According to a UN Office on Drugs and Crime 2007 opium survey in Afghanistan, the region produced 8,200 metric tons of opium – twice the annual estimate of global opium consumption. Afghanistan produces more opium than anywhere else in the world. But the price of opium is not being driven down by overproduction. Antonia Costa for the Washington Post writes,

“The (unweighted) national average price of dry opium at the farm gate in Afghanistan is dropping, but not significantly — it was $125 per kilo in December 2006 compared with $150 per kilo a year earlier. Prices differ across the country, not surprisingly, since Afghanistan is not a unified territory or market, even for opium. But overall, the drop in prices is modest when compared with the massive increase in opium production, 50 percent, in 2006.”

Opium also has a longer shelf-life than cocaine, and can be used as a store of value. It is considered a source of liquidity and is used as collateral for credit. But if this is so, why aren’t Afghan farmers using their collateral to build up capital? Why isn’t Afghanistan more prosperous? Something is not adding up. An alternative explanation is that the estimated annual global demand, thought to be 4,500 metric tons, is not actual demand. The real demand for opium could be much higher, or could be growing as fast as the production, as the illicit market spreads to new places.

But if new markets were absorbing the surplus, Costa writes, “we would expect an increase in seizures of the drug and overdoses in these countries. That hasn’t been happening.” She offers another alternate explanation.

“Drug traffickers have a symbiotic relationship with insurgents and terrorist groups such as the Taliban and al-Qaeda. Instability makes opium cultivation possible; opium buys protection and pays for weapons and foot soldiers, and these in turn create an environment in which drug lords, insurgents and terrorists can operate with impunity.”

“I suspect,” she concludes, “that the big traffickers are hoarding surplus opium as a hedge against future price shocks and as a source of funding for future terrorist attacks, in Afghanistan or elsewhere.” She warns that Afghanistan’s neighbors are “either accomplices or victims in the opium trade, so they need to be part of the solution.”

Her last statement echoes a longtime NATO accusation. NATO, with 55,000 troops in Afghanistan, accuses Iran of allowing weapons and drugs to be smuggled into and out of the region, and giving money to ‘insurgent’ farmers and fighters. The UN International Narcotics Control Board says Pakistan is also a popular trade route.

If the supply of opium does not affect the price, then buyers are willing to pay a lot for it. But while the price of opium has not significantly dropped (even though production is twice the expected demand) farmers are entering the cannabis market instead. The UN’s International Narcotics Control Board said in its annual report that because of overproduction in opium there has been a rise in the production of cannabis in Afghanistan. Many provinces which had been declared by the post-9/11 Afghan government and NATO to be free of poppy cultivation have switched to cannabis. The report went on:

“The lack of security in Afghanistan has severely hampered government efforts to eradicate illicit opium poppy; a total of 78 persons involved in the eradication efforts lost their lives in 2008, a six-fold increase over the previous year. The increase in illicit cultivation of cannabis in Afghanistan is also a worrying development.”

Another law of economics commonly touted is “comparative advantage”, which says that countries should produce in whichever products they have a comparative cost advantage over other countries. Afghanistan has comparative as well as an absolute cost advantage over other countries in drug production. And while Afghanistan is considered one of the least-developed countries in the world, with the lowest standard of living, their most traditional and cost-effective ways of industrial organization is outlawed, which leads to prohibition-style murder. The UNINCB does not see it this way. They say,

“The large-scale smuggling of Afghan opiates has resulted in a wide range of social ills, including organized crime, corruption and high illicit demand for opiates. For example, the Islamic Republic of Iran has, for a number of years, the highest rate of abuse of opiates in the world.”

The same could be said about US energy firms, whose large-scale operations result in a wide range of social ills. The United States has, for a number of years, the highest rate of abuse of oil in the world; oil money leads to massive corruption, and the propping up of imperialist regimes; world government leaders have been trying for years to switch oil producers to more legitimate ways of life, but the oil drilling persists. In addition, many of the legalized US agricultural commodities harm other countries in the same way the US claims opium harms it, through policies like dumping. What if the overproduction of these crops were banned by the international community? Oh wait, they are.

As occupying Western armies have learned, from Winston Churchill to the Soviet Empire, controlling Afghanistan is much harder than invading it. Alternative solutions to Afghanistan’s illicit drug “problem” should include the legalization of its drug trade.