The article "High Canadian Dollar Hurts Sales Of Premium BC Pot In US" supports our view that understanding economics is crucial to understanding how to deal with the illegal drug trade. The article quotes an economist:
"It's very simple," said Stephen Easton, professor of economics at Simon Fraser University in Vancouver, B.C. "Canadian marijuana production costs are met in Canadian dollars, and those are worth more now."
Previously, he said, pot growers could produce a pound of potent "B.C. bud" for about $2,000 Canadian and, with the exchange rate, smugglers buying with U.S. currency could sell it for a hefty profit south of the border. In those days, an American dollar in Canada was like a 50 percent discount card, and there's nothing like a wholesale discount to bolster retail profits.
Production costs remain in the range of $2,000 Canadian, Easton said. But with the currencies at par, the profit margin is completely gone, unless Montanans are willing to pay 50 percent more for the prime northern bud. A smuggler's risks and transport costs are no longer offset by profit.
"The upshot is that the Canadian marijuana is now less competitive against marijuana grown elsewhere," Easton said. "This is a cost-driven business. With exports no longer viable, the British Columbia marijuana industry has certainly taken a hit, so to speak."
With much of the 5,000 mile US-Canadian border being rugged and remote, and around 1,000 agents sharing the patrol duties, that leaves approximately 5 miles of border per agent. With the long, open border between and the police having a great many other things to do, selling Canadian marijuana in the US was actually less challenging than growing it right here, and the profits were higher as well.
Since the relative value of the US dollar to the lower Canadian dollar boosted the profits of smuggling pot into the US, a booming export business was created. Though it was strictly illegal, the export market for pot became an excellent case study from an economic point of view.
Easton and his university colleagues published a study in 2000 that estimated the annual market value of British Columbia's pot at around $5 billion, with perhaps 90 percent of the crop being shipped south into the U.S. Subsequent changes in the value of the US dollar against the Canadian dollar have essentially closed the export market to Canadian pot. The above study estimated that the approximately $5 billion spent by American consumers for Canadian marijuana represented about 3% of the total US marijuana consumption market.
This leads to an obvious question: has the actual consumption of marijuana by US residents decreased due to the import deficit from Canada? While there is no direct "market survey" data available, since overall price is down and convictions for trafficking are up, one could be forgiven for assuming that US marijuana consumption was not substantively impacted. The drug market is clearly more resilient than the oil market - imagine what would happen to gasoline prices with a 3% drop in supply! No provable impact occurred in the drug market.
As we have stated before, there are only two direct ways to "solve" the American drug problem: summarily kill anyone found with any illegal drug for any reason, or totally lock down our borders.
With over 6,000 miles total of miles of Canadian and Mexican borders and 2,000 miles of coastal regions in Florida and Puerto Rico for the 11,000 men and women of the US Border Patrol to guard, it should be no surprise to anyone who has once used a Wal-Mart or McDonalds this decade that the primary language of the poorer classes is fast becoming Spanish. For the same reasons as the encroaching language shift, the ease and availability of multiple illegal substances from pot to X to H is growing year by year with a seemingly impotent police force more and more obviously duplicitous in this sub-current of illegal economies.
Border restriction demonstrably isn't working. Quick execution for possession isn't politically feasible regardless of whether it is a good idea or not. Consumption is up, addiction is up, political will to effect lasting solutions is down.
Interestingly, we are fast approaching the time of year when we get to vote on what politicians we would have rule over us, so here is the ultimate question: Do we as a nation even care about illegal drug consumption and drug addiction, and subsequently, how important of an issue is it in comparison to terrorism, international opinion of the USA and the economy?
Since that is a complex question, let's ask it differently: Which is more likely to directly impact you: drug abuse, terrorism, international opinion of the USA, or the economy?
We have seen our government try many methods to attack the illegal drug industry. They have sprayed weed killer in all the garden spots of the world, they have sent our tax dollars to militarize local police forces all over the world, they even read our electric meters to see who has more lights burning than expected, they analyze our sewers to find neighborhoods where drugs are being used...but after the trillions of dollars and billions of hours spent we see that it all makes no difference whatsoever.
A shift in the US dollar relative to the Canadian dollar completely shut off drug smuggling from Canada because there was no longer any money in it. The only way to stop the illegal trade is to take the money out of it, which means legalization.
The prohibitionists are worried that if it's legal, businesses will want to increase the number of addicts by marketing it. We've seen sales increase when businesses market alcohol and tobacco, so they have a point.
The only way to keep businesses from marketing a legal product is to take all the money out of it, which means the government has to give it away. Giving away drugs is a lot cheaper than putting people in jail, we'll de-fund the Taliban, and addicts can stop stealing to support their habits.
In fact, we'll go back to the way things were before we tried our ill-advised experiment with drug prohibition, which we now know doesn't worked any better than alcohol prohibition worked half a century ago, and for pretty much the same reasons.