With election season upon us, we soon will be bombarded with political plans to “cure” all of society?s ills, from anorexia to obesity. What to do about crime is always a hot topic in election years.
Many cities have successfully reduced crime in the past decade, but an epidemic of violence still plagues America?s cities. The reason: the government?s “War on Drugs.”
Since the early 1970s, the federal government has poured massive sums of money into this war. The result has been a virtual replay of the government?s misguided War on Alcohol (aka Prohibition) during the 1920s and early ?30s.
One major difference is that our war is a hundred times worse. The simple economics of prohibition explains why.
First, making things like drugs and alcohol illegal does not eliminate them but creates black markets for them where they are sold at much higher prices than in legal markets. This makes it more profitable to be in the illicit drug business, so more people will be willing to take the risks of becoming drug dealers.
The higher prices also lead drug users to resort to crime (mostly theft) to support their habit.
In the war on drugs, even success is failure. Every time the government makes major drug arrests, the supply of illicit drugs on the street falls, making it even more profitable than before. That lures more drug dealers to the market, along with more drugs and drug users. This is why the war on drugs has failed miserably in its goal of curtailing drug use (despite suspect statistics showing otherwise).
Second, consider how business contracts are enforced in legal versus illegal markets. In a legal market, disputes between business people are routinely settled through negotiation, arbitration or by the courts.
If one businessperson defrauds another or a customer, the harmed party can go to the courts.
In contrast, a heroin dealer cannot go to a judge and say, “Your honor, my client has failed to pay for the stash of heroin I sold him last week, and I request that you compel him to honor his contract with me.” Instead, drug dealers “enforce” their contracts through violence, Al Capone-style and worse.
Once violence, including murder, becomes the means by which one succeeds in black markets, the enormous profits that can be earned there will attract those in society who have a “comparative advantage” in violence, i.e., those who have the least qualms about brutalizing their fellow man. The worst rise to the top under prohibition. It was true of alcohol prohibition, and it is true of drug prohibition.
In any normal competitive business, whenever someone earns exceptional profits rivals arise to compete for some of those profits, preventing the acquisition of monopoly power. In black markets, existing suppliers murder rivals and the most violent drug gangs become monopolists.
The police often become unintentional silent partners of drug gang monopolists, who sometimes serve as police informants to snitch on competitors. In some cases the police are not-so-silent partners: Many police officers and even judges have been corrupted by the war on drugs.
In the normal business world, a brand name is established through years of producing a good product or service. In black markets, a brand name is earned by acts of violence: Drug gangs intimidate rivals and potential rivals with their violent and bloody behavior. There are even what economists call “economies of scale” to such violence: If a drug gang is especially violent in, say, Los Angeles, its violent reputation will make it easier to work in Chicago, New York, Baltimore and elsewhere.
The enormous profits of the illicit drug trade have also lured thousands of children into the dead-end world of drug-related violence. The “lucky” ones survive long enough to end up in jail, where conditions turn them into hardened criminals.
The consumption of illicit drugs is foolish, but that doesn?t mean it should be illegal. (Indeed, if foolishness were outlawed, then neither the U.S. Congress nor the Maryland General Assembly would exist.) America will continue to suffer from some of the highest violent crime rates in the world, and to incarcerate thousands of young and disproportionately black men as long as it continues to ignore the violent reality ? and the simple economic logic ? of the war on drugs.
Thomas DiLorenzo is professor of economics at Loyola College; author of “How Capitalism Saved America” (Crown Forum/Random House 2005); and a member of The Examiner?s editorial board.
