After the Grand Fracture: Scenarios for the Collapse of the International Drug Control Regime

Abstract International prohibitions create asymmetries; production and transshipment concentrate in relatively few places that bear the bulk of the negative externalities created by the illegal trade. These externalities fuel calls for altering the United Nations treaty framework and for individual nations to legalize outside of the framework. Analyses of the pros and cons of legalization usually adopt the perspective of a single nation acting in isolation. However, one nation’s legalization alters incentives for others to act, and not always in obvious ways. So the proper perspective is that of a dynamic game. The primary contribution of this paper is to make the case for analyzing legalization as a strategic game, but it also offers preliminary analysis for the case of cocaine. Tentative conclusions include: – While decriminalizing possession of amounts of marijuana suitable for personal use has minimal repercussions beyond a nation’s borders, even one country’s legalization of a commercial cocaine or heroin industry could affect countries around the world. – Legalization of production in one country would draw production away from other producers who retain their prohibitions. This incentivizes current producers to encourage other such countries to legalize first, thereby addressing the first producer’s black market externalities without incurring opprobrium from final market countries. – Legalization in one transshipment country would likewise attract transportation activities from existing jurisdictions where drugs remain illegal. – The impact of a transshipment country legalizing cocaine varies by region. It might have minimal effect on the United States or Mexico if the “final mile” continues to be smuggling across the Mexico-United States border. By contrast, if an Eastern European country with large porous land borders were to legalize, that could dramatically alter supply conditions in Europe and Russia by producing covert smuggling networks similar to those currently existing on the U.S.-Mexico border.