Let's buy some opium

It hit the news today that the Afghan opium production is bigger than ever. They now account for almost the entire world supply, and opium farming is by far the strongest pillar of their economy. But that's not what this blog is about.

The US is funding a remarkably unsuccessful anti-opium program there. The plan for next year involves $475 million. They will spend this on eradicating crops, chasing down traffickers, and perhaps some money in funding for alternative crops. However, if past years are any indication, this will ruin a number of unlucky small farmers and drive them into the Taleban, and will have no impact on the profits of largescale opium and heroin traffickers, or on drug addiction in the US. But I decided to put on my bean-counting hat and take a look at the structure of this industry.

The Afghan farmers themselves are the ones who make the perfectly rational decision to grow opium. Now, they don't get all that much money from it. A recent (2006) reports a total household income of $1700-$1800 per year from growing opium (and only about $250 per capita), on average. In fact, the so-called "farm gate" price of the entire opium production of Afghanistan is only $560 million to $760 million. However, by the time this opium is converted to heroin and hits the streets of the first world, it will have enriched many middlemen and especially the large scale traffickers, to the tune of many, many billions of dollars.

Well, what's wrong with this picture? The US is spending around 1/2 a billion with no success in an eradication program, but the farmers are only making from about 1/2 to 3/4 a billion selling the crop. These two numbers are not very far away from each other.

I say, why not send some buyers around the country, backed up with armed US and/or NATO soldiers, with the job of buying up all or as close to all of the Afghan opium crop as possible?

Here's how it could work: the opium would be bought at the average market price, and resold to pharmaceutical companies at a profit. Clearly not all could be sold this way, the rest would be destroyed. If the farmer agreed to grow some wheat or some other crop, non-opium agricultural support, for example, wheat seed, could also be distributed. This would translate into paying individual farmers an average of $1500 or so each, in exchange for the typical annual production of a few kilograms of raw opium resin.

There would be a fairly large reaction from the narcotraffickers, and not only in Afghanistan. This would make a lot of junkies very sick. And, at least in the short run, Afghan farmers would still be growing opium. However, since the US would soon be the only buyer, or at least almost the only buyer, there would be a lot of things that could be done to move production into alternative crops. The goal here would be steady reduction in opium vis a vis other commodities. Building roads, schools, electricity, internet--all of those things would also help. The most important thing is, though, that we will have ended the illegal opium crop in Afghanistan, and at a cost only maybe 50% more than what we have been spending in our failed eradication program.

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