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President's Commission on Organized Crime, 1986
The last important factor shaping the structure, conduct and performance of the illicit drug industry is the character of the legitimate drug system that operates alongside it. The significance of the legitimate drug system is most obvious for drugs such as methadone, amphetamines and barbiturates, which have important medical uses, and very large legitimate production and distribution systems. Even those drugs that do not have legitimate medical uses often have some contact with a legitimate market system. Some illicit heroin, for example, comes from legitimate opium crops grown to produce morphine. Hallucinogens and methamphetamine are often manufactured from chemical precursors that have significant legitimate uses. And even marijuana has a legitimate sector composed of researchers who are experimenting with its pharmacological characteristics and potential medical applications for the control of glaucoma and depression.
The existence of a legitimate sector in which raw materials, precursors, or finished goods are produced, stored, distributed and consumed has a potentially significant impact on the character of the illicit industry. The reason is that diversion from the legitimate market becomes an alternative to wholly illicit production and distribution as a source of supply to illicit markets. Exactly what influence will be exerted depends on the size of the legitimate market, the strength of the regulatory regime that surrounds it, and whether the legitimate system includes the production and distribution of finished goods or stops some place short of this goal.
For drugs which have a large, loosely regulated legitimate supply system that includes the distribution of finished goods, diversion from legitimate sources is likely to become the dominant source of supply to illicit users. For drugs that have only a small legitimate sector that is limited to raw materials or precursors, the illicit supply will be dominated by wholly illicit production and distribution. Thus, the illicit demand for tranquilizers is likely to be supplied principally by diversion. The illicit demand for hallucinogens and marijuana will be principally supplied by wholly illicit production and distribution. Also, the illicit demand for amphetamines and opiate analgesics, such as heroin, morphine and methadone, will be supplied partly by diverted legitimate drugs, and partly by wholly illicit production and distribution.
The existence of a legitimate sector from which drugs may be diverted to illegal use will generally improve the performance of the illicit market in that drugs will be cheaper and more readily available than they would be if no legitimate sector existed. This is true simply because some portion of the activities necessary to produce and distribute the drug will not be hampered by the difficulties created by illicitness. Raw materials can be acquired, transformed into finished products, stored, and distributed with fewer worries about theft and betrayal by associates, or disruption by enforcement officials. True, operating costs will be increased by the requirements of the regulatory regime. And true, also, someone must absorb the costs and risks of diverting the drugs to illicit markets. But in all likelihood, these costs will be much smaller than the costs imposed on the firms, if they had to assume all of the burden of protecting their property and enforcing contracts as they have to in wholly illicit industry. To the extent that only a portion of the supply system must pay these costs, operating costs and therefore prices should be lower in illicit markets.
The existence of the legitimate industry should also make the illicit markets much more flexible. If an illicit amphetamine laboratory finds that it cannot obtain precursors from the legitimate market, it can always go into the business of stealing them from the legitimate sector. Once it has the capacity to steal precursors, the illicit firm might find it easier to steal finished products. In short, the existence of the legitimate market allows illicit dealers the options of relying on theft or fraud with or without the collusion of people within the legitimate industry to meet market demands - options that would not be available if there were no legitimate market.
The impact of the legitimate market on the structure of the illicit industry is also quite important. The crucial variables are the places where leaks occur in the process of production and distribution and the size and regularity of leaked quantities.
Obviously, if only raw materials and precursors leak from the legitimate system, the illicit system will have to develop illicit production capabilities to transform the raw materials into finished goods. This will exert a slight centralizing trend, for the knowledge and the equipment necessary to produce the drugs constitute a form of capital that must be amortized and that means those who possess these will stay in business long enough and produce enough drugs to achieve this goal. The break-even point may not require a very large or very durable firm. The point is that the diversion of raw materials will be associated with larger more durable firms than the diversion of finished goods.
When finished goods are stolen, the firm may have no capital to amortize, and may stay in business only long enough to dispose of an existing quantity. Of course, a large theft, such as a truck hijacking, can make a firm look like a major trafficker. If the firm arranges to continue hijacking drug shipments, it may become a major drug dealer with an unusual source of supply. In the more likely case, however, a large theft of legitimate drugs will produce a large, but transient firm. It will go out of business shortly.
The other possibilities are that small quantities of finished goods are diverted either continuously or irregularly from the legitimate supply system. This form of diversion will produce small firms that are either durable or transient depending on how frequently they go back to the well.
Thus, the supply of drugs that have legitimate uses to illicit markets will be decisively influenced by the size and character of the leaks from the legitimate system. The earlier in the process of production and distribution the leaks occur, the larger and more continuous they are, the more the illicit supply system will be composed of large durable firms. The later in the process of distribution, and the smaller and more erratic the leaks, the more the industry will be atomized. Thus, one might expect the illicit market in tranquilizers and methadone to be composed primarily of small, transient firms fueled by small scale thefts. The illicit markets in amphetamines and hallucinogens are likely to somewhat more concentrated with more of the illicit supply in the hands of larger, more of the illicit supply in the hands of larger, more durable firms.
Different Drugs, Different Industries
So far, our analysis of the illicit drug industry has abstracted from the particular features of the principal drugs of abuse in the United States. We have treated heroin, cocaine, marijuana, hallucinogens, amphetamines, barbiturates and tranquilizers in a similar analytic framework. But to analyze the supply systems for these drugs from the same analytic perspective is not the same as assuming that the supply systems will be similar. It is only to assume that they will be pushed in similar directions by the factors we have considered. Exactly how far they will be pushed in one direction or another strongly depends on all the factors we have considered, including how zealously the illegal supply systems are controlled by regulatory and criminal enforcement.
Heroin
Heroin, for example, seems to be primarily a problem of wholly illicit production and distribution. The fields in which the opium poppies are grown are generally illicit fields in countries that cannot adequately enforce existing laws prohibiting the cultivation of opium. Similarly, the processing of the raw opium into heroin occurs principally in foreign countries - probably to reduce the bulk of the material to facilitate international smuggling. Because the volume of heroin is so small, it comes into the United States through many different devices - in the carry-on luggage of pilots, hidden in small cans of tomatoes and olive oil, concealed in secret compartments built into cars, and so on. In the United States the distribution systems seem moderately tightly concentrated with significant local monopolies, but little vertical integration. There is probably some degree of horizontal integration at the importing stage, and it is at this stage that the concentration of the distribution system is probably the greatest. Perhaps the few largest firms in any given city control more than two-thirds of the total volume of heroin in the city, with some cities in the U.S. serving as transshipment points for other cities. This relatively tight and concentrated structure is the result of the fact that the enforcement pressures are probably still the heaviest against heroin dealers.
Cocaine
The cocaine supply system seems quite similar to the one for heroin. It is principally a problem of wholly illicit production and distribution. The sources of raw materials and finished products are primarily foreign. The physical volumes to be handled are small enough to make concealment of the drugs a relatively trivial matter and to allow smugglers to use a variety of different methods for bringing the drugs into the country. The average size of the deals measured in terms of financial requirements seem to be approximately the same as those that occur in the heroin market.
The major difference between the heroin and the cocaine supply systems seems to be that the cocaine system is less concentrated, and more violent than the heroin market. There seem to be many more entrepreneurs who enter the cocaine business on a short term basis. Moreover, none of the groups operating on a more permanent basis seems to have established predominance in the industry. Thus, it is not surprising that this market is more violent than the heroin market, for there are cash, drugs and market position up for grabs in a way unlike the heroin market.
Marijuana
Marijuana is similar to heroin and cocaine in that it is a wholly illicit system with predominantly foreign sources of raw materials. Three principal differences seem to make the marijuana supply system quite different, however. One crucial difference is that the bulk of marijuana per dollar of value is so much greater than that of heroin and cocaine that the smuggling problem is enormously exacerbated. A hundred thousand dollars of heroin or cocaine can easily be held in a suitcase, but to carry a hundred thousand dollars worth of marijuana, one needs a small truck, boat or plane. Because marijuana is so much more visible than heroin or cocaine, the primary mode of smuggling is in large loads landed between ports of entry rather than infiltrated through ports of entry in the huge volume of cargo and people that daily cross the U.S. borders. This also implies that many specialized firms might grow up to cope with the special problems of smuggling marijuana.
A second difference between heroin and cocaine on the one hand and marijuana on the other is that the pressures in the illicit industry seem less. It is not that marijuana dealers do not face substantial financial risks. Indeed, it seems that quite the opposite is true. The best current estimates indicate that marijuana dealers lose from a quarter to a third of their shipments to enforcement agencies. Instead it seems that the losses are primarily financial, and primarily inflicted by the government. Other criminals do not seem to prey on marijuana traffickers in the same way that they attack heroin and cocaine dealers. Moreover, even if the government seizes property and arrests the dealers, the prison terms meted out to marijuana traffickers seem less severe than for those who traffick in other drugs. Since the marijuana dealers face smaller and less drastic threats from both the government and other criminals, the marijuana market seems less preoccupied by the problems of secrecy, discipline and security than the heroin and cocaine markets. The net result of this is an industry that is probably less concentrated then either the heroin and cocaine market, and almost certainly less violent.
The third important difference shaping the marijuana industry is the existence of small scale domestic production and distribution as well as foreign. Indeed, the potential for small scale domestic cultivation of marijuana makes the marijuana market more like the market for barbiturates and tranquilizers than for heroin, because some portion of the overall illicit demand will be met by those who grow their own. It is this fact that guarantees the overall industry cannot become very concentrated, just as it is the widespread availability of barbiturates and tranquilizers through small scale diversion from legitimate sources that prevents a concentrated illicit industry in these drugs from developing.
Hallucinogens, Barbiturates and Amphetamines
The supply system for hallucinogens seems to be primarily domestic illicit production, although it is possible that some drugs come from Mexico or Canada. There is a degree of concentration in this industry as a result of specialized knowledge, and the creation of brand names to which consumers become loyal. It seems to operate with relatively little reliance on either violence or bribery, probably because the industry is sufficiently small to not be worth the time of enforcement officials or other criminals.
The industry that supplies barbiturates to illicit markets seems to depend primarily on diversion from the legitimate market. Thus, its structure mirrors the character of the leaks from the legitimate system. This seems to produce a highly atomistic market composed of small or transient firms. Again, there is little reliance on either violence or corruption because the economic stakes seem too small to warrant such risky conduct.
The amphetamine industry seems to be a combination of the supply system for hallucinogens and barbiturates. There seems to be small scale illicit production and distribution that is primarily domestic, but also from our near neighbors. There is also diversion from the large legitimate supply system. The net result is an industry that is high in performing, relative atomistic in structure, and relies little on either violence or corruption.
Designing a Strategy to Attack the Illegal Drug Industry
From the perspective of drug abuse policy the primary objective of a strategy to attack the illegal drug industry is to increase the effective prices of drugs in illicit markets. Given our analysis of the factors shaping the structure, conduct and performance of the industry, it is reasonable to suppose that making the production and distribution of drugs illegal will tend to make drugs more expensive and less available than they would be if they were legal. The important policy question is how the resources of the government - its diplomatic initiatives, its interdiction efforts, and its criminal investigations - might be deployed to maximize the impact of supply reduction efforts on the effective prices of illicit drugs.
Priorities in Attacking the Illegal Drug Industries
One way to establish priorities is to determine which particular drugs seem to be causing the greatest social problems, and which present opportunities that would give supply reduction efforts relatively powerful leverage. The worse the drug, and the more powerful the leverage that can be exerted, the higher the priority.
Of course, the question of which drugs pose the greatest threat to the society is much debated. One way to resolve the issue is to gauge the number of chronic users of each drug, and to weight that number by the seriousness of the health, economic and social problems that the chronic users of each drug suffer. By this reckoning, heroin, amphetamines and barbiturates tend to come out on top as the worst drugs.
A second standard would be to consider which drugs are most widely used, and therefore operate as the principal transmitter of an illicit drug culture and the most common introduction to drug use for young children. By this standard, marijuana and tranquilizers would probably come out on top.
A third standard would be to determine which drugs seem to be associated with the most money, violence and corruption, and attack that drug as the principal threat to the society. This last standard would probably make cocaine and heroin the dominant targets of drug policy.
In thinking about which of these standards night be appropriate to use in deciding which drugs caused the greatest social problems, it is worth trying to keep the separate objectives of drug abuse policy and organized crime policy in mind. The principal objective of drug use abuse policy is to minimize the social problems associated with drug use. A key instrument of that policy are criminal laws controlling the supply of drugs. These policies succeed when there are few people using drugs in patterns that create grave threats to their health and economic welfare. In effect, we use criminal laws and criminal enforcement to achieve a social welfare objective.
The principal objectives of organized crime policy are to suppress the provision of illegal goods and services that constitute the core of organized crime, to prevent the violence and corruption that is more characteristic of organized crime groups than other kinds of criminal activity, and to prevent the emergence of very large, durable organizations with well developed capacities for violence and corruption.
There is a substantial overlap in the goals of organized crime policy and supply reduction efforts insofar as organized crime policy takes the control of the supply of drugs as an important objective, and insofar as the illicit supply systems included violence, corruption and large firms. But to the extent that the core of organized crime policy is really concerned with the disruption of major criminal organizations, there is an overlap between the core of drug abuse policy and organized crime policy only insofar as the drugs are supplied by rich, violent and powerful criminal organizations. As we have seen, that is true of only a certain number of drugs, and not necessarily the drugs that pose the greatest threats in terms of widespread and dangerous consumption.
In fact, the third standard described above is closer to a description of the core objectives of organized crime policy than to the core objectives of drug abuse policy. In essence, the society has to decide whether it means to go after the drugs that cause it the most problem in illicit use, or whether it should attack the drugs that are supplied by the nastiest and toughest dealers. These are not necessarily the same.
The Instruments of a Strategy Against Illicit Drug Industries
Once the society has implicitly or explicitly established its objectives, it must then look to the available instruments of a supply reduction strategy. Again, there are many different ways one can think about the available instruments.
Attacking Different Drugs. One way is to think about them in terms of the particular drugs they attack. Thus, one can distinguish the instruments of heroin policy (which include the effective control of legitimate opium in Turkey, the suppression of illicit crops in Mexico and Afghanistan, the encouragement of crop substitution in Thailand, the creation of specialized heroin detecting devices at U.S. ports of entry, and the targeting of heroin importing and distributing organizations, and even the occasional attacks on street level dealing in notorious areas of a city) from the instruments of a marijuana control policy (which includes diplomatic initiatives and foreign aid to Mexico and Jamaica, the eradication of illicit fields, the training of marijuana sniffing dogs to stand guard at the border, the mobilization of the Navy and Coast Guard to aid in the identification of ships engaged in large scale smuggling, and so on). The point is that many policy initiatives are specific to, or have their maximum impact on, one drug rather than another, and it is a useful exercise to see how our efforts are deployed against particular drugs.
Operating in Different Locations. A second dimension in which strategies against the illegal drug industry can be described and evaluated is geography. One can talk about the division between the international drug control effort and the domestic activities. Among the international efforts, one can talk about policy towards Southeast Asia (which would be principally directed at heroin), or towards Colombia (which would be principally directed against cocaine), or towards Mexico (which would embrace heroin, marijuana and amphetamines). Within the domain of domestic supply reduction efforts, one can discuss the allocation of enforcement efforts across major cities in the United States, and this, too, has implications for the different drugs attacked. Enforcement efforts in New York and Los Angeles will probably give more emphasis to heroin and cocaine than efforts in Kansas City or St. Louis.
Targeting Factors of Production. A third dimension in characterizing and analyzing supply reduction policy instruments is the factor of production and distribution that is the principal target. Thus, one can distinguish eradication and crop substitution programs, which are directed at raw materials; from financial investigations, which attack the capital of illicit dealers; from interdiction programs which attack goods in transit, from conspiracy investigations, which are designed to immobilize trafficking network; from street level enforcement which is designed to discourage advertising and the development of new markets. Of course, many instruments allow one to reach other targets as well as its principal target. Indeed, conspiracy investigations are often built from the discoveries made in interdiction and street enforcement programs. The point is that these different policy instruments have different factors of production as their proximate targets. To the extent that some factors of production and distribution are scarcer than others, the relative importance of the different supply reduction instruments in constricting the supply of drugs may be gauged and appropriate adjustments made in the supply reduction strategy.
Relying on Different Agencies. A fourth way of thinking about supply reduction policy instruments, and probably the most common, is in terms of the agencies that are principally responsible for carrying out different activities within the overall supply reduction effort. Thus, one thinks in terms of the international supply reduction program as the principal responsibility of the State Department; the interdiction effort as the primary responsibility of the U.S. Customs, Border Patrol, and Coast Guard with occasional assistance from the U.S. Armed Forces; the domestic investigation program as the primary responsibility of DEA and the FBI; and the street level enforcement effort as the primary responsibility of the nation's thousands of local police departments. Thinking about the supply reduction effort in these terms has the advantage of bringing immediately to mind which agencies are available for supply reduction efforts, and of suggesting approximately where they can make a contribution both geographically and in terms of squeezing particular factors of production and distribution. It has the disadvantage, however, of not sharply distinguishing among the different efforts in terms of either drugs or specific factors of production and distribution.
The Strengths and Limitations of Alternative Instruments
For purposes of a broad brush strategic analysis, we will use this last set of categories, since they are the terms in which most of the policy discussions at the federal level are now being carried out. Our task will be to determine the potential of each area in minimizing the supply of drugs to illicit markets in the U.S. That, in turn, depends on our ability to see how each of these programs affects the factors of production and distribution for the major drugs of abuse.
The International Program. The international drug control program has two principal liabilities as an instrument of supply reduction efforts. The first is that this program is inevitably hostage to the interests and capabilities of foreign governments: the U.S. can do no more in this area than other governments will allow it to do. Of course, there are numerous ways in which the U.S. government can increase the motivation and capacities of foreign governments to control drugs that reach U.S. markets. The U.S. can indicate the importance it attaches to drug control among other interests it is pursuing within a given country; or it can appeal to obligations a country has under international treaties; or it can appeal to the country's self interest by documenting the extent of the country's domestic drug problem. On the capacity side, the U.S. can contribute money, or particular kinds of equipment, or technical assistance in the forms of specific on-site advice, or more generalized training of drug control officials. These specific measures constitute the daily activities of the international program. In the end, though, they run up against more or less unmovable barriers, such as the limited control of central governments over out-lying areas of a country, or the inefficiency and corruption of government agencies. Against these obstacles there is often little that the U.S. government can do.
The second limitation is that the bulk of this program seems too targeted on the raw materials for heroin, cocaine and marijuana. Arguably, this is not particularly effective, since there is not particular reason to believe that the raw materials for these drugs are in long run short supply. Indeed, all our experience and intelligence suggests that potential growing areas for these drugs are widespread, and that the elimination of fields in one place will fairly soon be replaced by cultivation elsewhere.
These limitations are sufficiently severe that it would probably be a mistake to rely on the international program as the primary instrument in a supply reduction strategy. It simply cannot do enough work reliably enough to merit that position. Having said this, however, there are some very important things the international program can do that will make an important contribution to the overall effectiveness of supply reduction efforts.
The first is that it will occasionally occur that the standard efforts of the international program suddenly become effective. This usually occurs when a country important in supplying drugs to the United States suddenly becomes highly motivated to control drugs. When this happens, support from the United States can often result in a significant shortage of the drug. Typically, the shortage lasts no longer than a year or two as the illicit industry adjusts to the new conditions. But even so, that shortage is worth producing. That is particularly true for drugs that are unusually dependence producing, for the shortage means that a cohort of children in the ages of maximum vulnerability squirts through that period of relative shortages with much lower probabilities of dependence or addiction.
Indeed, this is what happened in the early part of the 1970's, when Turkey suddenly shut down its legitimate production of opium and helped to produce a two to three year shortage in the supply of heroin. The effect of this success was high effective prices in the United States, reduced incidence of heroin use, and a shift to Mexico and Southeast Asia as the principal sources of supply, although for a while at lesser volumes than had been true when Turkey was also a supplier.
Keeping open such opportunities, and being in a position to exploit them when they come along, are the principal contributions of the international drug program. Hut one cannot always count on such successes. It is important, then, that the international program continue, trying to increase the likelihood that it can occasionally produce such successes, but no one should rely on it as the principal supply reduction instrument.
A second way that the international program can be helpful is by stepping up its efforts to support international criminal enforcement. In essence, the focus of the international program might usefully shift from crop eradication, to efforts to deny international traffickers "safe havens" anywhere in the world. This would mean concretely increased progress in negotiating extradition treaties with countries that now harbor traffickers, and improving operational coordination between foreign and U.S. police agencies to take advantage of both extradition and investigations and prosecutions within the host country.
Such a thrust has potential for two reasons. First, it is a narrowly focused program. It has none of the logistical and bureaucratic difficulties of massive crop control programs. Second, it is targeted against a factor of production and distribution that is probably in long run short supply, namely individuals with a sufficiently well established reputation for both reliability in successful transactions and viciousness in betrayals, who become the primary people with whom large drug deals can be made. If this is the factor in long run short supply in the illicit industry; and if the international program could squeeze this factor even more by denying notorious dealers safe havens anywhere in the world; then the international program would have another more reliable and more powerful way of making a contribution than cultivating the motivations and capacities of foreign governments to control illicit crops.
Interdiction. In recent years, the interdiction program has probably been the fastest growing component of the supply reduction effort. The growth has come primarily as a result of engaging the U.S. Coast Guard and other military agencies in the pursuit of smugglers on the ocean and in the air. The results of this effort can be seen in the dramatic difference in the price of drugs landed in the U.S. as compared with the price of drugs off-shore, or in foreign source countries.
The principal problem with interdiction as the dominant instruction of supply reduction efforts is that it is principally focused on a single drug - marijuana. That is particularly true insofar as it concentrates on bulk shipments clandestinely landed between ports of entry, for marijuana is the only drug whose volume restricts smugglers to these methods of getting the drugs across the borders. Smugglers of heroin and cocaine have many more options, and much more of these drugs seem to come across in relatively small containers through ports of entry. Thus, the engagement of the Coast Guard, the Navy, the Air Force, and the Federal Aviation Administration, turns out to be an initiative that is primarily targeted against marijuana. To the extent that one thinks marijuana is currently a high priority drug to control, this may be counted a benefit rather than a problem. But to the extent that one thinks other drugs are higher priority, or to the extent one wanted flexible supply reduction instruments that could be used for controlling several different drugs, the current interdiction program has important limitations.
The interdiction program has a further limitation. It is principally targeted on finished inventories of drugs. There is a certain, concrete satisfaction in capturing drugs that would otherwise reach illicit markets. But as in the case of crop elimination, one can wonder whether the inventories are what is in long run short supply. When we think about legitimate firms, we don't think of their inventories of finished goods as being particularly important. Obviously, the inventories have value, and to the extent they are eliminated, the firm had less capital than it otherwise would. But the inventories usually reflect only a small portion of the total value of the firm. When Tylenol had to be taken off the market, for example, no one expected the company to go out of business, even though a month's worth of production had to be written off, and their reputation had been seriously tarnished.
Similarly, it is hard to understand why we think it is so important when drugs are seized. This may be important if the firm was a short term operation, and the seized shipment represented a large fraction of its total assets, but there is no particular reason to believe this. Most of the time it seems that shipments are divided up precisely to hedge against the possibility that he drugs will be seized, and this seems to be a likely event. Current estimates indicate that somewhere between one-quarter and one-third of all marijuana shipments are seized, but this has had little impact on the effective price of marijuana. Thus, our experience and our reasoning suggest that finished goods are not a factor of production and distribution that is in long run short supply. Consequently, a policy instrument directed primarily against such inventories will not exert enormous leverage on the long run effective price of drugs in illicit markets.
Domestic Enforcement. The standard criticism of the domestic enforcement program is that it is "too far from the source" of drugs to allow effective control. By this reckoning both the international and the interdiction programs are preferred instruments because they attack the chain of production and distribution at an earlier stage than domestic enforcement. A second criticism is that the quantity of drugs seized in the domestic enforcement program is too low to allow it to have much effective control. A third criticism is that too much of the effort within the domestic enforcement program goes into low level cases, which are farthest from the source and involve the smallest quantities of drugs.
The difficulty with these criticisms is that they rely on assumptions - with little evidence or reasoning behind them - about the best way to control the supply of drugs. In fact, they emphasize physical over economic relationships. A priori there is no particular reason to assume that resources are better spent "nearer the source." True, if one stops the drugs earlier rather than later on need not worry about the later stages; and, true, the drugs may be at their maximum concentration with respect to volume at the point they are processed into finished products. But neither point indicates that he source is the most important point to attack. As we have seen, it may be quite difficult to mount an attack at that point. Moreover, both arguments place too much emphasis on the drugs and not enough on the entrepreneurs and firms whose continued determination and adaptability keep the drugs flowing, even if production runs are spoiled and inventories seized.
If the principal difficulties that confront dealers in producing and distributing drugs are risks posed by enforcement agents and other criminals, then the crucial factors of production and distribution are not raw materials and technology and warehouses, but the determination and capacity to complete transactions in this risky environment. Those may be qualities possessed by specific individuals or trafficking networks - not the raw materials, not the finished inventories, not even the financial capital. If these observations are accurate, then any instrument that attacked the capacities to complete risky trans actions would be more effective than those that attacked raw materials or inventories.
It is here that domestic enforcement operations have advantages as an instrument in a supply reduction strategy. The principal objective of domestic enforcement is the traffickers themselves. The drugs are important only as convincing evidence that will be sufficient to jail, and therefore presumably immobilize, the traffickers. In addition, the tactics of domestic enforcement operate principally on the capacity to execute transactions. The principal tactics include informants, undercover agents, and wiretap investigations. The first two attack the ability to make transactions by forcing dealers to be wary of associates, employees and customers, since any of these might become an informant or an undercover agent. The third makes it difficult for traffickers to communicate efficiently with associates, employees and customers. Therefore domestic enforcement presses hard on the factors of production and distribution that seem in long run short supply.
It is worth noting that slowing transactions and forcing dealers to be cautious has value at many different stages of production and distribution. Even at the lowest levels of distribution there are some advantages in forcing dealers to be cautious, for it prevents the aggressive recruitment of new customers and makes it more difficult even for regular consumers to find drugs. In short, street level enforcement increases the effective price of drugs in illicit markets. At intermediate or high levels each transaction that is slowed reduces the overall capacity of the system to supply drugs, and each trafficking network that is eliminated results not only in loss of current inventories, but also in future capacity to supply.
Moreover, it is possible that the same techniques of attacking transactions, and immobilizing those networks that have developed a continuing capacity to execute transactions in a risky environment, would have enormous value in the international program as well as in the domestic one. Indeed, while one cannot assume that foreign countries have laws enforcement agencies that allow them to attack criminal trafficking organizations, it seems that it is primarily convention that makes us think of the international program as focused on raw materials, and the domestic program as focused on trafficking networks. In principle, one could have a criminal enforcement program that moved across national boundaries. And that might hold the best chance not only for minimizing the supply of drugs to illicit markets, but also for advancing the subjectives and using the resources of organized crime policy.
An Alternative Approach to Attacking Illegal Drug Industries
If the right way to think about strategies against the illegal drug industry is to guess which factor of production and distribution is in long run short supply and then to devise a strategy that presses hardest on that factor, and if the factor in long run short supply is the capacity to make transactions quickly and effectively, then a different way is opened to think about the strategy against the illegal drug industry. Specifically, the principal aim should be to frustrate transactions and immobilize the largest trafficking organizations.
With this as the principal aim the way that we think about each of the other instruments changes. Of course, the international efforts to control legitimate crops and eradicate illicit fields retain their special, occasional importance, and the separate arguments for maintaining pressure at the street level remain strong. But we can also see that the international program, interdiction, and domestic enforcement all represent different opportunities to slice into the illicit industry, and create possibilities for developing cases against illicit traffickers. To see how this alternative strategy would work, it is useful to introduce some different analytic terms.
Patrol versus Investigation. If the goal is to immobilize trafficking organizations that are able to complete transactions with ease and efficiency, the central problem is to determine who the traffickers are and to develop evidence against them. This sounds like a problem of criminal investigation, and so it is. But all investigations must begin somewhere. In ordinary criminal investigations the start is usually provided by a victim or witness to the offense or by physical evidence available at the site of the crime. In narcotics investigations there is no victim, the witnesses are likely to be implicated in the crime, and the physical evidence will not reveal much. On the other hand, the traffickers are likely to continue committing offenses, and therefore the opportunity to observe a crime occurring is high, if the enforcement agencies can get themselves into position to see it.
In practice this means that narcotics investigations are extremely dependent on informants and undercover operators, who can provide evidence themselves or produce sufficiently precise and accurate information to justify a wire-tap or other less intrusive but more expensive and less penetrating form of surveillance. They can position the evidence-gathering capabilities of enforcement agencies and how to infiltrate undercover agents into the illicit industry. The question thus becomes how to develop and use informants and how to use informants and how to infiltrate undercover agents into the illicit firms.
One answer to that question is to attack the illicit supply systems in the places where it is least protected. This means on the streets in central cities where the distribution system must finally come into the open. Or, it means at the point that is inherently vulnerable, where drugs are moved physically from one place to another. Or, it means as raw materials are being collected from remote fields in foreign countries. Surveillance and undercover operations conducted in these areas will not only frustrate transactions at these levels, and remove small stocks of drugs, but they will also produce the rumors, the physical evidence, and the potential informants who might provide the basis for more intrusive and determined investigations of larger networks.
This will not always work, of course. Many people arrested at this level will be small scale, transient operators. Others will be employees, but they may be unable to supply information. Still others may know a great deal but be afraid to reveal it. Moreover, there are other ways of developing informants. One can offer large payments to those who are greedy, or protection to those who are afraid, or both to potentially valuable sources. And, just as low level enforcement operations against street dealers, smugglers, and collectors in foreign countries can produce potential informants,, all successful investigations against medium and high level investigations can also yield informants. Therefore, successful cases can be built from many sources other than low level cases.
But the argument is that a high volume enforcement effort at low levels is often quite valuable as a source of rumors, intelligence and informants. In fact, there is an argument supporting low level enforcement. Even more unexpectedly, there is an argument for a low level enforcement that is not directed or guided by intelligence about the operations of major traffickers.
The strength of investigative efforts is their capacity to make connections among known facts and inform enforcement agencies how to position themselves to penetrate existing trafficking organizations and develop evidence for a successful prosecution. The weakness of investigation is that it becomes increasingly narrow and discounts information that cannot be related to something that is already known. In attacking something as mysterious and dynamic as the illicit drug industry, this tendency to become narrow is potentially very dangerous. There is always the chance that one is concentrating on only a small piece of the overall industry and that there is a newer or better shielded piece that has so far escaped notice. If this is true, the only way that enforcement agencies could discover this is to look in areas where they didn't expect to find something. That is the role of broad, untargeted low level enforcement agencies. Like pickets and patrols sent out by a main military force to maintain contact with a mysterious enemy force, agents on the street, at the border, and in the bazaars of foreign countries help the investigative forces stay in touch with the emergence and development of new trafficking capabilities.
For analytic purposes it is useful to think of these broad, low level enforcement operations as "patrol" operations, which are scanning for drug offenses, and the remaining pieces as "investigative" operations, which can develop the leads into powerful cases that immobilize major trafficking organizations. Moreover, in many ways, the patrol operations perform better, if they are broad and random, rather than narrowly targeted. A random strategy is more successful in deterrence, and in disclosing previously unsuspected trafficking networks.
The Role of Intelligence and Conspiracy Investigations. To take full advantage of the potential relationship between investigative and patrol functions and to produce the maximum impact on trafficking organizations, it is necessary that some previously neglected capabilities be more fully developed. Two are particularly important: the intelligence function within the investigative agencies, and the capacity to develop and prosecute conspiracy cases within investigative and prosecutorial offices.
By the intelligence function, I mean the capacity to make disciplined use of the information about trafficking networks that is potentially available to the investigative agencies. This is essential not only to take full advantage of any opportunities that present themselves, but also to make sure the investigative agencies are not misled by informants. As we have seen, there is always an incentive for traffickers to inform on their competitors. And there is always an incentive for enforcement agencies to use the information and keep the informant alive. This is acceptable as long as the informant is not more important than the traffickers he is delivering to the enforcement agencies. But if the informant is himself a dealer, then the result of his informing looks like he and the enforcement agency are colluding to maintain his position in the market. The only way to guard against this is to have relatively accurate information about both the informant and the target and to have someone other than the case agent monitoring this situation. That is something that a good intelligence analysis function could provide.
The capacity to make conspiracy cases is essential because there are many traffickers who can be revealed only through conspiracy indictments. They may never be in direct contact with drugs, or with the violence and corruption that provide the structure within which the drugs can be confidently moved from place to place and from person to person. In addition, conspiracy cases have the advantage of simultaneously immobilizing many pieces of a trafficking network, leaving no remnants from which a new network might be constructed. If a single person is removed, he may be replaced. If the entire network is eliminated, replacement is more difficult because none of the personal relationships that are so essential to successful trafficking remain.
The challenges to investigators in making conspiracy cases are partly matters of technique. Electronic surveillance is often an essential ingredient, as are financial investigations. And each require the development of special skills. Hut producing high quality conspiracy investigations also requires a change in attitude. They require patience - including situations where enforcement agencies allow some dealers to continue operating even though they are indictable. They also require risking certain cases that are certain, for a future case that may or may not develop. Finally, the prosecution of conspiracy cases often depends on telling convincing stories rather than hard physical evidence. Even though the stories night be a more accurate account of what has been happening than the hard physical evidence, it requires a real knack for analysis and inference to make the story solid and convincing. In short, patience, a willingness to take risks for an uncertain gain, and thought are required, and these are not always qualities plentiful in action-oriented enforcement agencies. Yet, without these, the aggressive actions might have less impact than they otherwise could.
Summary and Conclusions
Criminal statutes directed at illicit drug trafficking and use are an important part of drug abuse policy. If they were perfectly effective in discouraging people from drug trafficking and drug abuse, there would be little need for any other instruments.
The problem is that these laws are imperfectly effective: they leave a residual market that consists of a continuing (but smaller) demand for drugs, and a continuing (but smaller) capacity to supply drugs to that market. To deal with the continuing demand, the society relies on drug treatment and preventive education programs. To deal with the continuing supply, the country invests in diplomatic efforts to motivate foreign countries to control drugs destined for the U.S., interdiction efforts to keep the drugs from landing on our shores, domestic enforcement to disrupt trafficking networks and discourage the aggressive marketing of drugs to non-users, regulatory efforts to keep legitimate drugs contained in legitimate channels of distribution and use.
These efforts on the supply side of the illegal drug market are helpful in achieving the purposes of drug policy. They increase the price and reduce the availability of drugs, and therefore discourage new drug use and motivate older users to abandon their drug use. But the laws create a problem for organized crime policy, for they establish the soil from which an illegal industry can grow. The firms that continue in the industry will make a great deal of money as compensation for the risks they run by continuing in the business. In addition, they will engage in violence and corruption as crucial elements of their strategies for surviving in an illicit industry. Finally, some of the individuals and organizations involved in drug trafficking may grow to become powerful criminal institutions that seem to defy effective control by law enforcement agencies. To the extent that these illicit firms become more adept at dealing drugs, they may become not only an organized crime problem, but an increased threat to the objectives of drug abuse policy. Thus, the special instruments we associate with organized crime policy must be deployed not only to deal with the organized crime problem that is created by our drug abuse policy, but also to prevent organized criminal groups from defeating the purposes of drug abuse policy.
Viewed from the perspective of drug abuse policy, the central objective of a strategy attacking the illegal drug industry is to minimize the capacity of the illicit drug industry to supply drugs to illicit markets. In terms of traditional analyses of industrial organization, this objective can be described as minimizing the "performance" of the illicit industry.
Viewed from the perspective of organized crime policy, the central objectives are to prevent the development of wealthy and powerful criminal groups and to reduce the violence and corruption associated with the illicit drug industry. Again, in the traditional analyses of industrial organization, these objectives can be captured by attacking the structure and shaping the conduct of the industry.
There may be some tension between the objectives of drug abuse policy on the one hand, and organized crime on the policy on the other. To the extent that the drug laws create the conditions under which an illicit industry might arise, there is an obvious conflict. Legalization of the drugs would almost certainly increase the number of chronic, intensive drug users and therefore make the drug problem worse. But it would also eliminate drugs as an organized crime problem. Beyond this observation is another paradox, however. From the perspective of drug abuse policy, a highly concentrated industry may be preferable to an atomized industry. A concentrated industry might supply fewer drugs at higher prices than an atomized industry. And, although each firm in the industry may be harder to attack effectively, the impact of a successful attack might be larger and more enduring than the results of ten successful attacks on smaller firms that accounted for a smaller portion of the total supply capacity and were easier to replace. From the perspective of organized crime policy, however, a concentrated industry would be worse because it would imply the existence of large, enduring organizations of substantial power and influence. What is not in conflict, however, is the need of both drug abuse policy and organized crime policy to develop and use tactics that are successful in attacking large, entrenched criminal organizations. This is useful to drug policy and essential to organized crime policy.
In controlling the supply of drugs to illicit markets the United States relies on many instruments, in addition to attacks" on organized criminal groups that deal in drugs. There is an "international program" that tends to focus on the production of raw materials to produce heroin and cocaine. This has the advantage of occasionally producing a significant but short-lived result when a foreign country's increased motivation and capacity to deal with the problem eliminates an important source of supply to the U.S. But the value of the instrument overall is limited by the widespread availability of raw materials and the fact that U.S. objectives are always hostage to the motivations and capacities of foreign governments.
There is also an "interdiction program" designed to intercept the drugs and shipment before they cross U.S. borders. This has the advantage of creating a significant obstacle to traffickers and inflicting economic losses on traffickers as a result of seizures. It has the disadvantages of focusing principally on the inventories of drugs rather than on the organizations that continue to send them, and of being relatively less successful in dealing with heroin and cocaine than with marijuana.
Finally there is a "domestic enforcement program", designed to attack domestic trafficking organizations, and to discourage the aggressive marketing of drugs through street level enforcement. This program has the advantages of focusing on the trafficking organizations and engaging the substantial resources of the nation's 400,000 local police officers. It has the disadvantages to being only occasionally successful in eliminating major trafficking organizations.
What appears to be missing in this common conception of the nation's strategy against the supply of drugs to illicit markets is precisely the perspective that a focus on international criminal organizations would bring. It seems likely that the capacity to execute large scale transactions in the risky environment of an illicit industry is in long run, short supply in the illicit drug industry. The firms that can overcome these difficulties are likely to be large scale, enduring, organizations with a well established reputation for irresistible violence. Thus, these firms - in all likelihood, international firms - should become the main targets of a supply reduction/ organized crime policy.
If this is the principal target, one's view of how the society should deploy it
resources should change dramatically. The interdiction and domestic enforcement programs
are suddenly seen principally as "patrol operations", which can produce
intelligence and informants to be used in mounting attacks on major trafficking
organizations. Moreover, the focus of the international program should shift from concerns
about crop control to the support of foreign enforcement efforts and the negotiation of
treaties, which would allow the more convenient prosecution of drug traffickers whose
crimes cross national boundaries. Finally, major investments should be made in the
capabilities of intelligence agencies and an orientation towards sustained conspiracy
cases among investigators and prosecutors. This strategy holds the greatest potential to
achieve the objectives of both drug abuse policy and organized crime policy. Moreover,
this strategy depends most heavily on the continuing development of our capacity to deal
with organized criminal groups no matter what illegal goods and services they happen to be
supplying.
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