Whether it is academic publications or the daily press, it is almost impossible to read anything at all concerning the drug traffic without encountering some figures on the volume of the money it allegedly generates. This paper also contains several estimates, taken from the most different sources, on the profits of this or that producing country. How should they be considered? With enormous caution. A caution which it is wise to intensify when moving toward larger ensembles, such as the value of the sales of narcotics in the consuming countries.
There are plenty of reasons to mistrust any estimation on the subject. The formation of the retail price of the various drugs is highly atypical (80). The ascertained prices, both wholesale and retail, can vary greatly in time and space. The estimations on the number of consumers are affected everywhere by large margins of uncertainty. "One must remain in the realm of conjectures, with the risk of accepting some figures because they are frequently mentioned or used" (81).
To avoid this risk, one can try measuring some of these figures on the scale of more plausible economic data, starting from the highest estimate, originally circulated by an American magazine and then widely mentioned (82). Thus, the main report of the convention "Drugs: the new Empire of Evil - A global and planetary war" (sponsored by UNDCP, Presidency of the Republic, Ministry of Foreign Affairs, of the Interior, of Justice, of Social Affairs), held in Rome on 12 May 1992, states that "After the traffic of weapons, drugs generate more profits than any other activity, an estimated $500 billion yearly" (83).
Taking for granted the demand in the countries that produce drugs - a demand which it seems legitimate to attribute to self-consumption - the final consumers of narcotics need to be sought in the industrialized countries. These countries, placed at the end of the commercial chain, buy the product of the drug industry as it is commonly meant, and determine its turnover.
In the OECD, private consumption absorbs 3/5 of the GDP. It amounts to about $8,700 billion (1989). Is it reasonable to think that the consumption of drugs in the OECD corresponds to 5.7% ($500 billion out of $8,700) of the private consumption? Is it possible that more money is spent on drugs than for the purchase of automobiles (3% in Italy, 5% in the United States, always on consumption of the families) or for combustibles and energy (4% both in Italy and in the United States) (84)?
The answer can only be negative, considering also the drug-addicted population, i.e. those who presumably spend all their income - whatever the origin - on drugs. To give an example of the size, these are formed by a maximum of 300,000 people in Italy and 1,000,000 in the United States, respectively on a total population of 57 million and 249 million inhabitants (85). It is obvious that an estimation corresponding to 1/5 of the mentioned one, i.e. about $100 billion, or 1.2% of the private consumption of the OECD, is already incredibly high, and presumes a wide recreational consumption (i.e. on the part of non-addicts) of illegal drugs in the developed countries. However, the most frequently mentioned estimates sometimes greatly exceed the threshold of $100 billion (Cf. chart 5).
Before trying to see what conclusions may be reached - limitedly to Italy - with the opposite procedure, i.e. an inductive calculation on the basis of the estimated expenditures of the drug addicts, it is worth reanalyzing the quote we started off from, according to which the turnover relative to the illegal drugs is second only to the traffic or weapons.
This has also rapidly become a leit motiv used by the media (86). However, it is odd that no one every stopped to check the amount of the arms traffic, obviously meaning by this the value of the international arms trade. Compared to the $500 billion attributed to drugs, these are lower figures: $49 billion in 1988, 56 in 1987, the last peak years before the recent, marked decline (87). Vice versa, the global expenditure for weapons - a different concept, as it includes the internal transactions, i.e. the supplies of the various national industries to the relative governments - should reasonably have amounted in those same years to $200-250 billion, i.e. 1/5 and 1/4 of the world military expenditure. In any case, we are far from the $500 billion mentioned.
This type of sensational comparisons, carried out with considerable superficiality, have ultimately given credit to a connection between weapons and drugs - of the kind of the Empire of Evil - which in my opinion is very scarcely buttressed by facts. Clearly, a series of Italian judicial investigations have revealed points of juxtaposition between the mafia and some clandestine supply of weapons. The mafia is also in the drug circuit, therefore weapons and drugs are related. But the syllogism is rather misleading.
The clandestine side of the international weapons transactions is but a small fraction of the legal and recognized one. The figures at hand are modest ones (no more than a few couple billion dollars yearly) compared to the more cautious estimates on the value of the drug traffic. Moreover, it is far easier to hide a substance in the form of powder than weapons and ammunition - a machine gun of the Kalashnikov type is sold at the same price as one or two grams of heroin, a howitzer shell weighs over 100 kilos, tanks and missiles are much more visible objects. The two types of trade call for extremely different skills, but it remains a fact that one of them, weapons, is far less profitable than the other. Therefore, why should there be some type of systematic connection? - which is something different from the occasional financial or personal combination.
On the other hand, it is true that the Colombian drug organizations provide themselves with explosive, weapons and ammunition. So does the mob. It is also true that the Lebanese and Afghan factions, the Peruvian and Burmese rebels and even the government of Rangoon have bought weapons with the profits of the drug trade. But the fact that the money of the drug traffic is used in this or that way is not very significant in itself. No one dares say that Rolex or Ferrari are implicated in the drug traffic for the simple fact that their products are bought by the Medellin or Calì lords.
Making an estimation of the turnover of the drug industry by deduction poses countless problems. For example, the price of the substances varies greatly from place to place and even in a same country, and from period to period in the same place. It is also difficult to interpret such changes in price in a correct manner: "An increase in the price [of heroin] can be caused by a greater demand, as would occur if the drug-addicted population grew for exogenous reasons, or by a shift in the curve of the supply, as could occur if greater police resources were involved in the struggle against the traffic. In the short term, an increase in the number of drug users, at the same conditions, increases the prices. In the long term, the casual relation is opposite: an increase in the price will discourage the flow of new addicts in the group of drug addicts" (88).
Even if we succeeded in establishing a price, it should be considered that many drug addicts or simple drug consumers discharge the cost of the substance on other consumers, buying wholesale, selling retail and keeping a share for themselves (the well-know figure of the consumer-dealer). Also, among the drug-addicted population, there is at every given time a subgroup in prison or in therapy, whose consumption is reduced or discontinued altogether. This may make a simple multiplication between the estimated number of drug addicts and the annual expenditure based on the daily consumption, misleading. Lastly, with the exception of a few surveys carried out in the U.S., there is total ignorance regarding the recreational consumption of illegal drugs, the one regarding the non-drug addicts: how many and who are these people, how much do they spend to buy the substances? This is simply unknown (89).
In the case of Italy, these difficulties have been taken into account in two surveys on the drug markets of Bologna and Verona, where reasonably plausible results have been obtained (90). It has been attempted to extend the method used in this study to the entire country, in a survey carried out by the Institute of Research on Social Investments (CENSIS) and by the National Centre for Social Prevention and Defence (CDS) (91). It is important to underline that, unlike other surveys, these advance reasonable hypotheses on the drug addicts' behaviours - the totality of whom are often attributed a consumption of 365 days all year round - as well as on the price and purity of the heroin. As to the drug-addicted population, the CENSIS-CDS survey is based on data from the Institute of Health and of the National Council for Research; data which lead to establish that the habitual consumers of heroin in Italy amount to about 150,000. The result is that the yearly value of the sales in Italy of this substance amount t
o about 2,400 billion lira - including the purchases of the few occasional consumers.
It cannot be ruled out that the number of Italian drug users has been underestimated in the sources used by the CENSIS-CDS researchers, possibly by factor two (92). Correcting the estimation as a consequence, the turnover of heroin would leap to about 5,000 billion yearly.
Doubling this figure, on a national basis, means making far but conservative hypotheses on the diffusion of drugs other than heroin. This will be more clear considering the following.
First of all, cocaine consumers. There are no data regarding Italy. However, there is a general agreement on the fact that the demand for this substance, while rapidly increasing, is generally lower than the demand in the U.S. The National Household Survey on Drug Abuse carried out by the National Institute on Drug Abuse (NIDA) has surveyed 660,000 people in 1990 in the U.S. who have consumed cocaine over the last week, and 1,600,000 people who have consumed it over the last month (93). Leaving out all those who use cocaine less than once a month (4,1 million in the U.S.), any transposition to Italy will hardly lead to more than 100-150,000 consumers " of the last week", and to 300-400,000 consumers "of the last month". Considering that the occasional use of the substance seems to be absolutely prevalent, it is already an exaggeration to attribute to a group this size a consumption which corresponds, in terms of value, to half of that of the drug addicts and occasional heroin consumers, i.e. 2,500 billion.
Secondly, there are cannabis consumers. The cost of this substance is much lower than the other ones considered (less than 1/10: Cf. chart 6), and generates a purely occasional consumption. There follows that those who use marijuana or hashish will hardly spend annual sums around 1 million lira. In order to generate the missing 2,500 billion or more, however, we need to hypothesize the existence of at least 2,5 million cannabis consumers, with an individual expense of one million lira yearly. According to the Ministry of Finance, on the contrary, this group is formed by about 2 million people, for a total annual expense of 900 billion (94).
Thirdly, the CENSIS-CDS research, that maintains - while basing itself on the "opinions and perceptions" of unspecified "experts in the field" - that the heroin market represents at least 55-60% of the Italian narcotics market.
As a further scale for the figures hypothesized in this study, we need to consider that 10,000 billion yearly would account for about one percentage point on the consumptions of all the Italian families - a far but negligible share (95).
In the case of Italy as well, nonetheless, there continue to circulate far greater estimates compared to the general hypotheses advanced here. Following are some of them. Some time ago, the CENSIS itself had estimated that the Italian turnover of the drug industry for 1985 amounted to 30,000 billion (96). In 1989, Il Sole-24 Ore calculated that it amounted to 93,000 billion (97). The Chambers of Commerce consider that the criminal organizations' profits from drugs and extortion amounts to $110 billion, or 15% of the GDP (98). While ignoring the part of this estimate that supposedly originates from extortion, the whole thing sounds exaggerated.
There is no need for such exaggerations. The margins of profit of the industry of illegal drugs (a partial indicator of which is the increase in price on moving up the commercial chain: chart 7) should be sufficiently high as to create considerable financial concentrations over a period of a few years - even with a smaller turnover and with criminal circuits which are not integrated among each other (i.e. the contrary of the Empire of Evil). In other words, there is all that is needed to expect an increase in the activities necessary to protect this type of business and to make it thrive: corruption, speculation, etc. In Milton Friedman's words, the drug industry "is not an example of an organized plot, but a predictable behaviour of the members of a branch of industry. That is to say that the drug lords behave no differently than the automobile tycoons" (98).
Why, then, does the problem of the drug traffic - also from the less controversial aspect, i.e. in terms of figures - continue to be handled with so many exaggerations?
The main explanation lies in the bureaucratic logic. It is a known fact that the military tend to exaggerate the enemy's capacities - the so-called worst case analysis - in order to mobilize the maximum of resources and to protect themselves from any criticism in the event of a defeat. The same behaviour characterizes the national and international anti-drug bureaucracies, all the more since the prevailing perception in the public is that of their defeat.
In fact, many antiprohibitionists also endorse these exaggerations, of the kind of the Empire of Evil, perhaps in the belief that these will further support their proposals for a legalization. However, this is a double-edged weapon. By refraining from criticizing the exaggerations, the antiprohibitionists run the risk of creating exasperated expectations on the legalization of drugs. It would be deceptive, for example, to expect from this measure such different things as the collapse of petty crime and the extinction of the Italian mobs, the overcoming of the military dictatorship in Burma and the end of the clandestine arms trade. On the contrary, the persistence of these phenomenons, while reduced, in a regime of legalization of drugs, could create precisely that type of generalized deception which is the ideal ground to relaunch prohibition.
-------------
(80) Because the export price is on average less than 10% of the final price, the traffickers of the consuming countries are in a position to absorb any increase un price in the producing countries, or any reduction of the quantity (caused, for example, by the seizures) which does not cause an absolute scarcity. Cf. Peter Reuter, "Eternal Hope: America's Quest for Narcotics Control", The Public Interest, Spring 1985.
(81) German Fonseca, "Economie de la drogue: taille, caractéristiques et impact économique", Revue Tiers Monde, July-September 1992.
(82) Cf. Louis Kraar, "The Drug Trade", Fortune, 20 June, 1988.
(83) Jamieson, cit., p. 46.
(84) All these data are taken from the World Bank, op. cit.
(85) The number of 500,000 drug addicts in the U.S. in the mid-eighties has been criticized as excessive, and with extremely convincing arguments: "If we use the estimates, produced in various academic studies, of the number of crimes committed by drug addicts, we find once again that the drug-addicted population alone seems to commit more crimes against property than are actually committed". Peter Reuter, "The (continued) Vitality of Mythical Numbers", The Public Interest, Spring 1984.
(86) A single example among the dozens of possible ones. In an article in which the author underlined the so-called weapons-drugs connections, the following was stated, "the investigation [of the Roman judge Mario Almerighi] proves that the chief traffic has always been that of weapons, whose turnover reaches unthinkable figures, whereas the one relative to drugs simply represents a first form of reinvestment of dirty capitals". Antonio Cipriani, "Spunta un rapporto segreto anche a Roma: 'I trafficanti di droga fanno incetta di Bot e Cct'", L'Unità, 5 January 1992.
(87) Cf. U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers 1989, Washington DC, Government Printing Office, 1990. L'ACDA, an agency of the U.S. government, does not take into account the supplies to sub-national groups, which can hardly represent, nonetheless, in terms of value, more than a couple percentage points of the cumulative demand of the governments. The latter is estimated by the ACDA regardless of the supply, so as to include also the black market of the unofficial suppliers. Lastly, the spare parts and ammunition are included.
(88) "The (continued) Vitality of Mythical Numbers", cit.
(89) Only now are the media starting to acknowledge the fact that there are occasional consumers also in the case of heroin. Cf. Joseph B. Treaster, "In New York, Juggling a Heroin Habit With Life at the Top", IHT, 23 July 1992.
(90) Cf. Pino Arlacchi and Roger Lewis, "Sociologia della droga: il caso di Verona", Micromega, 4/89; Pino Arlacchi and Roger Lewis, "Droga e criminalità a Bologna", Micromega, 4/90.
(91) Cf. Contro e Dentro, Milano, Franco Angeli, 1992, pp. 103-120.
(92) In the study on Bologna, Arlacchi and Lewis had indicated the average ration between drugs addicts in therapy at public and private structures and the total number of drug addicts as 1:4 (cf. "Droga e criminalità a Bologna", cit.). At 31 December 1991, the drug addicts in therapy in Italy amounted to 73,866. Cf. Carla Rossi (edited by), Osservatorio delle Leggi sulla Droga, VI Report, August 1992, Coordinamento Radicale Antiproibizionista e Millelire-Stampa Alternativa, Rome, 1992.
(93) Cf. National Drug Control Strategy, cit.
(94) Cf. Roberto Delera, "2 milioni di italiani lo fanno - stravaganti o colpevoli?", Epoca, 6 May 1992.
(95) If that which is of interest is the profits generated by the drug traffic pocketed by the Italian criminal organizations, it is obvious that the exports have not been considered, in Europe and in the United States. Though it is generally held that mafia, 'ndrangheta and camorra export great quantities of drugs, especially to Europe, it is also legitimate to presume some sort of role for the criminal organizations of the markets of arrival. A role which reduces the margins of profit. Even the Italian estimated turnover cannot be translated as it is into profit for the criminal enterprises: as in every other industry, it would take to deduce the costs of production, such as the purchase of raw materials, and intermediation costs. In this case, it can only be said that, compared to other legal activities, the former seem to be contained, while the latter (we need only think of the corruption or money laundering) should be considerable.
(96) Cf. Il peso dell'illecito in Italia, Milano, Franco Angeli, 1988. The same study (cf. pp. 143-4) maintained, on extremely fragile bases, that the turnover of the clandestine weapon trade was in a 1:1 ratio with the legal one (the latter being also overestimated). This gave a paradoxical result of 4,000 billion yearly.
(97) Cf. Lorenza Moz, "Il business della criminalità 'fattura' 200mila miliardi" and "Dal produttore al consumatore la 'coca' si ricarica del 2.300%", Il Sole-24 Ore, 4 September 1989. According to these figures, therefore, more than 10% of the private consumption and more than 6% of the GDP are allegedly used for the purchase of drugs.
(98) Cf. "Organized crime seeks to profit from Europe's single market", The Wall Street Journal Europe, 22 July 1992.
(99) "Der Drogenkrieg ist verloren", Der Spiegel, 30 March 1992.
