The economic case for decriminalising drugs

Is it better to have drug use made legal, and therefore taxed and regulated, or might this encourage more drugs to be consumed – with the social and other costs associated with that?

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The UN wants its members to decriminalise drugs, and Sir Richard Branson thinks that is just great. Well, it is not quite like that; as so often, the story is more nuanced than the headline. The paper Sir Richard leaked, which urges “decriminalising drug use and possession for personal consumption”, was drawn up for a conference in Kuala Lumpur on harm reduction by Dr Monica Beg, an official at the United Nations Office on Drugs and Crime (UNODC) in Vienna. It has since been withdrawn and, as you can gather from the outcry, it is certainly a “third-rail issue” – you touch it at your peril.

Actually, the idea that personal drug use should not be a criminal offence is supported by other UN agencies, including the World Health Organisation and UNAIDS, and the argument is really about the balance of harm rather than any high principle. Is it better to have drug use made legal, and therefore taxed and regulated, or might this encourage more drugs to be consumed – with the social and other costs associated with that? This will be a central issue at the forthcoming conference on the world drug problem at the UN General Assembly next April.

The approach to drug use is a health, public-safety and human-rights issue. But it is also an economic one. Would the world be richer, calmer and happier if the issue were treated differently? What do we know?

We are not flying completely blind, for we can make a tally of the costs of enforcement of anti-drug legislation, which are huge. The UNODC paper makes this case.

We can also observe that there has been a gradual softening of anti-drug legislation, particularly for cannabis and particularly in the US. This has happened alongside the hardening of anti-smoking legislation pretty much everywhere, leading to the idea that it would be more effective for society to lean against drug use, rather as it does against smoking, than prohibit it completely.

There has been a plethora of studies of the drugs trade, but it is more helpful to look at two real-world examples of the results of a change in policy: the legalisation of cannabis in several US states, in particular Colorado; and the de facto decriminalisation of heroin use in Zurich.

We have now had more than 18 months of experience of the Colorado experiment, which began at the beginning of 2014 when recreational use was allowed (previously only medical use was permitted). In that first year, employment in the cannabis industry rose from 6,500 to 16,000 and revenues to the state reached $44m (£28m). This year revenues look like being around $125m.

A new industry has sprung up, with dispensaries looking more like fine-wine merchants and different brands of pot being described as having a strong finish or floral notes – though, unlike alcohol, distribution is tightly controlled.

We don’t yet have much feeling for the downside. More pot is being consumed and there have been reports of drug misuse and drug-related traffic accidents. Drug-related hospital admissions have also risen. Most troubling, perhaps, have been the statistics suggesting that many more children are using, and abusing, pot.

But in terms of public perception, the experiment has on balance been ranked as a success, with the change in legislation having a 58 per cent approval rating in a poll last February. Just 38 per cent disapproved.

Whatever people’s views, however, such legalisation is spreading. Washington state and Alaska have followed Colorado’s lead and, if you allow for medical use, there are now 23 US states where cannabis is legal.

The Swiss example is older and therefore easier to assess. The problem in Zurich was that, by the 1990s, this orderly bourgeois city had the worst drug problem in Europe. Fed-up with drugs being sold on street corners, the authorities decided that drug dealing should be confined to one area, a park at the point where the city’s two rivers meet, Platzspitz. The result was a disaster: the park became a magnet for drug users from all over Europe. More than 2,000 of them would congregate every day. Their discarded needles gave it the new name of “Needle Park”.

The citizens, who had initially supported the project, were aghast. Far from keeping the drug problem limited to one location, the social problems associated with drugs increased even faster than the number of users. The park was shut and drug users dispersed. But this spread the problem all over the city. Users were arrested, and at one stage 60 per cent of the people in the jails were there for drug offences. Switzerland was spending more per head on law and order than even the US.

Then came a change of policy. Heroin was made legal. Treatment centres provided injection rooms. Patients could choose their own doctor and treatment was free. There was also a big methadone project, for methadone, as elsewhere, has generally been the favoured alternative to heroin. The project is ranked as a success. Within 10 years the death rate from overdoses had halved, and there was an 80 per cent fall in HIV infection rates. Former users were rehabilitated: after treatment, two-thirds found jobs, started to pay off their debts, and gave up crime (offences falling to a quarter of the previous level).

The Zurich experiment has had its imitators all around the world, though the outcome has not been perfect. The Swiss use of other drugs – including cannabis, cocaine, ecstasy and amphetamines – rose. Supply rose to meet demand and Switzerland became Europe’s largest hemp producer.

Those are just two snapshots of what happens when policy is changed. A balanced assessment of the evidence, rather than the ideology, surely is the best guide to policy. For my own part, a softening of the legislation on drug use (coupled, of course, with access to medical treatment), combined with a hardening of social attitudes against it appears the most fruitful way forward.