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The Other War

Mises Daily: Wednesday, November 14, 2001 by

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America's emergency room physicians met recently for their annual convention and emerged with their well-scrubbed hands extended and begging for government handouts. Terrorism, they say, means that taxpayers will have to hand over additional billions of dollars to the emergency rooms of America's hospitals.

Additional tax dollars would not be necessary, however, if government would eliminate the main source of medical emergencies--at least in urban hospitals:  the war on drugs.

A former MBA student of mine was the director of emergency medicine at a large hospital in the city of Baltimore. He once told me that he and his colleagues spent about 90 percent of their time treating the knife and gunshot wounds of drug gang members. Drug war-related injuries are bound to dominate the emergency room services of virtually all inner-city hospitals. The incredible violence in America's inner cities that most Americans have become numbed to is almost exclusively the result of the war on drugs.

None of this should be surprising. In a free and legal market, any dispute between business associates can be settled through negotiation or, if that fails, lawsuits. If one businessman defrauds another, he can seek to have his property protected by the courts.

No such (relatively) civilized solution is available to illegal products. A drug dealer cannot go to a judge and say, "Your Honor, I delivered one ton of cocaine to Mr. Tucker here, and he refuses to pay. In the name of justice, I want you to make him pay up."  Instead, drug dealers--like alcohol dealers during prohibition--resort to the only means available to enforce their business agreements:  violence.  

There is an even more ominous dynamic at work here. Once violence becomes the means by which one succeeds in illegal markets, the profits earned in those markets will attract those elements of society who have a comparative advantage in violence.  The most violent will rise to the top, as witnessed by such characters as the Los Angeles drug gang leader known as "Little Monster," who is an especially vicious killer.

Drug gangs are simply business partnerships, but unlike normal business partnerships, they have great latitude in destroying their competitors by violent means. If there are above-normal profits in the skateboard business, for example, new competitors will materialize and compete for those profits by offering lower-priced and/or better-quality skateboards.

Such entry cannot occur in the market for illicit drugs if the existing gangs can literally murder the competition, which they often do. Moreover, the police are often "silent partners" in such situations, since existing drug gangs can become police informants and (anonymously) inform the police of the new entrants into their business.

In legal markets, a brand name that is established by years of good performance and competitive pricing is a valuable asset that can lead to high levels of profitability.   In illegal markets, a brand name is earned by acts of violence. Drug gangs intimidate potential rivals with their acts of violence.

Moreover, there are economies of scale to such behavior. If a drug gang is especially violent in Los Angeles, it will find it all the easier to enter the drug market (and to face little or no competition)  in Chicago, St. Louis, New York, or other cities because of the intimidation factor.

This monopolization of the illicit drug trade has also lured thousands of children into the world of drug-related violence. With the extraordinary money being earned selling illicit drugs, it is inevitable that young children will be enticed by the money they can make as "spotters" (of police) or "runners" (i.e., drug deliverers) for drug gangs.

To make matters worse, children under the age of 18 who are arrested for violent, drug-related crimes are usually put on probation or released outright to the custody of their parents. In some states, a jail term cannot extend past age 17, even for murder. Facing little or no consequences for their violent behavior, these children grow up to be the most hardened, violent criminals in society, thanks to the war on drugs and a buffoonish "juvenile justice" system.

The workload of hospital emergency rooms in America's cities could probably be cut at least in half by ending the failed war on drugs. That would make room for more genuine emergencies and reduce the financial burden on taxpayers as well, since the big majority of hospitals are either government-run or government-subsidized nonprofit hospitals. The cycle of violence in America's cities would be reversed, property values there would soar, and the lives of literally thousands of Americans would be saved.


Thomas DiLorenzo is a professor of economics in the Sellinger School of Business and Management at Loyola College in Baltimore, and is senior scholar of the Mises Institute.  See his Mises.org Articles Achive.  Read an interview with the author or send him MAIL.