In recent years there has been a drastic decline in the price of well known hard drugs such as cocaine and marijuana. There is one key factor in this price change. This factor being globalisation.
What is globalisation? Globalisation is “the widening, intensifying, speeding up and growing impact of worldwide interconnectedness” (Held , 2013). We must ask ourselves, how can globalisation affect not only the retail price of these drugs, but also the consumption, so dramatically? Globalisation helps to facilitate drug supply by improving efficiency and multiplying opportunities while also becoming one of the toughest challenges faced by the European Union in recent years. Globalization has also helped by improving in areas such as transport, technology, communications and introducing larger markets for drugs. By improving in areas such as transport, globalisation has allowed for greater quantities of product being distributed on a larger scale for a cheaper price. Due to the advancements in areas such as technology and communications, it has become much easier to produce and transport illicit drugs. Lower transport costs as well as information costs may result in a lower price for hard drugs while simultaneously increasing the profits made by the supplier.
Since introducing the internet, the level of communications has increased significantly allowing others to share their knowledge on illicit drugs as well expanding the reach of producers looking to sell their products. Technological advancements have helped producers of illegal drugs produce large quantities of product at a faster rate at a lower cost. Lets take cannabis production for example. Previously, cannabis cultivation was predominately focused within the Rif mountains in Morocco as it was easy to conceal and the land was ideal for growing. Nowadays, production of cannabis can be achieved fairly easily due to advancements in terms of technology.
Globalisation has also had a strong impact on the cultivation of cannabis throughout the years. It was the development of the counter culture of the 1960’s and 1970’s that pushed the demand for cannabis and helped to further improve the cultivation of cannabis (Decorte T, Potter G, 2015). Members of the counter culture returning from areas with high levels of cannabis production, areas such as Morocco, with seeds and knowledge about the drug helped to innovate the cultivation of cannabis throughout Europe and parts of America. Thanks to technology, it is easy to substitute the environmental elements required for the production of cannabis. Elements such as the terrain and artificial lighting. Not only did this increase the production of cannabis but also made it easier to cultivate cannabis indoors making it easier to hide production. This also raised the competition within the market resulting in sellers lowering their prices in order to compete with competitors.
How did the cultivation of cannabis effect Ireland? Ireland in terms of cannabis cultivation, had somewhat of a late start. It wasn’t until the times of the recession that cultivation started to become prominent within Ireland. This was a result of a lack of money. Most people did not have enough money to spend on drugs so instead they began to produce their own seeing as it was cheaper. This is what we call import substitution.
Globalisation did not necessarily affect the retail price directly. Initially, it was the intermediate margin which was hit by globalisation which in turn affected the retail price. The intermediate margin is the difference between the retail price of drugs and the price of production. So if the intermediate margin decreases, sellers in return, will decrease the retail price of drugs. What factors contribute to a change in the intermediate margin? The three main factors are the market structure, rick involved with production and transportation and efficiency of the factors of production (Costa Storti C, De Grauwe P, 2007). The most important of these three factors would be the efficiency of the factors of production, which have been heavily influenced by globalization in recent years
The main policy when attempting to reduce the consumption of illicit drugs is to increase the price of drugs, but it is important we understand the price responsiveness in relation to drug consumption (Olmstead T.A, 2015). The majority of the time, legalisation of these illegal drugs will result in a decrease in price of the drugs but how does that in turn affect consumption (Becker G, Grossman M, Murphy K.M, 1991). Is consumption of illegal, addictive drugs responsive to price? In the short run the lower cost of drugs due to factors such as legalisation, will result in an increase in consumption for many of these drugs. This in turn will create addiction and dependency resulting in an increase in consumption even if the price change were to shift upwards. With most goods, if the price is increased the demand will fall. This is not the case however, with illegal drugs. Due to the addictive nature of drugs, if price is raised the demand will stay constant. As a result of addiction, a price increase for drugs can also result in an increase in crime as people will do whatever they have to do, to get their next fix.