Drug Trade Props Up World Economy

U.N. says drug money kept banks in business.

When we think of the international drug trade, we usually think of financial support being funneled to Columbian insurgents or Taliban fighters. Propping up the world banking system is not what usually comes to mind. However, the illicit drug trade may in fact be one of the world’s few growth industries at the moment, with little unemployment, maximum profits, and a plethora of cash-hungry banks ready to lend a hand.

The head of the United Nation’s Office on Drugs and Crime said that profits from the illicit drug trade were being used “to keep banks afloat in the global financial crisis,” Reuters reported last week. In an interview with Profil, an Austrian news magazine, UNODC Executive Director Antonio Maria Costa warned that “in many instances, drug money is currently the only liquid investment capital.” Costa’s Office on Drugs and Crime uncovered evidence that “interbank loans were funded by money that originated from drug trade and other illegal activities,” Costa said. “There were signs that some banks were rescued that way.”

Specifically, Costas said interbank credits have been financed by drug money. “It is naturally hard to prove this, but there are indications that a number of banks were rescued by this means.” While most banks have money laundering rules in place, “now criminals stash their funds in cash sums which can be up to hundreds of millions of dollars.”

Viewed from a macroeconomic perspective, drug money represents scarce investment capital for banks. “In many instances,” Costa said, “drug money is currently the only liquid investment capital to buy real estate, for example.”

Costa would not name any countries or banks which may have been involved. He did note that the current global financial crisis was a “golden opportunity” for crime groups needing to launder money, and that the laundering of illegal funds was “certainly happening across the board,” Veronika Oleksyn of AP reported. Costa said the information came from contacts with prosecutors and banking representatives in various countries.

Costa also told the BBC that South American drug trafficking threatens to economically destabilize Mexico, Central America, the Caribbean and West Africa. He estimated that the worldwide illegal drug economy was now worth about $323 billion per year. “If you look at agriculture markets, it is the most important,” according to the Drug War Chronicle account of the Profil article. “According to our calculations, the wholesale value of illegal drugs is more than $90 billion, in the range of world meat and grain trade. The street trade we access at a volume of over $320 million.”


Photo Credit: typicallyspanish.com

Drugs on the Ballot

States to vote on drug policy proposals.

The Drug War Chronicle has done an excellent job of rounding up the various drug policy initiatives that will appear on state ballots in November. The majority of these initiatives concern marijuana decriminalization, medical marijuana, and prison sentencing reform. The Drug War Chronicle reports in its October 3 issue that the pace of drug policy initiatives has slowed, compared to the beginning of the decade, when medical marijuana initiatives were on the ballot in dozens of states.

While California voters will be asked to strengthen their support of medical marijuana and lessen penalties for possession, voters in Michigan and Massachusetts will have the opportunity to follow California’s lead with marijuana decriminalization initiatives of their own. Michigan’s Proposition 1 would legalize the use of marijuana with a doctor’s recommendation, and would also allow a medical necessity defense when marijuana cases are being prosecuted. According to the Chronicle, a recent poll showed that 66 per cent of Michigan voters favored the proposal. In Massachusetts, Question 2 on the ballot would legalize the possession of up to an ounce of marijuana.

California’s Proposition 5 builds on the original work Proposition 36, the 2002 initiative that kicked off the medical marijuana movement in that state. Proposition 5 would divert drug offenders into treatment rather than prison, expand prison rehab programs, and decriminalize possession of an ounce or less.

In Oregon, a medical marijuana initiative is slated for the 2010 election. This year, Ballot Measures 61 and 57 attempt to move things in the opposite direction by imposing stiff mandatory minimum prison sentences for a variety of drug offenses.

There are also some municipal policy initiatives up for a vote this year, including Measure JJ in Berkeley, California. The measure seeks to “broaden and regularize medical marijuana access” through additional dispensaries and uniform operating rules. Fayetteville, Arkansas has a grassroots initiative that would mandate adult marijuana possession as “the lowest law enforcement priority.”

Finally, voters on the Big Island of Hawaii will confront Ballot Question 1, which in essence prohibits law enforcement from spending any money to enforce laws against adult marijuana possession. The Drug War Chronicle says that the initiative was the product of “Project Peaceful Sky, a local grassroots organization whose name alludes to the disruption of tranquility caused by law enforcement helicopters searching for marijuana.”

medical marijuana

McCain on Drugs

Full speed ahead on the Drug War.

One issue largely missing in action during the presidential campaign has been the Drug War, and all the policy implications for addiction treatment that go with it. Our thanks go out to OnTheIssues blog for compiling the admittedly skimpy record of public statements about drug policy by both candidates. In this post, we examine the on-the-record views of Republican candidate John McCain.

In his long career in the U.S. Senate, John McCain’s support for the Drug War has never wavered. Campaigning for president in 2000, McCain’s positions were the most hawkish of the four major candidates, the Boston Globe reported. “He wants to increase penalties for selling drugs, supports the death penalty for drug kingpins, favors tightening security to stop the flow of drugs into the country, and wants to restrict availability of methadone for heroin addicts.”

This latter position was embodied in the “Addiction Free Treatment Act” that McCain introduced in the Senate in 1999, which called for defunding any drug program that used methadone, unless the program followed a restrictive set of guidelines.

McCain has criticized the former Clinton administration for going “AWOL on the war on drugs,” and has pushed tirelessly for greater military assistance to drug-exporting nations like Columbia.

In more recent activity, Senator McCain sponsored a a 2005 bill, “The Clean Sports Act,” mandating drug testing in all major professional sports leagues. And in 2006, McCain signed on to the “Safe Streets Act Amendment,” which called for federal grants to Indian tribes to fight methamphetamine addiction.

This year, “McCain met with Mexican President Felipe Calderon to discuss immigration, trade and the recently passed Merida Initiative, a $400 million U.S. aid package to help Mexico fight an increasingly bloody drug war that has claimed more than 1,800 lives this year.”

“Drugs is a big, big problem in America,” McCain said in a fact-finding trip to Columbia in July. “The continued flow of drugs from Colombia through Mexico into the United States is still one of our major challenges for all Americans.”

McCain’s response last year to a New Hampshire police officer’s question about the failure of the Drug War does not bode well for the prospects of responsible changes in drug awareness and addiction treatment in a McCain administration: “Look, I've heard the comparison between drugs and alcohol. I think most experts would say that in moderation, one or two drinks of alcohol does not have an effect on one's judgment, mental acuity, or their physical abilities. I think most experts would say that the first ingestion of drugs leads to mind-altering and other experiences, other effects, and can lead over time to serious, serious problems."

A search of the McCain-Palin campaign website for the term “drug war” came up empty.

Obama on Drugs

Will he do anything about the Drug War?

One issue largely missing in action during the presidential campaign has been the Drug War, and all the policy implications for addiction treatment that go with it. Our thanks go out to OnTheIssues blog for compiling the admittedly skimpy record of public statements about drug policy by both candidates. In this post, we examine the on-the-record views of Democratic candidate Barack Obama.

The official Obama plan, as outlined in his campaign booklet, Blueprint for Change, calls for greater use of drug courts, job training for ex-offenders, and the elimination of sentencing disparities like the crack/powdered cocaine inequities. He does not favor lowering the current drinking age from 21 to 18, despite a collective push to do so by dozens of university presidents.

In an AP report posted at Drug WarRant, Obama said, “I’m not interested in legalizing drugs.” His focus, he said, was on emphasizing the public health approach to drugs over the prison approach. “All we do is give them a master’s degree in criminology.”

In a speech at Howard University, he told the crowd that “it’s time to take a hard look at the wisdom of locking up some first-time, non-violent drug users for decades.... We will review these sentences to see where we can be smarter on crime and reduce the blind and counterproductive warehousing of non-violent offenders.... So let’s reform this system. Let’s do what’s smart. Let’s do what’s just.”

In reference to the HIV/AIDS crisis, Obama has said that “we have to look at drastic measures, potentially like needle exchange in order to insure that drug users are not transmitting the disease to each other. And we’ve got to expand on treatment.”

Obama himself--a former cigarette smoker--is no complete stranger to drugs, having admitted to high school and college drug use in his book, Dreams from My Father. On page 87, he writes that he used to get high as a way to “push questions of who I was out of my mind, something that could flatten out the landscape of my heart, blur the edges of my memory.... Everybody was welcome into the club of disaffection. And if the high didn’t solve whatever it was that was getting you down, it could at least help you laugh at the world’s ongoing folly and see through all the hypocrisy and bullshit and cheap moralism.”

On a Tonight Show appearance with Jay Leno, when reference was made to President Bill Clinton’s famous claim that he “didn’t inhale,” Obama responded, “That was the point.”

As Kurt Schmoke, the former mayor of Baltimore, wrote: “The relative silence by presidential candidates about the War on Drugs has been disappointing but not surprising. The next president will be in office when we commemorate the one hundredth anniversary of the Harrison Narcotics Act, which many consider to the beginning of the war on drugs. Hopefully, the new president will listen to the voices of reform....”

It appears that Senator Obama is at least partially receptive to the goal of changing national drug policy “to make the war on drugs a public health battle rather than a criminal justice war,” as Schmoke wrote.

Fewer People Testing Positive For Meth and Cocaine

Quest Diagnostics releases 2007 figures.

Quest Diagnostics, the nation’s leading provider of employee drug testing services, reported a 22 percent drop in the number of U.S. workers and job applicants testing positive for methamphetamine last year. The percentage of positive tests for cocaine fell 19 percent in the same period—the largest single-year decline since 1997, the company reported.

Overall, drug test positives were at an all-time low (see chart). The company said 3.8 percent of employees had tested positive for drug use in 2007, compared to a high of 13.6 in 1988.

Quest Diagnostics based its conclusions on a summary of results from more than 8 million workplace drug tests the company conducted in 2007. The data include pre-employment, random, and for-cause testing. The primary test population included federally mandated testing of “safety-sensitive” workers such as pilots, truck drivers, and employees at nuclear power plants
It is not immediately clear what conclusions can be drawn from the Quest Drug Testing Index. Do the results indicate a falloff of stimulant use, or are they a reflection of scarcities of supply?

The DEA was quick to jump in and claim the latter: “The fact that America’s workers are using cocaine and methamphetamine at some of the lowest levels in years is further evidence of the tremendous success that law enforcement is having at impacting the nation’s illicit drug supply,” Drug Enforcement Administration (DEA) Acting Administrator Michele Leonhard said in a press release.

In the same press release, Dr. Barry Sample of Quest Diagnostics, citing figures that show a 5 percent increase in the use of all forms of amphetamines last year, said: “Although some may conclude that there is a reduced availability for methamphetamine, the fact that our data show an increase in amphetamines suggests that some workers might be replacing one stimulant drug for another in the larger drug class of amphetamines.”

It is also unclear whether or not the lower numbers reflect greater employee awareness of drug testing, and greater knowledge of methods for finessing the testing system, such as a crash course of abstinence when testing is considered likely.

Moreover, drug testing remains a controversial practice. Critics maintain that the costs of drug testing far exceed the benefits of identifying a very small percentage of workers with testing procedures that are not always and inevitably reliable.

In a review of a report on drug testing by the National Academy of Sciences in 1999, the American Civil Liberties Union (ACLU) concluded: “There is as yet no conclusive evidence from properly controlled studies that employment drug testing programs widely discourage drug use or encourage rehabilitation.” According to the ACLU, the federal government spends more than $77,000 dollars for each positive drug test, when overall costs of the federal government’s drug testing program are taken into consideration.

Graphics Credit: Market Wire

Cocaine is Cocaine: New Sentencing Guidelines

U.S. Supreme Court relaxes jail time for crack crimes.

In a little-noted ruling last month, the U.S. Supreme Court bowed to reality and restored a measure of sanity to cocaine sentencing guidelines. The Court ruled, on a 7-2 vote in the case of Kimbrough v. U.S., that federal judges had the discretion to reduce prison terms for crack-cocaine offenses.

The move was an effort by the Supreme Court to bring crack cocaine sentences more in line with sentencing guidelines for powdered cocaine. Many drug experts expressed relief, noting that the changes were long overdue. “There’s no scientific justification to support the current laws,” said National Institute of Drug Abuse (NIDA) director Dr. Nora Volkow.

Writing for the majority, Judge Ruth Bader Ginsburg noted that the two substances in question “have the same physiological and psychotropic effects.” A number of federal judges have long advocated the change, the importance of which was demonstrated when the U.S. Sentencing Commission announced that as many as 20,000 federal inmates serving time for crack possession may be due for sentence reductions, based on the new ruling.

A 1986 law, the Anti-Drug Abuse Act, reset mandatory minimum sentences for cocaine, allowing for as much as a 100-to-1 disparity between prison time for crack and prison time for powdered cocaine. As an article in the International Herald Tribune noted, the law allowed a prison term of “five years for trafficking in 5 grams of crack, or less than the amount in two packets of sugar. It would take 100 times as much cocaine [in powder form] to get the same sentence.”

Several bills with a similar aim have been introduced in Congress, including legislation jointly sponsored by Senators Edward Kennedy and Orrin Hatch, which would revise the crack-powder sentencing ratio to 20-1.

This Alice-in-Wonderland situation was triggered by the cocaine-related death of college basketball star Len Bias in 1986. The widely publicized death set off a cocaine panic in America that quickly reached the White House and Congress. In addition, doctors and the press were busy wildly overestimating the number of handicapped “crack babies” being born. Craig Reinarman, author of the book, “Crack in America,” told the Associated Press: “You had politicians manipulating fear, and instead of being seen as a more direct mode of ingestion of a very old drug, [crack] became a demonic new substance.”

Moreover, civil rights advocates have long claimed that the sentencing structure is racist: Blacks prefer crack and Whites prefer powder, if arrest records are any indication. (Crack is produced by dissolving powdered cocaine and baking soda in water, then boiling away the water.)

According to Graham Boyd of the American Civil Liberties Union (ACLU) drug law reform project, “This may be the first sentencing decision since the mid-1980s that actually talks about justice, that seems to have some blood in it.”

“There is a sense of a turning point,” Jack B. Weinstein, a federal district court judge in New York, told Newsweek. “The cost [of the current drug war] is tremendous, to the community and to taxpayers.”

Justices Clarence Thomas and Samuel Alito dissented in the case.

Cocaine Prices Climb, U.S. Drug Czar Declares A Win

NPR Investigation Suggests Otherwise.

It’s hard to win a war on drugs. Success stories are few, so it is not surprising that a temporary hike in recent cocaine prices in selected American cities was seized upon by U.S. Drug Czar John Walters as the lynchpin of a promotional campaign touting a victory in the war on drugs. After the U.S Coast Guard’s seized a record 160 metric tons of cocaine in early December, Walters declared: “These seizures are having a profound effect on availability of drugs in the U.S.”

But are they? In late December, National Public Radio (NPR) undertook an investigation of this claim by contacting the police departments in the 37 cities—including Los Angeles, San Francisco, Minneapolis, and Milwaukee--in which Drug Czar Walters claimed that interdictions had seriously disrupted cocaine supplies. Police officials in ten of the cities, including New York and Atlanta, confirmed that a cocaine scarcity existed. Some cities declined to respond. Five cities reported no signs of shortage, and police officials in 18 other cities gave “qualified responses,” according to NPR.

For example, officials in Boston, Chicago and Washington, D.C., acknowledged some scarcity, but said that the price and availability of rock cocaine on the street had remained essentially unchanged. Police in Detroit and Pittsburgh scoffed at the notion that cocaine was in short supply in their cities. “I spoke to my detectives out there in the streets making buys,” said Police Commander Sheryl Doubt, “and we all kind of agreed that if there’s a shortage here in Pittsburgh, we are not aware of it and don’t find that necessarily to be true.”

Police in Dallas and San Diego said they were unaware of any cocaine shortages in their cities. In San Antonio and Jacksonville, prices had gone up, but retail cocaine was readily available. In Philadelphia, Denver, and Houston, prices increased last summer, but have largely returned to normal, city officials told NPR.

Overall, said NPR, “The results suggest how difficult it is for law enforcement to create any long-term disruption in retail sales in America, which is the largest cocaine market in the world.”

Nonetheless, a stubborn Michael Braun, Chief of Operations for the Drug Enforcement Administration (DEA), said: “I don’t believe that we’ve ever seen this price/purity phenomenon over a 10-month period. This could all change next month. I hope that it doesn’t. I don’t think it will.”

But it did. In a statement not for attribution, an official at the National Drug Intelligence Center told NPR: “Cocaine availability appears to have returned to previous levels in some, but not all, drug markets, as traffickers re-establish stable sources of supply and distribution networks.” In Philadelphia, showcased as a major federal success story in choking off cocaine supplies, Police Captain Christopher Werner reported a recent bust involving 16 pounds of cocaine and more than $100,000 in cash “So,” Werner said, “is there a cocaine shortage right now? I don’t believe so.”

Even when drug wars seem to be working, and demand goes down, lowered usage of a particular drug often disguises the fact that a new drug has replaced it. There is an essential flaw in the logic behind the drug war. Demand for drugs is like a balloon--squeeze it in one place, and it bulges out somewhere else. Police officials contacted by NPR reported that wherever spot shortages of cocaine existed, “regular users turn to meth, heroin, prescription, drugs, and high-potency marijuana. In other words, enforcement had not appeared to curtail demand—one of the chief aims of the war on drugs.”

John Carnevale, a former budget director under four different drug czars, told NPR that there have been “occasional moments where we’ve seen spikes in cocaine prices… but eventually the trend continues to decline.” Such fleeting price changes, Carnevale contends, do not meaningfully affect overall demand and usage.

If it all sounds familiar, it should. By the early 1990s, after having spent more than $100 billion dollars over the preceding ten years, the Reagan-Bush drug war had almost no lasting successes to report. Interdiction at the border was a joke, cocaine and heroin were cheaper than ever, and people addicted to alcohol, cocaine, and other drugs were still committing the majority of violent crimes. Treatment for drug and alcohol addiction in prison was still an afterthought. After the “just say no” years of the Reagan administration, and the “lock ‘em up,” policy thrust of the senior Bush years, many policy reform advocates were buoyed by Bill Clinton’s election and his ardent backing of treatment on demand (which never came to fruition).