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Libertarians have very compelling arguments in favor of drug legalization. I have been convinced by these (and similar) arguments. But recently I heard one counter-argument that seems very compelling as well and, if it does hold water, I am ready to change my mind on that.

The critics argue that the FARC are currently the major producers and distributors of cocaine in the world. So, in a sense, they have a monopoly on drug trade. If legalization occurs, their main source of income will be automatically legitimized, making them an even more powerful organization. And it will be very hard for competitors to take a significant share of their market. So, while these critics grant that, in theory, individuals should have the right to consume whatever substances they want (agreeing with libertarians on this point), they say that, considering the actual geopolitical circumstances, this would be a disaster.

Does this argument make sense?

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    Because something is legal doesn't mean it has to be obtained from illegal sources. Pot is now legal in many states, but you can't just import it from anywhere. – user1530 Nov 7 '14 at 20:30
  • What makes you think legitimate business people in the US, with investor capital, cheaper (and shorter) transportation, and easy access all sorts of advanced processing tech. can't take all the market share from an organization based in the jungle using primitive methods? – Tyler Nov 8 '14 at 4:27
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Monopolies are either created by governments or created (and sustained, via lower than competitor prices) by highly developed businesses that others can't compete with due to the efficiency inherent in scale. (Note that the second type isn't bad. They maintain monopoly by selling things at market price. If they go above market price, competitors will arise.)

They will have a monopoly when it is first legalized, but they will be unable to sustain it because they won't be able to charge lower prices. Think about the situations a producer in the jungle or even just a 3rd world country, such as FARC, face versus one in the US. In the 3rd world country, there is limited access to high tech, high efficiency post production techniques. Anything shipped in or out of is massively more costly than domestic shipping in the US. Given the reduced costs for US producers, the monopoly would almost immediately shift, especially when venture capitalists kick start the capital accumulation of the US cocaine producers.

  • I'm soooooo over that IPO :) – user4012 Nov 8 '14 at 14:06
  • Note that the second type isn't bad It is bad indeed, the monopolies may overcharge easily. Competitors won't enter the market even at increased prices because, in the event of a new competitor, the monopoly may then lower prices and drive newcomers into bankruptcy. If the market requires significant investments (production facilities, R&D, marketing) then doubly so; no new players will come regardless of the price because of the risk of losing the investment due to the monopoly (which already has amortized those investments) practices lowering the price point to just the production cost. – SJuan76 Aug 2 '16 at 12:19
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That argument doesn't hold very much water.

The first thing you have to ask yourself is why it is a bad thing if FARC becomes more powerful. If you have a compelling argument for that, than you also have a compelling argument for why FARC won't actually be promoted to a legitimate organization.

In fact, most conventional wisdom suggests that legalization actually makes illegal drug cartels less powerful because more legitimate businesses will be able to enter the market.

http://hereandnow.wbur.org/2014/02/21/marijuana-drug-cartels

  • Yes, maybe they don't become a legitimate organization. But their main source of income will become legitimate. I edited the question to make this point clearer. – Otavio Macedo Mar 15 '14 at 11:30
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    @OtavioMacedo, even if their main source of income becomes legal, they don't have a monopoly. Other drugs are always competing with them, marijuana, meth, heroin, etc. Illegal organizations constantly adjust their business to lower risk and increase profits (many started to exploit ID theft because of the low punishment high reward). Legalization also doesn't necessarily make a legitimate business more powerful. Governments can always tax them to death. – user1873 Mar 15 '14 at 14:38
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    The existing economies of scale available to "Big Pharma" and agribusiness conglomerates will drop the price point of narcotics dramatically (presumably offset by a vice tax). Either way, narco-states would lack a viable export; especially if as suggested by @DA internal restrictions are lifted before import/export restrictions are. – LateralFractal Nov 7 '14 at 20:37
  • If their income is legitimate, they make less profit. Huge profit in drug markets happen because it isn't legitimate. – user4951 Apr 8 '17 at 19:08
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If legalization occurs, [FARC's] main source of income will be automatically legitimized, making them an even more powerful organization.

True, in some circumstances. At the moment, they are running a lucrative business on something that's awfully cheap and easy to manufacture, but prohibitively hard to distribute. If cocaine were to be legalized in Colombia, where FARC is based, FARC could easily become a major political power, and their goons may just as easily become the new 'police force', and completely replace the current government. FARC may then pass laws that prohibit competitors in their country.

However, if cocaine were to be made legal in a different country that's a major consumer, say the US, citizens of that country will start undercutting FARC. FARC, until it divests from the militia business, runs an awfully costly operation. Since FARC can't invade the US, FARC would be driven to lower their costs, thereby reducing the money they have at their disposal to spend on their militia. This would considerably weaken FARC.

And it will be very hard for competitors to take a significant share of their market.

Why exactly? Legal or not, production is cheap. Distribution is expensive because of ill conceived laws. Get rid of these laws, as I explained above, and competitors will produce and distribute cheaply.

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This has been tried as an experiment. Prohibition was first enacted and then repealed in USA.

It's a well agreed on fact that the prohibition severely contributed to the rise of Mafia in USA. And moreover, its repeal did not result in significant increase of Mafia power (though I am unsure it can be attributed to mafia's power waning)

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