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5 Reasons the War on Drugs Is a Costly Economic Disaster

A new report reveals obscene wastes of money and humanitarian disasters.

Closeup of a handgun of Mexican federal police forces maintaining order in the violent border city of Ciudad Juarez.
Photo Credit: Frontpage / Shutterstock.com


The global war on drugs is the cause of some of the biggest public health and social justice disasters of our time, from violent, billion-dollar cartels to mass incarceration targeting communities of color and locking people up for profit. On top of everything, the drug war is shockingly expensive according to a groundbreaking report released May 7 by the London School of Economics.

The report exposes the injustices of the drug war by examining its true costs. Five Nobel Prize economists, as well as national leaders and professors, weighed in, reaching the overall conclusion that policies need to move away from heavy law enforcement to public health and humanitarian-based efforts. 

The foreword of the report states, “It is time to end the ‘war on drugs’ and massively redirect resources towards effective evidence-based policies underpinned by rigorous economic analysis.”

It also notes, “Continuing to spend vast resources on punitive enforcement-led policies, generally at the expense of proven public health policies, can no longer be justified."

The report calls for a shift in global drug enforcement strategy. It suggests that new drug policies should be based on  harm reduction. It also calls for "expanded access to essential medicines," and "an unwavering commitment to principles of human rights.”

Below are five of the most important findings from the report.

1. Law Enforcement Paradox: Crackdowns Bolster Violent Dealers

Drug prices on the blackmarket are decreasing while drug doses are becoming more and more potent. This is happening “despite drastic increases in global enforcement spending,” according to the LSE report. This trend alone is evidence enough to argue that the current system of drug enforcement isn’t working.

This is because there is a paradox happening in which enforcing drug laws actually increases the profitability of illegal drugs, according to the LSE report. Since countries can’t realistically expect to eradicate any drug completely, the best they can hope for is to make it hard to sell illegal drugs so the prices increase, and that drug eventually becomes unaffordable to users and unprofitable to dealers.

The problem governments have run into is one of diminishing returns. After a certain level of drug enforcement spending, additional spending does little to mitigate the illegal market. If anything, all it does is create “interventions which are unpredictable and potentially violence-inducing,” or increased costs to society “in the form of incarceration and negative public health outcomes.”

The report explains that a “drastic overemphasis on policies aimed at suppressing the supply of illicit substances” has a short -term impact on the supply of a particular drug, but an adverse effect in the long run because there are so many different, shifting suppliers in the illegal market.

Cracking down on specific substances drives the price of those substances up as they become harder to find. This increases incentive for a new rise in supply. Over time, this trend feeds into lower prices, so crackdowns are a temporary solution at best.

The report notes that this effect is even stronger when it comes to addictive substances. Someone addicted to heroin, for example, is more likely to skip spending on other living expenses in order to cover new heroin expenses (to all the economists out there, yes, this is basic price elasticity).

2. Costs of Global Counternarcotics Efforts Far Outweigh Benefits

The US has led counternarcotics efforts—activities aimed at dismantling the narcotic drug trade—abroad for three decades based on incorrect assumptions, states the report. They assume that drug suppression policies reduce drug consumption by reducing the number of drugs that make it into the states. They also assume their efforts foster the US goals of taking down terrorists and militant groups involved in the drug trade. But these assumptions have been wrong as each effort on the part of US counternarcotics has had serious side effects.

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