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The true cost of cocaine

We might pay more for cocaine in Australia but the social and economic costs of its use reach beyond our shores. Flickr/Valerie Everett

According to the United Nations Office of Drugs and Crime, Australians are now the world’s eighth highest per capita users of cocaine.

Cocaine use within the wealthier echelons of society is so unremarkable that when he was convicted of cocaine dealing in 2010, Richard Buttrose described it as being “much like having a glass of wine”. And studies of our cocaine market suggest that alongside hardcore users, there is a large group of casual users who share Buttrose’s attitude. The drug is being used widely by people on more moderate incomes (typically relatively well-educated and employed), usually in private with friends. Cocaine use is becoming more socially acceptable.

Increased demand is being met by increased supply. Australian Crime Commission (ACC) data shows a marked increase in seizures of cocaine (measured by weight) in recent years. There’s also evidence that Mexican cartels have become involved in the supply and distribution of the drug in Australia, and have been stepping up the scale of smuggling.

What’s the market price?

So how much do we pay for our cocaine? By international standards, cocaine prices in Australia are high. In the US you can expect to pay a wholesale price of around 20 US dollars per gram. In Australia, it’s been rare to see that wholesale price fall below 200 to 250 Australian dollars per gram, depending on purity. Does that price reflect the real cost of cocaine? No. Not by a long shot.

The wholesale price of cocaine in Australia is one the highest in the world. UNODC World Drug Report 2012

Economists define the real cost of a good or service not just in terms of the cost paid by the buyer, but also the cost to other parties affected by the transaction – the negative externalities. This is why as institutions like the National Drug and Alcohol Research Centre try to estimate the social cost of drug use.

It’s also important to bear in mind the costs and consequences associated not just with its use, but also with its supply. There are negative externalities on the supply side of goods and services. In the context of illegal markets, consider the introductory sequence to Lord of War (a film of debatable quality modelled loosely on the story of Victor Bout), which emphasises the role not just of the user, but also of the production, transportation and distribution of a bullet before it is fired.

We know about campaigns against sweatshop labour or initiatives like Oxfam’s Fair Trade which try to raise awareness about costs and consequences in relation to food and clothing. So when it comes to cocaine, how does it get to Australia, and what other costs – whether monetary or not – are created along the way?


Most cocaine is produced in Colombia, before being trafficked through Central America into the major narcotics transit hub of Mexico. The fight between cartels for control of territory, trafficking routes and local distribution is a large part of the story behind that country’s drug war. Since the conflict there intensified in 2006, at least 47,000 people have been killed in the crossfire. Some estimates put the figure at 60,000 or more.

A Paraguayan police officer guards 388 kilos of cocaine seized in an operation, February 2013. Andres Cristaldo/EPA

The cartels corrupt public officials and extort and intimidate still more people, with the simple choice between plata o plomo (silver or lead). Los Zetas, who wield considerable influence over entry points for Colombian cocaine, kidnap engineers and technicians and force them to maintain the cartel’s private radio communications network, and intercept and enslave migrants on the outskirts of Mexico city.

While cocaine is by no means their sole business (groups like Los Caballeros Templarios are allegedly involved in protection and extortion, and it’s estimated that a large proportion of the cartels’ revenue is from cannabis), the Australian market is lucrative. Like legal business, organised crime goes where the money is, and for cartels there is plenty of money in cocaine, as evidence by the major Sinaloa cartel’s infiltration of Australia.


The cocaine makes its way from Mexico to Australia via a number of routes. In 2010-11, the majority of cocaine intercepted coming into Australia entered via small craft by way of the Pacific Islands (like the yacht that ran aground near Tonga last year) or stowed away in commercial shipping containers (say, hidden in a shipment of ride-on lawn mowers or stone pavers). As total shipments of legal products increases and the capacity to inspect them remains constrained, the latter method becomes easier and easier.

Tongan authorities found a dead body and 204 kilograms of cocaine aboard this yacht headed for Australia. Australian Federal Police/AAP

Technology helps reduce the risks for suppliers. Better encryption makes it easier to communicate and coordinate pickups without being detected (for some time, the encryption in RIM’s Blackberry made it the mobile phone of choice for cannabis traffickers in North America).

Package tracking for mail means you can try to smuggle cocaine in the post, and if the package is unexpectedly delayed, you can take that as an early warning sign that it might have been tampered with as part of an attempted sting. If you think posting cocaine into the country sounds fanciful, think again. The ACC reported that 55 kilograms were seized in mail in 2010-11 (at $250 per gram, around 13 to 14 million dollars’ worth).

Ultimately, getting cocaine into the country involves lining the pockets of the public officials and other individuals at stops along the way, as well as here upon arrival. The same is true of cocaine smuggled into the country by plane, as demonstrated by the alleged cooperation of airport staff and/or customs officers in bringing cocaine into the country through Sydney airport.

And if the corruption of public officials isn’t a bad enough additional cost, bear in mind that corrupt and criminal networks can easily be used to smuggle one product illegally into a country can easily be used to smuggle another.


As in any illegal market, doing regular business requires the ability to enforce your own contracts (obviously, the court system isn’t going to help a seller to compel a buyer to pay up, or order a seller to compensate a buyer for peddling a cap of cocaine that has more than the usual proportion of livestock dewormer).

You also need to be able to protect yourself from the authorities that want to shut down your business. And you need to be wary of competition. Dealing with these issues necessarily involves the use or threat of violence and the corruption of officers charged with policing narcotics, particularly when an illegal market becomes entrenched.

Mark Standen of the New South Wales Crime Commission was found guilty of involvement in attempts to import precursor chemicals. Other law enforcement officers, such as Malcolm Rosenes, have been found guilty of dealing cocaine. AAP/Tracey Nearmy

In addition to corrupting local police, suppliers tend to outsource distribution to local groups – this has proven to be a lucrative business model for Colombian gangs collaborating with local Italian and Spanish organised crime in distributing cocaine in the EU.

Pre-existing criminal groups in Australia alleged to be involved with the Mexican cartels include the ‘Ndrangeta, Triads and Comancheros. An industry that shores up criminal groups that already pose a serious problem is a costly one indeed.

Buyer be aware

Assuming decriminalisation or legalisation are not on the table, targeting suppliers in an illegal market such as this is unlikely to eradicate the problem. One possible complement would be to focus on consumer awareness and information – an anti-cocaine campaign that tries to reduce demand. Something that pushes buyers to face up to these not-so-hidden costs.

If we’re a society that worries about eating free range chicken, drinking fair trade coffee and buying shoes and jeans that were not put together by sweatshop labour? Well, we’d better worry about the real cost of cocaine, too.

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