Business World, 30 January 2017


The recent revelation that rogue police have been using the “war on drugs” as a cover to extort from business people — in the most notorious instance involving the kidnap and murder of the unfortunate Mr. Jee Ick Joo — is more than enough reason for the administration to pause and radically rethink its whole approach to the drug problem.

Beyond expletives and theatrics, the Duterte “innovation” is really just an intensification of an already-existing regime of prohibition. It applies a strategy of extreme punishment — well beyond what is in the statute books — aimed at striking fear among users, dealers, protectors and enablers alike, without distinction.

Viewed dispassionately, the logic is simply to reduce both drug supply and demand. What is effectively a death penalty for drug consumption (read: EJKs) is a “demand-reducing” strategy that pushes the demand curve left and downward. The same lethal strategy, however, also reduces supply, since it disrupts drug conduits and networks by threatening prohibitive costs and risks to dealers. Shift the supply curve up far enough and the demand curve low enough, and at some point the two no longer intersect. Et voila, drug-free Philippines!

The economics of prohibition, however, has never been just about demand and supply. We know this from the experience of US alcohol prohibition in 1922-1933, and more recently the various unsuccessful “drug wars” waged in various countries like the US, Mexico, and Thailand. Almost invariably, the unintended institutional effects of prohibition dilute or even swamp the direct effects. What are these indirect consequences?

The most important consequence is that prohibition makes criminals of people who at bottom are merely struggling with health problems and dealing with social want. Some countries decriminalize drug use and treat addicts and pushers differently. But not Philippine law: RA 9165 specifically imprisons persons possessing any quantity of drugs, e.g., 12-20 years for less than five grams of shabu; life-imprisonment for 10 grams or more; and the death penalty for 50-plus grams, just in case capital punishment is reinstated. It makes no difference whether the amount you possess is for your own use or for sale. Notwithstanding the pious slogan “Save the user, kill the pusher,” the law actually lumps users and drug lords together. It was not the President who innovated by treating rabbits like rats; the only novelty he introduced was to use a cannon to kill both.

An interesting sidelight is how the President has successfully bludgeoned churchmen and tycoons with his appeal for them to stop criticizing his drug war and build drug-rehab centers instead. Eager to please, some Filipino and foreign business interest actually stepped forward with their checkbooks. They must realize, however, that this is all for show, and those centers will more likely end up as white elephants. The success of the current drug campaign is frankly premised not on rehabilitation but on terror. Duterte is on solid ground, since even the law makes only a feeble gesture at redemption: rehabilitation is an option only for persons who test positive for drugs a first time — testing positive a second time will land you in jail for 6-12 years anyway.

Rehab is also a recourse if you voluntarily admit to your addiction and submit to the authorities (always remembering not to get caught with any amount of shabu, or otherwise it’s jail time anyway).

In practice, of course, the surrender-and-submit option of tokhang these days only exposes one to further harassment and execution. This explains why zumba classes organized by local governments — their miserable excuse for a detox and rehab program — have seen numbers drastically decline. Nope, if business people and churchmen truly want to advance the President’s war on drugs, they should invest in facilities we truly need — bigger prisons and more funeral parlors for the poor.

As a second institutional consequence, by driving an activity underground, prohibition hands over the industry to professional criminal organizations and therefore automatically invites violence. Where payments and contracts cannot be legally enforced, only organizations with their own mechanisms for enforcement — i.e., that have a comparative advantage in violence — can engage in the business. If you can’t take your supplier to court for failure to pay or deliver the goods, you need your own armed muscle to enforce the agreement. For this reason, the Mafia thrived especially during the Prohibition Era. (It moved on to drugs business once alcohol was legalized.) And this is also why the Yakuza and Triads dominate the illegal drug trade in Asia.

But it gets worse.

An illegal business can at some point become so lucrative that its criminal organizations can corrupt and annex that other large organization with a comparative advantage in violence, namely the police. The government half-admits this when it concedes that many of the observed extrajudicial killings are perpetrated by drug networks wanting to eliminate small dealers and simple addicts who might turn into police informants. What it omits saying is how many of these killings are by members of the police themselves who are part of the criminal syndicates. It is unclear at the moment what part of the 6,000-odd killings in the drug war were perpetrated by rogue cops as part of “housekeeping” measures by drug syndicates in which they were involved, and what portion represents killings “in good faith” by death squads dutifully implementing the President’s iron-fist approach to the drug problem.

One might surmise that from the viewpoint of the drug user shot dead and lying face down in a Payatas street, the distinction might not be all that important. The danger created by the President’s indulgent attitude toward drug-related killings is that broadens the license and opportunity for both types of abuse. Ultimately, however, as Mr. Jee’s case shows, the real and irreparable loss is the public reputation of law enforcement itself.

It is such larger and graver social consequences that have led to a growing global rethinking of the entire prohibition-and-punishment approach to drugs. The Global Commission on Drugs, whose members include (yes, Millennials, you may wiki these names) Kofi Annan, Paul Volcker, George Shultz, Fernando Cardoso, Richard Branson, Mario Vargas Llosa, George Papandreou, and Ernesto Zedillo, among others, has consistently pronounced the “war on drugs” to be a failure on its own terms. The punitive approach — such as that we have — only “threatens public health and safety, undermines human rights and fosters discrimination, fuels crime and enriches criminals, and undermines development and security,” aside from being a huge waste of resources.

Heeding this advice, other countries have adopted various alternative approaches that more humane in varying degrees, ranging from full decriminalization of drug use (as in Portugal), to legalization of milder drugs such as marijuana (as in some states in the US), to various harm-reduction strategies (as in the Netherlands and Switzerland). The bold Portuguese experiment in particular demonstrates that full decriminalization eliminates the worst crime, violence, and corruption that attends the drug trade in other jurisdictions and has led to improvements in public health (e.g., lower HIV incidence).

There is something deeply wrong with laws that not only define crime but also promote criminality. But that is essentially what our current drug laws do.

In a related context, it is worth listening to a famous (non-Nobel Prize winning) economic thinker who contemplated taxes on trade but showed unexpected compassion for the lawbreaker: “The smuggler is a person who, though no doubt blamable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been in every respect an excellent citizen had not the laws of his country made that a crime which nature never meant to be so.”

This is suggestive.

If by some miracle, drug use were only decriminalized as tobacco and alcohol consumption are now, then perhaps we would be less preoccupied with preventing kidnap and murder of citizens and foreigners and could devote more attention to what is really crucial — tax reform, right, Karl?