I’m watching The Wire (no spoilers from the last season, please). As you probably know, one of the central themes is drug dealing in Baltimore. Here’s how it goes, basically, as far as I understand: Drugs get shipped to Baltimore, where a criminal organization distributes it to the dealers at the street corners. The guy at the corner sells it to drug users in very small parcels. Most of the money goes back to the top guy in the organization, and he gets rich. That makes sense.
But what my ignorance hinders me from understanding, is the vast amount of money they make. They make so much money they seem to have literally sacks of cash, which in itself is a problem; what to do with it? It definitely seems to be hundreds of thousands of dollars pouring in to these guys, they are so wealthy there is no end to it, judging from how they spend (not only giving away briefcases with seemingly laundered money, but also spending say half a million on real estate if that seems to be a good idea, and so forth.)
I would grasp this without further concern, if it wasn’t that there isn’t one “godfather of drugs” collecting all this money in Baltimore, but seemingly half a dozen or so. Baltimore is divided among them, and they all get extremely wealthy from the small parcels at the corners, which, judging from The Wire, without doubt is the main source of income for them all. From illegal drug use in one single city.
Now, this might not be a factual question, but perhaps some dopers could elaborate on this, how guys at corners in a city like Baltimore can sell so much drugs to generate these vast amounts of money year in and year out. I’m bad at mathematics, if nothing else. How much does an addict spend a day? How many are they, who spend it daily, in a city like Baltimore? How does the economics behind this look like? What are the figures, roughly?
You’re not going to get really accurate figures from any two sources that agree.
The general answer to your question is just volume. A hamburger doesn’t cost much, but McDonald’s made Ray Kroc a billionare. The “fiends” in The Wire are paying twenty bucks a hit; if one corner sells a thousand hits a day, that’s $20,000 per corner, and so an Avon Barksdale who controls, says, thirty corners (or high rises, or project spots, or what have you; in the first season D’Angelo Barksdale supervises a project, not a corner) is grossing $600,000 a day. That would be $3,000,000 a week assuming you don’t sell on Sunday - it’s implied activity goes away on Sundays - which is $150 million a year, the size of a pretty large corporate outfit. Major professional sports teams make less than that.
I’m just making these numbers up, of course, but they’re all consistent with what we see in the show; the $20 is definitely the standard charge for a hit, a “package” looks like it could be 500 to a thousand vials, and it’s strongly implied the major players cover dozens of selling locations. Baltimore’s a big town.
I remember reading about the economics of drug dealing at the retail level for a paper on street gangs. The low level sellers don’t make all that much more than they would at another job they could get (say, burger flipping), especially when you discount their earnings for the danger premium.
The boss of the organisation makes a good living. The lieutenants make ok (perhaps a good deal more than they could make at another job). I think the sellers were motivated by the prospect of moving up in the hierarchy.
Overall though, it seems enlisting in the military in a non-combat role then using the benefits to gain blue-collar skills would be a better career choice for those who are not already felons.
Obviously, this guy has to be cited: http://www.ted.com/index.php/talks/steven_levitt_analyzes_crack_economics.html
Rickjay, make sure to distinguish between revenue and profit. Even if you admit you’re making the numbers up, a corner that had anywhere near 1000 sales a day seems like it would be too attraction-getting.
Moreso than volume, it’s about profit margin. Prices for drugs, wholesale or street-level, are artificially inflated in a number of ways: an extremely devoted and price-insensitive customer base along with the obvious legal and physical risks associated with purchasing and moving large amounts of narcotics.
So, lets you have a connection so you can buy 10 kilos at a time for 20,000 dollars a piece (a decent price but not insane). 10 kilos is 10,000 grams, and you paid 200,000 dollars or 20 dollars a gram. If your cocaine is pretty pure when you buy it, you can then cut a significant amount it to increase your volume. Or if, as on the wire, you cook it up into crack, you REALLY increase your volume that way. I don’t know by exactly how much but I’ve heard claims of being able to double it.
So say after cutting or cooking you have 15,000 grams of sale-ready product. When you’re selling to fiends, the bags could be 1/3 of a gram and sell for 10-20 dollars (note: all of these numbers are anecdotal and obviously vary wildly. I’m just trying to give you a reasonable example). So you have 45,000 15 dollar bags, for a total sale price of 675,000 dollars, or a profit of 475,000.
So the margin on a bag can be 10 dollars or more. Not many people get truly rich but it’s not too hard to make a good living like that. Organizations have to split the money up, but it only expands as needed. Also, notice that Avon never touches anything-- that’s one of the biggest benefits of having employees.
There’s a really good book out there written by one the guys cited in “Freakonomics.” But the name of the author and the book is escaping me write now (the author was of subcontinental Indian descent). Anyway IIRC he was a graduate student at the University of Chicago who decided as a sociology project to hang out with drug dealers on the southside of Chicago and study the economics of the trade.
ETA: Ah, I see Captain Amazing cited him. It’s Venkatesh.
Also, it’s not just drug users in Baltimore, but from the surrounding area. In one of the episodes they talk about controlling corners near the freeways and main arteries so that users from the suburbs or who work downtown can easily buy drugs. If you notice, some of the customers aren’t from the neighborhood, there are people who look like contractors and office workers buying heroin on the corners too. The corners become known as a destination for people in the greater Baltimore area looking for heroin. I rember reading about a suburban kid who od’ed in her car in Baltimore on a corner and stayed there for quite some time, while people stripped her car and robbed her possessions.
Just to add, they found that (in 2000), gang leaders made between $50,000-$130,000 a year, gang officers made about $12,000 a year, and “foot soldiers” (the people on the streets actually selling the drugs) made about $2400 a year.
Venkatesh also watched the Wire with actual drug dealers to get their reaction. The dealers really got into the series. He wrote about it either on the Freakonomics blog or on Salon, I can’t remember which, but a less lazy person could find it easlily.
I lived in Baltimore for almost 8 years, including all the years when The Wire was being filmed and screened. During that period, heroin was a massive problem for the city. According to this 2002 information from the Justice Department, Baltimore had about 45,000 heroin addicts. That’s about 1 in every 15 residents of the city addicted to the drug.
At $20 a hit, even if every one of those addicts scored only once a week, that’s almost $1 million a week. And hardcore addicts don’t wait a week between highs; for many, daily use is the norm.
One economic consequence of this that hasn’t really been discussed is the fact that all the money that passes from the users to the dealers has to come from somewhere. While some users might have money of their own, or work a job, many addicts get money through crime. This means that the communities where these people live are subject to theft, armed robbery, and a variety of scams. My neighborhood in Baltimore had fairly frequent armed stick-ups in the street, and i knew a couple of people who got robbed in this way.
I lived with a psychologist who worked at a methadone clinic for a while. She told me that withdrawal symptoms from heroin set in about 12 hours for regular users. Given that almost no one can be a ‘casual’ heroin user, I think that a city’s number of heroin users would at least equal its number of daily heroin sales.
I thought I remembered hearing that the dealers said something along the lines of that the only thing that wasn’t real about the show is that nobody in it watches The Wire.