Opium price supports

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The Afghan government's attempt to suppress opium production isn't exactly a raging success:
United Nations drug officials say the new Afghan Government has largely failed in its efforts to eradicate the opium poppy crop.

A UN spokesman, Hector Maletta, said a government campaign, launched in April, had had a very limited impact.

The announcement confirms reports earlier this year that hardly any opium poppies had been destroyed despite government assurances.

...

The interim government of President Hamiz Karzai banned the production in January this year but, according to the UN report, most of this year's opium crop had been already planted by then.

Three months later, the authorities announced an eradication programme.

The government said the farmers would be paid compensation of $1,250 per hectare for destroying their crops.

But the UN says this was only a fraction of the estimated $16,000 per hectare of gross income which a farmer can earn.

This seems like a program with some fairly obvious flaws. First, if you're going to ask people to give you a 90+% discount, it's not surprising you don't get a lot of takers, especially when you have only limited power to make them take the deal. Second, paying people to destroy their crops seems like an invitation for them to pretend that they've done it when they haven't really.

Of course, there's an alternative approach that might meet with some success: rather than destroying the crops, buy the opium crop directly and destroy it. I've seen estimates for the value of the crop in the 1-3 billion range, which really isn't that much money in the grand scheme of things. If you pay for the crop directly, you don't have to bother to send troops out to destroy the fields--or even verify they've been destroyed--since the producers will bring it to you. Moreover, it's easy to detect cheating by doing quality control on the delivered product. Then once you have it you simply destroy it. Plus, you're pumping money into the Afghan economy.

One problem, is that farmers may try to expand production and sell opium to the warlords anyway, but providing an unlimited market and making it illegal to sell to anyone but the government ought to mostly suppress that. Another problem is that as with farm price supports in developing countries, there's the obvious problem of how to transition away from a supported economy, but that problem would be a lot easier to solve in an environment where the country isn't mostly controlled by narcotics-trafficking warlords, so it's probably something we can defer to 10 or 20 years in the future.

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Why expand production and sell illegally to the warlords, if you can expand productsion and sell legally at "market rates" to the government instead? And how does unlimited demand from a well-funded source work to reduce the market size over time, which presumably is part of the goal?

I agree that an unlimited legal market ought to pretty much suppress diversion. That's sort of the idea...

I'm actually not that interesting in reducing the market size, at least not in the short term. If we have to subsidize Afghan opium production for the next 20 years, that's not really that awful an outcome. But the eventual idea would be that once Afghanistan had a real developed nation economy you could gradually taper off the payments and tighten controls on opium production till you had it more or less under control. I don't know how hard it will be to make that transition, but it seems to me that it's likely to be a lot easier then than it is now.

I would extend Craig's comment thusly: Instead of buying opium at 'market rate' (which would serve to increase the price of opium, because the illegitimate buyers would enter into a bidding war with the gov in an attempt to secure their supply), why not start offering opium 'rates' for legitimate crops like wheat, grapes, and whatever else grows in Afghan soil? Say, offer $20,000/hectare of wheat grown. This should serve to heavily reduce the narcotics crop (next year, anyway, not this year), and similarly support the Afghan economy.

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