During alcohol prohibition (1920-33) the United States changed from a beer and wine society to a bourbon and gin society. The reason? Alcohol prohibition created incentives for bootleggers to smuggle the most potent form of liquor possible. Like modern day drug traffickers, risk-taking criminal organizations were compelled to traffic in products that provided the most bang for the buck. Why risk smuggling a keg of beer when a case of whiskey brings higher profits without incurring additional risk? This phenomenon explains why consumers in drug producing countries like Peru and Afghanistan typically use illicit drug crops in their natural form as they have for centuries (chewing of coca leaves and smoking of raw opium), while Western consumer countries consume drugs in their most potent form available.

In addition to promoting the smuggling of illicit drugs in their most potent form possible, the drug war’s distortion of basic supply and demand dynamics renders otherwise worthless crops extremely profitable. Marijuana is a weed and grows like one. If legal, growing marijuana would be less profitable than farming tomatoes. Yet in major urban areas marijuana is worth its weight in gold at the retail level. The drug war essentially provides price supports for organized crime. Forcibly limiting the supply of drugs while demand remains relatively constant only increases the profitability of drug trafficking. Street level dealers and occasionally drug kingpins are routinely busted and incarcerated, but the long-term impact on drug availability is negligible. The obscene profits to be made trafficking and selling illegal drugs guarantees replacement dealers.

Ironically, the self-professed champions of the free market in Congress are either incapable or unwilling to apply basic economic principles to drug policy. This ignorance of economic forces, deliberate or otherwise, is not sustainable over the long-term. Despite a steady decline in violent crime throughout the 1990’s, the U.S. now has the highest incarceration rate in the world, with drug offenses accounting for the majority of federal incarcerations. The enormous cost associated with maintaining the world’s largest prison system is often cited by drug war bureaucrats as reason to throw more money at the problem.

In January 2002 the White House Office of National Drug Control Policy (ONDCP) trumpeted the release of a study titled The Economic Costs of Drug Abuse in the United States. The study tallies the cost of incarcerating drug offenders, supply-side eradication, the HIV epidemic, and prohibition-related violence. The total is then presented as "costs of drug abuse." Consider the HIV epidemic. Centers for Disease Control researchers estimate that 58% of AIDS cases among women and 36% of overall cases are linked to injection drug use or sex with partners who inject drugs. This easily preventable public health crisis is a direct result of zero tolerance laws that restrict access to clean syringes. Yet government bureaucrats would have the public believe that, like the cost of incarcerating record numbers of drug offenders, this unintended consequence justifies more of the same harmful policies.

Using new accounting procedures in 2003, the annual ONDCP Drug Strategy, for the first time ever, concealed billions of dollars spent on incarceration, military activities and other costs of the drug war by excluding these categories from the budget and including inflated expenditures on treatment services. Through this ONDCP was able to bring their enforcement to treatment ratios more into line with public sentiment (two-thirds of Americans want treatment, not incarceration, for nonviolent drug offenders). In reality, however, America’s drug policy uses millions of tax-payer dollars to perpetuate the same failed reliance on law enforcement and interdiction with relatively minor focus on education and treatment.