The Illicit Drug Industry
(See: Drugs
in American Society, 6th and 7th editions, Erich Goode, McGraw-Hill,
2005/2005/2008. Chapter 13 and The Sociology of American
Drug Use, Faupel, Horowit, and Weaver, 2004, chapter 9)
I. Myths surrounding the
drug industry
- Size
- 1980s: $100 billion.
Probably accurate
- 2000s: decline. Abt
Associates Report: "The
Price of Illicit Drugs: 1981-Second Quarter 2000;" $35 billion
on cocaine, $10 billion on heroin, $5.4 billion on methamphetamine, $10.5
billion on marijuana, and $2.4 billion on other drugs. Total: $65
billion. (estimate based on ADAM, NHSDUH, DAWN, UCR data). (local
copy)
- Prices down, purity
up.
- Generalizations:
- Cocaine number-one
drug based on money spent (2-4x that spent on heroin).
- Based on money
spent and volume of drug imported, cocaine use is down compared to
10-15 years ago.
- Heroin imports
relatively constant, price down and purity up
- Methamphetamine,
although a narrowly defined user population, constitutes a "major
player" in the trade
- Marijuana
tonnage is large, but market value comparable to heroin
- Market centralization
- Image--highly organized
conspiracy
- Reality--organized,
yes, but varies from drug to drug
- Even for the most
organized trade, no "Mr. Big" and trend is increasing decentralization
- Local structures
may be highly centralized
- Yet, dozens of
suppliers, hundreds of distribution networks, and "multicultural"
participation.
- Economic liability
- 2002 National Drug
Control Strategy report: cost to American society, $160 billion (not including
alcohol and tobacco)
- Typically, health
care costs and CJS costs are added to GDP.
- In 1992 Alcohol
costs: $148 billion; tobacco costs (1995): $145 billion (drugs for
1992 $98 billion) (Faupel, et al, 2004, page 281)
- Health care costs:
HIV and FAS, treatment.
- Productivity
(lost earnings): premature death, victimization, incarceration, crime
careers, impaired productivity
- Crime, fire,
traffic accidents, social welfare administration
- Costs paid for by
victims and their families (users and households: ~45%). Government (taxpayers)
2/3's of rest. Remainder--non-using population (higher prices, insurance
premiums, etc.)
- Illicit drug industry
is an Industry: jobs, cash flow, investments, as well as costs.
- Underground economy
employs thousands, and generates revenue for legitimate business
- Market demand and
high profits (even down the chain). An integral part of many nation's
economy
- The
Economic Cost of Methamphetamine Use in the United States, 2005 (Rand
Corporation, 2009)
II. Where do drugs come
from?
Drug trafficking Models
- Pure agricultural
model
- Harvest a product,
little processing
- Potential for decentralization
(farmer as seller)
- Marijuana
- Pure chemical
model
- Synthetic substances
- Technological expertise
on the production side
- Ecstasy, LSD
- Mixed model
- Farm to lab
- "Hourglass":
distributed production funneled through limited production facilities,
and then back to distributed distribution networks.
- Heroin, cocaine
Importation to USA:
- Land, Air, and Sea
- Depends on drug, production
source, etc.
- Wide range of "actors."
Sophisticated cartels as well as amateurs. "Mules," commercial vehicles,
and "private services."
- Technological escalation
to combat USA boarder patrols and the DEA.
Retail Distribution
(see Faupel, et al, 2004, page 289-291)
- "Dealers in quantity":
focused on making money
- Heroin: "bundles"
(about 25 street bags)
- Some at this level
sell pure enough for one additional "cut."
- Lower
level dealer--street level, typically a user: "juggler." Sells
to support habit and provide some living expense.
- Risky
- Problematic customers
- Will often "help
out" customers in withdrawal--buying on credit
- Lack of payment--violence
- Pressure by police
('flipping")--informants
- Most vulnerable to
arrest
- Risks and problems
at this level similar to lower-level positions in legitimate economy
- Goldstein: Dealers with
reputation "righteous dope"
- Special packaging
- Marketing techniques:
symbols, stamps, etc to distinguish their product
- Brand names--Goldstein
over 400 brands.
- One example of distribution:
Cocaine arrives in NYC airport, one of 10 or so "cells" pick it
up. Each "cell" has around 15-20 employees earning $2,500 to $7,000
a month. Each "cell" conducts around $25 million a month business.
Cells are autonomous, few have knowledge of all employees. Each "cell"
has a "head, bookkeeper, money handler, cocaine handler, motor pool,
and a 10-15 apartments serving as stash houses (Flynn, 1997, page 153, in
Faupel, et al, 2004, page 289).
- Cocaine and Heroin at
this stage are relatively pure. Each link in the distribution chain "steps
on" the product (dilutes, typically doubling the volume), and increases
the price. Ends up with approximately a 1,700% value added for cocaine, and
a 3,000% value added for heroin (Faupel, et al, 2004, page 289). Base price
for a kilogram of cocaine: $610 and ends up on the street at $110,000. Heroin:
$90 to $290,000. (1997, World Drug Report, table 1, chapter 4, page 126, in
Faupel, 2004, page 289)
Heroin
- pre-1972: French Connection
- 1972-early 1990s Golden
Triangle and Golden Crescent
- South America; Columbia,
Mexico
- Small (1-3 kilo)
loads
- Dominicans (east
coast)
- Mexican black tar
on west coast
- Shifting back to Golden
Crescent/Golden Triangle?
- Larger shipments
- Nigerian networks
- However, looks
like Goode (page 364 7th edition) is correct in that the DEA
reports the majority of the heroin consumed here in the USA comes
from Mexico and Latin America (2006-2007)
- 2005: Afghanistan
supplies 86% of world's heroin (up in 2006 and 2007)
- Centralized, highly
organized networks (ethnic base) for distribution, loosely organized within
producing countries.
- At local level--dependency
on small farmers, who in turn are dependent on opium production for
their income.
- The farmers can
make 33-800% more growing poppies than other agricultural products
- Typically, the
farmers realize about 5-6% of the profit, major traffickers about 90%
of profit.
- Opium is converted
to morphine in local "refineries." Conversion of morphine to heroin:
5-stage process. Early years--in Marseilles, France or Hong Kong. Now relatively
decentralized.
Cocaine
- Columbia, Peru, or
Bolivia: ancient practice
- Significant part
of economy (10% GNP)
- Inflation--billions
of dollars added to economy: consumer goods, land, and housing
- Difficult for
farmers not to produce (cost of land)
- Impact on other
agriculture (lowland farmers move to take advantage of profits
- Production down
by one-half (600-300 metric tons, by 1999)
- Price down, too.
- Two-thirds through
Mexico
- Shift from Columbian
centralization and control to distributed networks relying on Mexican transport
in the 1990s.
- East coast: Dominican
distribution, west coast: Mexican (2/3)
- Most of the product
is funneled though a small number of wholesalers.
- Organized Crime in
producing societies:
- Cartels
- Political corruption
- Cocaine production
is typically carried out in laboratories close to the coca fields. Coca
leaves are soaked in chemicals--alcohol, sulfuric acid, etc. Sodium carbonate
is added to precipitate out cocaine hydrochloride, and then washed with
kerosene, or gasoline--basuco or coca paste (90% pure). (See, Faupel, et
al, 2004, page 288)
Marijuana
- Decentralized
- One-half grown domestically,
one-quarter from Mexico (main source prior to 1969 and "Operation Intercept),
one-eighth from Columbia, and one-eighth from other sources.
- Canada (British Columbia)
a growing source
- Main producing states:
Indoor--CA, FL, OR, WA, WI; Outdoor: HI, CA, KY, and TN.
- $200,000 per year from
indoor, 5x10 foot plot.
- Development of "self-regulating"
gardens
- Hi-tech detection
- Drug most likely to
be produced by consumers
- Global
cannabis cultivation and trafficking. Chapter 12 of A
cannabis reader: global issues and local experiences, EMCDDA, Lisbon,
June 2008 (local
copy in .pdf).
Methamphetamine
- "Simple"
process
- Localized production
and Mexico
- Pre 1990s: Biker gangs,
now Mexican and independents
- 1994: 263 labs seized.
2000: 1,800 by DEA, 4,600 by local police
- 2004: Canada and Southeast
Asia getting into networks
Ecstasy:
- Western European sources
(Belgium and The Netherlands)
- Shipped through Canada
and Mexico
- A few labs in USA (7
seized in 2000)
- Costs 25 to 50 cents
to manufacture one tab, street price: $20-$30 (9 million tablets seized
in 2000)
LSD
- Complicated chemical
process
- 10-20 labs (CA and
Pacific Northwest) supply most of USA
- Manufacturers sell
LSD crystals to "trusted associates." These few sell to wholesaler.
Rarely discovered
- Crystals converted
to liquid: blotter acid, vials, "window pane."
III. Street
seller to user Transactions
- Heroin
on the street: Bruce Johnson's work
- Gangs
- Cloward and Ohlin
(1960)--criminal, delinquent and retreatist gangs (not very relevant)
- Levitt and Venkatesh
(1998): records of a Black, inner-city gang
- Crack sales
- Average wage:
$6 per hour, after 4 years: $11 (1995 dollars)
- Leadership--much
better pay (like any corporation, $32--over 4 years: $97)
- "Foot-soldiers'"
wages tripled too, $2.50-$7.10)
- Risk--high
- Symbolic value
of membership, and promotion--leaders rule.
- Lower-level workers--access
to legitimate jobs, yet stayed with gang as wages rose.
- Bourgois, In Search
of Respect: Selling Crack in El Barrio. (1995) (study 1985-1990)
- Substance use and
dealing: social marginalization and alienation
- Neighborhood--50%
Puerto Rican, 40% African-American
- 40% poverty.
40% welfare benefits of some sort
- 40% declared
no wages
- Few homeless
- Underground economy
- few benefits,
but (and) unregulated by the state
- image of legitimate
labor market--biased and dehumanizing
- cultural clashes
(street vs. office)
- "Structural
victimization."
- Street life
becomes alternative to marginalization
- Dialectic--embracing
street culture provides alternative, yet make the necessity of
an alternative more pressing--participation further marginalizes
- Drug use for Bourgois:
epiphenomenon--racism, classism, and criminality are the realties
- Issue: legalization
as solution? Bourgois ignores alcohol and tobacco. Again we see enormous
profit, yet outside the local community.
- Class and ethnic styles
of dealing
- Anti-crack laws:
racist
- 50% of incarcerated
drug offenders, Black, yet drug use consistent across racial/ethnic groups
- Increased scrutiny
(DWB) centered on minority status
- Structural racism
versus overt CJS bias:
- low-level drug
workers--more likely to be Black. Mid and upper-level dealers, more
likely to be white.
- Dunlar, Johnson,
et al (1994):
- Inner-city
dealers: likely to be Black, public space, sell to strangers,
small quantities, high volume.
- High
visibility
- Increase
chance of violence
- High
rate of detection and arrest
- Middle-class
dealers: most likely to be white, steady customer base, private/indoor
setting, larger quantities, semi-periodic transactions, violence
is rare.
- Low probability
of arrest
IV. Factors that facilitate
drug trade
- Prohibition: demand and
price inflation
- French Connection (1972):
opened up heroin marketplace in USA. Diversification and decentralization
- Collapse of Soviet Union.
Totalitarian/authoritarian political systems can control individual behavior:
repression
- Free trade
- Migration and immigration
- Opening of new centers
for production
- Economic privatization
- Deregulation
- Free trade (China's
port cities)
- Mexico: deregulate
trucking
- NAFTA
- Money Laundering
- Everybody loves cash
- Increasing number
of private banks
- Globalization
- Poverty
- Expansion of global
inequality: poor to grow the crops, poor to deal the drugs on the street
- Subsistence
- Get rich quick
- Local Governments
- Weak/chaotic: Afghanistan,
Columbia
- Corruption (Mexico--pre
2000 and Vicente Fox)
- America's
Habit: Drug Abuse, Drug Trafficking, & Organized Crime, President's
Commission on Organized Crime, 1986.
- Who
Profits from Drugs (PBS)
- Guns,
Drugs, and the CIA (PBS)
Education
and Intervention
URL: http://www.umsl.edu/~keelr/180/drug_industry.htm
Owner: Robert O. Keel rok@umsl.edu
References and
Credits for this Page of Notes
Last Updated:
Thursday, April 23, 2009 10:42 AM