Measuring the global drug market

When we imagine drug dealing we often picture Columbian gangsters with suitcases full of money, often literally bursting at the seams. We frequently see images on the news of millions of dollars seized by DEA agents or kilograms of heroin discovered by customs officials. All of this shows us that drug dealing appears to be a very lucrative market and that being an efficient drug smuggler can make one very very rich. 

Yet, is it possible to know the actual size of the illegal drug market? Can such a hidden and unregulated trade be effectively monitored? And can these ‘statistics’ ever be used to accurately assess a countries drug polices? Many have of course tried and the results have been hugely varied. As this report will show, many statistics that have been produced have often been gross overestimations that have utilised poor methodologies based on indirect evidence. What will also be shown is that these statistics are frequently used for political and ideological purposes with little regard for their scientific accuracy.

Before we scrutinise the reasoning behind these statistics we should first have a look at some of the figures that have been bandied about in order to see how much of a consensus there is. One of the first estimates of the global drug market was produced by the United Nations International Drug Control Program (UNDCP), now the United Nations Office on Drugs and Crime (UNODC), and was based on 1995’s drug production statistics. From this, they believed the value of the market to be somewhere in the region of $360 billion, with a range from $85 billion to $1,000 billion (hardly a miniscule difference). Due to a high degree of uncertainty over the validity of certain assumptions, this was reduced to a figure of approximately $400 billion for their 1997 World Drugs Report. This figure was subsequently attacked by academics for its accuracy (more will be said on this later). The academic Peter Reuter valued the global market in 1996 at no more than $100 billion. He later revised this figure to between $45-280 billion. The most recent estimates by the UNODC put the global figure $13 billion at production level, $94 billion wholesale and $332 billion at retail. As we can see these figures are hugely varied with the UNODC figure nearly ten times as high as Reuter’s lowest estimate. Can these statistics be trusted then? And more importantly, how are these statistics being used for political agendas?

Firstly we should try and understand the reasons behind these discrepancies. As many researchers have pointed out, one of the main reasons that it is so difficult to estimate the illegal drugs market is due to its clandestine nature which results in studies having to rely on indirect methods to obtain statistics. These include satellite photos, peasant interviews, journalistic reports and hospital overdose statistics. As academic Francisco Thoumi has pointed out, these indirect methods have led to a proliferation of ways of assessing the market such as trying to estimate the entire size of the American Illegal market or the amounts accrued by illegal industries in the South American states. Other reports focus on employment generated by the industry or the amount of money laundered. Still further reports aim to assess the impact on the economy of drug addiction by looking at welfare and healthcare costs as well as attempting to assess potential productivity losses. Thoumi notes how with each of these steps, assumptions need to be made to account for the lack of concrete evidence and this is what produces some of the extreme variation in estimates. Using these methods he shows how estimating Columbian cocaine net revues can result in extremely wide ranges, from US$ 161 million to US$ 3,965 million in 1991, from US$ 331 to US$ 3,323 million in 1992, from US$ 357 to US$ 2,999 million in 1993 and from US$ 194 to US$ 2,625 million in 1994, clearly illustrating the caution that needs to be taken when assessing these figures.  (Thoumi, The Numbers Game: Let’s all Measure the Size of the Illegal Markets, p.2-3)

Others have noted how many figures have relied on very simplistic methodologies which have produced truly outrageous statistics. In fact one of the most frequently attacked statistics was the estimate of $400 billion put out by UNDCP in 1997. One of the most astonishing things concerning this figure is that it is actually an estimation of turnover or ‘total retail expenditures’ not profit. This statistic therefore does not represent the value of the drugs trade as most of the retail price comes from value added in importing countries. Peter Reuter and Victoria Greenfield go even further in their criticism of this statistic by noting how this estimation was created by multiplying the global amounts of drugs produced by US prices. They concur that this has produced a massively over estimated figure as the US has some of the highest retail prices for drugs in the world and only represents a percentage of the market (for heroin perhaps only 5%). (Reuter and Greenfield, Measuring the Global Drug Markets: How good are the numbers and why should we care about them? p.160-163)

After assessing the reasons behind these variations and the wide ranges they have produced, we must ask ourselves why these statistics are even produced. For political and ideological reasons of course! As we know, the ‘War on Drugs’ is often presented as a moral crusade in which the drugs themselves are presented as an entirely existential threat that must be fought against. Statistics can therefore be very useful to politicians, and others with ideological motivations, who wish buttress their own beliefs with ‘scientific facts.’ When the estimations are so wide and the variables so great it is very easy to find a statistic that can be used to justify a particular policy. As Thoumi has pointed out, studies of the costs and benefits of the drugs trade have produced very diverse results depending on the author’s political stance. He cites the example of the National Institute on Drug Abuse (NIDA) which when estimating the costs of illegal drug consumption, ascribed to the belief that all drug consumption constituted drug abuse. In their opinion all drug consumption was to be condemned. From this logic it was therefore understood that all costs surrounding illegal drugs were blamed on the drugs themselves. This included, for example, government policies such as the cost of incarcerating non-violent drug dealers. Thoumi notes how by using this methodology one could also ascribe all cases of HIV spread by injection as due to drugs, rather than a government’s failure to provide adequate harm reduction facilities. (Thoumi, 3-4)

This is just one of the many ways in which data are manipulated for political gains. In many instances statistics are often frequently used to assess the effectiveness of a policy, such as crop eradications or quantities of drugs seized. They are used to argue that a particular group is benefitting from the trade; a particular country depends on the trade or a specific organisation needs a larger budget. In all of these instances finding the ‘right’ statistic can be of great use. Thoumi in fact contends that many of these reasons for using statistics ‘are highly biased and politically motivated, and consequently do not require accurate data. Indeed, many benefit from inaccurate and exaggerated figures.’ (Thoumi p.11)

With this is mind, should we even be attempting to gather this data? Most academics agree on the need for accurate statistics. If these were ever achieved it may be possible to actually assess to efficacy of polices. For instance, if we could accurately assess the profits of say Mexican drug gangs then we would be able to estimate how great their losses were due to interdiction.

The problem is that it may always be impossible to accurately estimate the illegal market due to its clandestine nature. If were look at one of the most recent UNODC reports from 2005 we will see that much of the methodology remains the same. The report states that opium and coca cultivation statistics are its strongest yet it still uses indirect methods, such as ‘ground and satellite based survey methods to measure the extent of cultivation’ (UNODC Report 2005 p.126) Perhaps the most striking aspect of the report is the fact that the UNODC admits that its cannabis statistics ‘are not based on rigorous scientific studies. In addition, for many countries the information is missing altogether’ (UNODC p.126) This is particularly worrying given the fact that cannabis is the most widely used illegal drug. Furthermore, the report also states that ‘largely missing – and not part of any routine data collection – is information on the per capita consumption of drugs by drug users… There is almost no systematic and comparable data on the quantities of individual substances consumed per users in different regions. The information which does exist is limited and often contradictory. More research efforts in this area are clearly needed.’ (UNODC p.126) Considering all these caveats can we really take these statistics seriously?

After considering all of the problems surrounding the production of economic statistics, it may be safe to say that all of these need to be taken with a large pinch of salt and we must always be aware of the motivations of those who quote these ‘facts.’ Perhaps it may be possible in the future to conduct more accurate estimations and generate decent statistics but even if this were so, politics may always get in the way.

At the beginning of this article Peter Reuter’s estimation of the global illegal market was noted. In 1999 Reuter was hired by the Financial Action Task Force (FATF) and tasked with estimating the global drug market. His study, which is often seen as one of the most serious attempts at estimating the market, produced a range of between $45 and $280 billion. Unfortunately FATF decided against publishing these statistics as some countries expected a larger figure.  Perhaps this is the most damning indictment of the way in which these statistics are produced and illustrates the point that, when illegal drugs are involved, ideology will always be more important than the truth.