Sunday 11 November 2007

Wasting our money

I fully agree with the idea that if you can't stop the drugs trade, the least-worst solution is to buy up all the raw materials from farmers and, ultimately, chuck it into the oceans. The raw materials cost a tiny fraction of the 'street' price, which in turn is only a fraction of the damage that drugs cause overall, once you factor in the social costs. As well as legalising, regulating and taxing drug purchases as far possible, that's a slightly different topic.

So far so good.

But there is no plan that The Goblin King cannot totally f*** up.

He now plans to pay people for not growing poppies. Which, like all agricultural subsidies, will totally misfire. Who is going to check that that field could have grown poppies anyway? Who is going to check that they are not cashing in the subsidies and growing poppies anyway? Who is going to check that field even exists? And so on.

FFS, it is not growing poppies that causes the trouble, it's refining them into heroin. The subsidy has to be at least equal to the potential profit from growing poppies. The easiest way to do it is to buy the stuff at market prices. Any other system means we are either overpaying (and wasting money) or underpaying (and the bribe will have no effect).

5 comments:

Scott Freeman said...

Not that I approve of spending my taxes on heroine (if people want to kill themselves, it's no business of mine) but that aside you can't buy vast quantities of something at its current market value. Increasing demand for poppies by paying your government to buy them will only increase the price of poppies. This makes poppy a more profitable crop so existing farmers will expand and new farmers will take up the crop. As farmers grow they will gain economies of scale and invest in new technology and discover or learn new methods. This will combine to make poppy growing cheaper. If the government decides it's not going to buy more than a million poppies, farmers can produce two million getting a guaranteed price for the first million and selling the rest on the cheap. So either the government gives in and funds a partial buy-up that does, at best, nothing, or it has to keep buying 100% which will be unsustainable up to a point - and that point is likely far too high to be acceptable.

Mark Wadsworth said...

True, there is a danger of this happening.

But the problems you identify apply just as much to subsidies for NOT growing poppies, don't they?

Henry North London 2.0 said...

Perhaps we can all apply and get a subsidy from the government?

A new wheedle to get cash from your government

Scott Freeman said...

Oh certainly, subsiding farmers not to grow poppies is also a terrible idea. However, it would create a rather convenient business opportunity for me: I could move to Afghanistan and set up my very own not-growing-poppies business where I would toil in the fields from dusk 'till dawn not growing poppies and receive a big fat cheque from HM gov every week. Or maybe I'll just get non dom status and go live in Chelsea...

Mark Wadsworth said...

SC, I am afraid it won't work like that. Let's say the subsidy is £50 an acre and your risk-adjusted rate of return is 5%, then the Afghan landowner will sell you the land for no less than £1,000 an acre.

Why would he sell it for less, and forego a risk-free, effort-free income of £50 a year?

Which is another reason why land subsidies are so awful, they just inflate land values and ensure windfall gain for whomever owns it when the subsidies are introduced.

Which, in turn, leads me to the observation that land value taxes are the least-worst taxes, by reverse logic. But that's another story.