DRUG WAR STRATEGY FATALLY FLAWED

BOGOTA, Colombia -- America's drug war is such a spectacular failure that a
visitor from another planet might conclude that it's intentionally that way.

Suppose that we asked President Bush if, for $8 billion or so each year
(plus another $12 billion in state and local enforcement), he would be
willing to finance a system that would ensure a violent black market
network extending from virtually every U.S. urban neighborhood all the way
to Mexico, Colombia and other parts of the world? Meanwhile, an additional
goal would be, at least in the United States, to crowd our courts and
prisons with people having health problems and those who prey on them.

The drug war is designed to raise prices and discourage use, mostly through
a strategy of tough enforcement. What in fact has happened is that
black-market prices are far higher than the price would be in a legal
market, but not high enough to discourage millions of drug users from
shopping in the black market. It's an insane scheme in the sense that it is
both an enormous expense and an enormous failure. Colombia, for example,
now supplies as much as 80 percent of the $50 billion American market.

But despite the war rhetoric from Washington, D.C., the enemy in the
supply-side drug war, which is, after all, the U.S. focus, is not Colombia,
or this cartel or that drug lord, but rather an entire market system.

Drug prohibition policies in the context of stubborn demand have had the
"price-support" result that drugs sell in the United States for more than
10 times the cost of production in Latin America.

Throughout the market system the enormous profitability finances criminal
organizations, spurs often-violent competition for market share, provides
billions of dollars to bribe ill-paid law enforcement and security forces
and ensures that new producers and traffickers will readily step forward to
replace those who are taken down.

No wonder that it's difficult to choke off supply. The barrier to entry, as
an economist might say, is just not very high. Coca, for example, is a
relatively easy crop to produce. It grows in marginal soils, needs little
investment or cultivation and earns peasant growers a greater return than
any other crop. Even the production of coca paste is economical. From a
cost-of-goods perspective, crushed coca leaves mixed with gasoline, cement
and ether (which is then dried in ordinary microwave ovens operated by
generators in jungle locations) are a bargain.

This is not to say that the drug industry benefits the producer country.
The effects are surprisingly negative, as the situation here illustrates.
Drug-related violence has had a chilling effect on foreign investment all
over Colombia. More important, the booming cocaine industry has literally
deformed civil society. Riches, no matter how ill-gotten, have become the
goal of too many Colombians. And respect for civic rights, education and
honest work have declined. The judicial system and other government
institutions have crumbled as the narco-trafficers have carved out a sphere
for their illicit business through corruption and violence. The result has
been the progressive "deligitimation of the government."

Drug barons do not invest in the industrial sector, but instead regularly
choose less value-added investments. Some analysts are now speaking of the
Andean disease -- a loss of competitiveness of those sectors of the economy
that produce legal goods for export or goods that substitute for imports,
largely because of the tendency for the Colombian peso, for example, to be
overvalued by the distorted "oversupply" of dollars.

Drug barons here have also shown a marked preference for the purchase of
some of the best land in the country. This process has translated into a
general displacement of positive agricultural activity, because the lands
in question are now devoted to pasturage or recreational farms.

As Colombian economist Mauricio Reina explains, "the rise in demand for
land has increased land prices exorbitantly in the affected regions so that
often it is better business to sell than to continue to farm. The overall
result is less prospect for land reform and overall limited economic growth."

An effective drug policy should not be a policy of denial. And yet the Bush
administration has retreated to the same tired, ineffectual, unilateral
certification process whereby the United States looks to drug-producing
nations to demonstrate that they are making major progress in the fight
against drugs or face sanctions. Seizures and arrests may increase, prices
may fluctuate, but the supply-side battle is a losing proposition. "It's
like hitting mercury with a hammer," one U.S. State Department expert said.

Not surprising, the escalating drug war in southern Colombia is simply
spreading production elsewhere. There are reports of coca cultivation being
restarted in areas of Peru that had been eradicated by fumigation. And
Brazil is bracing to meet the threat of drug production and trade in its
border regions.

Unless we attack the $50 billion American appetite for illegal drugs at
home, I'm convinced that our drug war strategy is fatally flawed. It might
be a good idea if the United States agreed to certify its own efforts.
Otherwise we're going to continue losing this war.