This article about drug legalization states the following:
If all that money were to dry up, what would the economic consequences be?
I don’t think ending prohibition would necessarily dry all that money up. Prices would probably be driven down quite a bit, but on the other hand production would probably increase for a lot of drugs.
The money would not “dry up.” It would be spent elsewhere.
Free markets and all that.
(And we definitely should legalize drugs. It’s ridiculous to worry about what people choose to indulge themselves in, ridiculous to divert money to such causes, and even more ridiculous to lose lives over it. Not to mention incarcerating people over it. Assinine.)
But, according to the article, demand is fairly inelastic. Or, the level of does not correlate with the stringency of local drug policy. Thus, an increase in supply doesn’t mean you could necessarily recoup the money lose due to falling prices.
In today’s global capitalism, yes, it’s possible that it could cause a recession. However, if you used the money you saved from the war on drugs and used it to subsidize the livelihoods of dealers and cops formerly in drugs, you’d find you’d come out about equal. A lot of labor is wasted in avoiding the law and in catching those breaking those laws: producing it legally saves tons and tons of money which represents the lack of necessary labour.
But people would never go for that, especially w/r/t drug dealers. But even though it could cause a recession I don’t think it would, since most of the formerly employed folks can probably get jobs and increase the economy where before they were a net drag on the economy. It’d suck to be a LEO if you couldn’t get a job after legalization though.
Right now the drug trade has a horribly inefficient distribution system. Law enforcement is the reason for the inefficiency.
So we have:
[Producers]
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[Distributors]
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[Dealers]
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[Consumers]
The producers will get more efficient without drug law enforcement. In fact, rather than sole proprietorships like we see now, I’d expect the farming end to wind up in the hands of big agribusiness and the chemical end of things in the hands of companies that either ARE or are LIKE big pharmaceutical companies.
We’d then wind up with companies along the lines of tobacco companies developing brands and marketing the products, using their efficient distribution networks to supply
The current distribution network is nowhere near that efficient.
Current dealers would largely be replaced by convenience stores and mass-market retailers.
It’d be a win for the bulk of the consumers in terms of drug pricing.
It would freaking kill the current dealers and their suppliers.
It would also be bad for the family farmers growing non-chemical product, as I imagine it would knock the market prices down.
Retailers would be in a better postion, as well as the newly-created ‘tobacco companies’.
The upside is that if it did create a recession everybody would be too stoned to care. 
I can’t find truly up-to-date figures but a quick Google search suggests that global trade in goods is actually closer to $20 trillion, so that $400 billion figure is only about 2%.
That’s pretty small in the greater scheme of things. And as others have said, that money would be diverted to other goods or other ways of making money.
Some individual localities would suffer recession, certainly, but the world economy wouldn’t even notice.
But that’s talking about the relative harshness of drug laws, not no drug laws vs. having drug laws. I suspect lots of people don’t even know how harsh or mellow (heh) the drug laws are in their state - the fact that it’s illegal at all keeps them from doing drugs. Keeping them illegal at all means that you have to do stupid, dangerous and illegal things to get them, and I don’t think most of us are willing to do that. Stock marijuana in your local CVS, and I do think more people would be willing to give it a try, or smoke on weekends - basically treat it like beer. Just the fact that you have to break the law and go into a crappy neighborhood and network with sketchy people is a gatekeeper in an of itself, regardless of what the penalty for possessing the drug is.
Of course it wouldn’t cause a global recession.
It would cut the price for various drugs by orders of magnitude. But the money that people used to spend on illegal drugs doesn’t disappear, it’s still there, but now is available to spend on other things.
It’s like asking if falling prices for computers will cause a recession, now that people don’t spend so much on computers. No, of course it won’t cause a recession, because now people get the same computers for less money.
The price per pound for legalized marijuana and heroin and cocaine has got to be incredibly low. Marijuana is easy to grow, poppies are easy to grow, coca is easy to grow. Marijuana shouldn’t cost any more per pound than tobacco. And even hard core potheads smoke a lot less than tobacco smokers…nobody chain smokes pot. The street cost for these products is something like 1% agricultural costs, and 99% distrubution costs.
And if legalized, it would be trivial for every pothead to have a small garden that could supply their entire needs, just like people who like homegrown tomatoes or fresh basil. People already do this, it’s just that it’s illegal, and as long as they’re growing pot they might as well sell it too, because the cost of farming it is trivial compared to the amount of money you can get. And the difference is the risk premium that the growers and distributors take due to the risk of being arrested.
The idea that legalization could cause a recession is like the old economic fallacy of the broken windows. The window maker pays a kid to throw rocks through the windows of the businesses around town, the businesses buy new windows. The kid gets paid and spends the money at the businesses, the windowmaker gets paid and spends the money at the businesses, the businesses get increased business, everybody wins. Breaking windows pumps up the economy! Except it doesn’t, because the entire system is poorer by however many windows the kid broke. If you think breaking random windows around town will stimulate the economy, how about I come over to your house and start smashing things randomly? That will stimulate the economy…you’ll have to go out and purchase replacements, that money spent will go to the shopowners, they’ll hire more staff, and so on. Except the money you spent on replacing your broken windows is now unavailable to spend on other stuff. After replacing the broken window, you’ve got a new window. If the window wasn’t broken, you’d have a window and you’d buy something else, which would stimulate the economy exactly as much as replacing the broken window does.
So the drug illegalization is like the kid that goes around breaking windows, and you’re worried that without this kid creating all this economic activity we’re going to have a recession. Nope.
I’m pretty sure that the fact that smoking pot (or whatever) is illegal does little to discourage pot smoking. People don’t do drugs because they don’t want to do drugs. Just about everyone knows that crack or meth will seriously fuck you up, and that’s why the smarter peeps stay away.
Well, I personally know at least six people who used to smoke pot who no longer do because of workplace drug tests. It’s a pretty common reason to *stop *smoking pot, in my experience, so I’d suppose it’s a common reason to not start in the first place.
Of course, one can question whether or not workplace drug tests would remain if drug prohibition was dropped. Since it’s been determined that employers can prohibit cigarette smoking off duty, they might keep on drug testing anyway.
Good god, when will those wankers stop spouting off all that trickle-down BS?
They’re so strident, they’ll even defend drug dealers to support that horsehockey.
I’m not sure I am following how this is a relevant analogy. If drugs were legalized, I would imagine a few things would happen.
- Drug growers would essential be out of business. As you said people might grow their own weed, etc. Or they would produce it locally at a fraction of the cost. Take Afghanistan for example .
How does a country make up for the loss of half there GDP when it disappears overnight? This article sums up my concerns:
I would imagine legalization would have a similar effect to eradication and interdiction. Essential they both would translate to lost revenue to growers.
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Drug dealers would be out of business. Thousands upon thousands of people would be out of the job overnight. Many would be left with supplies of drugs whose value has plummeted over night. Imagine buying 10k of weed one day, and finding it has a street value of $1000 the next.
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Police and military personnel would be out of the job. There would be no need to keep these people employed in the long term. How would they get by? While some would move on, many would fall through the cracks.
Why would all this not lead to a recession? I don’t claim to be an economics expert, but I would think that if another commodity that provides so many people with employment were to crumble, the economy would be greatly affected. Where am I wrong on this?
Legalising and regulating drug use in the Western world (particularly opium and/or cocaine) will not damage the growers in places like Afghanistan and Colombia. In fact, you can use it to legalise their source of income, cut out the middle men (the Taliban and drug cartels who rely on drug money) who make all the real profits, use the taxation on legal money flows to improve life and security, and manage the intake of western users. The biggest legitimate losers would be the Swiss bankers.
However, I can’t see the claimed reductions in criminality claimed. Drug dealers do it because they can make easy money, legality notwithstanding. They will just move to different forms of criminality, maybe with higher levels of risk to the general public.
The other issue is age controls. Legalised access to drugs will be regulated similarly to other intoxicating and dangerous substances like alcohol and tobacco. So the minimum age is likely to be 18. But there will be a market for drugs for those under that age limit, no matter what is done to prevent it. This will create a criminal target, but it will be aimed at a group who do not have access to serious funds.
I think prohibition is a failed policy, both for western societies and the poor societies that are the primary source of drugs. It’s time for a better approach. And, just to add, I have never used drugs and never plan to.
Si
There is not one type of drug. There are many. Each would take a separate course if legalized. Some people would grow their own marijuana, but most would probably want the highest quality product. This would open up a niche for marijuana farmers. This would actually add to the economy, because marijuana requires such large amounts of water and electricity that illegal growers illegally tap into infrastructure to steal it. If they would do so legally, suppliers would greatly benefit. Cocaine can’t be grown in most peoples’ backyards. Drug lords would still grow it and control its legal supply. Opium and its derivatives would be switched from illegal distribution channels to legal ones. Some people would lose money, others would gain it. And so on for every other drug of choice.
So what? Large corporations go out of business or shut down plants every day. The people involved in drug dealing would turn to other illegal activities - check the history of the mob for the dozens of businesses and activities they’ve been involved in over the years - or find legal jobs.
You vastly overestimate the number of police and military whose jobs depend on controlling illegal drugs. They could be absorbed by other work without missing a beat.
You’re wrong in every way. I agree that there would be local effects, just as there are when GM closes a plant. Michigan is in poor economic shape overall, but that’s from the cumulative effects of decades of lost jobs. Other parts of the country are booming despite that local effect.
Wiping out $400 billion of trade would have a noticeable effect. But it wouldn’t cause widespread recession. And the actual result of legalization would be nowhere near a $400 billion loss because virtually every cent of that money would be diverted into legal drugs or other activities. So the real world effect would be minimal when spread over the global economy.
If I have to sum up your error, it’s a very common one. You’re looking at one side of the loss equation without balancing it with the gains that would result from the change. Legal drugs might even expand the market and the gains would exceed any losses. Local disruptions would occur, but those occur with any change in the economy of any type, including the mere passage of time. You have to add up the gains and the losses to know where the outcome will fall.
“Dope will get you through times of no money better than money will get you through times of no dope.”
Gilbert Shelton