Wednesday Briefs – 5 May 2021

THIS WEEK: Drug Legalization; Cigarette Prohibition; Demographics and Destiny.

Drug Legalization

The question of drug legalization has been hotly debated for decades but legalization itself made little headway until recent years. The District of Columbia and an increasing number of states have legalized cannabis (marijuana) for medicinal and recreational use. A number of other states allow it only for medicinal purposes. See this map for current status of legalization.

From the perspective of health and public safety, we may rue or approve this trend a few years from now. With time, we will be able to look back and measure the impact of legalization. But from the perspective of the economy and geopolitics, legalization will result in some clear benefits.

Prohibition of marijuana and of other drugs has been detrimental to the US economy and destructive to a number of other countries. All across the globe, nations with weak institutions and small economies have had to contend with the rise of drug lords and terrorists financed by drug money. They are Colombia, Afghanistan, Mexico and many others.

Legalization has three immediate or quasi-immediate effects: 1) it moves tens or hundreds of billions of dollars from the black economy into the real economy, 2) it reduces the amount of money spent on drugs and diverts those dollars to other consumables or to savings, 3) it takes money out of the hands of domestic criminals and gangs, and 4) it cuts off the lifelines of nefarious actors overseas.

Cigarette Prohibition

This trend towards drug legalization is concurrent with another trend, which is to add new prohibitions on cigarette smoking. Some of the politicians who are cannabis-friendly are fierce crusaders against cigarettes. The public health consequences of cigarette smoking are well known but they should not in themselves constitute a pretext or reason for prohibition because prohibition is also destructive. The consumption of sugar and of fatty substances is arguably worse than smoking. But there is as of now no serious effort to curtail the consumption of sugar, notwithstanding the high incidence of obesity, diabetes and cardiovascular disease.

Awareness campaigns have been effective in reducing cigarette smoking in the United States and other developed countries. The rumored new government action is to reduce the level of nicotine to non-addictive levels. Leaving aside the intrusion of the state in a personal matter (is anything personal in a Medicare world?), we need to consider whether the proposed new measure could backfire. Nicotine is addictive but it is not as harmful as the other ingredients in a cigarette. If smokers have to light up a larger number of cigarettes in order to obtain their previous dose of nicotine, they will be ingesting a far greater amount of those harmful chemicals.

Prohibition would also create a black market and another source of profit for crime syndicates. Perhaps, the best way forward is to continue with what has been proven to work so far: health awareness campaigns that still allow people to make their own choices.

Demographics and Destiny

A common adage is that demographics are destiny. So let us look at the chart below which shows the size of the working age population in several major countries and regions. More details and numbers are provided in this post published yesterday.

A person who believes that demographics are destiny may deem from this chart that China, India and Europe must then be economically and geopolitically stronger than the United States. He/she would look at the BRIC countries and surmise that their combined power far exceeded that of the US for the past several decades. He would also project that the weight of sub-Saharan Africa will exceed that of China around 2035, fifteen short years away.

If none of this is true, it is obviously because demographics are not destiny. They are one of several important parts of destiny but are insufficient on their own to determine the course of a country. The other important parts are the pace of innovation, the state of productivity, the quality of governance and the depth of institutions. If the US economy still leads the world, it is because it has been able to combine all of the necessary vectors of growth while other major nations only have two or one or none.

The future is not preordained however. The order could change if some countries acquire more of these vectors and other countries lose them.

More reliably noteworthy in the chart are the expected growth of the working age population in sub-Saharan Africa and India, and simultaneously the decline of the equivalent population in Europe and China. More on this here.

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