BRITAIN IS STONED AT HOME AND SOLD OUT IN HELMAND

The Vast Increase in Opium Poppy Farming in Afghanistan Is Indicative
of an Inability to Grasp a Basic Law of Economics

The British government for sure knows how to do one thing. It knows
how to help farmers in need. Since it arrived in Afghanistan in 2001
and was put in charge of the staple poppy crop, ministers have spent
hundreds of millions of pounds on promoting it. On Monday the United
Nations announced the result. Poppy production in Afghanistan has
soared since the invasion, this year alone by 34%. The harvest in the
British-occupied protectorate of Helmand rose by 50% in 12 months.
This is a dazzling triumph for agricultural intervention.

Ministers may deny this was their policy, but they cannot be that
inept. They faced a heroin epidemic at home. Suddenly finding
themselves charged with controlling almost all the world's opium
production, they must have known what they were doing. By alienating
farmers and forcing them into the arms of the Taliban, they would
drive up illicit production and encourage oversupply. While that would
increase heroin consumption in Britain in the short term, as it has
done, oversupply would eventually cause prices to collapse. At that
point, the British policy of "poppy substitution" with wheat and other
crops would start to bite and supply would be stifled. What happened
when that stifling drove prices back up again was someone else's concern.

I cannot think of any less daft explanation for a policy that
otherwise defies every law of economics. Kim Howells, the Foreign
Office minister responsible for flooding British streets with cheap
heroin, may squabble with his American colleagues over whether poppy
eradication is better than substitution, but one thing is certain.
Since Nato arrived in Afghanistan, opium has become to the local
economy what oil is to a Gulf state. It is roughly 60% of the domestic
product and 90% of exports, with productivity per hectare rising by
the year.

Afghanistan now enjoys a global opium monopoly, supplying an estimated
93% of total consumption. This relatively sophisticated consumer
business has developed in conditions of near anarchy, with the country
under military occupation and a government impotent outside its
capital. Nor has it depended on any trade agreement, aid or price
cartel. Traders enjoy no regulation, red tape or export controls,
other than a need to bribe Afghan officials. They have even started to
bring within Afghanistan's borders some of the added value in opium
processing that previously went to factories and dealers in Iran and
Pakistan. This offers the hope of more money and jobs trickling down
to local towns. The free market is working.

Howells claims he wants to imprison the opium traders and destroy
their factories, and had been given UKP22.5m by Gordon Brown to that
end. Since he has so far arrested nobody important, unsurprising with
a mere 7,000 troops, we must assume he again has a subplot. He is
making the British so unpopular among the Afghan peasants as to leave
the promotion and protection of the poppy crop to the Taliban and
other warlords. They have been as good as he knew they would be,
boosting poppies today as they curbed them, at the west's bidding, in
2000.

The British regard excluding both the Taliban and any tribal leaders
dependent on drugs from the new state as their sacred post-imperial
duty. As long as that is the case, and the Americans keep bombing,
Taliban leaders will be able to recruit jihadists from across the
world. They can arm and pay them from drugs profits as long as the
British keep consuming heroin. Since Britain says it wants to stop
this by equating the price of poppies with that of wheat (meaning the
price of poppies must fall by 90%), the foreign secretary, David
Miliband, was right to say this month that Britain is in Afghanistan
"for the long haul". I assume he meant forever.

Every schoolchild economist knows demand will always attract supply.
If the government wants to restrict demand for heroin in Britain, it
could do so by making it more expensive. This was the covert rationale
for the spectacularly failed poppy eradication policy of 2001. But
impoverishing local Afghan farmers, processors and traders, who
receive a tiny proportion of the eventual street price, will not
achieve this any more than it has done already.

The only way, repeat the only way, of curbing the heroin trade is by
curbing demand. London's policy, shared with Washington, of trying to
stop its people from consuming heroin and cocaine by disrupting the
supply chain, was never going to work. It has merely made supply more
profitable. It has been pursued for the cynical reason that
politicians find it easier to blame some poor foreign country for a
British social problem than to tackle that problem domestically. While
Britons and Afghans are dying in Helmand, the budget for drug
rehabilitation at home is pitiful even by European standards.

The visionary proposal of the Senlis Council thinktank, to buy the
entire Afghan poppy crop, which some have been pushing for five years,
must now be rated close to hopeless. The hope is that the UN could use
the opium to meet a world shortage of morphine, in the same way as the
Turkish and Indian crops are bought at present. The Afghans would thus
get a fair and legal return for what they produce so
successfully.

After the invasion in 2001, poppy production was minimal and bulk
purchase might have been worth a try. But the US privately allowed
anti-Taliban warlords to start replanting and the proposal is now pie
in the sky. To buy the whole crop would be wildly expensive and
logistically close to impossible. Without curbing demand, stemming one
supply route would merely increase price and stimulate substitute
supply from elsewhere.

Growing, processing, transporting, protecting and selling opium
dominates the Afghan economy. As Declan Walsh reported in yesterday's
Guardian, 3.3 million people and hundreds of towns depend on it. Half
Hamid Karzai's cabinet is said to be involved to some degree in the
opium trade, not to mention the network of corrupt provincial
governors and police chiefs. There is now a huge vested interested in
what is overwhelmingly Afghanistan's most successful business.

If Britons want to stop Afghans growing poppies they must stop using
heroin. But the government is as bad at reducing drug demand at home
as it is good at increasing supply abroad. At every level, its policy
is a disaster.