The Illicit Drug
Industry
(See: Drugs
in American Society, 5th, 6th, 7th, 8th, and 9th editions, Erich Goode, McGraw-Hill,
1999/2005/2008/2012/2014. Chapter 13/14 and The Sociology of American
Drug Use, Faupel, Horowitz, and Weaver, 2004/2010, 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 (Mexican
Drug Wars, 2010).
- 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.
- How illegal drugs flow around the globe, World Economic Forum, 7/4/2016, from the 2016 World Drug Report (local copy), (local copy of WEF article).
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.
- See, PBS Frontline "Opium Brides."
- 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 (see, "The
Acid King")
- 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
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Last Updated:
Wednesday, July 6, 2016 9:10 AM