Drug War

Stratfor on the Futility of the War on Meth

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A new Stratfor primer on the illicit methamphetamine market cites some numbers that illustrate the risk premium associated with prohibition, which delivers big profits to murderous thugs all over the world:

Depending on the price of chemicals used—determined by the quantity of chemicals purchased and the legitimacy of the supplier—the cost of manufacturing 1 kilogram (2.2 pounds) of meth comes to anywhere between $150 and $4,000….According to the U.S. Department of Justice's National Illicit Drug Prices Mid-Year 2009 report, the wholesale market price for meth is $19,720 per kilogram while its street value is $87,717 per kilogram. Needless to say, this is a huge markup.

Indeed. Based on Stratfor's range of estimates, meth sells for between 20 and 600 times as much as it costs to make, and almost all of that value is added after the drug has been broken down into relatively small quantities—one reason interdiction has little impact on retail price. Stratfor also notes that "since the product can be made anywhere and can be fabricated into a variety of forms, it is very easily transported." Nor is Stratfor sanguine about the prospect of shutting down the market by controlling precursor chemicals such as pseudoephedrine and methylamine:

For meth manufacturers, lawmakers' attempts to stop meth production and regulate the drug's requisite precursor chemicals are at best temporary obstacles. For example, meth manufacturers in the United States have begun mixing methanol and anhydrous ammonia to circumvent regulations on methylamine. These chemicals can be purchased at a variety of locations, such as hardware stores.

Regulatory measures are reactive and have failed to stop manufacturers from finding ways around the law, giving manufacturers a distinct tactical advantage….

As of May 2011 the United States was home to 1.4 million known meth users—certainly a massive market on which criminal manufacturers can capitalize. Due to the drug's popularity and high profit margins, methamphetamine will continue to be manufactured, distributed and used regardless of regulation.

There's the prohibitionist conundrum in a nutshell: Banning a product people want creates the very incentives that ensure the ban will be ineffective.

[Thanks to Victor McDonald for the tip.]