Guest Post: Heroin & Non-Consensual Capitalism

Via Notes From Disgracedland’s Bjarne Knausgaard

Heroin consolidates all your problems into one big one. No more worrying about aggression, repression, poverty, futility, and frustration – just heroin and how to get a hold of it.

The street price of heroin has dropped below $100 per gram. A disturbing development. For a novice, about 10-20 mg provides a decent high. Simply put, one can get high on heroin for the price of a chocolate bar. The most addictive drug is now also the cheapest, cheaper than cigarettes. Its 20-fold price decline, from $2000 in the 1980s, is unlike any other commodity or product. This is not a result of a more efficient production process or technological advances, but a curious cooperation between the forces of geopolitical and ideological makeup. Three decades of heroin price history parallel the transformation of the neoliberal state and society. It tells an interesting story of business, politics, economics, globalization, and governmentality.

Heroin

  • Pull back. The blood rushes in. Slowly push the plunger. I want this to last. Pull it back out again, the blood swirls back in. Now, squeeze! It rushes up my arm in tingles. Then it hits. It is like a mini explosion of pure pleasure. Everything is blissful and beautiful. It is pure joy to be alive, to have a body. Depending on the quantity and quality this is there for hours. It is sensual. All your nerves are on fire and just having someone run their fingers along your skin feels delicious. It isn’t really sexual. It is simply that the intensity of the experience lends itself to being described that way. This is when you are “high” on heroin.

In 1980 a wholesale dealer (if he had $1 million) could buy 1kg of heroin from the supplier at $1000/g (red line) and sold it to hoppers (street dealers) at $1700/g (blue line). In this transaction, he would have made $700/g profit ($700K for a kilo). In comparison, a hopper buys at $1700/g and sells to the users at $2000. His profit is $300/g, i.e. $3000 for a 10g package.

Since then, the price continues to decline at an annual rate of 9% — it drops to 1/3 of its value every 12 years. In the 1990s the wholesale price of heroin was $300/g. Dealers had to work harder (sell more heroin) to earn the same money as before. However, risks associated with drug dealing were lower and the money was still good, especially on a risk adjusted basis and when compared to the available alternatives. The business was booming.

Another decade and a half later and another threefold drop in prices: Heroin in the new century is selling for near $100. No longer is just the first hit free, but all subsequent hits are practically free as well. This changes the business model completely. Post-90s is the period of major consolidation and systematization of drug business. The dealers are no longer interested in quick profit from one-time sales to occasional users. They are now after lifetime subscribers. And the system continues to deliver them in numbers like never before. Drug businesses began to think and operate like any legal profit center, which sets in motion the true market forces.

Globalization has played a key role in these developments. It has achieved this effect in two ways. 1) Efficiency of the distribution of drugs: Lower transport costs, the use of the new IT and the enhanced worldwide competition have dramatically improved the efficiency of drug business. At the same time, the greater efficiency of the distribution process, made it easier to conceal the transport and the stock management of drugs. 2) Risk premium effect: Globalization has opened the borders of many countries with a surplus of poor and low-skilled workers. Millions of havenots who have little to lose have been attracted by the fantastic intermediation margins provided by the drug market[1].

Inelasticity of demand has defined the background as one of the main economic drivers. For heroin addicts, nothing is more frightening than being without heroin. No one who has gone through heroin withdrawal wants to repeat this experience. So, no matter how high the price, they will find the way to pay for it.

The Breakdown of communism has created new markets and sustained demand. Post-socialist countries, which have largely been sheltered from the influence of hard drugs in the past, suddenly opened up as a new untapped market. Erosion of local state institutions, and general hopelessness that ensued after its fall, were directly responsible for the surge in drug users.

The war on drugs became its own antithesis from inception. It supported high margins, which guaranteed that drug business remains more attractive, and therefore more competitive, than any other business[2]. Wholesale dealers held the racket. They effectively lowered their own risk by transferring their exposure to street dealers and were happy to accept lower margins as this increased their business longevity. What was lost on tighter margins was made up by the volume of the business. Bigger volumes and increasing profit gave access to the benefits of the legal system, attorneys and corrupt government officials, which provided an additional protective layer and reduced risks further, while elaborate money laundering schemes opened the doors to legitimate investment opportunities and further wealth accumulation. So, although margins were lower, on a risk adjusted basis, drug business never looked better.

Ideological mainlining: Biopolitical penetration of the American brain

One of the most extensive by-products of globalization is a surplus of humanity that is unwanted, inconvenient, and ultimately displaced. The volume of humans made redundant by capitalism’s global triumph grows unstoppably and comes close now to exceeding the managerial capacity of the planet; there is a plausible prospect of capitalist modernity choking on its own waste products which it can neither reassimilate or annihilate, nor detoxify. (Z. Bauman)

This is one of the biggest and the most acute problems today. The need to address this issue has shaped the transformation of the neoliberal state in the last decades from the welfare to the penal modality of its functioning. While neoliberalism produces social and economic vulnerability, criminalization produces ways to capitalize on that vulnerability. The criminalization of illicit drugs accomplishes three things at once. First, it reinforces socioeconomic vulnerability through a steady flow of pre-trial detainees, prisoners, parolees and families disrupted by harshly punitive sanctions. Second, it makes the economic viability of hard drugs dependent on a willingness to assume risk, especially as entry-level narco-labor. This willingness is a condition clearly associated with the socioeconomically marginalized – those who have little to lose but their “freedom” [3]. Third, it guarantees accessibility of hard drugs to the disenfranchised segment of the population. In this way, the very victims of global capitalism are trapped in the spider web of the carceral state and the more they struggle to survive in it, the more precarious their position becomes.

In the past, drug addiction existed as an expensive “luxury” for a small minority. Democratization of heavy drugs has been embraced by the ideological apparatus as a way of managing exclusion, poverty and discontent in general. Within the neoliberal project, the war on drugs has become synonymous to the war on poverty. And so, as poverty grew, so did the heroin usage.

Heroin2

  • Gini coefficients are often used as a measure of wealth inequality and, as such, they are an indirect measure of poverty. Developed/civilized societies, like the most advanced West European countries, have Gini’s typically in the mid 20s. Among developed countries, the United States has the highest levels of inequality, the only one in the western hemisphere with Gini above 40. In that metric, it is on par with China, the Dominican Republic, Nepal and Ecuador for income. The Figure shows the history of the (wholesale) heroin price against Gini coefficients (on inverted axis) since 1980. The two histories, both having exponential trend, show high degree of commonality. Declining price of heroin goes hand in hand with growth of poverty: As rich get richer, poor get higher.

State as enabler of self-destruction

I bought a gun and chose drugs instead (Kurt Cobain)

While global capitalism is the engine of production of socioeconomic vulnerability, the state is the main architect of subjects and spaces of exclusion, e.g. the black American male and the post-industrial ghetto, whose political and economic exclusion catalyzes participation in illicit economies as well as vulnerability to policing. The objective of criminal justice in the neoliberal state is no longer to correct behaviors that are socially harmful, but to identify the bodies that must be excluded from the population and justify this exclusion by labeling their behaviors as abnormal. In this context, heroin has been recognized (and embraced) as a powerful tool of self-destruction, capable of turning any resisting individual into a perfectly docile social subject, eminently manageable by its dependency.

The evolution of the heroin business reveals the inner logic of the massive consolidation of the state’s repressive apparatus in the post-1968 era. When viewed in this context, the war on drugs emerges as but one of many neoliberal strategies of governing, a technique for identifying populations that must be governed in other ways. The essence of these strategies is that they do not use force to destroy dissent, but push it to self-destruct. They stay as a constant reminder that power has been deemed as a highly ineffective tool of governing. Outside of its repressive apparatus, the state no longer represents the ability to engineer change, but has become an enabler. The war on drugs is an ideological answer to the problem of surplus population, and heroin an instrument of drainage of wasted lives.

[1] C. Costa Storti, P. De Grauwe, Int. J. Drug Policy, 20 (2009) 488

[2] In the 1990s, assuming a hopper sells 10g every day, he could make $2000 a day ($250 an hour or 50 times the minimum wage commensurate with qualifications of most of the drug dealers), which, translates into $500K a year (untaxed), equivalent to an $800K of taxable annual income. This is a full-blown Wall Street salary. In most cases, they pay “tax” to the wholesale distributors who “own” the territory hold the racket.

[3] D. Corva, Political Geography, 27 (2008) 176

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2 thoughts on “Guest Post: Heroin & Non-Consensual Capitalism

  1. Wow, I love seeing black market analysis like this; stuff you never hear about or can see actual stats about. Very cool

    Like

  2. Do you think that at the heart of the matter, this is conspiracy or cause and effect? I.e. is what you’re saying explicit or implicit? Is it a description of the equilibrium that we’re seeing in the US, or a description of a successful plan constructed and executed by powerful actors?

    I see heroin as a commodity product, the pricing of which has fallen because of
    – supply chain improvements
    – competition (between heroin dealers, and from other substitute drugs like synthetic opiates but also crack and meth)
    – increases in producer experience and associated reductions in production and distribution costs
    – cheaper labor (a growing base of poor to use and sell it)

    To take the other side, I can’t think of another commodity that has shown similar pricing dynamics, though it’s hard to find an effective comparison because of heroin’s recent introduction to markets. Can you think of a useful comp?

    Like

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