Down the Malay Barrier 3.

The Shan State forms one of Myanmar’s ethnic communities.  Located in the northeastern quadrant of Myanmar, it borders southwestern China (Yunnan), Laos, and Thailand.  Under other circumstances, a bunch of forested hills on the inland edge of a no-account country would be of no interest.  In fact, however, it is an important–and increasingly important—link in the international narcotics supply chain.

For one thing, the many small farms grow both produce and opium poppies.  Poppies grow easily in the poor soil often found in hill regions.  Poor peasants value poppies as a cash crop.  For another thing, part of the anti-Communist Chinese Kuomintang Army retreated from Yunnan into the Shan State after the Communist victory in 1949.  Rather than transit to join the other supporters of Chiang Kai-shek in Taiwan, they settled down in Shan State.  There the refugee army embarked on opium and heroin production.  For yet another thing, since 1962 the central government’s effort to suppress autonomy movements has spawned local resistance groups.  As the old saying goes, “For success in war, three things are necessary: money, more money, and still more money.”[1]  Shan autonomists have relied upon drug sales to build up military forces more than capable of holding off the army of Myanmar on most occasions.[2]

If opium and heroin built the foundations of the Shan State drug trade, the producers have been alert to changes in global market conditions and new product development.  Take, for example methamphetamine and fentanyl.  Methamphetamine is a synthetic stimulant.[3]  “Crystal meth” is an alternative form of methamphetamine.  Fentanyl is a synthetic opioid that is far stronger than is heroin.[4]  All have become popular “recreational” drugs.  Much of production of the chemical components of both methamphetamine and fentanyl took place in China.  In recent years, pressure from the United States caused the Chinese government to restrict production in China proper.  Producers shifted their facilities outside China, including to Shan State.

New supply chain routes then developed.  Fishing villages dot Myanmar’s long coastline on the Bay of Bengal.  Doubtless the local fishermen feel the same eagerness to profit from the drug trade as do the peasant farmers.  Probably they carry their cargo to ports like Yangon and Singapore, while another route may run down the nearby Mekong River to Ho Chi Minh City.

Myanmar’s war with the ethnic groups has been a murky business.  To offer one example, the Kachin Defense Army, in Shan State, is suspected of having done a deal with the army of Myanmar involving the drug trade.  However, the trouble with criminals—even criminals in uniform—is that they’re dishonest.  The Kachins seem to have been sending some of their product to the Arakan Army on the west coast.  Discovering this betrayal, the army and police launched a series of raids into Kachin territory in Spring 2020.  They hauled in 200 million tabs of meth, 1,100 pounds of crystal meth, 630 pounds of heroin, and almost 1,000 gallons of methyl fentanyl.[5]  The army probably sought to remind the Kachins of the deal, not break the deal.

[1] Attributed variously to Marshal Trivulzio and Raimondo Montecucolli.

[2] You might enjoy and learn from “Proof of Life” (dir. Taylor Hackford, 2000).

[3] See: https://en.wikipedia.org/wiki/Methamphetamine

[4] See: https://en.wikipedia.org/wiki/Fentanyl

[5] Hannah Beech and Saw Nang, “Record Raids in Myanmar Point to Shifting Drug Trade,” NYT, 20 May 2020.

Runnin’ all ’round my brain.

Cocaine prices per gram in selected American cities, 1999 and 2005.

1999.             2005.               Change in base price.

Seattle.                       $80-100           $30-100          -62%

Denver.                       $100-125         $100-125         0%

Los Angeles.               $50-100           $30-100           -40%

Dallas.                        $90-125           $50-80             -44%

Chicago.                     $75-100           $75-100              0%

Detroit.                       $75-100           $50-120           -33%

Atlanta.                      $100                $80-100           -20%

Miami.                        $40-60             $20-110           -50%

New York.                 $21-40             $20-25             -0%

 

There are a bunch of ways of cutting up this data, so to speak.

First, in 1999, cocaine was a glut on the market in New York, Miami, and Los Angeles. These were major cities with a large over-all market, ports of entry, and centers of a counter-culture. In contrast, it was hard to come by in Atlanta, Denver, Dallas, and Seattle. These were chief cities of “the provinces,” as the Romans would have put it. Six years later Seattle had joined New York, Miami, and Los Angeles as the capital cities of cocaine. This probably has something to do with the explosion of the computer and software industries in Seattle. Maybe writing software allows for blow in a way that designing airplanes for Boeing does not. Still, the “cocaine revolution” hadn’t reached Denver, Atlanta, and Chicago. These cities remained the ones with the highest priced (and thus least available) cocaine.

Second, even in two of the original core cities of cocaine consumption, Miami and Los Angeles, prices fell sharply. New York began with the lowest price and pretty much stayed there. Perhaps $20 a gram was the rock-bottom price for cocaine. Lots of people hustling on a big, but limited, market, all of them competing to deliver the best product to the most people at the lowest price. Adam Smith take note. Labor costs driven down to the subsistence minimum. David Ricardo take note.

Third, prices fell while the Drug Enforcement Agency was spending billions of dollars to drive up the price (and thus reduce consumption) through interdiction and eradication. Why didn’t this effort produce better results?

One reason is that cocaine producers in Columbia dispersed their coca-growing operations into more remote areas and spread into Peru and Bolivia as well. These are outside the range of US-sponsored eradication efforts. Production went up, not down.

Another reason is that, since the signature of the North American Free Trade Agreement (NAFTA) in 1994, there has been a huge increase in trans-border truck and vehicle traffic between Mexico and the United States. This made it much easier to move cocaine into the United States. One government policy warred with another government policy. The thing is that people trying to make money won in both cases. What’s more American than that?

Final thing to think about: 88 percent of cocaine moved through Mexico. Eventually, the Mexican intermediaries for the Columbians wanted a better deal. Much violence followed. (See: Narcostate with a State.)

 

Ken Dermota, “The World in Numbers: Snow Fall,” Atlantic, July/August 2007, pp. 24-25.