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Economic crisis and illicit drugs

The great recession since 2008-09 has reshaped international attitudes in ways that are influencing public policy on drugs. It is a process with echoes of the 1930s.

Juan Gabriel Tokatlian
15 September 2014

The century-old international drug regime is gradually losing legitimacy. Drug prohibition is still prevalent worldwide, but new regulatory alternatives are on the rise everywhere. Colorado and Washington’s marihuana legalisation, as well as Uruguay’s decision to legalise pot, are good illustrations of a revealing and compelling tendency.

An indirect, but potentially significant, factor that may influence the evolution of the drug question is economic - in particular, the ongoing "great recession" that has affected many states (especially in the west) since 2008-09. Here, paradoxically, the critical economic situation may have positive effects upon the expanding and lively public debate on drugs.

There are three ways in which the influence of the great recession on the future of drug policy, actual or potential, is visible.

The first relates to the impact of the economic crisis on the state. The recession has increased awareness of the need for action in several areas: supervision of offshore banking, tax-havens, and cash-smuggling, which are relevant both to legal and illicit flows; and increased transparency regarding banking secrecy, capital flight, and trade mispricing. All this will require reinstating the value of state intervention and the state's ability to impose stricter market regulations. Overall, an alternative drug-policy approach requires state capacity-and-control mechanisms able to ensure clear regulation. The foundation of the approach is an effective and vigorous state rather than narcotics prohibition under a free (and distorted) market.

The second relates to the effects of the economic crisis on public-policy funding and bureaucracy, which include a more thorough cost-benefit analysis of inequality (and in general greater sensitivity towards the subject). Governments, particularly in the developed north, came to realise that budget adjustment is inevitable and the waste of resources involved in ineffective policies untenable. So there is already a general shift towards re-evaluating existing programmes and plans, including those that involve anti-drug activities. Meanwhile, the damaging consequences of growing inequality cause increasing alarm in the United States and Europe. Some studies highlight the connection between inequality, drug-addiction and drug-related deaths, adding a further layer of concern about the west's enduring economic downturn.

The third relates to the way the economic crisis has led to an adjustment of values. The 1990s and early 2000s was a period of lavish personal spending by the upper segments of the population, uncontrolled greed by financial speculators, unrestrained individualism, a high-risk-prone environment, and self-indulgent hedonism. This atmosphere extended from New York and London to Moscow and Bogotá; in all places the local drug barons, transnational narcos, and the global money-laundering tycoons were equally welcome, their lifestyles transforming both the rich and the poor. After the great recession, the uninhibited show of wealth and voracious acquisitveness by the powerful creates is less acceptable. This new setting may be important in helping to delegitimise illegal businesses such as drug-trafficking.  

The indirect effect of the great recession on drug-prohibition in the west may be analogous to the relation between the great depression of the 1930s and the prohibition of alcohol in the United States. The depression created a broad framework to discuss and rethink key issues in a fresh way: among them labour productivity, employment needs, social ills, attitudes to the law, capacity at both national and state level to secure revenue via tax and other sources. One by-product of the process was that, four years after the Wall Street crash of 1929, the twenty-first amendment of the US constitution repealing alcohol prohibition was passed in 1933.

The link between the two examples should not be overestimated. But both cases - the 1930s and the 2010s, great depression and great recession, alcohol prohibition and drug prohibition - do reveal a single, vital truth: that major crisis may play a part, unplanned and positive as it may be, in reshaping attitudes and policy on illicit substance use. 

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