How cocaine markets have been hit by the financial crises

The following commentary on the recent SOCA report has been prepared for the Transform Blog by Axel Klein, Lecturer in the Study of Addictive Behaviour, Centre for Health Service Studies, University of Kent.

On May 12th a government agency reported that rising levels of dangerous adulterants including boric acid, an insecticide, and tetramisole hydrochloride used as worm powder are being added to cocaine sold in UK drug markets. This is alarming as the largest group of consumers in UK retail markets are 16-24 year olds. It seems extraordinary that the exposure of school children and students to toxic substances sold in an unregulated market, with minimal information about content or health risk is the direct result of government policy.

Whatever the unintended consequences, SOCA, the agency that is responsible for stopping the inflow of cocaine into the UK, is celebrating the success of its undercover work manifest in the ‘wholesale’ cocaine price rise. Retail prices have, alas, not changed, but SOCA points to decreases in purity which are attributed to rises in overall prices and concomitantly, a stipulated reduction in overall inflows. Both these trends are apparently a direct result of SOCA activity in the UK, and Europe wide operations, with or without SOCA. This follows from the reported increase in overall seizures and an even sharper rise in overall arrests related to drug trafficking.

So what are the consequences of this 'success'? One is already noted, the increasing adulteration of street cocaine – the substance that people snort up their noses or smoke in rocks of crack. Where these adulterants are toxic they increase the health harm to users whose continuation of use is not affected by the supply cuts up the supply chain. Retail markets remain unaffected and continue to respond to consumer demand. What is sold is a more dangerous, diluted product which will first cause health damages to some users, and may secondly well increase the incidence of use, as consumers compensate through stepping up episodes of consumption. Most affected will be the consumption of dependent users outside of effective treatment, who will increase their dosage to riskier levels in compensation of diminishing potency. The minority of intensive and chaotic users with no legitimate means of income to fund their habit will resort to illegal alternatives to meet rising costs. More crime will produce more arrests and a diversion of some perpetrators of acquisition crime into prison where treatment can be offered part of the new Integrated Drug Treatment System. Repressive drug policies thereby generate crime to produce an opportunity for arrest. If it works all the crime generators are taken out of the drug / crime cycle through rehabilitation, and a portion of overall crime eliminated. Casual cocaine users on the other hand will be driven away from cocaine, and reduce overall prevalence in the mid term. Whatever the calculation of law enforcement agencies in meeting their objectives of eliminating cocaine from the UK, the dynamic of the illicit market has to be factored in. According to the assumptions – search for profit, willingness to break the law, - it is also predictable.

The rise in ‘wholesale’ prices in cocaine markets is going to set an incentive for organised crime groups to redouble their efforts. Where profits are rising and other forms of enterprise are as affected by global downturn as the licit economy organisations will respond that have hitherto been outside the cocaine trade in the UK. In a situation of overall contraction across the economy cocaine importation, according to SOCA, makes for an attractive business proposition. The National Criminal Intelligence Service, predecessor of SOCA, was alarmed by criminal groups committing violent crime to collect start up capital for entering the drug trade as early as 2003.

If this phenomenon is known, then why is it sensible for a government crime prevention agency broadcast the opening of a criminal opportunity? Most potential perpetrators, it may be said, already know this and SOCA would not give away information unless it had been carefully assessed. Yet information on ‘wholesale’ prices was precisely what the Matrix analysis based on interviews of 222 drug traffickers found was difficult to come by (Matrix Knowledge Group, 2007, The illicit drug trade in the UK, Home Office Online Report 20/07). The cocaine business is extremely opaque, with no overall information on the movements of goods, leaving each trader to operate through networks. Prices are determined and assessed through personal information, and the weighing of risk and profit. An earlier Home Office study characterised the drugs market as fragmented (Pearson et al, 2001, Middle Market Drug Distribution, Home Office Research Study 227)

Cocaine transactions are cash based, and take place in marginal settings, outside the protective framework of the law. They are fuelled by fear of violence from partners or police and the loss of wealth or freedom. Prices are dictated by security as much as by market demand and exponential increases after importation. The number of people involved at buyer and seller level is far smaller than at the retail level.

At street market level research can establish overall prices as informants are easy to identify and liable to give truthful answers. Surveys can establish relatively easily what drug buyers buy as work of the Independent Drug Monitoring Unit has demonstrated. It has historic data on price trends collated from questionnaires distributed at festivals and web surveys. The police, by contrast, have been relying on undercover purchases. Over the years, the respective drug price information has been variance. Notwithstanding shortcomings, the police approximations of price levels have been methodologically far more robust at the simpler retail market than elsewhere. The claims to price trends in the secretive, opaque and volatile ‘wholesale’ market requires a ‘conceptual explanation of methods. All we have at the moment is a reported fall in purity for which there could be a multitude of causes.

We have learnt from the heroin drought in Australia in 2000, celebrated by law enforcement as a seizure breakthrough, that market changes are often the result of supply shifts. Serious organised crime groups can switch their exports to more lucrative markets, wherein currency ratios play a part. In the late 1990s Burma based drug trafficking groups redirected heroin flows from Australia to China while increasing the supply of methamphetamine (Bush, William, Marcus Roberts and Mike Trace, 2005 Upheavals in the Australian drug market: heroin drought, stimulant flood, Beckley Foundation, briefing paper 4). In the UK the stipulated fall in cocaine may be a function of sterling depreciation, or a corollary of overall drop in imports. Bitten by recession, UK consumers are spending less on imported luxuries, cocaine included. Among celebrities the new austerity chic may even trigger an abstinence trend.

In the streets though a different process, of cocaine normalisation may have been at play. The prevailing culture of psychoactive experimentation has seen a rapid widening of occasional to regular cocaine consumers. With this ‘social extensification’ cocaine has been transformed from luxury to chemical fix, and quality dropped to the standards of a mass market.

Low grade cocaine, ironically, is consequence of the same repressive drug supply policy that delivered high grade cannabis. In both cases changes in the product have not responded to consumer demand, but are market adaptations to the constraints of enforcement. Young people are left to celebrate the end of exams with 'killer skunk' and insecticide courtesy of the UK Drug Strategy.

There are increasing demands for closer scrutiny of the consequences of drug policy enforcement. Instead of explaining hard data on reducing cocaine availability, SOCA produces soft targets, hard to verify, and of indirect value. According Trevor Pearce,[1] project Kitley has netted some 15 tonnes of chemicals used to bulk up cocaine and led to 72 arrests. But how this impacts on the overall availability of cocaine and raises the levels of safety for cocaine users remains mysterious. It is best read as an activity report demonstrating that the agency has been active and successful, therefore justifying ongoing support. ‘We are on the right track, let us not give up fighting now’ is the motto.

What happens when we get there is not clear. But the concern is shared by senior officers at SOCA itself, one of whom lamented that:

“We may have to say at some stage that taking heavily adulterated cocaine is more physically harmful to the user than taking cocaine that’s less adulterated. That is not the case at the moment. But we’ve got to keep asking the question. I’m aware that the health equation could one day say: Stop trying to stop cocaine coming in.”

It leaves the drug policy watcher wondering what exactly the point is?

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[1] http://news.bbc.co.uk/1/hi/uk/8044730.stm accessed 13/05/09