Tuesday, April 24, 2007

Drugs & socialism: the more you succeed the more you fail.

The U.S. Coast Guard, which today is another policing body, claims that they “captured” a ship in international waters and boarded it to find it was “filled” with cocaine. It allegedly contained 21 tones of the white powder and was the “largest bust on the water, ever, in history.”

Drug warriors are cheering it as a great victory for the moral and the pure. I would like to argue that it is not a victory by any means and explain why shortly. But first I want to say two things.

If the ship was in international waters then under what authority did the Coast Guard board it and seize it? Now I realize that the neo-cons thinks that “national defense” includes every nation in the world. But I didn’t know the Coast Guard had authority outside of U.S. waters. No matter what was on that ship I have to question the legal authority of U.S. policing forces to seize ships on the high seas. That used to be called piracy.

Second, of course it’s the “largest” “ever”, blah, blah, blah. Drug warriors have been having the largest seizures quite regularly since “I am not a crook” Nixon started the Drug War. There is a penchant among the Drug Warriors to exaggerate a tad bit. Actually they lie, a lot, frequently, and in rather heaping proportions. It’s good for their budget. The press reports it. No body really double checks and they use it to demand more powers, more funding, more personnel and big government gets bigger. Actually the days of big government are gone. We now have gigantic government.

I also think we need to ask if this “success” is actually a success or not. The Drug War is a lot like socialism. The more “successful” it is the harder it fails. Let us assume the sea pirates were telling the truth and they confiscated 21 tons of cocaine. What actually did they accomplish?

Well, obviously the removed cocaine from the supply chain. How did that effect the demand? It didn’t. Demand for cocaine remains unchanged but the supply has been reduced. Now go to Econ 101 for a minute and ask yourself what a reduced supply, with a steady demand, does?

It increases the price! Of what? Of cocaine. So removing 21 tons of cocaine from the market pushes up the price of the cocaine that wasn’t removed from the market. One drug cartel, who ever shipped the drug, took a bit of a loss here. But that is only one. Meanwhile all the competitors to that cartel are reaping windfall profits.

The Coast Guard pushed up the price of cocaine and managed to hurt one cartel while rewarding all the others. Everyone else sees prices, and profits, increase. That is the result of a Drug War success.

Now go to day two of Econ 101. If you increase profits in an industry what happens to suppliers in that industry? The number of suppliers increases. Higher profits only attract additional dealers at all levels of the supply chain. That is the result of a Drug War success.

Second, let us look at how this impacts on crime. There are X number of cocaine users out there, some of them are true addicts. They need to find a way to cover the higher costs of their supply. We do know that some addicts engage in criminal activities to pay for their usage. Let us assume that our local addict, for the sake of illustration, mugs grandmothers after they cash their social security check.

Every week he has to locate two grandmothers to mug to pay for his habit. The Coast Guard, or some other Drug Warrior, has a major bust. One so successful that they cut the supply of drugs dramatically and drug prices double. Our local addict now has to mug four grandmothers instead. That is a the result of a Drug War success.

Of course with higher profit at stake the drug gangs in the country will fight extra hard to secure turf for their dealers. It is more lucrative to do so. Drive by shootings increase, there is increased gang warfare. More people die, some just bystanders. That is the result of a Drug War success.

The sad reality is that the Drug War dramatically increases crime in numerous ways.

All markets, even markets for substances deemed immoral or criminal, have feedback loops. Every action creates a series of actions leading to specific consequences. And these happens whether or not you want them to happen. The reality of seizing illegal drugs is that it raises the price of drugs, rewards dealers who didn’t get caught, hands windfall profits to the other cartels and increases crime on the street. With success like that how can we stand it?

Socialism is similar. Each socialist intervention into the market creates unintended consequences. It sets in motion a chain of events leading to specific results. Push up the cost of labor through well-intentioned measures and you decreased the demand for labor. The net result is that you make some workers a little better off and other workers a lot worse off.

Increase welfare payments and you find the number of people “needing” welfare increases. Pay for that increase by increasing taxes and you find production decreases relative to what it would have been. Everywhere you go you find that these intricate feedback loops seem to confound your best laid central plains. And the more successful you are in imposing these solutions the sooner the inevitable collapse.

The War on Drugs and socialism both, for the most part, are supported by people with good intentions. Too bad intentions have no impact on those feedback loops. In the end both end up doing a great deal of harm.

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