Drugs and Capitalism

[Christopher Valen]

One of the unfortunate consequences of the war in Afghanistan is the near doubling of global opium production in less than two decades. According to the United Nations, opium production had declined by more than 90% under the hard-line rule of the Taliban. Today, UN data estimates that Afghanistan produces over 90% of the global supply of heroin.

Heroin now represents a large share of the global narcotics’ market, estimated to be between $400-500 billion. According to some accounts, narcotics’ trafficking is the third largest global commodity after oil and the arms trade.

While concerns over drug use and street crimes increase, so do drug revenues. But where does the money go and who benefits?

It’s no secret that drug money is laundered in the numerous Western banks in countries like Switzerland and Luxembourg, and offshore in tax havens like the Cayman Islands. Bankers have to be cooperating or turning a blind eye. The reason they look the other way is obvious. The International Monetary Fund estimated in 2004 that global money laundering generated between 590 billion and 1.5 trillion dollars a year, which represents between 2 and 5% of global GDP.

Capitalism is one of the prime beneficiaries of laundered money, which is invested in real estate, the service economy and manufacturing. Miami in the 1970s and 80s is a prime example of a city built primarily on the false drug economy. Drug money can also be invested in financial instruments including the trade in derivatives, commodities, stocks, and government bonds.

With large banks like Washington Mutual closing their doors and other banks in the U.S. and abroad on the verge of collapse due to the current fraud and financial mismanagement on Wall Street, one has to wonder if the banking industry, now more than ever, has a vested interest in keeping the drug trade alive and laundered money flowing into their coffers.