WE MUST CURTAIL DEMAND FOR DRUGS, NOT JUST SUPPLY

The Afghan government just announced a new crackdown on opium
production. That country now produces 90 percent of the world's
output. Opium reportedly is the largest single component of
Afghanistan's GDP. Though the crackdown is laudable, history and
economic theory tell us it will have only limited success.

The problem with trying to limit the growing of such crops is that
any success in restricting output pushes up the price of what is
produced. This increases profitability for the remaining producers.
The greater the effort put into eradicating production, the greater
the incentive for producers to somehow keep producing.

There is much history here. For four decades, the United States has
prodded various South American countries to eliminate marijuana and
coca growing. Such programs usually emphasize sticks - arrests and
forcible eradication. Some efforts also included a small carrot,
providing poor peasant growers with some alternate crop.

I worked on a U.S. foreign-aid project in Peru in 1980-1982 and saw
such efforts firsthand. Our project, funded with a couple of hundred
thousand dollars, helped livestock production at high altitudes.
A-drug control project, funded with tens of millions, tried to
curtail coca production 40 miles further east and 8,000 feet lower down.

But it was spitting into the wind. Huanuco, the regional center of
coca production, was booming. Stores were full of TVs, VCRs and Honda
generators to power them. Thousands of people buzzed about on
Japanese motorbikes. Most people looked well-fed. U.S. and European
cokeheads were lifting thousands of poor Peruvians out of poverty.

The U.S. drug-control project hired agronomists and ag economists to
find alternative crops. The problem was that there was no alternative
crop that was even a fifth as profitable as coca. Any coca grower who
shifted to watermelons or rice was a chump.

And so squads of Peruvian army and police officers were ferried
around in U.S. helicopters to grub out coca bushes here and there.
U.S. airplanes sprayed herbicides on coca and food crops alike. To
the extent such efforts cut coca production at all, prices for
cocaine paste rose in response and rational peasants sought even more
secluded places to establish new plantations.

The same will happen in Afghanistan. Opium poppies are the best way
for Afghan farmers to feed their families. As long as U.S. and
European drug users are willing to shell out billions to support
their habits, poor growers somewhere will produce the raw material.

In week two of any introductory econ course, students learn that
reducing supply raises prices. Reducing demand lowers prices. For
various reasons, including an unwillingness to acknowledge our own
society's role in drug abuse, we spend many times more on curtailing
supply than on curtailing demand. Prices rise and producers respond
just as the textbooks say they will. Nothing much will change until
we find a way to curtail demand.

Economist Edward Lotterman teaches and writes in St. Paul, Minn