Illegal drug trade - The War on Drugs: Drug trade generated an estimated US$531.6 billion in 2013

Table Of Contents

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The War on Drugs

Heinz Duthel

ACKNOWLEDGMENTS

ABOUT THE AUTHOR

Copyright

The War on Drugs

Heinz Duthel

Copyright © 2011 – 2015 Heinz Duthel

Revised Version 2015

All rights reserved.

DEDICATION

Dr. Joachim Koch, University of Regensburg

ACKNOWLEDGMENTS

EAP Agency, EPA, ICCI and Miguel de las Silva

Illegal drug trade

The illegal drug trade is a global black market, dedicated to cultivation, manufacture, distribution and sale of those substances which are subject to drug prohibition laws. Most jurisdictions prohibit trade, except under license, of many types of drugs by drug prohibition laws.

A UN report said the global drug trade generated an estimated US$321.6 billion in 2003. With a world GDP of US$36 trillion in the same year, the illegal drug trade may be estimated as slightly less than 1% (0.893%) of total global commerce. Consumption of illegal drugs is widespread globally.

History

The Illegal Drug Trade has emerged as a result of drug prohibition laws. During the 19th century, China retaliated with imports of opium and two Opium Wars broke out. In the First Opium War the Chinese authorities had banned opium but the United Kingdom forced China to allow British merchants to trade opium with the general population. Smoking opium had become common in the 19th century and British merchants increased. Trading in opium was (as it is today in the heroin trade) extremely lucrative. As a result of this illegal trade an estimated two million Chinese people became addicted to the drug. The British Crown (via the treaties of Nanking and Tianjin) took vast sums of money from the Chinese government through this illegal trade which they referred to as reparations. In his book Narcotic Culture: A History of Drugs In China, the Sinologist Frank Dikotter argues that China's opium problem was greatly exaggerated, explaining that while British politicians and Protestant missionaries grandstanded over China's opium problem, Britain was quietly consuming more opium per capita than China.

However in China there was an average of one death by starvation per year for more than a millennium until the late 1800s - where millions died of starvation in China. The opium was exported from India, which was controlled by the United Kingdom at the time and imported to China.

Legal penalties

In many countries, drug smuggling carries a severe penalty, including the death penalty (for example, China and Singapore). In 2010, two people were sentenced to death in Malaysia for trafficking 1 kilogram/2.2 pounds of cannabis into the country. On March 30, 2011, three Filipinos were executed by the Chinese government for drug trafficking.

In the USA, Federal law states that first time offenders be sentenced to a minimum term of imprisonment averaging 1 to 3 years. These sentences have become more noticed in recent years.

Drug trafficking is widely regarded as the most serious of drug offences around the world. However, sentencing often depends on the type of drug (and its classification in the country into which it is being trafficked) and where the drugs are sold and how they are distributed; for example if the drugs are sold to or distributed by underage people, then the penalties for trafficking may be harsher than in other circumstances.

Effects of illegal drug trade on societies

The countries of drug production have been seen as the worst affected by prohibition. Even so, countries receiving the illegally-imported substances are also affected by problems stemming from drug prohibition. For example, Ecuador has allegedly absorbed up to 300,000 refugees from Colombia who are running from guerrillas, paramilitaries and drug lords, says Linda Helfrich. While some applied for asylum, others are still illegal, and the drugs that pass from Colombia through Ecuador to other parts of South America create economic and social problems.

Violent crime

In many countries worldwide, the illegal drug trade is thought to be directly linked to violent crimes such as murder; this is especially true in third world countries, but is also an issue for many developed countries worldwide. In the late 1990s in the United States, for example, the Federal Bureau of Investigation estimated that 5% of murders were drug-related. However, after a crackdown by U.S. and Mexican authorities in the first decade of the 21st century (part of tightened borders security in the wake of the September 11 attacks), border violence inside Mexico surged, with the Mexican government estimating that 90% of the killings are drug-related.

A report by the UK government's drug strategy unit that was subsequently leaked to the press, stated that due to the expensive price of highly addictive drugs heroin and cocaine, that drug use was responsible for the great majority of crime, including 85% for shoplifting, 70-80% of burglaries and 54% of robberies. The cost of crime committed to support illegal cocaine and heroin habits amounts to £16 billion a year in the UK (note: this is more than the entire annual UK Home Office budget).

Profits

Due to its illicit nature, statistics about profits from the drug trade are largely unknown. In its 1997 World Drugs Report the UNODC estimated the value of the market at USD$400 billion, ranking drugs alongside arms and oil amongst the world's largest traded goods. An online report published by the UK Home Office in 2007 estimated the illicit drug market in the UK at £4–6.6 billion a year

In December 2009, the United Nations' Drugs and Crime Tsar Antonio Maria Costa claimed that illegal drug money saved the banking industry from collapse. He claimed he had seen evidence that the proceeds of organised crime were the only liquid investment capital available to some banks on the brink of collapse during 2008. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result. In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor...Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way. Costa declined to identify countries or banks that may have received any drug money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame.

Minors and the illegal drug trade in the US

The U.S. government's most recent 2005 National Survey on Drug Use and Health (NSDUH) reported that nationwide over 800,000 adolescents ages 12–17 sold illegal drugs during the twelve months preceding the survey. The 2005 Youth Risk Behavior Survey by the U.S. Centers for Disease Control and Prevention (CDC) reported that nationwide 25.4% of students had been offered, sold, or given an illegal drug by someone on school property. The prevalence of having been offered, sold, or given an illegal drug on school property ranged from 15.5% to 38.8% across state CDC surveys (median: 26.1%) and from 20.3% to 40.0% across local surveys (median: 29.4%).

Despite over $7 billion spent annually towards arresting and prosecuting nearly 800,000 people across the country for marijuana offenses in 2005 (FBI Uniform Crime Reports), the federally-funded Monitoring the Future Survey reports about 85% of high school seniors find marijuana easy to obtain. That figure has remained virtually unchanged since 1975, never dropping below 82.7% in three decades of national surveys.

In 2009, the Justice Department identified more than 200 U.S. cities in which Mexican drug cartels maintain drug distribution networks or supply drugs to distributors - up from 100 three years earlier.

Trade of specific drugs

Cannabis

While the recreational use of (and consequently the distribution of) cannabis is illegal in most countries throughout the world, it is available by prescription or recommendation in many places, including some US states and in Canada. Cannabis use is tolerated in some areas, most notably the Netherlands which has legalized the possession and licensed sale (but strangely not production) of the drug. Many nations have decriminalized the possession of small amounts of marijuana. Due to the hardy nature of the Cannabis plant, marijuana is grown all across the world and is today the world's most popular illegal drug with the highest availability. Cannabis is grown legally in many countries for industrial, non-drug use (known as hemp) as well.

Tobacco

While the purchase and use of tobacco is legal for adults in most countries throughout the world, heavy taxation in some countries such as the United Kingdom has resulted in an extensive market for its illegal trade. Tobacco products such as name-brand cigarettes may be sold as low as one third of the retail price because of the lack of taxes which would be imposed throughout the legal distribution process. It was estimated in 2004 that smuggling a single truck containing up to 48,000 cartons of cigarettes into the United States could lead to a profit of around US$2 million. The source of the illegally-traded tobacco is often the proceeds from other crimes, such as store and transportation robberies.

A notable exception to the legal status of tobacco in most countries internationally is the kingdom of Bhutan, which made the sale of tobacco illegal in December 2004, and since this event, a large supply of tobacco has been made available on the black market. In 2006, tobacco and betel nut were the most commonly seized illicit drugs in Bhutan.

Heroin

Up until fairly recently the majority of the world's heroin was produced in an area known as the Golden Triangle (Southeast Asia). Today Afghanistan is by a very wide margin the world's largest exporter of heroin. In 2007, 93% of the opiates on the world market originated in Afghanistan. This amounts to an export value of about $64 billion, with a quarter being earned by opium farmers and the rest going to district officials, insurgents, warlords and drug traffickers. Another significant area where poppy fields are grown for the manufacture of heroin is Mexico.

According to the United States Drug Enforcement Administration, the price of heroin is typically valued 8 to 10 times that of cocaine on American streets, making it a high-profit substance for smugglers and dealers. In Europe (except the transit countries Portugal and the Netherlands), for example, a purported gram of street heroin, usually consisting of 700–800 mg of a light to dark brown powder containing 5-10% heroin base, costs between 30 and 70 euros, making the effective value per gram of pure heroin between 300 and 700 euros. Heroin is generally a preferred target for smuggling and distribution over unrefined opium due to the cost-effectiveness and increased efficacy of heroin.

Heroin is a very easily smuggled drug because a small, quarter-sized vial can contain hundreds of doses. From the 1930s to the early 1970s, the so-called French Connection supplied the majority of US demand. Allegedly, during the Vietnam War, drug lords such as Ike Atkinson used to smuggle hundreds of kilos of heroin to the U.S. in coffins of dead American soldiers (see Cadaver Connection). Since that time it has become more difficult for drugs to be imported into the United States than it had been in previous decades, but that does not stop the heroin smugglers from getting their product onto U.S. soil. Purity levels vary greatly by region with, for the most part, Northeastern cities having the most pure heroin in the United States (according to a recently released report by the DEA, Camden and Newark, New Jersey and Philadelphia, have the purest street grade A heroin in the country).

Penalties for smuggling heroin and/or morphine are often harsh in most countries. Some countries will readily hand down a death sentence (e.g. Singapore) or life in prison for the illegal smuggling of heroin or morphine, which are both, internationally, Schedule I drugs under the Single Convention on Narcotic Drugs.

Methamphetamine

Methamphetamine is another popular drug among distributors. Three common street names are crystal meth, meth, and ice.

According to the Community Epidemiology Work Group, the numbers of clandestine methamphetamine laboratory incidents reported to the National Clandestine Laboratory Database decreased from 1999 to 2009. During this same period, methamphetamine lab incidents increased in midwestern States (Illinois, Michigan, Missouri, and Ohio), and in Pennsylvania. In 2004, more lab incidents were reported in Missouri (2,788) and Illinois (1,058) than in California (764). In 2003, methamphetamine lab incidents reached new highs in Georgia (250), Minnesota (309), and Texas (677). There were only seven methamphetamine lab incidents reported in Hawaii in 2004, though nearly 59 percent of substance abuse treatment admissions (excluding alcohol) were for primary methamphetamine abuse during the first six months of 2004. As of 2007, Missouri leads the United States in clandestine lab seizures, with 1,268 incidents reported. Often canine units are used for detecting rolling meth labs which can be concealed on large vehicles, or transported on something as small as a motorcycle. These labs are more difficult to detect than stationary ones, and can be often obscured with the legal cargo on big trucks.

Methamphetamine is sometimes used in an injectable form, placing users and their partners at risk for transmission of HIV and hepatitis C. Meth can also be inhaled, most commonly vaporized on aluminum foil, or through a test tube or light bulb fashioned into a pipe. This method is reported to give an unnatural high and a brief intense rush.

In South Africa methamphetamine is called tik or tik-tik. Children as young as eight are abusing the substance, smoking it in crude glass vials made from light bulbs. Since methamphetamine is easy to produce, the substance is manufactured locally in staggering quantities.

Temazepam

Temazepam, a strong hypnotic benzodiazepine, is illicitly manufactured in clandestine laboratories (called jellie labs) to supply the increasingly high demand for the hypnotic drug internationally. Many clandestine temazepam labs are in Eastern Europe. The way in which they manufacture the temazepam is through chemical alteration of diazepam, oxazepam or lorazepam. Clandestine jellie labs have been identified and shutdown in Russia, Ukraine, Czech Republic, Latvia and Belarus.

In the United Kingdom, temazepam is the most widely-abused legal, prescription drug. It's also the most commonly abused benzodiazepine in Finland, Ireland, the Netherlands, Poland, Czech Republic, Hungary, India, Russia, People's Republic of China, New Zealand, Australia and some parts of Southeast Asia. In Sweden it has been banned due to a problem with drug abuse issues and a high rate of death caused by temazepam alone relative to other drugs of its group. Surveys in many countries show that temazepam, heroin, cocaine, MDMA, cannabis, nimetazepam, and amphetamines rank among the top drugs most frequently abused.

U.S. Government involvement

The U.S. Federal Government is an opponent of the illegal drug trade; however, state laws vary greatly and in some cases contradict federal laws. Despite the US government's official position against the drug trade, US government agents and assets have been implicated in the drug trade and were caught and investigated during the Iran-Contra scandal, implicated in the use of the drug trade as a secret source of funding for the USA's support of the Contras. Page 41 of the December 1988 Kerry report to the US Senate states that indeed senior US policy makers were not immune to the idea that drug money was a perfect solution to the Contra's funding problem.

Acclaimed investigator and former DEA agent Michael Levine has alleged that the CIA participated in orchestrating the 1980 Cocaine Coup in Bolivia to install an Operation Condor military government, in place of the pre-coup civilian government. The pre-coup government had collaborated with the DEA in bringing leaders of the Roberto Suarez cartel to justice, and Levine alleges that the CIA not only intervened judicially to release the extradited cartel leaders and allow their flight to Bolivia, but also enabled them to collaborate with right-wing military factions in overthrowing the civilian government that had collaborated with the DEA. The drug links of the coup government were obvious to the international community, which led to the coup becoming termed the Cocaine Coup by historians. Levine alleges that one of the CIA agents who participated in the coup was Klaus Barbie, the former SS Nazi known as the Butcher of Lyon, who had previously collaborated with the CIA in Bolivia during the capture and execution of Che Guevara.

Contrary to its official goals, the US has suppressed research on drug usage, although the CIA researched regardless during MKULTRA. For example, in 1995 the World Health Organization (WHO) and the United Nations Interregional Crime and Justice Research Institute (UNICRI) announced in a press release the publication of the results of the largest global study on cocaine use ever undertaken. However, a decision in the World Health Assembly banned the publication of the study. In the sixth meeting of the B committee the US representative threatened that If WHO activities relating to drugs failed to reinforce proven drug control approaches, funds for the relevant programmes should be curtailed. This led to the decision to discontinue publication. A part of the study has been released. Several government-sponsored reports by commissioned experts have pointed to public substance abuse treatment as opposed to criminalization as the only effective way to battle the public health crisis caused by drugs; these recommendations have been mostly ignored by US government officials, and in some cases suppressed.

Further reading

Murillo, Luis E. (1995). The Noriega Mess: The Drugs, the Canal, and Why America Invaded. 1096 pages, illustrated. Berkeley: Video Books. ISBN 0-923444-02-5.

External links

The Forgotten Drug War, published by the Council on Foreign Relations

Illicit drug issues by country, by the CIA

United Summaries of EU legislation: Combating drugs

LANIC Drug Production, Consumption, and Trafficking page

The illicit drug trade in the United Kingdom – 2007 Home Office report

UNODC – United Nations Office on Drugs and Crime – World Drug Campaign

Texas School Survey of Drug and Alcohol Use – The nation's largest online library of state-funded school district survey reports showing annual substance use trends among Texas students, covering years 1989–2009.

Global Drug Trade Market Data Havocscope Black Markets

Black market

A 'black market' is a market in goods or services which operates outside the formal one(s) supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. the black market in bush meat or the state jurisdiction the black Market in China. Although markets in the regular economy are not given a white attribute, markets that have borderline status are called grey.

Worldwide, the underground economy is estimated to provide 1.8 billion jobs.

Background

The literature on the underground economy has avoided a common usage and has instead offered a plethora of appellations including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black. This profusion of vague labels attests to the confusion of a literature attempting to explore a largely un-chartered area of economic activity.

There is no single underground economy, there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified:

1. the illegal economy,

2. the unreported economy,

3. the unrecorded economy, and

4. the informal economy.

The illegal economy consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services. The black market is trade, goods, or Service (economics) in illegal activities, such as drug trafficking, arms trafficking, and prostitution.

The unreported economy consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the tax gap, namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a tax gap of $450–$500 billion.

The unrecorded economy consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts) but is not recorded. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to the western norms of National Income and Product Accounts. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. But there is still little consensus concerning the size of the unreported economies of transition countries.

The informal economy comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally.

Pricing

Goods acquired illegally take one of two price levels:

They may be cheaper than legal market prices. The supplier does not have to pay for production costs or taxes. This is usually the case in the underground economy. Criminals steal goods and sell them below the legal market price, but there is no receipt, guarantee, and so forth.

They may be more expensive than legal market prices. The product is difficult to acquire or produce, dangerous to handle or not easily available legally, if at all. If goods are illegal, such as some drugs, their prices can be vastly inflated over the costs of production.

Black markets can form part of border trade near the borders of neighboring jurisdictions with little or no border control if there are substantially different tax rates, or where goods are legal on one side of the border but not on the other. Products that are commonly smuggled like this include alcohol and tobacco. However, not all border trade is illegal.

Consumer issues

No government, no global nonprofit, no multinational enterprise can seriously claim to be able to replace the 1.8 billion jobs created by the economic underground. In truth, the best hope for growth in most emerging economies lies in the shadows.

—Global Bazaar, Scientific American

Even when the underground market offers lower prices, consumers still have an incentive to buy on the legal market when possible, because:

They may prefer legal suppliers, as they are easier to contact and can be held accountable for faults;

In some jurisdictions, customers may be charged with a criminal offense if they knowingly participate in the black economy, even as a consumer;

They may feel in danger of being hurt while making the deal;

They may have a moral dislike of black marketing;

In some jurisdictions (such as England and Wales), consumers in possession of stolen goods will have them taken away if they are traced, even if they did not know they were stolen. Though they themselves commit no offense, they are still left with no goods and no money back. This risk makes some averse to buying goods that they think may be from the underground market, even if in fact they are legitimate (for example, items sold at a car boot sale).

However, in some situations, consumers can actually be in a better situation when using black market services, particularly when government regulations and monopolies hinder what would otherwise be a legitimate competitive service. For example:

Unlicensed taxicabs. In Baltimore, it has been reported that many consumers actively prefer illegal taxis, citing that they are more available, convenient, and priced fairly.

Traded goods and services

Largest black markets Estimated annual

market value

(Billion USD)

Total 796

Marijuana142

Prostitution108

Counterfeit technology products100

Counterfeit pharmaceutical drugs 75

Prescription drugs 73

Cocaine 70

Opium and heroin65

Web Video piracy 60

Software piracy 53

Cigarette smuggling 50

In developed countries, some examples of underground economic activities include:

Transportation providers

Where taxicabs, buses, and other transportation providers are strictly regulated or monopolized by government, a black market typically flourishes to provide transportation to poorly served or overpriced communities. In the United States, some cities restrict entry to the taxicab market with a medallion system— that is, taxicabs must get a special license and display it on a medallion in the vehicle. This has led to a market in Carpooling/illegal taxicab operation, although in most jurisdictions it is not illegal to sell the medallions.

Illegal drugs

From the late 19th and early 20th centuries, many countries began to ban the keeping or using of some recreational drugs, such as the United States' war on drugs. Many people nonetheless continue to use illegal drugs, and a black market exists to supply them. Despite law enforcement efforts to intercept them, demand remains high, providing a large profit motive for organized criminal groups to keep drugs supplied. The United Nations has reported that the retail market value of illegal drugs is $321.6 billion USD.

Although law enforcement officers do capture a small proportion of the illegal drugs, the high and very stable demand for such drugs ensures that black market prices will simply rise in response to the decrease in supply—encouraging new distributors to enter the market. Many drug legalization activists draw parallels between the illegal drug trade and the Prohibition of alcohol in the United States in the 1920s.

In the United Kingdom, it is not illegal to take drugs, but it is illegal to possess them. This can lead to the unintended consequence that those in possession may swallow the evidence; once in the body they are committing no crime.

Prostitution

Prostitution is illegal or highly regulated in most countries across the world. These places form a classic study of the underground economy, because of consistent high demand from customers, relatively high pay, but labor intensive and low skilled work, which attracts a continual supply of workers. While prostitution exists in almost every country, studies show that it tends to flourish more in poorer countries, and in areas with large numbers of unattached men, such as around military bases.

Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codewords and subtle gestures. In countries such as the Netherlands, where prostitution is legal but regulated, illegal prostitutes exist whose services are offered cheaper without regard for the legal requirements or procedures— health checks, standards of accommodation, and so on.

In other countries such as Nicaragua where legal prostitution is regulated, hotels may require both parties to identify themselves, to prevent the rise of child prostitution.

Weaponry

The legislatures of many countries forbid or restrict the personal ownership of weapons. These restrictions can range from small knives to firearms, either altogether or by classification (e.g. caliber, automation, etc.), and explosives. The black market supplies the demands for weaponry that can not be obtained legally, or may only be obtained legally after obtaining permits and paying fees. This may be by smuggling the arms from countries where they were bought legally or stolen, or by stealing from arms manufacturers within the country itself, using insiders. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmithing their own firearms. Those who may buy this way include criminals, those who wish to use them for illegal activities, and collectors.

In England and Wales some kinds of arms designed for shooting animals may be kept at home but must be registered with the local police force and kept in a locked cabinet. Some people buy on the black market if they would not meet the conditions for registration— for example if they have a record of committing a criminal offense, however minor.

In some jurisdictions, collectors may legally keep antique weapons. Sometimes they must be disarmed (incapable of being fired); but sometimes they are so ineffective by modern standards that they are allowed to be kept intact. For example a blunderbuss or cannon is hardly likely to be used for a drive-by shooting.

Alcohol and tobacco

It has been reported that smuggling one truckload of cigarettes from a low-tax US state to a high-tax state can lead to a profit of up to $2 million. The low-tax states are generally the major tobacco producers, and have come under enormous criticism for their reluctance to increase taxes. North Carolina eventually agreed to raise its taxes from 5 cents to 35 cents per pack of 20 cigarettes, although this remains far below the national average. But South Carolina has so far refused to follow suit and raise taxes from seven cents per pack (the lowest in the USA).

In the UK it has been reported that 27% of cigarettes and 68% of roll your own tobacco [is] purchased on the black market.

Booze cruise

In the UK, the booze cruise— a day-trip ferry to continental Europe simply to get alcohol and tobacco at lower tax rates— is still very popular. Its popularity varies on the Euro to Sterling exchange rate, and the relative tax rates between the different countries. Some people do not even bother to get off the boat; they buy their stock on board and sail straight back. Ferry companies offer extremely low fares, in the expectation that they will make the money up in sales on the boat. The same system exists for boats between Liverpool and Dublin, Ireland.

Providing the goods are for personal consumption, booze cruises are entirely legal. Because there are no customs restrictions between European Union countries it is not strictly a black market, but closer to a grey market. The UK and Ireland are both European Union members and are both in a Common Travel Area so there are neither customs nor passport checks between the two countries.

There is however a thriving black market in goods, rubbing tobacco in particular, which have avoided the payment of excise duty. This is partly supplied by booze cruises.

Copyrighted media

Street vendors in countries where there is scant enforcement of copyright law, particularly in Asia and Latin America, often sell deeply discounted copies of films, music CDs, and computer software such as video games, sometimes even before the official release of the title. A determined counterfeiter with a few hundred dollars can make copies that are digitally identical to an original and suffer no loss in quality; innovations in consumer DVD and CD writers and the widespread availability of cracks on the Internet for most forms of copy protection technology make this cheap and easy to do.

This has proved very difficult for copyright holders to combat through the law courts, because the operations are distributed and widespread— there is no Mr. Big. Since digital information can be duplicated repeatedly with no loss of quality, and distributed electronically at little to no cost, the effective underground market value of media is zero, differentiating it from nearly all other forms of underground economic activity. The issue is compounded by widespread indifference to enforcing copyright law, both with governments and the public at large. To steal a car is seen as a crime in most people's eyes, but to obtain illicit copies of music or a game is not.

Yet, the preceding comparison, although common, is not truly analogous. Automobile theft results in an item being removed from the owner with the ownership transferred to a second party. Media piracy is a crime of duplication, with no physical property being stolen. Copyright infringement law goes as far as to deem illegal mix-tapes and other such material copied to tape or disk. Copyright holders typically attest the act of theft to be in the profits forgone to the pirates. However, this makes the unsubstantiated assumption that the pirates would have bought the copyrighted material if it had not been available through file sharing or other means. Many artists and film producers have accepted the role of piracy in media distribution. The spread of material through file sharing is a major source of publicity for artists and has been shown to build fan bases that may be more inclined to see the performer live (live performances make up the bulk of successful artists' revenues ).

Currency

Money itself is traded on the black market. This may happen for one or more of several reasons:

The government sets (pegs) the local currency at some arbitrary level to another currency that does not reflect its true market value.

A government makes it difficult or illegal for its citizens to own much or any foreign currency.

The government taxes exchanging the local currency with other currencies, either in one direction or both (e.g. foreigners are taxed to buy local currency, or residents are taxed to buy foreign currency)

The currency is counterfeit.

The currency has been acquired illegally and need to be laundered before the money can be used.

A government may officially set the rate of exchange of its currency with that of other currencies— typically the US dollar. When it does, it is often pegged at an exchange rate that is artificially low— that is, below what would be the market value if it were a floating currency. Others in possession of the foreign currency, for example expatriate workers, will sell the foreign currency to buy local currency at higher exchange rates than they can get officially.

In situations of financial instability and inflation, citizens may substitute a foreign currency for the local currency. The U.S. dollar is viewed as a relatively stable and safe currency and is often used abroad as a second currency. At the present time, $340 billion dollars, roughly 37 percent of all U.S. currency is believed to be circulating abroad. The widespread substitution of U.S. currency for local currency is known as defacto dollarization, and has been observed in transition countries and in some Latin American countries. Some countries, such as Ecuador, abandoned their local currency and now use US dollars, essentially for this reason, a process known as de jure dollarization. See also the example of the Ghanaian cedi from the 1970s and 1980s.

If foreign currency is difficult or illegal for local citizens to acquire, they will pay a premium to acquire it. U.S. currency is viewed as a relatively stable store of value and since it does not leave a paper trail, it is also a convenient medium of exchange for both illegal transactions and for unreported income (tax evasion) both in the U.S and abroad.

Fuel

In the EU it is not illegal for a person or business to buy fuel in one EU state for their own use in another, but as with other goods the tax will generally be payable by the final customer at the physical place of making the purchase.

Between the Republic of Ireland and Northern Ireland there has often been a black market in petrol and diesel. The direction of smuggling can change depending on the variation of the taxes and the exchange rate between the Euro and Pound Sterling; indeed sometimes diesel will be smuggled in one direction and petrol the other.

In some countries diesel fuel for agricultural vehicles or domestic use is taxed at a much lower rate than that for other vehicles. This is known as dyed fuel, because a coloured dye is added so it can be detected if used in other vehicles (e.g. a red dye in the UK, a green dye in Ireland). Nevertheless, the saving is attractive enough to make a black market in agricultural diesel. In 2007 it was estimated that £350 million was not gained in potential revenue this way in the UK.

Appearance and disappearance

If an economic good is illegal but not seen by many in society as particularly harmful, such as alcohol under prohibition in the United States, the black market prospers. Black marketeers can reinvest profits in diverse legal or illegal activities, well beyond the original source of profit.

Some, for example in the marijuana-trade debate, argue for removing the underground markets by making illegal products legal. This would, in their view:

decrease the illegal cashflow, thus making the performance of other, potentially more harmful, activities financially harder

allow quality and safety controls on the traded goods, thus reducing harm to consumers

let the goods be taxed, providing a source of revenue

free up court time and prison space and save taxpayer money.

Modern examples

Wars

Black markets flourish in most countries during wartime. States that are engaged in total war or other large-scale, extended wars must necessarily impose restrictions on home use of critical resources that are needed for the war effort, such as food, gasoline, rubber, metal, etc., typically through rationing. In most cases, a black market develops to supply rationed goods at exorbitant prices. The rationing and price controls enforced in many countries during World War II encouraged widespread black market activity. One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened. Another in Britain was supplies from the USA, intended only for use in USA army bases on British land, but leaked into the local native British black market.

During the Vietnam war, soldiers would spend Military Payment Certificates on maid service and sexual entertainment, thus supporting their partners and their families. If the Vietnamese civilian wanted something that was hard to get, he would buy it at double the price from one of the soldiers, who had a monthly ration card and thus had access to the military stores. The transactions ran through the on-base maids to the local populace. Although these activities were illegal, only flagrant or large-scale black-marketeers were prosecuted by the military.

Indian black-money

Further information: Indian black money, Indian Economy#Corruption, and Corruption in India

The black money market situation in India is epidemical. India currently tops the list for black money in the entire world with almost US$1,456 billion in Swiss banks (USD 1.4 trillion approximately) in the form of unaccounted money. According to the data provided by the Swiss Banking Association, India has more black money than the rest of the world combined. Indian Swiss bank account assets are worth 13 times (1300%) the country’s national debt, and, if this black money is brought back to the country, India has the potential to become one of the richest countries in the world.

Prohibition in the United States

Alcohol

A classic example of creating a black market is the Prohibition of alcohol during the 1920s in the United States. Many organized crime syndicates took advantage of the lucrative opportunities in the resulting black market in banned alcohol production and sale. Most people did not think drinking alcohol was particularly harmful nor that its buyers and sellers should be treated like common criminals. So illegal speakeasies prospered, and organizations such as the Mafia grew tremendously more powerful through their black market activities distributing alcohol. This lasted until repeal of Prohibition.

Although Prohibition ended in 1933, there are still some parallels today with evasion of the drinking age of 21 in the United States, which is high compared to other industrialized countries and three years above the age of majority in nearly all states. Like Prohibition, this law is widely (but more covertly) disobeyed as well. Though social sources of supply predominate for underage drinkers, some bars and stores knowingly serve and sell to those who are underage, and some may even make deals with local police. Many college towns especially have a vast network of fraternities and sororities (and others) that run what can be considered modern-day speakeasies in their houses, in which age is irrelevant. Since the substance in question, alcohol, is legal for those over 21, it can be considered more of a gray market than a black market.

Smoking

This effect is seen similarly today, when jurisdictions pass bans on smoking in bars and restaurants. In these jurisdictions, smokeasies arise which allow smoking despite the legal prohibition. In a sense the owner is not a black marketeer since he is not necessarily selling tobacco, but he profits by the sale of other goods on his premises (typically alcohol).

This phenomenon is very prevalent in many US state jurisdictions with smoking bans, including California, Philadelphia, Utah, Seattle, Ohio, and Washington, D.C..

Further reading

Breusch, Trevor. Estimating the Underground Economy using MIMIC Models. Ideas.repec. Retrieved 2005.

Feige, Edgar L. (1989 and 2007). The Underground Economies:Tax Evasion and Information Distortion. Cambridge: Cambridge University Press. pp. 378. ISBN 0-521-26230-5.

Feige, Edgar L. (July, 1990). Defining And Estimating Underground And Informal Economies: The New Institutional Economics Approach. World Development. Elsevier, 18 (7): 989–1002.

Schneider, Friedrich; Enste, Dominik H. (2000). Shadow Economies: Size, Causes, and Consequences. Journal of Economic Literature (American Economic Association) 38 (1): 77–114. JSTOR 2565360..

External links

Havocscope Black Markets - Database and statistics on black market activities

Official March 2000 French Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe by French MPs Vincent Peillon and Arnaud Montebourg, third section on Luxembourg's political dependency toward the financial sector: the Clearstream affair (pp. 83–111 on PDF version)

The Underground Economy from National Center for Policy Analysis (1998)

Going Underground: America's Shadow Economy by Jim McTague (2005)

The Underground Economy: Global Evidence of Its Size and Impact (1997)

The Effects of a Black Market Using Supply and Demand

Economist, 11 August 2010, A lengthening shadow: Shadow economies have grown since the financial crisis began

Drug

A drug, broadly speaking, is any substance that, when absorbed into the body of a living organism, alters normal bodily function. There is no single, precise definition, as there are different meanings in drug control law, government regulations, medicine, and colloquial usage.

In pharmacology, a drug is a chemical substance used in the treatment, cure, prevention, or diagnosis of disease or used to otherwise enhance physical or mental well-being. Drugs may be prescribed for a limited duration, or on a regular basis for chronic disorders.

Recreational drugs are chemical substances that affect the central nervous system, such as opioids or hallucinogens. They may be used for perceived beneficial effects on perception, consciousness, personality, and behavior. Some drugs can cause addiction and/or habituation.

Drugs are usually distinguished from endogenous biochemicals by being introduced from outside the organism. For example, insulin is a hormone that is synthesized in the body; it is called a hormone when it is synthesized by the pancreas inside the body, but if it is introduced into the body from outside, it is called a drug. Many natural substances, such as beers, wines, and psychoactive mushrooms, blur the line between food and recreational drugs, as when ingested they affect the functioning of both mind and body and some substances normally considered drugs such as DMT (Dimethyltryptamine) are actually produced by the human body in trace amounts.

Etymology

Drug is thought to originate from Old French drogue, possibly deriving later into droge-vate from Middle Dutch meaning dry barrels, referring to medicinal plants preserved in them.

Medication

A medication or medicine is a drug taken to cure and/or ameliorate any symptoms of an illness or medical condition, or may be used as preventive medicine that has future benefits but does not treat any existing or pre-existing diseases or symptoms.

Dispensing of medication is often regulated by governments into three categories—over-the-counter (OTC) medications, which are available in pharmacies and supermarkets without special restrictions, behind-the-counter (BTC), which are dispensed by a pharmacist without needing a doctor's prescription, and Prescription only medicines (POM), which must be prescribed by a licensed medical professional, usually a physician.

In the United Kingdom, BTC medicines are called pharmacy medicines which can only be sold in registered pharmacies, by or under the supervision of a pharmacist. These medications are designated by the letter P on the label. The range of medicines available without a prescription varies from country to country.

Medications are typically produced by pharmaceutical companies and are often patented to give the developer exclusive rights to produce them, but they can also be derived from naturally occurring substance in plants called herbal medicine. Those that are not patented (or with expired patents) are called generic drugs since they can be produced by other companies without restrictions or licenses from the patent holder.

Spiritual and religious use

The spiritual and religious use of drugs has been occurring since the dawn of our species. Drugs that are considered to have spiritual or religious use are called entheogens. Some religions are based completely on the use of certain drugs. Entheogens are mostly hallucinogens, being either psychedelics or deliriants, but some are also stimulants and sedatives.

Self Improvement

Nootropics, also commonly referred to as smart drugs, are drugs that are claimed to improve human cognitive abilities. Nootropics are used to improve memory, concentration, thought, mood, learning, and many other things. Some nootropics are now beginning to be used to treat certain diseases such as attention-deficit hyperactivity disorder, Parkinson's disease, and Alzheimer's disease. They are also commonly used to regain brain function lost during aging. Similarly, Drugs such as steroids improve human physical capabilities and are sometimes used (legally or not) for this purpose, often by professional athletes.

Recreational drug use

Further information: Prohibition (drugs)

Recreational drugs use is the use of psychoactive substances to have fun, for the experience, or to enhance an already positive experience. National laws prohibit the use of many different recreational drugs and medicinal drugs that have the potential for recreational use are heavily regulated. Many other recreational drugs on the other hand are legal, widely culturally accepted, and at the most have an age restriction on using and/or purchasing them. These include alcohol, tobacco, betel nut, and caffeine products in the west, and in other localised areas of the world drugs such as Khat are common. Because of the legal status of many drugs, recreational drug use is controversial, with many governments not recognising spiritual or other perceived uses for drugs and classing them under illegal recreational use.

Administering drugs

Drugs, both medicinal and recreational, can be administered in a number of ways. Many drugs can be administered in a variety of ways rather than just one.

Bolus

Inhaled, (breathed into the lungs), as an aerosol or dry powder. (This includes smoking a substance)

Injected as a solution, suspension or emulsion either: intramuscular, intravenous, intraperitoneal, intraosseous.

Insufflation, or snorted into the nose.

Orally, as a liquid or solid, that is absorbed through the intestines.

Rectally as a suppository, that is absorbed by the rectum or colon.

Sublingually, diffusing into the blood through tissues under the tongue.

Topically, usually as a cream or ointment. A drug administered in this manner may be given to act locally or systemically.

Vaginally as a suppository, primarily to treat vaginal infections.

Legal definition of drugs

Some governments define the term drug by law. In the United States, the Federal Food, Drug, and Cosmetic Act definition of drug includes articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals and articles (other than food) intended to affect the structure or any function of the body of man or other animals. Consistent with that definition, the U.S. separately defines narcotic drugs and controlled substances, which may include non-drugs, and explicitly excludes tobacco, caffeine and alcoholic beverages.

Governmental controls

In Canada the government has moved to remove the influence of drug companies on the medical system. The influence that the pharmaceutical companies, the for-profits, are having on every aspect of medicine ... is so blatant now you'd have to be deaf, blind and dumb not to see it, said Journal of the American Medical Association editor Dr. Catherine DeAngelis.

External links

DrugBank, a database of 4800 drugs and 2500 protein drug targets

The Cult of Pharmacology: How America Became the World's Most Troubled Drug Culture by Richard DeGrandpre, Duke University Press, 2006.

Opium

Opium

Opium poppy fruit exuding latex from a cut

BotanicalOpium

Source plant(s)Papaver somniferum

Part(s) of plantlatex

Geographic originIndochina Region

Active ingredientsMorphine, Codeine

Main producersAfghanistan (primary), Pakistan, Northern India, Thailand, Laos, Myanmar, Mexico, Colombia, Hungary

Main consumersworldwide (#1: U.S.)

Wholesale price$3,000 per kilogram

Retail price$16,000 per kilogram

Opium (poppy tears, lachryma papaveris) is the dried latex obtained from the opium poppy (Papaver somniferum). Opium contains up to 12% morphine, an alkaloid, which is frequently processed chemically to produce heroin for the illegal drug trade. The latex also includes codeine and non-narcotic alkaloids such as papaverine, thebaine and noscapine. The traditional method of obtaining the latex is to scratch (score) the immature seed pods (fruits) by hand; the latex leaks out and dries to a sticky yellowish residue that is later scraped off the fruit. The modern method is to harvest and process mature plants by machine. Meconium historically referred to related, weaker preparations made from other parts of the poppy or different species of poppies.

The production of opium itself has basically not changed since ancient times. However, through selective breeding of the Papaver somniferum plant, the content of the phenanthrene alkaloids morphine, codeine, and to a lesser extent thebaine, has been greatly increased. In modern times, much of the thebaine, which often serves as the raw material for the synthesis for hydrocodone, hydromorphone, and other semi-synthetic opiates, originates from extracting Papaver orientale or Papaver bracteatum.

Opium for illegal use is often converted into heroin, which is less bulky, making it easier to smuggle, and which multiplies its potency to approximately twice that of morphine. Heroin can be taken by intravenous injection, intranasally, or smoked (vaporized) and inhaled.

History

Cultivation of opium poppies for food, anaesthesia, and ritual purposes dates back to at least the Neolithic Age (new stone age). The Sumerian, Assyrian, Egyptian, Indian, Minoan, Greek, Roman, Persian and Arab Empires each made widespread use of opium, which was the most potent form of pain relief then available, allowing ancient surgeons to perform prolonged surgical procedures. Opium is mentioned in the most important medical texts of the ancient world, including the Ebers Papyrus and the writings of Dioscorides, Galen, and Avicenna. Widespread medical use of unprocessed opium continued through the American Civil War before giving way to morphine and its successors, which could be injected at a precisely controlled dosage.

In China recreational use of the drug began in the fifteenth century but was limited by its rarity and expense. Opium trade became more regular by the seventeenth century, when it was mixed with tobacco for smoking, and addiction was first recognized. Opium prohibition in China began in 1729 yet was followed by nearly two centuries of increasing opium use. China had a positive balance sheet in trading with the British, which led to a decrease of the British silver stocks. Therefore, the British tried to encourage Chinese opium use to enhance their balance, and they delivered it from Indian provinces under British control. In India, its cultivation, as well as the manufacture and traffic to China, were subject to the East India Company, as a strict monopoly of the British government. For supervising and managing the business, there was an extensive and complicated system of government agencies. A massive confiscation of opium by the Chinese emperor, who tried to stop the opium deliveries, led to two Opium Wars in 1839 and 1858, in which Britain suppressed China and traded opium all over the country. After 1860, opium use continued to increase with widespread domestic production in China, until more than a quarter of the male population were regular consumers by 1905. Recreational or addictive opium use in other nations remained rare into the late nineteenth century, recorded by an ambivalent literature that sometimes praised the drug.

Global regulation of opium began with the stigmatization of Chinese immigrants and opium dens in San Francisco, California, leading rapidly from town ordinances in the 1870s to the formation of the International Opium Commission in 1909. During this period, the portrayal of opium in literature became squalid and violent, British opium trade was largely supplanted by domestic Chinese production, purified morphine and heroin became widely available for injection, and patent medicines containing opiates reached a peak of popularity. Opium was prohibited in many countries during the early twentieth century, leading to the modern pattern of opium production as a precursor for illegal recreational drugs or tightly regulated legal prescription drugs. Illicit opium production, now dominated by Afghanistan, was decimated in 2000 when production was banned by the Taliban, but has increased steadily since the fall of the Taliban in 2001 and over the course of the War in Afghanistan. Worldwide production in 2006 was 6610 metric tonnes —nearly one-fifth the level of production in 1906.

Ancient use (4200 BCE–800 CE)

At least seventeen finds of Papaver somniferum from Neolithic settlements have been reported throughout Switzerland, Germany, and Spain, including the placement of large numbers of poppy seed capsules at a burial site (the Cueva de los Murciélagos, or Bat cave, in Spain), which have been