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Lessons from the past could help tackle today’s narcotics trade

Drugs
Trade
Colombia
China
Opium poppy seedheads

Opium poppies - cause of two wars between Britain and China in the 19th century. free photos under a Creative Commons Licence

Drug cartels are usually regarded as mafias operating in the shadows, engaged in illicit and criminal activity. But they are economic enterprises too – ‘firms’ set up to turn a profit. More than two and a half centuries ago, the opium-trading British East India Company (EIC) arguably employed a business model similar to today’s Latin American cocaine cartels. This involved controlling the cultivation of the drug crop, pegging its farm-gate prices, regulating processing, and monopolizing the trade. Armed retainers were then used to protect supply chains and to export the commodities. To reach markets, systematic corruption and bribery were employed to get through border and customs controls.

Like today’s cocaine trade, the EIC’s opium trade was no petty smuggling trade, but rather, as historian Michael Greenburg asserts, ‘the largest commerce of the time in any single commodity’.

The EIC began importing tea from China from the mid-1600s, but China under the Qing dynasty was not interested in foreign products. It was self-reliant in food, livestock, textiles, and most minerals and was busy exporting its technologies to the West: gunpowder, silk-working machinery, ship-building, paper, and porcelain, to name a few.

The balance shifted when merchants discovered China’s appetite for opium, which in 1773 led the EIC to impose a state monopoly over Indian opium for barter in Canton. Consequently, as noted by historian Alfred McCoy, India’s opium exports to China spiralled from 75 tons in 1776, to 3,200 tons in 1850.

The opium trade became a historical game-changer. Historian Carl Trocki maintains that ‘without the drug [opium], there probably would have been no British Empire’. Opium was what made British colonial expansion in Asia affordable.

However, opium addiction in China grew to be such a serious problem, that in 1796, the Chinese emperor Jia Qing banned its use. In response, the EIC, according to the historian Gregory Blue, devised a scheme that enabled it to bring Indian opium to China but deny responsibility for doing so.

The EIC purchased all the opium produced in India, and then sold it at auction in Calcutta to ‘country traders’ – private entrepreneurs running fully armed and crewed ships who, without their  licenses to operate, would have been little different from pirates and smugglers.

In 1839, China confiscated 1,210 tons of British-owned opium stocks in Canton (equivalent to $400 million in today’s money) and imposed a blockade. Two opium wars with the British followed and China was forced to legalize the drug. The commercial interests driving the trade seemed to have won.

However, legalisation did not result in a ‘golden age’ of opium trading. Instead, Chinese officials started advocating for import-substitution: rather than import Indian opium, why not grow it locally instead? As a result, the Chinese economy started to reorganize. For example, land in China previously devoted to food production was lost to opium poppies. This was because, said historian Martin Booth, ‘more money could be earned from poppies than from wheat or rice’.

At their height in the 1980s, Colombian drug trafficking organizations were running operations comparable in scale to giant transnational companies. According to former chief of the US Drug Enforcement Administration (DEA) Thomas Constantine, the Cali cartel smuggled up to 210,000 tons of cocaine out of Colombia between 1983 and 1995, taking it mainly to the US.

Today, cocaine exporters typically make $15,000 to $20,000 per kilogram when moving the product across international borders. That means that Cali traffickers would have generated revenues of anywhere from $3.15 to $4.2 billion for the period. Constantine compared the Cali cartel to a large US company with a strong corporate headquarters and many franchises, observing that ‘they run a tightly controlled empire, with a board of directors overseeing all the details of their worldwide distribution and marketing efforts’.

Both the Medellin and Cali drugs cartels ran centralized operations, using brutality to enforce and protect their commercial interests, but the violence created a backlash. When a new Colombian president, Cesar Gaviria, was elected in 1990, he vowed take on the drug traffickers and by the time he left office, both the Medellin and Cali cartels were no more.  

However, the cocaine business did not disappear. Instead, it merely restructured. The centralized and hierarchical cartels were replaced by fluid networks of dispersed and decentralized small firms that each specialized in one, sometimes more, elements of the production and trading processes, which made them better able to withstand police enforcement, even as they collectively expanded the business.

For more than 200 years after China first imposed prohibitions on opium use, law enforcement was no match to the commercial power of the commodity. When law enforcement did score a victory – such as China’s 1839 confiscation of British-owned opium – it did not result in the strategic demise of the illicit drugs trade. It merely facilitated the restructuring of the trade. Similarly, the law and order response of the Colombian government leading to the demise of the two most powerful cartels did not end the cocaine trade.

The historical lessons for next year’s special UN General Assembly Special Session on the World Drug Problem are clear – dealing with illicit drugs cannot be solely a law enforcement matter alone.

Eric Gutierrez is the editor of a new report commissioned by Christian Aid, Drugs and Illicit Practices, assessing their impact on development and governance, which examines four countries where an increasingly active drugs trade has begun to affect development.

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