Effect of the illegal drug trade on the economy

Political analysts, economic pundits, scholars and researches have always posited that the drugs trade is weakening the economic well being of the Columbian government, through the fact that it promotes corruption, insecurity, human rights violations and deaths. Apart from these factors, the illegal drugs trade is also known by the economists to harm the export trade.

At the other end, there are those who maintain that the drugs trade by themselves do not have a one to one intervention with the export, and that instead, it is the political violence and instability that touch on these drugs that cause economic obfuscation. This paper seeks to establish this fact by relating the particular effects of illegal drugs and the guerrilla and the paramilitary activities on the economy. Effect of the illegal drug trade on the economy. Since the 1970s, the Colombian GDP per capita had been annually growing.

However, the situation began to reverse in the 1990s when the GDP per capita began to fall, with the annual growth rate remaining at 4%. The rate of GNP growth as touching the cocaine era 1980- 1997 was 3. 2%, while 30 years before this, it was 5. 4% (Chall, 1962 pp. 90). Other causes of this decline include the president Gaviria’s acceptance to liberalize the Colombian economy. This is said to have ushered in increased unemployment by 20% by the year 2000. In the same vein, the labor that was participating in agriculture also fell.

Others cite cases of financial and trade liberalization, high public spending which was then catalyzed by the discoveries of oil, and the huge upsurge of foreign exchange. Lack of comprehensive supervisory by/ or of the banks which issued high credits are also considered as one of the reasons for the plummeted economic growth of Colombia (Ameringer, 1992 pp. 144). One of the ways in which the illegal drugs sales and dealings affect the economy is through the extirpation of the availability of employment.

The fact that increased coca cultivation affects employment negatively is clearly shown in the fact that when coca production and cultivation was stable in the 1990s, together with the GDP, The situation reversed, starting with the 1995, going onwards, when the coca production and cultivation slowed, and thereby also derailing with it, the growth of the GDP. This caused also, soaring cases of unemployment. On short term basis, the drug trade has been shown to be able to, through higher income, boost the construction sector, and thereby, generating jobs for the low class (Cattell, 1976 pp. 123).

Nevertheless, the longterm prospects show the massive and likely cases of atrophying of the assets and the real estate values. Although it is possible when the capital has been used for real estate funding and reconstruction, to launder the real estate, it is yet also true that the real estate boom threatens the economy when there are cases of unsustainable rates of increase in the property values. Narcotics were known to have played a critical role in the Valley’s economy, but the present hitch occurs due to the economic pitfalls that had been brought about by the incarceration of the high echelons of the Cali Cartel.

The rural impact pervaded the past real estate values while the cultivation and production of coca led to the dethroning of the legitimate agricultural crops such as coffee, tobacco, among others. For most of the Colombian farmers, the shift from legitimate cash crop farming to drug crops can be linked to the atrophying income and the heightening of unemployment in the regions that specialize in the coffee growing areas due to high cost of production and the lowering of the costs of the primary commodities.

Other pundits also posit that the boom of coca occurs as consequences of the local, national and global markets development, which make the cultivation and the production of alternative or legal crops to be less profitable. Having been dealt stiff competition from foreign foreign producers who charge low costs, this locally ushers in low coffee prices, forcing the coffee farmers to supplement their meager income by taking to planting drug crops.