1. Introduction:
Now, if we dive into the annals of human history, we find that drug consumption has been a part of our lives for ages – way back into prehistory. Fun fact: our ability to digest alcohol actually goes back before we even became fully human 1. And let’s not forget, the first miracle Jesus performed in the Bible was turning water into wine at the Wedding of Cana (John 2:1-11). That’s a pretty solid endorsement of alcohol’s place in our lives, right?
Let’s zoom in on the Americas and Brazil in particular. Brazil has had a rather unique relationship with drugs. Did you know that coffee and tobacco were once symbols of power, emblazoned on the imperial coat of arms and the flag, and they still hold a place on the republic’s coat of arms today? Back in colonial times, Brazil’s economy was heavily built on the trade of legal drugs. Slaves were bought with alcohol and tobacco, which were then used to produce and export sugar 2 back to the metropolis in exchange for manufactured goods. Coffee came onto the scene in the 18th century and became Brazil’s main export in the 19th century.
Think about this: for centuries, colonial Brazil thrived on the export of legal drugs like sugar, alcohol, and tobacco, which caused more deaths and health issues than any other substances, legal or illegal. The empire’s top export, coffee, contains caffeine, a psychoactive substance 3, which gained popularity partly due to the Islamic prohibition of alcohol 4.
Now, here’s a wild thought: some historians believe that alcohol was a major reason why societies transitioned from being hunter-gatherers to settling down and taking up agriculture. Why? Because alcohol, being portable, durable, and highly valuable, could be stored and traded as a form of currency and sustenance. And to make it on a large scale, you need agriculture.
Look at indigenous peoples with their fermented beverages like pajuaru, cauim, and caxiri. These technologically Neolithic societies were already producing drugs without any use of metals. Pre-Columbian peoples used various entheogens for both recreational and ritualistic purposes 5. Coca leaves, peyote, mushrooms, and even frog toxin were part of their prehistoric practices.
In the Mediterranean, we have records of opium and cannabis use dating back to 1300 BC in Egypt 6, with evidence of cultivation from as early as 3400 BC in Mesopotamia. Poppy seeds from 4200 BC were discovered in a burial site in Spain (Cueva de los Murciélagos) 7.
To sum up: we’ve seen sporadic production of alcoholic fermentations since 13,000 BC, and it became widespread around 7000 BC 8. By the 16th century, alcohol was being promoted for its medicinal properties. By the mid-18th century, alcoholism was recognized as a social problem, leading to the temperance and moderation movements, and eventually to Prohibition in 1920 in the US. This criminalization led to a boom in illegal trafficking, which funded the entire crime economy until Prohibition was repealed in 1933.
Now, let’s talk about the “War on Drugs” 9. It’s rooted in what I call the “The Fatal Conceit” 10 of voters and legislators. They believe that victimless crimes are legitimate targets for legislation and don’t understand the real-world consequences of their decisions. Prohibition only increases drug potency (the third law of demand), boosts the profitability of trafficking, diverts resources into the crime economy, and reduces the ability to fight actual crimes with victims like fraud, rape, robbery, and murder.
The outcomes of the “War on Drugs” over two centuries of victimless crime repression are consistent: only governments that become more violent and ruthless than the traffickers themselves achieve partial and temporary victories 11– Singapore being a case in point 12. The real winners are violent traffickers, who get their market share and high profits guaranteed, and other criminals, who find new revenue streams to fuel the crime economy.
Who should serve whom? Should the government serve the citizens or the other way around? If the government can decide who to arrest, expropriate, or kill (if they resist) for consumption or possession of anything that harms no third party, then there is no more property or freedom. If they can prohibit drugs, they can prohibit anything – meat, weapons, gold, real estate, you name it. Are you okay with that?
Jesus made it clear that third-party interference in private contracts is malicious and based on envy, as seen in the parable of the workers in the vineyard. Another grotesque example of a “victimless crime” is “animal cruelty,” deemed demonic from the first book of the Bible 13. This justifies rulers’ and their agents’ power to imprison, expropriate, and kill anyone accused of mistreating their own property. This confirms the thesis that “all civilizations that worship animals sacrificed innocent humans.” It’s no coincidence that the “War on Drugs” was declared by Nixon in 1971 – the same year the dollar became a purely fiat currency 14.
2.1 Market Solution: Crypto Dealer
Alright guys, let’s dive into a potential game-changer – the Crypto Dealer. Now, using violence to control drug sales points, or “drug dens,” is expensive. You’ve got costs for surveillance, weapons, lawyers, bribes, and dealing with complaints. Beyond maintaining the drug dens, drug trafficking runs a kind of “perfect price discrimination” – think of how airlines sell seats at different prices.
There’s a significant cross-subsidy between recreational users and dependents. This is why you see drugs sold cheaper or even given away at parties – especially to teenagers. This strategy is all about creating a loyal customer base of dependents who end up funding the business.
Here’s the kicker: the numbers game of drug dealing avoids killing customers because it doesn’t sell on credit. Without credit, there’s no need for violent collections. This is exactly how a crypto dealer would operate – either transitioning from traditional street sales to virtual commerce or building market trust with referrals, free initial orders to known users, and leveraging established marketing tools.
Without the overhead of cross-subsidies, collections, and maintaining a drug den, a “crypto dealer” – someone who takes orders and payments through encrypted means and delivers without compromising privacy – could undercut street prices drastically, shaking up the violent trafficking business model.
Imagine drugs from a crypto dealer costing half the street price for dependents and being delivered by drones or left in public places after payment. Dependent users would naturally flock online, and even recreational users might pay a bit more for the privacy and safety of online purchases. Losing these profitable customers would leave only insolvent dependents and non-paying recreational users for the drug dens, leading to their collapse due to adverse selection. It’s like “The Market for Lemons” – market collapse driven by information asymmetry and adverse selection.
For crypto dealers to dominate, users need to master: a) acquiring and using cryptocurrencies; and, b) using encrypted, secure communication apps. This learning curve is becoming more manageable as privacy concerns diminish and platforms with KYC/AML compliance become more user-friendly. Suppliers, who have more at stake, would handle the greater operational complexity, driving down costs and risks, and thus eliminating the competition without violence.
Let’s take a look at some key questions to assess viability:
- An anonymous profile without a number (accessing the net via VPN) sends a message with a price and product list, the first order is free – will the user request it?
- If delivered with a photo, will they retrieve it from a nearby public place or dropped by drone in their yard or balcony?
- Proving superior quality, personal risk reduction, and lower prices, will they start consuming exclusively from the crypto dealer, or will they return to risky street purchases?
- Receiving a referral credit percentage, will the user share the menu with their friends, informing where each one lives and who they are?
Early commercial uses of bitcoin, like Silk Road, aimed to offer these services but failed because of inadequate anonymity, insufficient cryptocurrency liquidity, and risky distribution methods. However, today we have decentralized and secure communication means and more effective distribution strategies.
2.2 State Solution
Now, let’s talk about the State Solution. Decriminalization and regulation have been trending in recent years. With tax erosion from cryptocurrency adoption and taxes/regulations reaching levels that even breach the Laffer curve 15, 36 US states and DC have already legalized recreational or medical marijuana, with the market growing by 45% in 2020 16.
A literature review on legalization consequences in the US shows that tax revenues often exceeded even the most optimistic projections 17. Historically, until 1929, Coca-Cola contained cocaine 18, which was sold pure in catalogs (like Sears) until 1895. Freud, a user himself, prescribed cocaine as a treatment for depression and morphine dependence 19, documenting his experiences in “Cocaine Papers.”
There are records of drug dependence in non-criminalized environments, like opium in China and the American Civil War (where both sides used it as a medication). Dependence spikes were related to crises and wars 20. During the Vietnam War, many American soldiers used drugs, with over 20% using heroin daily. Prohibition and mass arrests for marijuana use led to increased consumption of harder drugs, like heroin and cocaine, which were easier to hide 21.
As thousands of everyday users quit without treatment after returning to productive life, it became clear that dependence is mainly social, not genetic. This is supported by “addiction theories”, like the Canadian “Rat Park” study 22. The availability of drugs is less relevant to dependence numbers than opportunities for social and economic development, as seen in prisons.
A public policy respecting the Non-Aggression Principle (NAP) that could rival or surpass crypto dealers in effectiveness would be the free distribution of drugs (or bioequivalents) for dependents in confinement. No one can compete with a free, high-quality product.
3. Conclusion:
The prohibition of opium in China, justified to combat the trade deficit, ended with the humiliating defeats of the Opium Wars 23. Nixon’s “War on Drugs,” declared in the same year the U.S. abandoned the gold standard, led to an explosion in drug use and potency in the U.S., including the opioid epidemic (with Chinese fentanyl) which, according to official data, resulted in over 500,000 overdose deaths between 1999-2019 24(doubling each decade, 2019 already had more deaths than American casualties in 20 years in Vietnam).
For millennia, drugs were used without creating the levels of dependence observed today. In all cases of repression, the potency of drugs exploded, along with the profitability and violence of traffickers. Those who understand the Third Law of Demand (Alchian-Allen theorem or Alchian-Allen effect) understand the “Iron Law of Prohibition” 25, which explains that “crack would never exist without the prohibition of cocaine,” skunk wouldn’t exist without the prohibition of marijuana, and if sugar were banned, dealers wouldn’t sell granulated sugar but rather caramels and condensed milk (with more potency per gram) for the same reason Al Capone didn’t sell beer but whisky and spirits.
Prohibition leads to the creation and popularization of more potent variants and ensures profitability for the most violent traffickers, increasing resources for the crime economy – including political, judicial, and police corruption, arms trafficking/rental, and human trafficking resulting from drug trafficking. All financing for this crime economy ceases with deregulation, with anyone being able to produce and sell any drug, eliminating any competitive advantage for using violence (which is a marginal cost).
The trend – with decriminalization by governments seeking increased revenue and crypto dealers selling drugs locally using pseudo-anonymous communication and payment – is to end the current model of violent trafficking in the next decade.
Other factors support the end of the violent trafficking model: extensive facial monitoring, CBDCs 26(like FEDnow eliminating alodial money (bills and coins) and promoting financial totalitarianism), and the use of Big Data and new technologies by governments and law enforcement agencies. Soon, any police officer will be able to check all of a suspect’s FEDnow records and consult their call metadata (including GPS coordinates) and confirm this data with images from public cameras. Those who go to the drug den will be seen, those who pay or receive payments via FEDnow will be identified, and those with cellphones in the same environment as someone who was there will be included in the monitoring network.
It remains to be seen which sector (regulated or unregulated) will occupy the larger market share.
