Cameron does cocaine

Wednesday, January 2nd, 2013

Writing my post on decriminalisation and the thought-provoking discussions that followed, I spent some of my Merry Christmas costing up the production, import and distribution of cocaine. Festive, joyous and in Jesus’ name. I mean, who wouldn’t want a big bag of the white stuff from Marks and Sparks’ next Christmas? (‘This isn’t any old chang, this is legal, 90% pure, Columbian chang.’) Answer: anyone with anxiety issues, a family history of bipolar or schizophrenia, problems with any organs (especially heart), abuse of other substances, or more money than sense. But then again, as we concluded in the post-blog discussion, if people are going to take drugs, they may as well be paying tax on it (so at least they are contributing to their own physical health / mental health / substance misuse treatment if/when the time comes that they require it).

So come on a journey from Columbia to Milton Keynes – a journey with no knowledge-base, no real method, and some dodgier estimates than my mate’s weigh-by-sight eighths…

I chose cocaine as my subject for a few reasons:

a) It is widely-used and the most popular substance used in the UK after alcohol and cannabis.
b) It is a more controversial drug to discuss than cannabis – which, let’s face it, there isn’t really much rational argument to keep ‘criminalised’ (yes there are health problems associated, but significantly less than with many prescribed medications and massively less than alcohol, other than for a minority in high-risk groups – the high-risk groups that largely have no problem accessing the drug at present – so stop wasting your time, Police, let people grow their own to cut out the association with serious crime, and get on with chasing some proper criminals, please).
c) Cocaine is used in a wide range of ways – from the ‘treat myself’ occasional snorters to the bareback-anal-funded IV snowballers – and so the range of market considerations is broader (it’s harder to put cocaine use into a box – not literally, Marks and Spencer, don’t panic).
d) I am guessing that the coca plant needs to be grown at high altitudes and so would need to be produced elsewhere and imported; making it, I would imagine, one of the higher-cost drugs – there may be ways round this, such as breeding new strains or recreating such an atmosphere and environment, but I’m not clever enough or technical enough to be able to make any educated guesses about this.

So, in order to (in a very crude, basic and unscientific manner) assess whether there may be any financial benefit to making cocaine legal, and therefore taking charge of the market, creating tax revenue and potentially even profit to be channelled back into health interventions and treatment (or bankers’ pockets, if you’re not utopical), I am going to attempt to approximate the cost of cocaine if the Government were to start producing and selling it for themselves, to see whether legalisation would not only reduce Government spending on punishing those that use cocaine, but also make money to offset the required increase in health interventions and market management.

So, step one – production. My brief wwwdotresearch has produced some widely varying figures, but it does appear that the cost of producing cocaine has multiplied in recent years, partly due to improved policing of trafficking routes and seizures which inevitably pushes up overall prices, but primarily because the cost of ‘precursor chemicals’ has dramatically increased. This seems to be as a result of Columbian authorities increasing the control over the supply of the chemicals used in the production of cocaine, meaning that substances such as sulphuric acid, acetone and potassium permanganate are harder to come by, and so chemicals either have to be acquired by illegal means or the coca paste has to leave the country for cocaine production to take place elsewhere. It also apparently takes 74-86 gallons of oil to produce 1kg of cocaine, and so it appears that the increased cost of crude oil hasn’t just affected our food prices.

It might also be making a slight aside at this point, for all the environmental leftie types out there who stick the odd line up their noses – hundreds of thousands of tons of these precursor chemicals are dumped in the South American jungle every year as unwanted by products of cocaine production. I’m not judging you, I’m just saying. ‘A cheeky line, monkey death chime.’ ‘Fancy a snort? L’arbres sont mort.’

So, aside from the environmental damage, it looks to me from my brief scour of the net as though the cost of producing cocaine has increased from around US$100-200 per kilogram twenty years ago, to somewhere around US$1000-$1250 per kilogram today. One source prices a gram of cocaine in the UK at twenty times the price of one purchased in Columbia, but as the purity would also be massively reduced in the UK gram it is difficult to draw any price comparisons from this. So if we imagine that the UK Government bought or rented some land and produced their own coca, and we work to a nice round approximated figure of £1000 per kilogram to produce cocaine (and I apologise to any lovers of the scientific method or mathematical precision), then lets move onto the cost of exporting the drug and getting it to the UK. (Again, my theoretical method goes a bit squiffy here, as it seems that Columbia are doing their best to reduce cocaine production following pressure from USA, whilst Bolivia appear to be embracing this valuable export and so seem to be more likely potential business partners – and my costings are for Columbia as this was all that was available – but let’s not be pedantic, for this is just an exercise, I am just a drugs worker, and this is a mere blog.)

So, stage 2 – export, transportation, and import into UK. Bolivian export duty is, according to my internet reading, set a a flat fee of 10%. Transport costs look to be around £5 per kilogram using airfreight from Bolivia to UK. Then, I have failed miserably at attempting to understand and apply the British import tax system to our hypothetical situation, given that there is no current legislation around importing cocaine (funny that, eh). The amount of duty varies wildly depending on what is being imported (it looks like medical equipment is not taxed, whereas alcohol seems to be subject to anything from a couple of quid a litre to nearly £30 on anything with high alcohol content) and so it would depend how legal cocaine would be conceptualised – as a medical substance or a recreational one. It seems more likely that it would be considered a luxury item such as alcohol, but whether the Government would minimise taxes to make importing legally more appealing, or to keep their resale value down, it is impossible to second guess – and let’s face it, this bit is boring as hell.

So yes, I am being simplistic yet again, but let’s pick some numbers out of the air and imagine that when cocaine enters Britain it is taxed like cigarettes – at a rate of £209 per kg and with 20% VAT payable at the docks. If we estimate that we will cut our pure cocaine into something a bit more manageable – reducing it to, say, 50% purity before letting it loose on the streets of Britain – we can estimate its value at £100 a gram, making a kilogram worth £100,000. So if we lost 10% of its value to Bolivia’s export tax, then a fiver in airfreight, then £209 and a further 20% in import duty and VAT, our kilogram of cocaine would have so far cost us £31,214.

So far, it’s looking good – high quality cocaine on British soil costing so far less than a third of its resale value.

Stage 3, then – distribution. Here we need to factor in a cutting agent, both to water down the cocaine to something that won’t completely blow people’s minds, and to make the sale more profitable. At 50% purity, our cocaine would still be significantly stronger than the cocaine on our streets today, which is currently estimated to be between 5% and 35% pure, meaning that the Government should be able to compete with the black market due to its superior goods. So we need to factor in the cost of a cutting agent, and consider that it needs to be something which causes no harm when inhaled or injected. I’m thinking whatever is used to pad out paracetamol or ibuprofen tablets must be pretty harmless, and has to be cheap given that you can buy a pack of those for a few pence. Let’s be as unscientific as we have throughout and guesstimate an additional £2 per kg.

Then, getting it out to the people – the drug users. As suggested by Josh in his comments following my decriminalisation blog, let’s say we distribute it through current drug service provision – so this could be via GPs, needle exchanges, pharmacies, or drug workers. These services are already commissioned to provide harm reduction interventions to drug users – and all recent service developments expect more work for the same money – so I can’t see there being a huge additional cost there. The cocaine could be distributed with existing medical supplies using the NHS logistics department (admittedly with increased security measures) and sold by NHS staff. Let’s stick a tenner a kilo onto the price to account for this. If 1kg of imported cocaine becomes 2000g of sellable product, I guess we’re looking at a full time employee per kilogram each week, so we ought to add a further £400 to the cost of each kilogram.

It’s brings the final cost of our fictional kilogram of cocaine to £31,626 (a very precise figure for such an imprecise calculation, I am sure you will agree). Given that it is worth £100,000, this is a pretty profit margin by anyone’s standard – and £68,374 could provide one hell of a lot of health provision for people who are probably already sticking significantly less healthy things up their noses and into their lungs and veins as we speak. Each kilo of cocaine could fund a drugs worker and a Police officer’s wages for a year.

So I know it has not been the most exciting blog I have ever written, and it’s economic and scientific validity is roughly equivalent to the personality of Cheryl Cole, but even so I think it goes some way to support the argument for the legalisation of drugs. And I didn’t even know that was what I was going to do. Funny how things turn out, eh. And if anyone who does actually have some business knowledge wants to take these figures and apply them properly (is export tax 10% of the sellable value, for example, or of the production value? I haven’t a clue), I’d love you to post your findings here.

Some references below, and remember, kids – cocaine leaves you feeling like a crisp packet that’s been shrivelled in the oven and then shat on.

http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA282313
http://www.dialogo-americas.com/en_GB/articles/rmisa/features/regional_news/2011/06/03/colombia-chemicals
http://www.havocscope.com/black-market-prices/cocaine-prices/
http://www.unodc.org/documents/data-and-analysis/WDR2012/WDR_2012_web_small.pdf
http://www.unodc.org/documents/crop-monitoring/Colombia/Colombia_Coca_cultivation_survey_2011.pdf
http://www.economist.com/node/21560270

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4 comments on “Cameron does cocaine

  1. Fascinating stuff. That must have taken ages! As you know, I’m no statistician or mathematician, so no suggestions or corrections coming from here. I do like your argument though! The only thing perhaps not accounted for is the cost of setting the system up in the first place?
    I’ve believed for a long time that the ‘half-hearted’ stop smoking campaigns are to look like ‘something is being done’, but if all the smokers did stop, the loss in tax revenue would be phenomenal, and for a good 20-30 years or more, they’d be a huge deficit in what it costs to provide healthcare to everyone with their smoking related illnesses, and the profit from tax revenue if they all stopped buying cigs today!
    Producing and selling cocaine could be a great ‘money spinner’ for the government, but perhaps not a ‘vote winner’ for your average member of the public who just wouldn’t understand the sensible argument. If the Daily Trash, and the Sunday Tosh got the wrong angle on it (which they of course would) there’d be a revolution!!!!
    Another great post, really interesting. Happy New Year to you x

    • Thanks, glad you liked it. I wasn’t sure if it was a bit geeky and dull to anyone bar me. It did take a while to research but otherwise Christmas would have been way too joyful. Your comments on smoking are extremely interesting and tell a warning tale… And re: the tabloids – does anyone really give a shit what they say these days anyway??? Sadly, probably.

  2. Ingólfr Arnarson says:

    Excellent blog! This is how I like to see things done, and I bet you’re closer in your estimations than you give yourself credit for.

    When I was thinking about this post, though, I had to wonder about the development of one of your most important assumptions: the selling price. Since we live in a glorious country of free market capitalism, prices follow demand and the market value of cocaine would probably drop significantly with legalisation since everyone wants a luxury good at a Primark price nowadays. One possible outcome of this would be businesses undercutting each other with lower profit margins in order to stay competitive, which is not such a problem in things such as tobacco or alcohol since we have a rich cultural heritage of poisoning ourselves with a particular flavour i.e. brand, and there are both high- and low-value products on the market. However, I can’t see the majority of large-scale drug users being prudish about buying M&S cocaine over Morrison’s own if they have to pay more per (pure) gram. So if the business model works around a price fixed as high by the seller, or the government via taxation, another possibility is black market cocaine, at a lower cost (tax-free, stolen, whatever) – except that now “the white lady” is everywhere, making it much harder to control (what I would, perhaps controversially, call) “the black lady”. It’s also possible that everyone would agree to sell it cheaply and just make less money off it, in which case weyhey! Order me a kilo before the January sales are over.

    This is the most informative and thorough blog post I have read on this issue and I look forward to reading more in the future. Please keep it up! You are making at least me think very deeply about issues that are so often ignored.

    P.S. I was trying to work through the figures myself, and the police came and took away my laptop. Thanks.

    Sent via iPhone

    • Excellent point, and I fully agree. I guess the only way it could be controlled is the Government smothering the ‘free’ market and monopolising its partners. I don’t think there are many places high enough to grow coca, and if it was made profitable to be straight for the farmers… But yes, you are absolutely right – and for every one South American partner, who knows how many other high-altitude growers could be found elsewhere…

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