Report — From the April 2016 issue

Legalize It All

How to win the war on drugs

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So why doesn’t the United States decriminalize? It’s an attractive idea: Lay off the innocent users and pitiable addicts; keep going after the really bad guys who import and push the drugs. But decriminalization doesn’t do enough. As successful as Portugal’s experiment has been, the Lisbon government still has no control over drug purity or dosage, and it doesn’t make a dime in tax revenue from the sale of drugs. Organized crime still controls Portugal’s supply and distribution, and drug-related violence, corruption, and gunned-up law enforcement continue. For these reasons, the effect of drug decriminalization on crime in Portugal is murky. Some crimes strongly associated with drug use increased after decriminalization — street robberies went up by 66 percent, auto theft by 15 percent — but others dropped. (Thefts from homes fell by 8 percent, thefts from businesses by 10 percent.) A study by the Portuguese police found an increase in opportunistic crimes and a reduction in premeditated and violent crimes, but it could not conclude that the changes were due to the decriminalization of drugs. Heavy-handed enforcement also requires favoring scare tactics over honest inquiry, experimentation, and data gathering; and scare tactics are no way to deal with substances as dangerous as heroin, cocaine, and methamphetamine.

Portuguese-style decriminalization also wouldn’t work in the United States because Portugal is a small country with national laws and a national police force, whereas the United States is a patchwork of jurisdictions — thousands of overlapping law-enforcement agencies and prosecutors at the local, county, state, and federal levels. Philadelphia’s city council, for example, voted to decriminalize possession of up to an ounce of marijuana in June 2014, and within a month state police had arrested 140 people for exactly that offense. “State law trumps city ordinances,” Police Commissioner Charles Ramsey told the Philadelphia Inquirer. And while marijuana may be legal in four states and D.C., under federal law it is still as illegal as heroin or LSD — and even more tightly controlled than cocaine or pharmaceutical opioids. The Obama Administration has decided, for the moment, not to interfere with the states that have legalized marijuana, but times change and so do administrations. We cannot begin to enjoy the benefits of managing drugs as a matter of health and safety, instead of as a matter of law enforcement, until the drugs are legalized at every level of American jurisprudence, just as alcohol was re-legalized when the United States repealed the Eighteenth Amendment in 1933.

One of the evils that led to Prohibition in the first place was the system of “tied houses” — saloons owned by alcohol producers that marketed their product aggressively. As Prohibition was ending, John D. Rockefeller commissioned a report published as Toward Liquor Control that advocated total government control of alcohol distribution. “Only as the profit motive is eliminated is there any hope of controlling the liquor traffic in the interests of a decent society,” he said. That never happened, of course. Tied houses were banned, but Seagram, Anheuser-Busch, and other companies became gigantic from the manufacture and sale of alcohol; only eighteen states assumed any direct control over the distribution process.

We’ve grown used to living with the consequences of legal alcohol, even though alcohol is undeniably costly to the nation in lives and treasure. But few would argue for a return to Prohibition, in part because the liquor industry is so lucrative and so powerful. Binge drinkers — 20 percent of the drinking population — consume more than half of the alcohol sold, which means that for all the industry’s pious admonitions to “drink responsibly,” it depends on people doing the opposite. At the same time, Big Alcohol’s clout keeps taxation low. Kleiman, of NYU, estimates alcohol taxes to be about a dime a drink; the societal cost in disease, car wrecks, and violence is about fifteen times that. Neither the binge-dependent economics of alcohol nor the industry’s capture of the regulatory process is something we would want to mimic when legalizing substances such as heroin and crack cocaine. We’ll have to do a better job at legalizing drugs than we did at re-legalizing alcohol if we want to hold addiction to a minimum, keep drugs away from children, assure drug purity and consistency of dosage, and limit drugged driving. Last November, Ohio voters rejected marijuana legalization, most observers believe, precisely because the proposed initiative would have allowed only ten companies, all of which sponsored the initiative, to grow and distribute marijuana in the state.

If we can summon the political will, the opportunity to establish a state monopoly on drug distribution, just as Rockefeller urged for alcohol in 1933, is now — before the genie is out of the bottle. Switzerland, Germany, and the Netherlands have successfully made heroin legally available to addicts through networks of government-run dispensaries that are divorced from the profit motive. The advantages of a state monopoly over a free market — even a regulated one — are vast.

A poster showing how to use a syringe at Insite, a safe-injection site for drug addicts in Vancouver, British Columbia © Andy Clark/Reuters

A poster showing how to use a syringe at Insite, a safe-injection site for drug addicts in Vancouver, British Columbia © Andy Clark/Reuters

In the 1970s, the eighteen states that established government control over alcohol distribution at the end of Prohibition began to water down their systems by feeding their wholesale or retail alcohol businesses, or both, to private industry. Still, in 2013 a team of researchers at the University of Michigan found that even in “weak monopoly” states, consumption of spirits was 12 to 15 percent lower than in states with private liquor stores or grocery stores. In states that retained control over retail sales, alcohol-related traffic fatalities were about 7 to 9 percent lower than in states that did not; crime rates were lower as well.

Just about everybody who thinks seriously about the end of drug prohibition agrees that we’ll want to discourage consumption. This goal could be accomplished, at least in part, under a system of regulated, for-profit stores: by setting limits on advertising and promotion (or banning them altogether), by preventing marketing to children, by establishing minimum distances from schools for retail outlets, by nailing down rules about dosage and purity, and by limiting both the number of stores and their hours of operation. In a for-profit system, however, the only way government can influence price — the strongest disincentive to consumption — is by levying a tax, and getting taxes right is no small task. First, on what basis should the tax apply? Federal taxes on alcohol are set according to potency, but keeping up with the THC content of every strain of marijuana would be impossible. Weight? The more potent the drug, the less you need to buy, so taxing by weight might end up promoting stronger drugs over weaker. Price? Post-legalization prices are likely to plummet as the “prohibition premium” — which compensates dealers for the risk of getting caught — disappears, competition sets in, and innovation increases production. To keep prices high enough to discourage use, legislators will have to monitor those prices constantly and risk their jobs by pushing for politically unpopular tax increases.

“It’s too hard to adjust taxes quickly enough,” said Pat Oglesby, a North Carolina tax lawyer who was chief tax counsel for the Senate Finance Committee from 1988 to 1990 and who now researches marijuana taxes. “Legislatures love lowering taxes. Getting them to raise taxes is like pulling teeth.” What’s more, if legislators overdo it and set taxes too high, they’ll risk reawakening a black market in untaxed drugs.

A government monopoly on distribution solves the problem by making the setting of prices a matter of administration, not legislation. Government officials, whether at the state or federal level, would have infinite flexibility to adjust the price — daily, if necessary — to minimize use without inspiring a black market. The production of marijuana, cocaine, and heroin could remain in private hands, and the producers could supply the government stores, just as Smirnoff, Coors, and Mondavi provide their products to state liquor stores. If the cost of producing a drug drops because of innovation or competition, the government agency selling that drug to the public would see an increase in revenues. Likewise, it is much easier for the government to set the dosage and purity of products it sells in its own outlets than to police the dosage and purity of products that are spread throughout a free market. And the government could decide on its own to what extent it wants to permit advertising, attractive packaging, and promotions.

Finally, of course, when the government holds a monopoly, the public, not private shareholders, enjoys the profit. The states that retain control over alcohol distribution collect 82 to 90 percent more in revenue than states that license private alcohol sales collect in taxes, depending on whether they control both wholesale and retail. That the government should profit from a product it wants to discourage could be seen as hypocritical, but that’s the way things stand now with tobacco, alcohol, and gambling. States generally reduce the moral sting of those profits by earmarking them for education or other popular causes. In the case of drugs, the profits could go toward treating addicts. The great thing about trying a state monopoly first is that if it doesn’t work, it’s politically much easier to liberalize to a regulated free market than to go the other way.

But as long as federal law in the United States maintains an absolute prohibition on marijuana, cocaine, and heroin — and stringent restrictions on methamphetamine — it’s hard to imagine state drug monopolies on the model of state liquor stores. Even if the international bans on Schedule I drugs were to lift, could our legislators muster the will to legalize them, much less to expand government to distribute them? It’s one thing for the chief executive to turn a blind eye to the states’ experiments in licensed marijuana commerce; it’s another to grind the gears and shift conservative congressional sensibilities.

This is a pity, since a government monopoly would be the least expensive and most flexible way to legalize drugs. It would generate the most revenue and — more important — it would protect public health. Until Congress reschedules marijuana, heroin, and cocaine, and until we get over the idea that government can do nothing right, we’re stuck with second best: state-size experiments that ignore the federal ban on marijuana and license private industries. Colorado is the furthest along that path, and its experience is instructive.

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is the author of four books, most recently Gun Guys (2013). His most recent article for Harper’s Magazine, “How to Make Your Own AR-15,” appeared in the June 2013 issue.

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