The Economic Implications Of The War On Drugs

Here in lies a detailed analysis of the longest ongoing war in the history of the United States, the War On Drugs. This paper will demonstrate that there is no right or wrong way to approach the problem of drug use in this country but that there are better alternatives then the current policies. This will be demonstrated through an in-depth look at the history of prohibition of drugs and alcohol in the U.S., analysis of the social costs of the current underground economy, pros and cons to the legalization of drugs and a detailed analysis of the benefits to our nations economy if some drugs do become legal.

The United States of America’s war on drugs today is very similar to America’s Prohibition of Alcohol in the 1920’s. These two major issues of their time may not seem like they can be logically compared, but statistics for usage and a correlating rise in crime for both eras show a strong relationship. There is also a tendency for an outright defiance of the laws and lawmakers of the United States government in both cases. Most people today think that the prohibition of the 1920’s and the current war on drugs has many contrasting points. The opposite is true. However, the points that do contrast are more opinion-based than fact oriented. The following will attempt to clearly and effectively show a comparison and contrast between America’s famous Prohibition era and the War on Drugs being waged today.

First, a general comprehension of how Prohibition came about is necessary to the understanding of the effects it had on the general population. The anti-drinkers started to become organized around the turn of the century and formed the Anti-Saloon League. This very vocal group was fed up with the constant public drunkenness and the fights that were caused. They spent millions of dollars between 1900 and 1919 in an attempt to try to persuade people to stop drinking. Two and a half million dollars were rose in the effort to stop the drinking, came from the middle and poor classes because these were the people most affected by the problem. The Anti-Saloon League had an effect on a great many people. By 1917, twenty-five states were dry. This meant that there was no legal use of alcohol in those twenty-five states. On December 18th, 1917, the 18th Amendment to the United States Constitution was passed by a majority vote in the House of Representatives, but it would not go into effect as law unless three fourths of the states ratified it within seven years. The drinkers were happy because they thought that the 18th Amendment would never be ratified.

However, within one year and eight days, thirty six states – the three quarters necessary – voted for the 18th Amendment outlawing the manufacture, sale, transportation, import and export of January 17th, 1920, at exactly midnight, was when Prohibition went into effect. One minute after the law passed, $100,000 worth of alcohol was stolen from a government facility (Thornton). This was the beginning of a new and violent crime wave in America. Four other cases of alcohol-related robberies alone were reported that night. The increase in crime was just one of the many problems created by Prohibition that was overlooked by the proponents of the new law. Gangs and the Mafia took over the streets resulting in bloody feuds. They made massive amounts of money importing alcohol to the public. These organized crime elements had a lot of police paid off to look the other way while they went about their business. Smuggling liquor became a quick way to make money. Often, the liquor was homemade and very impure. Moonshine and other homemade alcohol resulted in 4,154 deaths in 1925 alone (Krout).

By the mid 1920’s, around forty million dollars worth of liquor had been illegally imported into the United States and the undermanned police force was powerless to stop it. At this time, around ten percent of the population was involved in some way in the illicit liquor business. In fact, some of the wealthiest and most influential families in the U.S. today got the start of their fortunes during prohibition. Speakeasies were opened everywhere throughout the country. These were secret or hidden bars behind everyday business fronts. Passwords were often needed by patrons to get into the speakeasies. Although police made a lot of busts and arrests for alcohol, most of the general population was not effected by their actions.

During the time span of prohibition, drunkenness arrests increased by forty-one percent, thefts by nine percent, and assault and battery crimes rose thirteen percent (Krout). A change was clearly needed and the government responded by redefining the Volstead Act. The redefinition made any drink containing more than 3.2% alcohol illegal. Wine, because of its lower alcohol content, became very popular and sales soared. Then on December 5th, 1933, thirty-three states ratified the 21st Amendment to the Constitution, which repealed the 18th Amendment. Drinking, and the sale of alcohol were once again legal in the United States.

The United States of America has been engrossed in a War on Drugs policy since the mid-nineteen seventies. Since the founding of the Drug Enforcement Agency in 1973 under then President Richard Nixon, and the Office of National Drug Control Policy under President Reagan in 1988, the United States has found themselves in a winless war and in debt a tremendous amount of money. The reason that the United States has found themselves in this current state is due to one simple thing: the failure to respect the basic concepts of economics. The United States failure to realize the simple concept of demand and supply has found the nation digging itself a hole and only going deeper. The United States has spent countless amounts of money in trying to prevent the use of illegal drugs and has since faced many repercussions in doing so, leading to more taxpayers money being spent on a winless cause.

A summary of the war the United States is waging on drugs is necessary before any comparison and contrast position can be made with the Prohibition Era. In the past several decades, millions of people in America have become involved in illegal drugs, either through usage or through the importation, manufacture, sale and distribution of these illegal substances. According to United States Justice Department statistics, of the millions of Americans who use illegal drugs today, two million of these people are hard-core drug abusers (National Household Survey). The hard-core drugs that enjoy the most popularity are crack, cocaine and heroin, all of which are highly addictive. Addiction increases consumption and consumption increases the necessity to provide the drugs. It is an illegal example of a supply and demand scenario.

While drugs attract users in all economic levels, it appears to be especially prevalent among those living in poverty. One possible explanation is that at the poverty level there is little else to do. There are no jobs, there is no recreation, there is no easy way out. People in the lowest economic brackets tend to use drugs to escape, or sell drugs to get a piece of a better lifestyle. Addiction to drugs takes its toll on both the American economy and the personal lives of the users and their families. For the user, the addiction can cause nausea, nosebleeds, insomnia, paranoia, long and short-term destruction of brain cells, liver dysfunction, eating disorders, extreme rage, apathy and death. The emotional and psychological toll on the families of these drug dependent people is devastating.

The cost to the U.S. economy that these addictions impose is almost immeasurable…lost wages, drops in productivity, increased costs for treatment facilities, incarceration centers and law enforcement. The costs associated with non-addictive drugs are even harder to measure. Every United State President since Eisenhower has created new measures to decrease drug use in the U.S. and for the most part, all measures tried have failed. Increases in drug usage and drug users creates a correlating increase in drug dealers and traffickers to the community…all trying to get a piece of the seventy billion dollars a year people spend on illegal substances. United States Treasury Department statistics cite that ninety percent of all U.S. hundred dollar bills are contaminated with cocaine residue.

It is becoming increasingly difficult for the United States government to prevent, reduce or even control, the sale and consumption of illegal drugs with the budget it has for this and the way the budget is allocated. Justice Department figures cite eighty four percent of the national drug war budget is allotted for enforcement, six percent is used for treatment and rehabilitation, five percent is directed to fighting the war on drugs on a state level, four percent goes to research and only the remaining one percent is used for prevention and education. Since a full eighty percent of the people in jail today are there in relation to drugs, the amount of the national anti-drug budget allocated to enforcement seems to be justified. However, more and more people are being attracted to today’s drug craze and with the massive sums of money generated by drugs, there is also a rise in the number of law enforcement personnel being paid off by those involved in the drug trade.

The legalization of marijuana has been questionable for many years now, but the government just seems to always decline. I feel that marijuana should be legalized. There are many reasons for and against legalization, but the arguments for it outweigh the arguments against it. I think marijuana should be legalized for three main reasons. Legalization will bring in much needed tax dollars, it will free up prisons and their resources, and it will save the United States a lot of money. If marijuana is legalized, the federal government can tax it, like alcohol and cigarettes are now. If this is done, not only will the government save millions of dollars on searching for marijuana, the government will make billions of dollars off the sale of marijuana, which can be used for drug education programs to help educate the youth of America. In the United States, all levels of government (federal, state, and local authorities) participate in the “War on Drugs.” We currently spend billions of dollars every year to chase peaceful people who happen to like to get high. These people get locked up in prison and the taxpayers have to foot the bill.

We have to pay for food, housing, health care, attorney fees, court costs, and other expenses to lock these people up. This is process is extremely expensive. It costs taxpayers like you and me $42,000 a year to keep just one criminal in jail (Ostrowski). That’s more than twice the amount citizens spend on sending their children to school. We could save billions of dollars every year as a nation if we stop wasting money-locking people up for having marijuana. In addition, if marijuana were legal, the government would be able to collect taxes on it, and would have a lot more money to pay for effective drug education programs and other important causes. According to The Report of the Task Force on Cannabis Regulation to the Center for the Study of Drug Policy, “marijuana is one of the largest tax-exempt industries in the country today.” Ten to fifteen billion dollars a year could be made simply by legalizing cannabis. Hemp, the non-psychoactive version of the plant, has many, many uses but is outlawed by the U.S. government. Hemp is an incredibly strong fiber that can be used for ropes, clothes and cloth. Its seed can be used in many industrial applications. The seed can also be used for animal and human consumption. Paper can also be made from the fibers of hemp. Legalizing marijuana will allow our industries to grow and allow our government to make billions of dollars annually off the taxation of marijuana and hemp.

Approximately 500,000 people each year are arrested for possession, sale or manufacture of marijuana. This money could go to drug treatment and prevention, but instead it goes to keeping someone in jail. If these criminals were released, jails would be much less crowded and the chances of rehabilitating a convict will only increase as crowding decreases. People become angrier and are quicker to be become violent than if we are in an environment that is not overcrowded.

For teenagers, one of the big kicks of using marijuana is that it is illegal; it is a way to rebel against society. If marijuana is legalized, part of the thrill of using it will be taken away. I am not trying to say that legalization will wipe out the use of marijuana; in fact during the first few years of legalization, usage will probably rise. But as more and more generations of people grow up knowing that marijuana is legal, less and less people will start using it because it’s “thrill of rebellion” will have been taken away.

The decriminalization and legalization of marijuana will benefit America by increasing revenue for the government, decreasing the overcrowded prisons, and taking the thrill of using our of marijuana are three main reasons for legalization. Economy, prisons and rebellion among teenagers are not the only reasons marijuana should be legalized; they are just the tip of the iceberg. There is also the issue of all the Pro-Marijuana clubs and organizations, such as NORML that exist today constantly trying their hardest to legalize drugs such as Marijuana.

The National Organization for the Reform of Marijuana Laws also known as NORML. NORMAL was founded in 1970, a group that advocates the legalizing marijuana. During the 1970s, NORML led the successful efforts to decriminalize minor marijuana offenses in 11 states and lower penalties in all others. Though the movement eventually fell victim to the “war on drugs,” NORML has remained the nation’s principal organization dedicated to ending marijuana prohibition. Today NORML serves as an informational resource to the national media on marijuana-related stories; lobbies state and federal legislators to permit the medical use of marijuana and to reject recent attempts to treat minor marijuana offenses more harshly; and serves as the umbrella group for a national network of citizen activists committed to ending marijuana prohibition.

Also in Washington, hundreds of students from all over the US gather for the “Student Leaders in Drug Policy and Justice Conference–The DARE Generation Speaks Out”, hosted by Students for Sensible Drug Policy (www.ssdp.org), November 10 and 11, 2001. Ranging from high-school age to all levels of university, kids and young adults packed the rooms at George Washington University, listening to numerous freethinkers, politicians, and drug war reform advocates.

Organized by SSDP National Director Shawn Heller, with the help of Carolyn Lunman and other SSDP volunteers, the rooms were filled with eager, attentive, youths all trying to figure out ways for abolishing the war on some drugs. Topics covered in lectures and breakaway classes included the Higher Education Act of 1998, which denies students who’ve received drug convictions federal aid for college; harm reduction and club drugs, engaging communities affected by the War on Drugs, international drug policy, and zero-tolerance policies on campus.

Prohibition does not help the country in any way, and causes a lot of problems. There is no good evidence that prohibition decreases drug use, and there are several theories that suggest prohibition might actually increase drug use. One unintended effect of marijuana prohibition is that marijuana is very popular in American high schools. Why, because it is available. You don’t have to be 18 or 21 to buy weed. Marijuana dealers don’t care how old you are as long as you have the cash. It is actually easier for high school students to get pot than it is for them to get alcohol, because alcohol is legal which is regulated to keep it away from kids.

If our goal is to reduce drug consumption, then we should focus on open and honest programs to educate youth, regulation to keep drugs away from kids, and treatment programs for people with drug problems. But the current prohibition idea does not allow such reasonable approaches to marijuana; instead we are stuck with ‘DARE’ police officers spreading lies about drugs in schools, and policies that result in jail time rather than treatment for people with drug problems. The government tried prohibition with alcohol, and that failed miserably. Marijuana should be legalized because there isn’t enough proof or reasoning to label it as a bad thing. I think if God made it we should use it regardless of what the government thinks. Maybe someday they will see it that way after all.

With a subject such as measuring the underground economy we must consider the social costs of this type of market on our economy and ourselves. The latest estimates say that the United States has a minimum of twenty million drug users who purchase drugs regularly (“Social Research”). If the underground drug economy were eliminated with legalization would we be better off in more ways than with prohibition? We may never truly know, but the supporters and protestors of this idea are not hard to find. This section of the paper will discuss the benefits and costs of both prohibition and legalization relating to social costs in the United States.

The war on drugs or drug prohibition has been in effect in the United States since 1969. The rising drug use of this time period forced government to strike back. Legalization was not a popular subject at that time especially for those who didn’t use drugs. Today the argument is not only for the purpose of legalization of drugs but the revenue and tax money that could be brought into our economy from the legalization. Criticism of the current policy of prohibition has come about since underground activity has not ceased. Despite this criticism; drug activity has slowed. Since it is illegal, violators of the law must still work in secret and hide their work from police and the law abiding general public.

Prohibition should lower the number of users because at least some of those possible users see it as breaking the law or having a fear of being caught and facing punishment. However, some feel that if legalization occurred the “forbidden fruit” effect of illegal drugs might not exist for rebel teenagers who are just looking to break the rules and do things they are told not to. Of course there is little proof that could back up or prove that the “forbidden fruit” effect even exists for today’s average teenager (“Social Research”). The one thing that we must remember is that drug use is voluntary and that we have to make our own decisions concerning our life. The latest number on United States prisoner’s states that more than twenty-five percent of prisoners in our jails are there for some sort of drug violation (United States Department of Justice).

Murder in America has increased to higher percentages since drug prohibition started in 1969 than during the alcohol prohibition that lasted from 1919 to 1933 (“Social Research”). It is also said that drug prohibition has increased crime in the United States, because disputes over drug related events couldn’t be handled in court. This is true because drug users and dealers cannot handle their disputes legally because they are breaking the law. However, the violence that is used to keep the drug market in check is no more right than the drug violations themselves.

Another aspect that legalization could help is the vast spreading of HIV through dirty needles (Social Research). Currently our government doesn’t allow the sale of syringes, because of drug prohibition policies. This means that the drug users and addicts will use contaminated syringes to get their high. With legalization syringe sharing would only be an issue for those who choose not to use fresh needles.

With the discussion of national debt comes the discussion of taxes that are not being collected because of an underground economy used to distribute illegal drugs, stolen property, prostitution, and commit many other illegal activities. Also the billions of dollars spent on the war against drugs that many economists feel could be saved if legalization of drugs were to occur in the United States. It is said that our government currently spends twenty to thirty billion dollars a year to enforce drug prohibition policies. With legalization of once illegal narcotics would come billions of dollars in taxes, less crime due to lower drug prices, a new legal market in the United States, and a huge drop in prisoners in our jails.

Sin taxation is another possible advantage of legalization. Sin taxation is the taxation in excess of normal goods, which could mean even more money going into our government in the form of taxes (Social Research). Legalization brings about the possibility of less crime, which could lead to fewer jobs in law enforcement, and our judicial system could be lost. Economists are sure to argue that with legalization police corruption in relation to drugs should stop completely. A report from the General Accounting Office stated that “half of all police officers convicted as a result of FBI-led corruption case between 1993 and 1997 were convicted for drug-related offenses”. The increase in jobs from the drug market would hardly be sufficient to offset the jobs lost from legalization and would not be the same quality as the jobs that were lost. Are we willing to allow injustices in our society to lower the number of people who are breaking the law and going to prison?

One argument that prohibitionists will most definitely argue is that illegal narcotics can cause significant harm to users. However, tobacco causes cancers with no cure and kills millions of people every year; yet tobacco is legal. Tobacco cannot be blamed for senseless violence, crime, and murder, which are commonly associated with drug dealing. The underground economy creates many illegal activities to cover up and supply their market. Economists feel this too could be eliminated with legalization. Legalization and local production of these drugs could possibly eliminate the drug cartels that plague South America and Mexico.

So, the United States government could gain billions of dollars from drug taxation and drug market revenues that would exist under legalization, but what about the billions of dollars they would have to pay out to fix all the new problems that legalization could create. Medical costs could rise dramatically from overdoses alone with drug prices dropping. The British Lung Foundation says marijuana contains at least fifty percent more carcinogens than tobacco, and three joints causes as much damage to the lungs as 20 cigarettes (“Illawarra Newspaper”). Carcinogens can cause cancer in tobacco and marijuana users as well as those who inhale the second hand smoke.

With the possibility of an increase in drug users comes an increase in the number of people needing rehabilitation. The government will have to help drug addict’s families to survive with government aid like welfare. In a recent study fifty-five percent of state prisoners and sixty-three percent of federal prisoners reported having children under the age of 18 (United States Department of Justice Bureau of Justice Statistics). Unemployment would have huge gains due to all the once imprisoned people who would now be free plus those people who lost their jobs in the judicial system and law enforcement. Government aid in unemployment would have to help these people survive also.

Laws are used to give guidelines by which people must live by in order to stay out of trouble, because not everyone can differentiate between right and wrong on their own. We learn by example and not everyone has someone who has good ethics and moral decision making to look up to. These people need guidelines to live by just as much as a person who was born with positive influences and just chooses to break the law anyway. Some people may feel that if drugs are legal then they are safe and ethical because they are legal.

When it comes to harsh drugs like cocaine and heroin there is a need to worry about those who might use the drug thinking that if it is legal than it must be safe. Drugs such as marijuana are the least of all worries when there are drugs out there that take over your entire life and tare it apart. Laws are made to keep us safe and as happy as possible without worry. Can we write the laws around injustices just to gain money in our government or to satisfy a small percentage of the United States citizens?

The issue of drug legalization has been fiercely debated for many years. Proponents of both sides continually present new and compelling evidence for each side of the issue. Some deserve attention, and others do not. An example of one very bad argument made by the office of national drug control policy is in a recent commercial they have aired. It states that 1 out of 3 reckless drivers who were tested for drugs, tested positive for marijuana. Well if they were tested for drugs, the police probably had a suspicion that narcotics were involved. The statement makes it seem like 1/3 of all reckless drivers were under the influence of marijuana. As you can see from this example, valid arguments must be extracted from all of the nonsense that has come from both sides of the legalization issue.

One argument that has been presented is that drug legalization would lead to a decrease in crime, because all of the selling and trafficking of drugs would disappear. Remember, that illegal sale and traffic of drugs would still be illegal. While it’s true that this would initially occur, one must consider the circumstances involving drug crimes. Some crimes involving drugs are committed in order to obtain drugs. These include robbery or any other illegal act committed in order to afford a drug. This crime would decrease, because drugs would be much cheaper from legalization, so fewer funds would need to be raised by users to purchase drugs. The affordability of drugs would also benefit people who can’t afford them but still purchase them, by allowing them to keep more of their disposable income. Which would then be pumped into the economy, instead of illegal trade. Some argue that if drugs are legalized, the amount of crime associated with trafficking and selling those drugs will decrease tremendously. In this area of drug crime, they are wrong. According to the drug enforcement agency in 1995, if drugs were legalized, most who traffic or sell would move to other areas of crime (Speaking out). This makes sense. Many of these people are either addicted to a drug, or depend on these illegal activities for their income. If these activities are legalized, they will be out of a job, and most are not going to go out and find a legitimate job. For one thing, most have no experience, and secondly, most have no desire for a regular job. So instead, they will simply find other illegal ways to make money. There is a theory that this could result in more violent crimes, but there is no way to tell.

One thing is for sure though; criminalizing drugs has not made drugs less available, but has made them available in only the most dangerous and violent situations (Pros and Cons). No on can argue that the purchase and sale of drugs is usually a very sketchy proposal, and if it were legal, could be done in a much safer environment. One example of drug legalization resulting in increasing crime comes from Zurich Switzerland. In 1987 they permitted the use and sale of drugs in a part of the city called PlatszSpitz. By 1992, the amount of drug users in the area swelled from a few hundred to 20,000 (Speaking out). There was also a very large increase in crime, especially muggings. Part of the problem with this situation is that the sale of the drugs was not regulated, but even just the muggings show that crime will increase if drugs are legal. Another issue is that of criminal acts increasing due to an increase in the amount of drug users. It is a fact that people under the influence of drugs are more likely to commit a crime than those who are not. Alcohol is a great example. So we would see an increase in crimes committed under the influence simply because legalization would increase the number of users.

The last issue regarding legalization and crime is the affect it will have on incarceration rates. Many people will be released, and this could ease the pressure on the prison system in the U.S. Obviously violent offenders will not be released, so we will see an influx of mostly addicts and some occasional users. In one sense, by criminalizing drugs, the United States has turned millions of stable and productive citizens into criminals (Pros and Cons), “and has infringed on the idea of personal sovereignty”. There are countless people who use drugs and still contribute to society, but as of now they are criminals. Considering these arguments, it is likely that the affect of legalization on crime would be negligible. The decrease due to the absence of the drug trade would be somewhat off put by the increase in drug-influenced crimes. The one true benefit would be less people in jail, however some of these people might become addicts on the outside and require treatment, but treatment costs much less than incarceration (Economic Costs).

The second main issue regards economic benefits. The legalization of drugs would definitely benefit the economy. Millions of dollars that are currently moved illegally would now be accounted for. It would be taxed, and would all remain in the calculations of GDP. The office of national drug control shows that in 1998 Americans spent $66 billion on illegal drugs (What American Users Spend). So if drugs were legalized, an amount anywhere from 30-70 billion would now be accounted for and taxed (What American Users Spend). The increase tax and spending would invariably have a positive affect on GDP. Let’s compare that figure with the total social costs of drugs provided by the white house drug control policy. Health Care, productivity losses and other costs related to drugs totaled 160 billion (Economic Costs). However, this number would be significantly lowered because of the productivity loss number. A large chunk of the productivity loss is due to incarceration, which would be reduced. Some would argue that drug legalization would lower productivity because people would be high all of the time.

Before 1915, drugs were legal and easy to obtain; but America was still booming and there was no loss of productivity (Miller). Nor was there a gain in productivity when drugs became illegal (Miller). Also, there are law enforcement and legal issues, which accounts for 35 billion dollars (Economic Costs). These costs would be greatly reduced, and many would be eliminated. All of these factors show that the ratio of income from drugs would greatly offset the costs. Much like taxes on gas and alcohol, taxes on drugs would go to offset the social costs, which currently are paid by other tax forms. The result would be an improved economy because of these offset costs. So from a social economic standpoint, legalization would be a good thing.

Another affect of drug legalization would be employment. Legalization would result in the formation of companies, and also additional business for existing companies. Farming opportunities would also grow. Existing shipping companies would see a growth in demand, along with farm and seed companies. Shops would open and jobs would need filling. There will be some people for whom drugs cause a loss of employment as well, those who become addicted may quit or be fired. So which side outweighs the other? For a comparis