Tuesday, December 26, 2006

Afghan heroin: a unique price/quality proposition

David Seaton's News Links
If a newsman really wanted to know how the war in Afghanistan was going, all he or she would have to do is follow the retail/street price of heroin in their hometown. That simple. All the questions are there. Why do Americans consume so much heroin. How does it get through the NATO surveillance of Afghanistan? What is the USA really doing in Afghanistan anyway? And on and on. DS

Afghan heroin's surge poses danger in U.S. - Los Angeles Times
Supplies of highly potent Afghan heroin in the United States are growing so fast that the pure white powder is rapidly overtaking lower-quality Mexican heroin, prompting fears of increased addiction and overdoses. Heroin-related deaths in Los Angeles County soared from 13
Publish7 in 2002 to 239 in 2005, a jump of nearly 75% in three years, a period when other factors contributing to overdose deaths remained unchanged, experts said. The jump in deaths was especially prevalent among users older than 40, who lack the resilience to recover from an overdose of unexpectedly strong heroin, according to a study by the county's Office of Health Assessment and Epidemiology. "The rise of heroin from Afghanistan is our biggest rising threat in the fight against narcotics," said Orange County sheriff's spokesman Jim Amormino. "We are seeing more seizures and more overdoses." According to a Drug Enforcement Administration report obtained by The Times, Afghanistan's poppy fields have become the fastest-growing source of heroin in the United States. Its share of the U.S. market doubled from 7% in 2001, the year U.S. forces overthrew the Taliban, to 14% in 2004, the latest year studied. Another DEA report, released in October, said the 14% actually could be significantly higher. Poppy production in Afghanistan jumped significantly after the 2001 U.S. invasion destabilized an already shaky economy, leading farmers to turn to the opium market to survive. READ IT ALL

1 comment:

walyon said...

Getting an even better price for heroin....

It seems, at least to a layman trying to understand how things work, that professional economists can place too much reliance upon whether or not something can be modeled, applying mathematics to all we can and then closing one’s eyes to the rest. The eyes part is ‘blind faith.’ It’s also like trying to model common sense with a blind faith that if you try hard enough, that how people behave will become, like compound sentences, easily diagrammed. (It was never easy and is now almost a lost art.)

I take the policy point-of-view that common sense is often better (and easier) being used than modeled.

So what can professional economists overlook, fail to compare, and therefore, fail to use?

Let’s start with comparing the price differentials between rich and poor nations. That should qualify as a valid avenue of exploration in economics, diplomacy, foreign policy and national security. To use a timely comparison that exposes vast and clear-cut differences, let’s compare Afghanistan and the U.S.

What do we know about Afghanistan?

Afghanistan is one of the world’s poorest nations, with a per-capita income of less than $1 per day, poorer than all but two nations of the African sub-Sahara.

We know also that America, by choice, has made a commitment to make Afghanistan a demonstration project for democracy in the troubled Middle-East. We know success is an issue of our national honor.

We know too, that Afghanistan produces 92% of the world’s opiates, for which Afghan farmers receive $700 million dollars. In stark contrast, rich OECD nations incur a ‘societal cost’ of those same opiates of $217 billion dollars annually. The cost differential is $216.3 billion! Amazingly, opiates are reflected as a full 30% ($2.8 billion) of the total Afghan GDP. Afghan poppy farmers, however, gain only 25% of the portion of GDP money attributed to poppy cultivation.

Afghanistan is an Islamic Republic. Islam rejects the use of narcotics.

What then, are Afghanistan’s economic options to reject the cultivation of opium poppies?

Option One: Cease poppy cultivation. Result: Suffer the loss of $700 million poppy farmer income and $2.1 billion other GDP income. Result: Vast civil unrest, loss of life, and severe poverty.

Option Two: Eradicate poppy cultivation by armed might; either by hand eradication, ground level spraying or aerial spraying. Result: $2.8 billion reduction in GDP, poverty and suffering. Armed combat, civil strife and greater loss of life. Loss of hope; disdain for democracy in citizens’ hearts and minds.

Option Three: Using the OECD cost differential, fully compensate poppy farmers for not cultivating their crops. (And for the next ten years, allowing both crop and/or occupational adjustments.) Pay the Afghan government an additional $2.1 billion to make up for their GDP loss. Add $2.8 billion to provide needed development to sustain domestic recovery and democratization. Result: No loss of farmer income--No government loss of income--Adequate money to build democratic institutions-- No civil unrest or increased poverty--Stabilization for the geographic region.

Conversely: Loss of major funding for insurgency and terror, reducing revenues of al-Queda, Taliban, druglords, mafia and other criminal interests.

Pass along results: OECD nations save $217 billion ‘societal cost of narcotics’ each year, now available for better uses. A good model can also be used elsewhere. Apply similar diplomacy to Colombia, reducing US societal cost of narcotics $117 billion additional dollars, again annually. Build more democracy. Further diminish terrorist funding sources. Reduce major narcotics availability, consequent deaths, imprisonments, and health costs.

What makes this diplomacy unique? It is funded with easily available dollars. but only when available diplomacy reduces narcotics related costs. It is a simple concept, expense money saved, not money gained from additional taxation. It comes from the cost differentials that already exist between rich and poor nations. It enables the richer nations to lend generous support, not only without cost, but also with social and monetary profits. What to call such a model? Why not call it common sense?

What do we know about Afghanistan now? Afghanistan is our world’s best investment opportunity!

The economic diplomacy paper I’ve sent is one page. Here is what people you will recognize have had to say. I hope you will be the next to share your views, By showing that price differentials can actually be used as financial instruments, I make no claim to being a visionary. I claim only that people like you who have already thought the same thing, and then pushed it aside or out-of-mind, have forgotten a powerful economic force, one we sorely need to recall for good use today.

Thank you! waltoncook@publicpolicypress.com


I liked the piece you sent me on Afghanistan. I agree that we are being penny wise and pound foolish…we should be spending much more for reconstruction, development and substitutes for poppy cultivation. --Joseph S. Nye Jr.--Soft Power: The Means to Success in World Politics

…a very interesting idea! --Tim Harford--The Undercover Economist

…this is an interesting idea. Our efforts at dealing with drugs have caused lots of harm in poor countries. It would be a big improvement if we could find a workable approach that helped them instead. --Paul M. Romer--Increasing Returns and Long-Run Growth, Macroeconomics

Politically very difficult. But not impossible. Good luck!--David Warsh—Knowledge and the Wealth of Nations: A Story of Economic Discovery

Thanks for this. It is very interesting and I’m sharing it with some colleagues who have a special interest in Afghanistan. --Peter David, Foreign Editor—The Economist

I read your proposal with great interest and am strongly sympathetic to your suggestion.
Niall Ferguson—The War of the World: Twentieth-Century Conflict and the Descent of the West

With my thanks for your efforts. --Robert B. Charles, Former Assistant Secretary of State, Bureau of International Narcotics and Law Enforcement Affairs.

…your tightly reasoned case is one of those exceptional instances. The failure of the wealthier states to do their part and the risks attached to the global money flows arising from the drug economies should galvanize international action.--Harm de Blij—Why Geography Mattters

Your proposal is fascinating. There is a serious problem though: it's quite sensible…Foreign policies of the US and other global powers seem to be detached from such sensibilities. If the common people of Afghanistan had compelling economic reasons, they themselves would not only switch from poppy production to more Shariah-compliant productions, but also they themselves would have vested interest in a country with stability and free from destabilizing forces, such as al-Qaeda. Mohammad Omar Farooq, Ph.D., Professor of Economics & Finance