Efforts to reduce cocaine production and exports from the Andean region continue to be an important component of U.S. drug control efforts. This article presents a simple economic analysis of the effects of major source-country control programs: eradication, crop substitution, and refinery destruction. When account is taken of the structure of prices in the cocaine industry and the ability of farmers and refiners to make behavioral adaptations, none of these programs has much prospect for affecting the flow of cocaine to the United States. Despite the continued failure of the programs and the analytic arguments against them, they continue to flourish budgetarily; they are protected by the rhetorical claims of the past, the need to appear to have a complete portfolio of programs, and the sheer momentum of drug control expenditures.
Get full access to this article
View all access options for this article.
References
1.
1. National Narcotics Intelligence Consumers Committee, Narcotics Intelligence Estimate, (Washington, DC: Department of Justice, Drug Enforcement Administration, 1990).
2.
For a more complex view, see Seizing Opportunities: Report of the Inter-American Commission on Drug Policy (San Diego: University of California, Institute of the Americas and the Center for Iberian and Latin American Studies, 1991).
3.
3. The conclusions of this article are close to those of an earlier analysis that dealt primarily with opium control. See Peter Reuter, “Eternal Hope: America's Quest for Narcotics Control,”Public Interest (Spring 1985).
4.
Mark Kleiman and Kerry Smith, “State and Local Drug Enforcement,” in Drugs and Crime, ed. Michael Tonry and James Wilson (Chicago: University of Chicago Press, 1990).
5.
5. The distinctive feature of enforcement against the retail transaction is that it imposes costs directly on the customer, not reflected in the price that is paid to the dealer. See Mark Moore, “Achieving Discrimination in the Effective Price of Heroin,”American Economic Review, vol. 63 (May 1973).
6.
6. For example, interdiction may affect the price of leaf. Interdiction raises both retail prices, reducing final demand, and the amount of leaf needed for a given final demand, because it raises the amount of cocaine shipped per kilogram consumed. The second effect is likely to outweigh the first under most assumptions about the relevant parameters. See Peter Reuter, Gordon Crawford, and Jonathan Cave, Sealing the Borders: The Effect of Increased Military Involvement in Drug Interdiction (Santa Monica, CA: RAND, 1988).
7.
7. See Eugene Lewit and Douglas Coate, “The Potential for Using Excise Taxes to Reduce Smoking,”Journal of Health Economics, vol. 1 (1982).
8.
8. Jonathan Caulkins, “The Distribution and Consumption of Illicit Drugs: Mathematical Models and Their Policy Implications” (Ph.D. diss., Massachusetts Institute of Technology, 1990).
9.
9. The range represents in part the enormous variation in leaf prices. In the Cochabamba region of Bolivia, since 1986, the range within a year has been at least 1 to 5.
10.
10. The explanation for this observation probably lies in the fact that low-level dealers have to spread their risks over a small quantity of cocaine relative to that over which smugglers and high-level dealers spread their risk. Hence the markup per gram, in absolute dollars, will be highest at the low end of the trade.
11.
11. Richard Ashley, Cocaine: Its History, Uses and Effects (New York: Warner Books, 1975).
12.
12. Ronald Siegel, personal communication, 1990.
13.
13. Victoria Greenfield, “Bolivian Coca: A Perennial Leaf Crop Subject to Supply Reduction” (Ph.D. diss., University of California, Berkeley, 1991).
14.
14. Little detailed research is available on these programs. See Rensselaer Lee, White Labyrinth: Cocaine and Political Power (New Brunswick, NJ: Transaction, 1989).
15.
15. For details about this early period, see Richard Craig, “Operation Condor: Mexico's Anti-Drug Campaign Enters a New Era,”Journal of Interamerican Studies and World Affairs (Aug. 1980).
16.
16. Published reports of the Drug Enforcement Administration point to only modest increases in potency-adjusted prices in recent years. Anecdotal evidence suggests that the official prices now substantially understate actual prices; there are also reports of bouts of scarcity in various cities.
17.
17. This assumes that Brazilian and Colombian demand is more elastic than U.S. demand with respect to leaf price. The demand curves may be the same, but the retail price is more sensitive to leaf price in countries where dealer risks are low.
18.
18. European border seizures of cocaine exceeded 12 tons in 1990, comparable to the 1983 levels in the United States. Yet data on European cocaine consumption point to a market that is still quite small.
19.
19. See, for example, National Strategy for Alternative Development, 1990, an English-language document produced by the Presidency of the Republic of Bolivia. It argues for large infusions of capital from overseas.
20.
20. These programs can have perverse effects. Sanabria claims that the introduction of a road into the Cochabamba region, intended to facilitate the marketing of legal produce, instead helped provide cocaine traffickers with a landing strip for their small planes. H. Sanabria, “Social and Economic Change in a Bolivian Highland Valley Peasant Community: The Impact of Migration and Coca” (Ph.D. diss., University of Wisconsin, Madison, 1989), cited in Greenfield, Bolivian Coca.
21.
21. Even if U.S. demand for cocaine is elastic with respect to retail price, that price is very insensitive to changes in leaf price.
22.
22. Note, though, that such programs may affect where coca is grown in the Andean region. A successful crop-substitution program in Bolivia would raise the price of coca in Bolivia and motivate refiners in Colombia to purchase more leaf in Peru.
23.
23. Greenfield, Bolivian Coca.
24.
24. A. L. Spedding, “Coca Eradication, A Remedy for Independence?—With a Postscript,”Anthropology Today, 5(5) (Oct. 1989).
25.
25. See the annual International Narcotics Control Strategy Report.
26.
26. Neil Sheehan, A Bright Shining Lie: John Paul Vann and America in Vietnam (New York: Random House, 1989).
27.
27. The Colombian government complained bitterly in 1989 when the United States refused to help improve access for Colombian textile exports at the same time that large quantities of aid were being provided by the United States to assist in fighting the Medellin cartel.
28.
28. See, for example, U.S., Congress, House, Government Operations Committee, Stopping the Food of Cocaine with Operation Snowcap: Is it Working?101st Cong, 2d sess., 14 Aug. 1990.
29.
29. U.S., Office of National Drug Control Policy, National Drug Control Strategy, 1991, p. 140.
