ECONOMIC AND SOCIAL CONSEQUENCES OF DRUG ABUSE FOCUS OF STUDY RELEASED TODAY BY UN DRUG CONTROL PROGRAMME

Press Release
SOC/NAR/771

ECONOMIC AND SOCIAL CONSEQUENCES OF DRUG ABUSE FOCUS OF STUDY RELEASED TODAY BY UN DRUG CONTROL PROGRAMME

VIENNA, 28 October (UN Information Service) -- The Executive Director of the United Nations International Drug Control Programme (UNDCP), Pino Arlacchi, said today that the economic cost of drug abuse has reached more than $120 billion per year for Organisation for Economic Cooperation and Development (OECD) countries, as he released a UNDCP report on the Economic and Social Consequences of Drug Abuse and Illicit Trafficking.

The economic price tag of drugs is endangering not only lives, but the economies of some countries, Mr. Arlacchi said. Citing from the report, he noted that drug abuse in the United States alone costs $76 billion a year. Tax dollars must be used for drug enforcement, prosecutions, prisons, drug prevention programmes and treatment and health care costs for drug-related diseases, such as AIDS. Financial losses incurred from drug-related crimes also comprise a substantial part of the costs. Each year similar drug- related costs in Germany are an estimated $9.6 billion; the United Kingdom $3.2 billion; Australia $1.2 billion; and Canada $1.1 billion.

According to the study, traffickers in industrialized countries take in one half to two thirds of drug profits. Less than 10 per cent of the drug profits remain in the producer countries, which are predominantly developing countries. Tracing the money trail of drugs originating in Afghanistan and transported to Europe, Mr. Arlacchi said that Afghani farmers who grow opium poppy receive less than 1 per cent of the total profits; only 2.5 per cent of the proceeds remained in Afghanistan and Pakistan, while 5 per cent was spent in countries en route to Europe. Drug traffickers took in 43 per cent of the profits as drugs pass through European industrialized countries, and drug dealers made the remaining 49 per cent of profits in retail sales to western European consumers.

The report also examines how the drug trade damages the national economies of developing countries. Drug traffickers in producer countries generally invest their money in conspicuous luxury items, such as yachts,

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villas, flashy cars and arms to support their trade. "What little money that is invested in the economy does not lead to sustained economic development," said Mr. Arlacchi. Aside from promoting corruption, drug profits are usually invested unproductively, often in real estate and construction, which inflates prices, and in the entertainment industry. Compounding the problem, drug- financed enterprises often eliminate legitimate business competition using intimidation and violence against their competitors. Furthermore, governments have difficulty making sound economic policy decisions, since their markets did not respond predictably, due to the large amounts of drug-money in the economy. For instance, drug-financed enterprises will not react predictably to changes in interest rates generated by a central bank.

The study also notes that drugs are price-sensitive in OECD countries, as are most licit commodities. At current price levels, a one per cent increase in street price reduces the number of heroin users by 0.9 per cent. Higher prices and lower availability mean less experimentation in the short term, which translates into fewer addicts in the long term. Also, according to the report, at current levels more than 16,000 people die annually from drug abuse in OECD countries. However, the actual numbers are much higher because drug-related deaths are often attributed to other factors, such as car and work-related accidents, strokes and heart attacks. The calculated cost per heavy drug abuser in OECD countries ranges from $20,000 to $30,000 per annum.

The report also highlights an emerging danger in countries that are rapidly privatizing State-owned assets, such as former Soviet-bloc nations. The assets from the sales of State-owned industries can easily become the target of criminal investment, which in the longer term undermines the foundations of both the country and its emerging market economy. Criminal enterprises often use intimidation or violence against competition, which can lead to monopolistic price-setting policies. And, once the ability to coerce is recognized by the legitimate local competitors, criminals no longer need to spend money on violent activities to achieve their goals.

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