Cocaine. A drug that is associated with corruption and poverty, criminals and addicts, not to mention the rich and the famous. Since it's introduction there have been thousands of arrests, millions of dollars worth of charges and fines, and billions spent in prevention programs, yet it still thrives. Does that mean that cocaine is an unstoppable force in today's market (much like every illegal drug on the market)?
Most would like to believe that the police will triumph in the end. But when you look at it from a different perspective, you may notice something a little disturbing. If you bend your inner eye, look around the drug problem, past the violence and into the heart of the system you just might see that they have, in essence, created the perfect business.
How could anything dealing with cocaine be a perfect business, you scream at me? Well, let us first take a look at what sort of business this is, shall we?
Let's start with cocaine itself, in its purest, whitest form. For this we must give credit to the Johnny Appleseed of Cocaine, Oscar Danilio Blandon. When Blandon brought cocaine to America he must have had a faint glimmer of what might happen should it catch on. This is America, after all: we buy what we what, when we want it, and the amount we want. What he had no idea of though, was that he would create an economic system so flawless it leaves every other business yearning for his model.
I'll start at the top, which happens to be the rich and powerful, i.e., those who can purchase cocaine in its purest form. If you've seen Scarface then you know what I'm talking about, if you haven't, drive down to Blockbuster and get it. It's Al Pacino at his best. The movie shows, with extreme accuracy, the amount of demand there is for cocaine and how much power there is to gain from selling it.
Unfortunately for Pacino, it also shows the complete demise of the unsuccessful drug lords. What we see in the rich community is the wealthy spending thousands of dollars on this substance for a couple of nights' use. They will continue to buy this drug until it consumes them and they end up on the front page or they can't sustain the lifestyle any longer. For the drug lords who bring it in, they make millions off these people, whereas the drug runners make some decent change as well since they are dealing with the upper class.
None of this may seem out of the ordinary, i.e. the wealthy blowing money on pointless crap, until you look at what they get out of it. Cocaine, like most of the hardcore drugs, starts to become less potent each time it's used. This means that after the first hit, the total amount of satisfaction they are getting from it starts to decline (1 st hit=40 min, 2 nd =35 min, 3 rd =30min, etc). So why do they keep buying it? We may never know, since most of us who read PI wouldn't get involved with that sort of drug.
Try looking at the flip side of this story now, the ghetto. There once was a time when cocaine was the major drug in the ghetto. But business started to go down as the substance was getting more and more expensive and it became more difficult to transport. Then they got innovative. If you take cocaine, put in a bit of baking powder and some other substances, you can boil it down into this product called 'crack' (called crack because of the "cracking" noise it makes when it cools down). This product was cheaper, easier to transport and most importantly it had the same effect . So despite the fact that these neighborhoods could not afford to get the original substance, they could get something with the same effect for a quarter of the price. This would lead to the bosses earning less than those in the upper classes but still earning quite a bit of money.
Now let's take a look at the structure of this business. You have a handful of people who can get the drugs (the board members) and distribute it. Below them are another dozen 'managers' and they control a few thousand street soldiers (sales associates). The board members and the managers make some major dough (roughly starting at 100k per year for the lowest manager and moving up) while the street soldiers get paid well below minimum wage.
So what do we have here? We have a well-structured system where the people who run it get mass profits (tax free!) and only have to pay their employees peanuts. Employees can't go to their unions and complain about unfair treatment (usually because if they do they will get shot), and the board members don't have to report to any governing body (deregulation, anyone?). Meanwhile the customers demand more and more of the product despite the fact they get less satisfaction each time they buy (Microsoft, anyone?).
But what if the trade were effectively regulated, like all those inferior, non-narcotic business models? If competition were allowed and protected (i.e. you weren't shot for entering the market), innovation would certainly increase. If the profits were taxed, the average Joe would benefit from the indulgences of the rich. And if working conditions were regulated, the distribution of income might even smooth out. Until then, we only see how markets will always triumph over governments.
It's genius. It's the idealistic economists' world. Blandon for the Nobel Prize, anyone?
The above work is the opinion of the author,
and not necessarily that of the Prometheus Institute.
