Cover: Assessing the Operation of the Global Drug Market

Assessing the Operation of the Global Drug Market

Report 1

Published Apr 20, 2009

by Peter Reuter

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Illicit drugs, predominantly cocaine and heroin, now generate a substantial international and domestic trade. For these two drugs, production is concentrated in poor nations and the bulk of revenues, though not of consumption, is generated by users in wealthy countries. Earnings have an odd shape; most of the money goes to a very large number of low level retailers in wealthy countries while the fortunes are made by a small number of entrepreneurs, many of whom come from the producing countries. Actual producers and refiners receive one or two percent of the total; almost all the rest is payment for distribution labour. The industry is in general competitive, though some sectors in some countries have small numbers of competing organizations. While it is not difficult to explain why cocaine and heroin production occurs primarily in poor countries and only a little harder to understand why the accounting profits are downstream, almost everything else about the trade presents a challenge, both descriptively and analytically. This report is an attempt to address these challenges and reviews what is known about the operation of these various markets. It offers a theoretical account for a number of the features.

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This study has been produced by the Trimbos Institute and RAND with the financial support of the Commission of the European Communities. The research described in this report was conducted by RAND Europe.

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