Economist lifts lid on the drugs trade
April 3, 2006 - cambridge-news.co.uk
EXPERTS admit the battle against the vast and hugely profitable trade in illegal drugs will never end.
It is an underground industry accounting for eight per cent of world trade, according to the United Nations, worth more than the combined world market for textiles, clothing, iron and steel.
And as with any multi-billion pound industry, the economics of supply and demand, the financial rewards for risk-takers and entrepreneurs, and the usual marketing and sales techniques all apply.
Dr Richard Fordham, a visiting lecturer at Cambridge University and senior lecturer in health economics at the University of East Anglia, said many aspects of the drugs trade were similar to the trade in other commodities.
He said: "Research has found the average weekly expenditure on illegal drugs among arrestees was ?169 - around ?9,000 a year - while heroin and cocaine or crack addicts spend an average of ?290 a month, or ?15,000 a year.
"Although many aspects of drugs can be analysed in the same way as the demand and supply of everyday goods, there are obviously some important differences in the markets.
"In particular the consequences of consumption may be different, possibly life-threatening. In unregulated markets the potential magnitude for harm, some irreversible, is significant.
"It is not only the addictive qualities of drugs but also the imperfect information and supplier monopolies that weaken consumer sovereignty in illicit markets."
The profit available to dealers is far beyond the realms of legal commodities.
Coffee appears to have a similar profit margin, costing about 35p a kilo wholesale and around ?10 a kilo when it is sold to British cafes in bulk.
But it is estimated coffee can change hands more than 100 times before it reaches the cup, and profits from the 16-fold increase in price are split many ways.
Illegal drugs are likely to change hands just a few times before they hit the street - for heroin HM Customs and Excise believe the average stash is sold on four times between Afghanistan and Cambridge.
But despite the profits available, market forces are at work and prices for many drugs are falling.
Dr Fordham said: "It has been found that the demand for cannabis and methamphetamines are also both sensitive to price and are consumed more at times when their prices are low.
"Also, the demand for one particular drug may also depend upon changes in the price of another.
"In recent years, informal surveys suggest that the price of some illegal drugs has fallen relative to alcohol and tobacco, so much that it may be as cheap or cheaper to obtain a unit of an illegal drug, for example a tablet of ecstasy, or line of cocaine."
Tom Lloyd, former chief constable of Cambridgeshire, sparked the latest debate by saying he wanted to set up a seminar to discuss the possibility of the Government taking over the supply of hard drugs.
He believes it would result in fewer deaths and cut drug-related crime.
Dr Fordham said: "The risks attached to drug consumption and transacting for drugs are often higher than goods in conventional markets.
"Governments can only indirectly monitor and control market conditions such as drug purity by interception of the supply chain and raising awareness of the danger of impure products.
"The very nature of the illegality of such markets offers little formal protection to con-sumers.
"In some high risk/high profit markets low level crime and disorder is prevalent, and serious and violent crimes, including murder, frequently occur."
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