmission of HIV and AIDS.

The war on drugs weakens America and strengthens its enemies in at least five ways.

First, prohibition effectively supplies criminals with skills demanded by terrorists: specialized knowledge about how to cross borders undetected.

Second, prohibition helps finance terrorist operations. After decriminalization, terrorists would harvest fewer bombs from planting poppies.

Third, prohibition contributes to the supply of drug-corrupted “gangster cops” (the title of a forthcoming book by Joe McNamara, former police chief of Kansas City, Missouri, and San Jose, California).

Fourth, about a quarter of convicted property and drug offenders in the United States (and one-third of incarcerated mothers) commit their crimes to obtain drugs or money for drugs. Eighty-five percent of parents in state prisons have a history of drug use, and a majority reported that they had used drugs in the month before their current offense. The prison industrial complex incarcerates more than a million parents of minor children: Between 2 percent and 3 percent of American children have a parent in jail. The U.S. Bureau of Justice Statistics reports that almost 10 percent of imprisoned mothers have left behind at least one child in out-of-home care. Since family breakdown is associated with intergenerational poverty and subsequent drug abuse, it would be preferable to deal with these issues within the health, rather than the criminal, system. Moreover, as the price of drugs falls, drug-related property crime would also fall.

Fifth, successive “drug czars” have expanded their empires, but after 18 years, the U.S. Office of National Drug Control Policy has failed to curtail drug consumption while continuing to consume taxpayer funds, with $245 million allocated for 2007.

The war on drugs is responsible for almost one-quarter of the $40 billion swallowed up each year by the U.S. prison system. Many of those caught become permanently trapped in tangled webs woven by drug crusaders. With decriminalization, American taxpayers would be relieved of these often counterproductive burdens.

Those who lead the fight against “terror,” crime, and drugs have not grasped the interrelationships between the parts of this unholy alliance; nor do they realize that their war on drugs has created a common interest among these groups.

Alcohol once made the mob rich and powerful but now generates state and national tax revenue (in 2005, the federal treasury received almost $9 billion from that source). Other taxes could be reduced by squashing illegal (nontaxable) drug revenues. This would both reallocate expenditure towards nondrug taxable activities and shift spending on drugs away from the underground into the overground taxable economy.

Prohibition of alcohol (1920–33) revealed that the costs outweighed the benefits; the same is revealed by the current experiment. A “peace dividend” from the war on drugs would free up resources for a country already fighting on multiple fronts and degrade the resources of its enemies.

If policy makers fail to make peace work and become nostalgic for current arrangements, the proceeds of the drug industry can be transferred from pharmaceutical companies back to Osama bin Laden and his associates.

The bombs dropped on Vietnam “exploded” in American cities; the drugs peddled on American streets now finance roadside bombs in Iraq and Afghanistan. President Bush declared that “the first shot in the war was when we started cutting off their money”; but those who prosecute that war are being shot in the foot by an incentive structure that increases the ability of terrorists to launch attacks against the United States and its allies.


Robert Leeson was a W. Glenn Campbell and Rita Ricardo-Campbell National Fellow for 2006–2007 at the Hoover Institution.


This essay appeared in the Australian Financial Review on October 20, 2006. Contributing to this article were: Alexandra Baecker, Nicolas Beck, James Morrison, Nelson Ray, Jadie Rendon, and Adam Yuan of Stanford University.

Available from the Hoover Press is Drug War Deadlock: The Policy Battle Continues, edited by Laura E. Huggins. To order, call 800.935.2882 or visit www.hooverpress.org.