Narconomics

Man and woman cooking meth

When we speak about narcotics, you all think about cocaine or heroin, and you all think that they are illegal and liable for world’s most death cases. You may also think that they are used by low-class individuals. You are all wrong. Narcotics are legally manufactured for their use in medicine, and they are on the top of the world’s biggest market and at the bottom of the world’s deadliest product; numbers will be analyzed later in this article. The name “NARCONOMICS” is not here by accident. It is collateral to the name “ECONOMICS”. Narconomics can define and drive a country’s healthy economy or a country’s recession. I can compare the numbers of narconomics with the very important economic indicator “DURABLE GOODS”. As we all know, durable goods are an indicator to the health of an economy. They show that people in a country, after they have spent money on food, mortgage, electricity, water, and taxes, still have available money in their pocket to buy durable goods like a new television, washing machine, car, boat, etc. Narconomics are the same. From middle-class to the rich, people are using drugs, like cocaine, for pleasure or relaxing or even to keep them awake more hours in order to work more. For instance, back in the 80’s cocaine was widely used and also in fashion with wall street traders because they could stay awake many hours and trade more to make more money. Now, from an economic point of view, drugs are overused when the economy is booming and people have extra money in their pocket so they can afford it. On the other hand, drugs are underused when the economy is in a recession because people are fearful of the future’s uncertainty, and they do not have that extra money to spend on drugs for pleasure.

THE NUMBERS: (based on global annual records)

Drugs retail values $400 billion (not including government taxes, not including unknown users and unknown dealers not including legal pharmacy sales)

Cigarette retail values $698 billion (including an average of 300% government taxes)

Alcohol retail value $1.2 trillion (including an average of 100% government taxes)

4 million die from smoking cigarettes

3.3 million die from alcohol abuse and alcohol related car accidents

200 thousand die from drug abuse

THE CARTELS:

We’ve all heard that drugs are controlled by cartels, and they are killing each other for control of the market. Did you ever wonder if the other industries are controlled by the same cartel-like method?

Drug cartels like Sinaloa, Zetas, Guadalajara, Tijuana, and Golf are controlling 80% of the world’s cocaine. Taliban in Afghanistan are controlling 80% of the world’s heroin.

By 2014, 84% of the cigarette market was controlled by transnational tobacco companies. Over the last decade, the international cigarette market has been dominated by five companies, China National Tobacco Corporation, Philip Morris International, British American Tobacco, Japan Tobacco Inc., and Imperial Tobacco.

Alcohol industry is controlled as follows:

Global Market Share, % (Ranking)
Corporation (Headquarters) 2006    2008
Diageo plc (United Kingdom) 10.8 (1)      10.2 (1)
Pernod Ricard (France) 8.3 (2)       8.9 (2)
United Spirits Ltd (India) 6.7 (3)       7.9 (3)
Bacardi (Bermuda) 3.7 (4)         3.4 (4)
Beam Global Spirits & Wine (United States) 3.7 (5)         3.3 (5)
Central European Distribution Corp (Poland) 1.8 (7)         2.1 (6)
Brown-Forman (United States) 1.9 (6)         1.9 (7)
Gruppo Campari (Italy) 1.7 (9)          1.7 (8)
Sazerac Co Inc (United States) 1.7 (10)          1.5 (9)
Suntory (Japan) 1.8 (8)           1.5 (10)
Total share of top 10 41.8           42.5

NARCONOMICS VS ECONOMICS

All economies, including big businesses and people, are passing through recession and financial crises, except one: the drug business. The main reason behind the success of this industry is the huge profit margin from the cost of production to the market price. From the day it was discovered, cocaine’s production price was from 200 -500$/kg. Its selling price is constant at $20.000 from the first day it was imported in the US until today.

The cocaine business, by contrast, has switched its attention to Europe, which goes through twice as much coke as it did at the end of the 1990s. The average Brit now buys more than the average American, albeit of lower quality. Mexican sellers are also making inroads in Australia, another promising market.

The drug industry’s flexibility is partly due to its exemption from import duties. Whereas legitimate Mexican traders have free access to America and Canada via the North American Free-Trade Agreement (NAFTA), drug smugglers are granted tariff-free entry to every country in the world thanks to the Single Convention on Narcotic Drugs, which prohibits the regulation or taxation of their product. Pesky rules of origin, which prevent many Mexican manufacturers from selling goods in America, do not apply to Colombian cocaine processed in Mexico.

All those factors are making the drug cartels more and more powerful and financially independent, and producing a huge portion of GDP in their country of origin. One of the main reasons for the US to invade Afghanistan and change the government was the opium production (heroin). The 9/11 attack and the hunt for Bin Laden were simply a convenient excuse. After the US took control of the opium production in Afghanistan, the opium production increased and, at the same time, the price of heroin doubled.

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