(introduction...)

Illicit drugs typically move internationally from less developed areas of the world to more developed countries, where most drug consumption takes place. In recent years, just as the growth of legitimate global businesses has been facilitated by the globalization of financial systems and market relations, drug producers and traffickers have also taken advantage of the opportunities presented by the changing macro-economic environment. They have organized themselves on a global scale and put a significant proportion of their drug profits in financial centres offering secrecy and attractive investment returns. Their adoption of high-tech computer and communications technology has facilitated the expansion of their trade and the protection of industrial secrets. Drug traffickers are now able to launder illicit profits by moving money around the world electronically with few national controls. They are aided by porous borders due, in some cases, to policies intended to encourage trade and investment, and in other cases to weak governments and weak or unenforceable laws against money laundering, fraud or organized crime.

The consumption, production and trade of illicit drugs have a wide variety of adverse socio-economic and political effects. These activities can at times undermine the legal economy (for instance by contributing to an overvalued exchange rate). They contribute to increased crime and social disruption on all levels, and their adverse effects can in fact be intensified by drug control laws. Most of the benefits and liabilities associated with the production and trade of drugs ultimately derive from illegality itself, a condition which the drug control laws, by definition, establish. Illegality provides what has been called the “crime tax”: the difference between prices in legal and illegal markets. This “tax” is reaped principally by traffickers, but they pass on a sufficient proportion to peasant growers to create incentives for drug crop production. Given the lack of alternative economic opportunities, especially in rural areas of producing countries, illegality and the profits associated with it make it very difficult to devise a policy mix of punishments and incentives that would induce growers to abandon their drug crops. In many cases, moreover, drug control initiatives have actually contributed indirectly to social dislocation, corruption, militarization and abuse of human rights.

The following sections examine in more detail the economic, social and political impacts of illicit drugs at the production, trafficking and consumption stages, as well as the forces contributing to the problem. Effective policy strategies should be based on an understanding of the linkages between these different stages in the illicit drug chain.