The Economics of Drugs: Afghanistan and Opium Farming

Addiction is a profitable business. Sugar, alcohol, drugs – we can’t pretend these (and many other addictive goods) don’t move substantial amounts of money. In fact, the alcohol, tobacco, and junk-food industries make around £53 billion every year from harmful consumption. Needless to say, addiction sells, whether we like it or not. 

Despite countless initiatives to reduce the consumption of addictive goods, the demand for these remains constant. And as any introductory economics class will teach you: when there is demand, there is an incentive to supply. The global demand for narcotics is as alive as ever, and, naturally, the question arises: who is doing the supplying? 

The answer, historically, has been Afghanistan. For years, it produced more than 80% of the world’s opium, with heroin made from Afghan opium accounting for 95% of the European market.  

But the story has taken a dramatic turn. Afghan opium production has dropped by more than 90% - largely due to the Taliban’s ban on poppy cultivation introduced in April 2022. Since the ban, the total land used for opium poppy has shrunk by 20%, and total opium output has fallen by 32%. Production has plummeted ever since. 

This may sound like an all-round success, but we must acknowledge our perspective here: most of the world’s narcotics are exported to Europe, where most consumers are. So yes, falling production benefits consuming countries, but we can’t ignore the impact on the real producers: the Afghan population. 

To understand that impact, we need context. First, the Afghan economy relies heavily on agriculture. More than 70% of Afghanistan’s population depends on farming. Ironically, the country doesn’t have much arable land to work with, as only 12% of their territory is arable. 

Although Afghanistan’s geography favors livestock, other factors come into play. Maintaining animals requires far more investment than growing crops, and considering Afghanistan is one of the poorest nations in the world, the choice almost makes itself.  

Then comes the poppy plant: low maintenance, requiring less irrigation than wheat, and for the cherry on top, someone out there is always ready to buy it no matter the cost. So even though official sources insist production has collapsed, the market is very much alive - perhaps worse than before. Economics tells us that when governments restrict production but demand stays constant, black markets emerge where goods are sold at dramatically higher prices. This is exactly what has happened. 

Prices for poppy have skyrocketed (no surprise there), farmers are hoarding their pre-ban stock hoping that prices climb even further, and many have begun planting illegal crops in their backyards - risking their lives to keep their families afloat. 

All in all, drug consumers are not the only ones dependent on opiates. Afghans are too. In 2021, the opiate economy accounted for up to 14% of Afghanistan’s GDP. After decades of relying on the opium economy, the sudden collapse was going to shake the country. While some farmers have shifted to other crops, many more are transitioning into something more concerning: methamphetamine production. 

This was almost certainly not the Taliban’s intended outcome. The methamphetamine trade has proved to be quite resilient, and a good alternative for Afghan farmers. Methamphetamine in Afghanistan is made from the ephedra shrub, which grows abundantly; laboratories are cheap and simple to build, and if destroyed, can be easily rebuilt elsewhere. This shift reflects not criminal ambition, but desperation: a population trying their best to survive another day. 

As meth production increases and opium declines, a gap is left in the global supply chain, one that’s being covered by nations more than willing to step in. In Myanmar, poppy cultivation has risen by 18% following Afghanistan’s 95% drop. 

So, are we actually reducing the global production of narcotics, or simply transferring it to the next country? 

It’s complicated. On one hand, reducing access to narcotics is essential for combatting addiction. On the other, slashing production in Afghanistan pushes an already poor population into even deeper poverty, eliminating one of their only reliable income sources. 

The decision to enforce the ban was difficult, but it has already been made. Now, Afghanistan needs alternative ways to sustain itself. If the world wants to truly reduce narcotics production while avoiding a humanitarian disaster, it must help fill the void left behind by opium. Only then can black markets be abandoned and real progress made in addressing addiction.