November 20, 2001
Economics is Winning Bolivia's Drug War
A 1998 article from the New York Times reported that Bolivia was winning its war against drugs as a result of two factors that influence the market for coca, which is used to make cocaine. First, Bolivian soldiers raided a number of coca plantations and destroyed the crops. Second, Colombians began growing more of their own coca and, as a result, now buy less from Bolivia than in the past. I am proposing that the basic principles of supply and demand are what helped to solve the drug problem. The following paragraphs will support my argument.
Figure 1 shows the supply and demand curves before and after the changes occurred in Bolivia. As you can see, after the coca plantations were raided, the supply of cocaine was cut short, thus shifting the supply curve to the left. Also, because Colombians began growing their own coca, demand decreased for the cocaine from Bolivia, shifting the demand curve to the left also. To sum up, supply decreased from S to S1, because of the raids, and demand decreased from D to D1 because Colombians began to grow their own coca and didn't need to rely as much on Bolivia. The diagram clearly shows that the quantity sold at P* decreased from Q* to Q** due to these two changes.
According to the article in the New York Times, the Bolivian government hopes these changes in the coca market will motivate coca growers to switch to a substitute crop such as pineapple. This is a possibility if the price of coca falls. If the price of coca falls, supply will also decrease because it won't be as profitable to farm coca as it was before. The falling price would then trigger farmers to switch to another crop such as pineapple.
The Bolivian government, hoping to eliminate the cocaine problem, indirectly turned to economics for a solution. That solution is a simple tale of cutting supply in a way that leads to a decrease in demand. That decrease came because...