A Freer Market for Heroin in Australia: Alternatives to Subsidizing Organized Crime - Part 1

Abstract

The problems associated with illicit drug use in general, and the illicit use of heroin in particular, have led to stringent attempts by Australian governments to enforce the laws against drug abuse. The strongest reaction of the criminal justice system has been toward heroin, with a total prohibition on heroin importation, manufacture, distribution, possession, and use. Before attempting to evaluate the extent and costs of heroin use today, this paper reviews the evolution of laws and social attitudes toward heroin in Australia. Using an economic framework for analyzing the black market in heroin, the paper examines proposals for enforcing the prohibition by tightening the supply side, and by reducing the demand for heroin. It argues that attempts to restrict the supply have had the effect of increasing the costs borne not only by the users but by society at large, through increases in acquisitive crime and police corruption. On utilitarian grounds it concludes that the costs to society of the prohibition far outweigh the costs of a policy of freer availability, and suggests that a policy of government supply of price-controlled heroin and methadone would be far preferable to today's failed policy of prohibition.

Introduction

Any discussion of drug use in its private and social aspects must be qualified by the statement that "drug addiction is a complex phenomenon which has generated a good deal of heat and invited much speculation, but which continues to defy understanding and analysis as fast as it grows" (Willis 1978:370). For this paper the word "addiction" will be used to describe states in which "a person becomes apparently unable to stop taking a drug either because it gives pleasure or because the person experiences withdrawal symptoms if the drug is discontinued" (Willis 1978), although without clinical tests, it is virtually impossible to distinguish addict from nonaddict. Indeed, the World Health Organization (1982) does not recognize the condition of "addiction," preferring the term "drug dependence."

In 1985 at the special Premier's conference on drugs - the so-called "drug summit"- the Australian Commonwealth, States, and Territories agreed to spend $120 million over the following three years on an anti-drugs program, the National Campaign Against Drug Abuse or "drug offensive." Of this large amount, $24 million was allocated specifically to improved police and Customs surveillance and detection, and the balance for programs of treatment, education, and rehabilitation (Blewett 1986). Unfortunately for the taxpayer, lack of data on the pre-existing situation means that the effectiveness of the campaign cannot be clearly measured, although some resources are being spent to remedy this lack - perhaps for future campaigns. If this amount of money can be spent on it at a time of financial stringencies, the drug problem must be serious. Heroin abuse is seen to be a significant part of the problem. Before examining some alternative policies for dealing with heroin use, we review the history of the present drug laws and usage of heroin in Australia. It seems clear that any serious attempt to reduce the social costs of heroin use will have to focus on the demand side.

To use Russell's words, in order to change the world, it is first necessary to interpret the world. To do that, to know who we are, it is necessary to know whence we have come. Especially in such an emotion-laden area as opiate policy, laws and public attitudes interact, the one reflecting the other reflecting the first as it was, and so on.

Yet it is possible to penetrate and to unravel. Using a framework which focuses on the market for illicit heroin, we examine policies directed at reducing the supply of heroin and policies directed at reducing the demand for the drug, before arguing that the prohibition against heroin manufacture, distribution, possession, and use has been a costly failure, and that the time has come to examine a radical departure: decriminalization of heroin.

The Drug Problem

Peyrot (1984), in discussing the development of the "drug problem" as a social issue in the United States, argues that such social problems result from the interplay of political and historical forces, to which we might add economic. He formulates a cyclical model of the drug problem, comprising five stages: a period of "mobilizing agitation," followed by official involvement in the "policy-formation stage" and the "policy-implementation stage," after which the problem may persist despite the remedy, or application of the remedy may wane as the cure is seen to be worse than the disease. The fourth stage of the cycle comprises modification of the program, when lack of success is seen as evidence not that the policy is a failure, but that the policy has not been applied sufficiently rigorously. Other possible modifications may be the development of "alternative" program , without challenge to the prevailing logical pattern of response, as embodied in the definition of the problem from stages one and two.

It may be that persistent lack of success allows previously uninfluential groups to establish an alternative definition of the problem. This will occur during and after a fifth stage of "reform agitation," accompanied by claims that the original policy is "bankrupt," that the program have been a "total failure," and may indeed have exacerbated the problem, rather alleviating it, as proposed. The fifth stage may mark the end of the first cycle and the beginning of a second, with a new definition of the problem and new policies. A radical alternative to a new cycle after the fifth stage is deregulation of the controls.

Drug Use in the United States

Peyrot uses his framework to analyze the U.S. drug problem as it developed from a completely free market with no legal restriction on the use of drugs before 1875 to the federal Harrison Act of 1914, which brought control of opiates clearly into the criminal-justice arena, although not prohibiting doctors from prescribing opiates for "legitimate" medical purposes. By 1922 a series of Supreme Court judgements had substantiated the position that prescribing opiates for existing users ( "opiate maintenance" ) was not a "legitimate" medical practice. In twenty or so years following the enactment of the Harrison Act, "an estimated 25,000 physicians were arraigned on narcotics charges, and 3,000 served prison sentences" (Peyrot 1984:88). The drug problem was clearly seen as one for control by the criminal-justice system, rather than for treatment by the medical profession. This fourth stage of Peyrot's cycle lasted until the 1950s and 1960s, when the severity of punishment for narcotics violations was increased, and when there was upsurge in criticism of the criminal-justice approach, heralding the beginning of the fifth stage.

The cycle in the United States has not (yet) turned full circle, nor is there deregulation, as happened at the end of the Prohibition of alcohol. Instead, there is an uneasy relationship between the legal sanctions of the criminal-justice system (sale, possession, and use of heroin and morphine remain illegal) and the clinical treatments of the medical profession: opiate (viz. methadone) maintenance has been legal again since 1961. There are also "diversions" from the courts to medical treatment, which at the same time control by requiring drug users to submit to treatment, while lending legitimacy to the medical model of drug users as "sick" people who can be "cured" of their illegal drug use by appropriate clinical intervention.

The coexistence of these two contradictory approaches can also be seen in Australia, where there is no single, comprehensive policy toward opiate use (partly due to the constitutional powers of the States, which leave the Commonwealth with control only over the importing of illegal drugs, although if there were a relaxation of the prohibition on heroin, the Commonwealth could exercise some control via the financial arrangements for health care). In Australia, a series of royal commissions and inquiries (Baume 1976/77; Costigan 1984; Durick 1978; Marriott 1971; Rankin 1981; Sackville 1979; Senate 1979/80; Stewart 1983; Williams 1979/80; Woodward 1979) have underlined the criminal-justice approach to drug use, while the pressure for opiate (methadone) maintenance has grown (National Information Service on Drug Abuse 1985), and diversion program thrive (Bush and Scagliotti 1983). Drew (1979 and 1982) has been arguing for freer markets for heroin in the medical literature, but experience would suggest that the medical profession might not readily agree to deregulation when they are having some success at redefining the drug problem in their terms (Milner 1976).

Drug Use in Britain

The British have not (yet) succumbed to the criminal-justice-system approach to opiate use. Opium was one of the most widely used drugs in nineteenth-century Britain (Stimson and Oppenheiner 1982). From 1827 to 1859 average consumption had risen from 600 mg. to 1,410 mg. of opium per person per year. It was available in solid and liquid forms, and mainly taken by mouth. Stage one of Peyrot's cycle began after the Arsenic Act of 1851 regulated sales of that drug, with arguments that opium overdoses could be reduced by control over opium, although Stimson and Oppenheimer argue that the hidden agenda was monopoly power for chemists and druggists, competing with shopkeepers, stall-holders, and itinerant vendors.

Stages two ( "policy formation" ) and three ("policy implementation" concluded with passage of the 1868 Pharmacy Act, which restricted to pharmacists the prerogative to sell opium (Kaplan 1983:155), and stage four took place as the Act was amended to tighten controls on opium-based patent medicines in the 1890s, and was followed by the 1908 Poisons and Pharmacy Act. These acts tightened the supply of opiates, but it was still easy to obtain them. All that was necessary was to be known by the pharmacist or be personally introduced, and to sign the poisons register. There was no need for a prescription.

Doctors would have appreciated much stricter regulations over opiates than were provided in the 1868 Act. There was agitation that habitual use of drugs (opiates or alcohol) should be viewed as a disease. The British Medical Association campaigned against self-medication, and discussed ways of making some drugs available only on prescription, which would have increased the control of doctors over drug use and treatment. Meanwhile, after the turn of the century, international concern at opiate use in China, North America, and Britain led to pressure for controls over opiate use on the grounds that it was a social problem. Stage five was well under way. The debate in Britain had moved away from concerns of who should be allowed to sell opiates, and from the view of habitual use of opiates as a disease, to questions of the circumstances in which people should be allowed to possess opiates (Stimson and Oppenheimer 1982:23) - the criminal-justice approach.

During the First World War an order prohibited the gift or sale of cocaine to soldiers except on prescription; this was the first time that a doctor's prescription had been required, by law, for the purchase of a specified drug. In 1920 it became illegal for anyone to possess opium, morphine, heroin, or cocaine without a doctor's prescription. Stages two and three of the second cycle had occurred, and the criminal model was dominant to the extent of urging that the law had been broken when doctors had prescribed such drugs to habitual users: was such prescribing "necessary to medical practice"?

The doctors argued that it was, and were backed up by the Rolleston Committee of 1926, which firmly defined "addiction" as a disease and as a problem for legitimate medical treatment, under certain conditions and for certain classes of "patients": for those undergoing treatment by gradual withdrawal, for those for whom complete withdrawal would produce severe distress or even risk of fife, and for those for whom a minimum dose of the drug was necessary to enable them to lead useful and relatively normal lives maintenance doses. The government agreed, and this formed the basis of the "British system" for dealing with drug abuse. Drug policy remained in the context of the criminal-justice system - unauthorized possession was illegal but the medical profession had successfully claimed the right to define the nature of addiction and to treat it, and to police itself. This fourth stage of the second cycle persisted for forty years.

Was it the British system which successfully prevented the size of drug-use problem seen in North America? Or was it successful precisely because there were few British drug users? It is not clear what prompted the review (the figures on drug-offense prosecutions and convictions remained level, as did the numbers of known addicts), but in 1958 the first Brain Committee met to review Rolleston's advice. In 1961 its report confirmed the medical model of addiction, and provided a rationale of maintenance as a positive treatment for addiction.

However, the numbers of known addicts had started to rise - from 68 in 1959 to 2,240 in 1968, an average annual growth rate of 47.5% (Stimson and Oppenheimer 1982:32-33). In 1964 the British government reported that of 237 known heroin addicts, 222 were neither therapeutic nor professional. They had become addicted using drugs illegally obtained. Moreover, 17 of them were younger than twenty. The stage-five response to the accompanying agitation was to reconvene the Brain Committee.

The second Brain Committee found that the major source of supply for the new addicts was a very few doctors who had prescribed "excessively." Although these doctors (no more than six) had acted within the law and according to their professional judgement, their actions meant that the "British system" was actually contributing to the growth of addiction by making supplies so readily available. In their report, the second Brain Committee shifted the emphasis of the medical model from one of treatment to one of control: too little control and addiction will spread; too much and "an organized illicit traffic" will develop. In treading a middle path, Brain recommended that doctors other than those working at proposed treatment centers be prohibited from supplying, administering , or prescribing "dangerous drugs" to addicts; that special centers for treatment of addiction be set up; and that (in keeping with the model of addiction as a socially infectious condition) a central register be established for the compulsory notification by any doctor of an addict. It was left to doctors at the treatment centers (clinics) to determine a course of treatment, including the possibility of maintenance, but there was a potential conflict for such doctors as they tried to achieve the two aims of control and treatment.

As a stage-two policy formation, the 1965 Brain Report was clear, but implementation took three years. On 16 April 1968, the new clinic system started. If the implicit aim of the second Brain Committee was not eventually to curtail the individual addict's dosage of heroin and cocaine, then why did it not simply recommend that the six doctors be dealt with? It's possible that the clinic system was a compromise between the medical profession's desire to prescribe the politicians' need for social control. At any rate, the clinic system was successful in reducing the diversion of prescribed heroin to the "grey" market in which prices doubled in response (Kaplan 1983:159).

The clinic system meant that the doctors had become government agents of social control: for the most part users were able to continue obtaining prescriptions for injectable heroin at high rates of dosage. In 1969 the clinics began prescribing methadone. In 1970 54% of prescribed opiates were heroin, 35.2% injectable methadone, and 11.8% methadone syrup for oral administration; in 1978 the percentages were 21.3%, 35.0%, and 43.7%, respectively (Stimson and Oppenheimer 1982:100). What might have looked like a medically administered heroin-maintenance program at its beginning had changed into a treatment program, as clinic staff confronted addicts and attempted to "treat" them, to "cure" their opiate use. Stimson and Oppenheimer quote clinic staff as arguing that, first, prescribing had not led to the withering away of the black market; second, controlling opiate use and its spread was not a role for doctors; and, third, there was the practical issue of maintaining on injectable drugs people with no usable veins left. Numbers of addicts grew steadily, with 5,116 notified addicts in 1980, and perhaps another 5,000 unrecorded. There was a thriving black market, with customs seizures growing from 1.14 kg. in 1971 to 60 kg. in 1978 (Stimson and Oppenheimer 1982:210).

Statements by clinic staff and addicts obtained by Stimson and Oppenheimer clearly show that the move away from prescribing injectable heroin to prescribing oral methadone was a deliberate policy by many clinic doctors, and, equally, was resisted by many addicts. The well-known study comparing the effects of prescribing heroin against prescribing oral methadone (Hartnoll et al. 1980) showed that after twelve months, 74% of the heroin-treated remained patients, but only 29% of the methadone-treated. It appears that a side-effect of the move toward treatment of addicts at the clinics and away from social control of addiction was to increase the numbers of addicts leaving, or perhaps never presenting at, the clinics. Did this move away from social control toward individual treatment give the Conservative government the excuse it needed to foreshadow reduced government money for the clinics, or was it the rhetoric of "smaller government"? In 1981 the Minister talked of withdrawing government funding. In the light of the difficulties of working with addicts, the apparent lack of immediate therapeutic success, and the move of the clinics away from social control, stage five of the third cycle had been reached.

In the last few years the British system has moved further away from the medical model, and there are signs that the Conservative government is being recruited to the "war on drugs." These changes have left British drug policy without any clear direction (Madden 1987) or distinctive approach (Stimson 1987). Recently, a doctor was stricken from the rolls because of her persistence in prescribing for addicts (Swan 1987).

Drug Use in Australia

The history of Australian attitudes toward opiate use and its control is not markedly different from that of the United States or Britain. But to attempt to describe the separate responses of the six colonies-turned-states and the Commonwealth is beyond the scope of this paper (see Lonie 1979; McCoy 1980; Carney 1981). We shall concentrate mainly on the most populous states, Victoria and new South Wales (NSW), together with the Commonwealth.

The social responses to concerns about drug use in Australia maybe thought of as falling into four cycles, to use Peyrot's framework: poisons, Chinese opium dens, patent medicines, and international conventions. From an economist's viewpoint, these present a progression from attempts to regulate and control the supply side to attempts to control the demand side of the market for opiates (mainly in a criminal-justice context).

The first Poisons Act in Australia (South Australia 1862) antedated the equivalent British law by six years in its treatment of opium. Despite the objections of pharmacists, it required the labeling of opium as a poison, but, perhaps because of their objections, it excluded patent and proprietary medicines despite often high concentrations of opium (as the British Act was to do). Previously, vagrancy laws had stated that any person possessing any "deleterious" drug was deemed to be "idle and disorderly," probably in response to "hocussing," the use of stupefying drugs in cases of theft. The Poisons Acts were an attempt to deal with the increasing risk of accidental poisoning as the number of poisonous compounds in use increased, and later to establishing "tracing" procedures with "poisons books," to deter would-be murderers.

Previous attempts in NSW and Victoria to pass Poisons Bins in 1849 and 1857, respectively, had foundered on the opposition of the pharmacists, who had complained of the "indiscriminate injustices" against them, arguing that the bills favored the business of unqualified merchants who sold drugs and poisons, especially in the country (McCoy 1980:49; Carney 1981:174). At this time there was strong competition among pharmacists (a group seeking to break away from the image of suppliers of abortifacients and V.D. cures), general retailers (who could sell what pharmacists could sell), and doctors (who could dispense). Before the development of today's scientific medicine, beginning with the sulfanilamide antibiotics of the 1930s, there was little doctors could do for bacterial or viral infection apart from easing the pain, often with opiate-based medicines, the constipating effects of which were often useful for treatment of diarrhea (Jaffe and Martin 1980). Moreover, the profession was not always as clearly delineated as today. Not until 1898 did the law in NSW distinguish between the qualified and unqualified medical practitioner.

If most opiate use among European Australians was therapeutic, there was, however, a significant recreational use of opium, which was providing the revenue with a substantial source of income. The gold rushes of the 1850s had attracted many Chinese diggers, with their habit of smoking opium. In 1857, when an import duty was levied on opium, it is estimated that there were 25,000 Chinese in Victoria, which had imported 21,891 kg. of opium the previous year, valued at L56,979 (Carney 1981:175). The duty, of 10s. a pound, was levied for three reasons: revenue, because everyone else did it, and because few European Australians (or Victorians) indulged (Lonie 1979:1).

Despite their contribution to the revenue, imports of non-medical opium became increasingly threatened as the tide of xenophobic, anti-Chinese sentiment rose in the 1880s and 1890s. In the 1880s there were still 12,000 Chinese in Victoria, and the annual imports of 8,000 to 9,000 kg. of opium were raising L21,000 in duty (Lonie 1979:2). The first successful attempts to use the law to prohibit the sale of a drug in Australia, however, were to prevent the use of opium by Aborigines in Queensland in 1891 and in South Australia in 1895. The debate in Adelaide introduced themes which would echo through parliamentary chambers down the years. Various speakers argued that a ban would not prove effective since users would go to any lengths to procure opium; that the proposed law was no more than an attempt to dictate to people how they should carry on their affairs; that since taking opium was not immoral, it should not be banned; and that using (but not supplying) opium was a personal choice and that the ban would promote immorality and smuggling. Clauses forbidding the importation and use of non-medicinal opium were removed. There was a realization that successful bans on importing would require concerted action by all colonies, and even that such a ban would increase smuggling, which was already occurring in response to the duty of 30s. a pound. A particularly enlightened commentator, Quong Tart, argued in 1894 that if opium smoking could not be stamped out, then the proper alternative method of control would be the establishment of government-run offices to sell the drug to users (Lonie 1979:4). It may have been that the dominant sentiment was pro free trade, even in opium. One voice against banning imports to NSW said, "we are a British community and are not inclined to adopt the extreme measure of prohibition" (Lonie 1979:10).

In 1904 21,417 kg. of smokable opium was imported into the new Commonwealth. However, in 1905, forgoing the L10,000 revenue from the duty (Lonie 1979.18), the new national government banned the import of non-medical opium, and required licenses of medical-opium importers: doctors, manufacturing and wholesale chemists, and pharmacists. In the same year, both South Australia and Victoria prohibited the sale, manufacture, and use in dens of smoking opium, and the Victorian law attempted to outlaw its possession. In a move to impose controls over the demand for non-medical opium as well as over its supply, Queensland had banned unauthorized possession in 1897, but after Federation Chinese merchants had been able to obtain licenses from Commonwealth Customs. This legal commerce ended with the import prohibition.

In the sometimes lengthy debates over the "oriental vice" of opium smoking, there seems to have been little awareness that there were cheap, plentiful substitutes for the activity. But, during the debate over the Victorian Bin in 1905, one member pointed out that

Unless we provide by legislation to prevent the morphia habit, we will have these people knowing that they will get the same result by injecting morphia or taking laudanum, relieving themselves by resorting to a vice which will have the same effect as the smoking of opium (Lonie 1979:14)

Morphine had been extracted from opium in 1805 and produced commercially by E. Merck and Co. and invention of the hypodermic syringe in the 1850s had enabled the use of morphine as a painkiller. In 1898 the Bayer Co. had started to sell the new semi-synthetic opiate, diacetylmorphine, under their trade name of heroin (McCoy 1980:52). Despite these more potent forms, opium in various guises had continued to be popular, both with the public and with the doctors, pharmacists, and general retailers.

Following the earlier defeats, 1876 saw the passage of Poisons Acts in both Victoria and NSW. The Victorian Act, as had the earlier South Australian, required labeling of opiates and the maintenance of sales records, and it authorized doctors, pharmacists and other certified sellers. However, pharmacists were given the power of self-regulation, thus softening their failure to gain a much greater degree of monopoly of medicine sales. The pharmacists had argued that they needed some legal protection against "commercial necessity" in order to provide the highest standards of an "essential community service" (Lonie 1979:24). They were threatened not only by the activities of dispensing doctors and general retailers, but individually by the pharmacy chains. In 1885 the Victorian Act made such chains of shops illegal. In NSW the chains prospered under the 1876 Act, which was very similar to that in Victoria, although it placed greater controls on laudanum. (tincture of opium).

Meanwhile, the manufacturers of patent medicines relied on advertising and the addictive properties of the opiates in their products to maintain sales. Exempted from the provisions of the Poisons Act, patent medicines were freely available to consumers mostly unaware of what they were dosing themselves with. As we have seen, the pharmacists in Melbourne were a more effective lobby than their colleagues in Sydney, and in 1890 the Victorian Poisons Act required a prescription for the sale of hypodermic "tablets" of morphine. In NSW the strength of the general retailers was such that they were able to block a pharmacy bill in 1896, to emasculate an 1897 pharmacy act (which would not have stopped the general sale of patent medicines), and to retain their right to sell such medicines in the 1902 Poisons Act.

In the 1890s there was increasing awareness among the medical profession that the new opiate analgesics were addictive. Given the preeminence of these medicines, many patients had developed a therapeutic addiction, which may explain why drug addiction was usually regarded as a disease, not a socially criminal offense. In 1904 Victoria established institutions to treat "inebriates" (from alcohol or narcotic drugs). A proposal that a doctor's prescription be required for the purchase of opiates and opiate-based medicines was defeated.

Between 500 and 600 different brands of patent medicines were being imported into Australia soon after Federation (Lonie 1979:31), and even their manufacturers acknowledged the problem of therapeutic addiction (McCoy 1980:67). Despite this, these firms were in the vanguard of lobbying to prevent implementation of the Commonwealth Commerce Act 1905, which set limits on alcohol and opiates in imported medicines, and of the Victorian Pure Food Act 1906 which did likewise for domestic medicines (McCoy 1980:68).

While pharmacists were prevailing over the general retailers, pressures for labeling of all medicines and for no-repeat prescriptions for narcotic-based medicines were beginning to build. The pharmacists opposed labeling, and argued that it would promote hardship on the poorer and middle classes, that it would frighten the buying public to know what the medicines contained, and that the public would self-administer if they knew what the active ingredients were, which might induce them to become addicted (Lonie 1979:34). Medicines were exempted from the labeling requirements, in general, but in 1913 Victoria legislated to require prescriptions for "narcotics- (opiates and cocaine), and in 1923 limited the repeat filling of a prescription to four times.

Meanwhile, in 1909 the Western Australian Parliament had rejected a bill to introduce the Poisons Act "tracing controls" for opium. In discussion the Commonwealth Comptroller of Customs suggested that prohibition of opium would simply force up the price of opium on the illicit market, stimulating the ingenuity of smugglers, resulting in more organized importation, which would make tracing even more difficult. Had he but lived..

From the revenue-raising cycle of import duties, the criminal-justice cycle of the prohibitions of non-medicinal opium, to the consumerist cycle of the pure food laws, the new federation was influenced by events abroad. Australia became a signatory to the international Hague Convention on Narcotics in 1913, and a year later introduced a system of import licensing for wholesale and manufacturing chemists, pharmacists, and doctors. With fits and starts, the states proceeded to tighten their legal controls over authorized importers, manufacturers, wholesalers, dispensers and users, with an increasing emphasis on controlling the user.

As the controls tightened, the opportunities for profiteering on the black market grew. Indeed, this was recognized in a 1927 debate on a NSW bill to provide for criminal sanctions against the recreational use of opium and other drugs:

by forcing the minor recreational use of drugs into the nether world of gangs and pushers, the state created the conditions whereby good profits could be realized by [drug] runners and necessarily required the police to seek more and more powers and the criminalizing of more and more related activities (Lonie 1979:72-73).

The pharmacists' advocate claimed that the greater the number of drugs placed on the dangerous drugs list, the greater the potential for crime, the greater the number of opportunities for the black marketeer, and so the greater the need for police. The bill would promote expansion of the police force. Stiff, in 1934 the bill passed, and the pharmacists lost the right to self-regulation.

Perhaps because of the effects of cocaine sniffing after the First World War, or perhaps in response to the criminalization. of the opiates, or the growing black market in recreational narcotic drugs, the image of drug taking was changing (Lonie 1979:64). Rather than an illness, it began to be looked at as a hereditary psychological flaw, with corresponding disapproval: in 1926 the Queensland Health Commissioner referred to drug users as "perverts" (Lonie 1979:79).

The import prohibition on recreational opiates was not unchallenged after 191-5. In response to reports that the Japanese occupiers of Taiwan had adopted a successful policy of opium maintenance and withdrawal, supplying addicts with the highest quality opium in order to stop smuggling and to "Wean addicts off opium" (Lonie 1979:78), the Commonwealth sounded out the states in 1925 about a similar policy in Australia. All were negative. In 1935 the Chief Medical Officer of the Northern Territory made a similar suggestion, but objections were even stronger, (Lonie 1979:79). "Because of the possible international repercussions," a conference of Commonwealth and State "Protectors of Aborigines" in 1937, although expressing agreement with the principle involved, rejected a resolution asking the Commonwealth "to supply certified [opium] addicts in the Northern Territory with opium at a price that would render illicit importation uneconomic" (The Age, 23 April 1937).

Despite the tight controls on legal opiate use, Australian consumption remained high. In 1936 Australians were consuming 14% and 7.5% of the world's legal supply of morphine and heroin, respectively - in per-capita terms three times the British consumption of heroin (McCoy 1980:42,92). Despite U.N. figures that showed that in per-capita terms Australian heroin consumption had risen by 70% since 1935 to the world's highest of 4.2 mg. per person per year in 1951, heroin addiction was reported as "rare" (Davies 1986:40-41). Nonetheless, in 1954 Australia banned heroin imports unconditionally, and it became a prohibited drug in all states except Victoria (Williams 1980:A94). Protests by individual doctors followed, but a request in 1956 by the Australian council of the British Medical Association - forerunner of the Australian Medical Association - that the Commonwealth lift the ban on prescription heroin was unsuccessful (Davies 1986:43). Although it has been possible since December 1974 to import heroin for scientific research - and small amounts have been imported for samples and forensic purposes - the general prohibition has remained in force, despite testimony to the unique properties of heroin for use in the treatment of a limited number of special medical conditions (William 1980:C178-195). Canada has recently allowed heroin for analgesic use in the case of terminally ill patients (Swan 1987).

By 1955 the Victorian police announced that there were no heroin addicts in that state, but by November 1963 heroin - smoked, not injected, in the Chinese community of Melbourne - was back in the headlines. In 1964 a record amount of heroin was seized by Customs officers, and by 1965 increasing numbers of non-Chinese were being charged with opiate offenses. In 1966 a seminar organized by the Department of Customs and Excise in conjunction with the Institute of Criminology in Sydney heard of the growing problem of heroin and morphine abuse in Australia, even before Australian and American servicemen had begun the acceleration in demand for heroin which accompanied the Vietnam war. Kenneth Shatwell suggested that perhaps a system of legally distributed heroin would eliminate growth of the black market and its consequences, but the debate died without issue. In 1966 with nine members the NSW Drug squad made 39 arrests; in 1978 with 46 members the Squad made 1,461 arrests (Davies 1986:41-48).

Two recent surveys (Irving Saulwick and Associates 1985 and 1988) provide evidence of changing Australian attitudes toward heroin addicts. The 2,000 people surveyed in 1985 were asked which of three possible courses of action was "the most important as far as they were concerned." The suggested courses were

• to provide more police resources and heavier penalties for those involved;
• to provide more treatment centers and help for heroin addicts; or
• to provide free heroin or methadone for registered addicts.

We can identify the first with the criminal-justice approach, the second with the treatment approach, and the third with the social-control approach discussed above. The responses were 55%, 39%, and 8% across all respondents. Across subgroups of respondents the criminal-justice approach was most popular (62%) with Liberal Party voters, and least popular (37%) with the 18- to 24-year-olds. Popularity of the treatment approach varied inversely with popularity of the criminal-justice approach, while the popularity of the social-control approach remained low, across all subgroups.

No question was asked about decriminalization of heroin use in 1985, but the 1988 survey focused on this issue:

It has recently been suggested that in an attempt to reduce crime and the spread of AIDS, registered heroin addicts should be given free heroin under supervision. Others suggest that this will not solve the problem and will lead to more addiction. From what you know at the moment, would you support or oppose the supply of free heroin under supervision to registered addicts?

Of the 1,000 registered voters polled, 35% said yes, 60% said no, and 5% were undecided. Among all sub-groups (by age, sex, and politics), support in favor was greatest (41%, 57% and 2%) among the 18- to 24-year-olds, and least (25%, 69% and 7%) among the 55 + age group. Will the growing severity of the AIDS epidemic provide the impetus for us to move to Peyrot's stage five in dealing with heroin use, and accept that the prohibition has failed?

The Size of the Heroin Problem in Australia

Despite the increasing interest in this issue in Australia in recent years, and the expenditure of many millions of dollars of taxpayers' money in parliamentary inquiries and royal commissions, there are no reliable estimates of either the numbers of heroin users or the social cost of their use. There have been virtually no empirical studies of the issue. A document prepared for the "drug summit" by the National Information Service on Drug Abuse (1985) concludes that "there has been little change in overall levels of the legal use of narcotics in the last ten years." Moreover, "the use of methadone increased considerably overall soon after methadone syrup was made available for the treatment of addicts in 1974," - other forms of methadone had been available earlier "but the level of use has been affected by changes in State policies." The document states that there is no reliable evidence to allow an estimate of the number of heroin users, and that no firm estimates can be made of the quantities of illegal drugs used, including heroin. Indeed, there are not adequate data, even at state level, on the numbers of people using drug treatment services, as an indicator of overall drug use. In the absence of such data, the size of the problem can only be deduced from health and crime statistics.

A recent National Advisory Council on AIDS (NACAIDS) study concluded that 5% of adult Australians had injected [illicit] drugs at some time in their lives and that 2% had injected over the twelve-month period of 1986-87 (NACAIDS 1988). For an adult population of 12 million, this corresponds to 600,000 who have ever injected, and 240,000 who have recently injected figures ten times larger than those quoted below, perhaps corresponding to a large population of occasional drug users as found in the United States by Zinberg (1979) and others.

As Egger (1985) comments, royal commissions provide the most authoritative estimates of the size of the problem, and yet virtually ignore the methodology of the social sciences, using instead the legal processes of cross-examination of experienced witnesses, which are inadequate to the task. She makes the valid point that empirical studies costing a faction of the amounts spent on recent royal commissions would yield more-informed decisions, and so better policy. Elliott (1982 and 1983) has scrutinized the Woodward (1979), William (1980), and Stewart (1983) royal commissions in their "mythology formulation" in the light of "recalcitrant and incomplete data" (Elliott 1982:7). The Williams report states that in 1978 there were between 14,200 and 20,300 "hard-core heroin addicts" in Australia (William 1980:A350). The Woodward report estimates that approximately 10,000 people in NSW regularly used illicit opiates in 1978 (Woodward 1979:199). The Sackville report, using the same "indicator-dilution" method, estimated that in 1977-78 there were between 500 and 1,500 non-therapeutic opiate users in South Australia, people whose use of opiates was likely to lead to treatment, arrest or autopsy (Sackville 1979:119). Despite the differences in terminology among the reports, Elliott feels that these figures, together with anecdotal data from professional advisors in other states, lend "some degree of credibility" to the William estimate (Elliott 1982:11). Sandland (1986) reviews the assumptions necessary for use of the indicator-dilution method, and from police arrest data he estimates a more flexible model which takes into account individuals beginning and stopping heroin use, individuals whose arrest histories are aberrant, and changes in police practice; he estimates that the number of heroin users in NSW over the period 1979-1984 trebled, from about 4,000 to almost 12,000.

There is an eagerness to agree on numbers, and perhaps there is an urge on the part of many in the field to exaggerate the numbers to amplify the importance of the issue (Reuter 1984). We should not forget that the licit drugs of alcohol and nicotine are implicated in a much larger number of deaths in Australia than are the illicit opiates. Nonetheless, the research of Sandland (1986) and the figures plotted in Figure 1 strongly suggest that the number of heroin users has been growing amazingly fast, despite the prohibition. If we accept that there were about 8,000 regular users of illicit opiates in 1978, what can we say about the numbers of heroin users then, and the situation more recently? It is well known that heroin is overwhelmingly the users' illicit opiate of choice; moreover, as Table 1 shows, no more than 25% of opiate-related charges involved other drugs. Let us assume 8,000 regular users of illicit heroin in 1978.

From Table 1 and Figure 1 we can see several indicators of more recent heroin use. The amount of heroin seized by federal agencies has fluctuated, but in 1983 was five times the figure for 1978. Criminal charges associated with "narcotics" peaked in 1978, as did charges associated with heroin specifically. What can we make of these? None is an ideal proxy for illicit drug usage: deaths may well be related to cumulative usage in previous years; the amount of drug seized is a function of the size of each shipment, the number of shipments, and the level and effectiveness of law-enforcement activity, and numbers of criminal charges also reflect the numbers of users, the amount of trafficking, and the level and effectiveness of law-enforcement activities. Figure 1 shows a steady increase in the four indicators of NSW heroin users (Sandland's method), morphine-type dependency deaths in NSW, opiate-related convictions in NSW, and Australian opiate-related deaths. All have tripled over the period 1980-1985. The series which has risen most smoothly since 1978 is that for opiate-related deaths. On the basis of this series, and given the confounding influences on the other series, we shall work with a figure of 20,000 regular users of heroin in 1983.

This estimate approximately agrees with press reports of estimates by Paul Fitzwarryne's Health Research Associates of between 15,000 to 20,000 "heavy narcotics users," most of whom are between 21 and 35 years of age, and 80% of whom are male (Lawrence 1985). Fitzwarryne is also estimated that "heavy users" typically each spend $80,000 to $100,000 a year on drugs. If the average user consumes for only 70% of the year (256 days), and if Fitzwarryne's estimate of 5%-pure heroin costing $250-$400 per gram is correct, and if the user buys all his drug at retail or "street" prices, then he is consuming on average between 39 mg. and 78 mg. of pure heroin per consuming day, or between 10 and 20 grams of pure heroin a year. If some purchases are made at a lower, wholesale price - and the Woodward report assumes that on average a third are - then the amounts consumed will be larger.

Nonetheless, the amounts implicit in Fitzwarryne's figures are close to amounts calculated by Elliott (1982:115) from Woodward's estimates: 67 mg. per consuming day, or 16.2 grams of pure heroin a year. Elliott refers to Moore's (1977:90) estimate of 45 mg. a day or 9.4 grams a year and Holahan's (1972:290) of 55 mg. a day. Moreover, Fitzwarryne's estimate of a "landed" price of $25-$40 per gram of 80-90%-pure heroin is close to Elliott's figure for 85%-pure "landed" heroin in 1977-78 of $34.30 a gram in 1983-84 dollars. Fitzwarryne's figures imply a maximum gross profit of 1,000% as the kilogram of heroin moves down the distribution chain from the wharfs toward the street, being successively cut and divided into smaller quantities, assuming no final sales at wholesale prices.

We can compare Fitzwarryne's figures with an analysis by Leader-Elliott (1986), based on Dobinson and Ward's (1985) survey. He extrapolates from a small number (78) of user thieves who reported a median income of $1,500 per 1000 week from property crime, a median heroin consumption of 1.4 gram (pure) per week, and a median expenditure of $2,000 per week (the difference mainly from dealing) to a group of perhaps 600 user thieves in NSW who were responsible for about one-fifth of the unrecovered stolen property in 1981. At the same time, Leader-Elliott postulates a further 10,000 users buying a weekly 10 mg., which is 5 grams a year, for about $7,800 per user. He argues that users in other states buy less individually for higher prices than do the users in NSW.

Figure 1
Indicators of Heroin Use, 1980-1985

How is the money for the habit obtained? In the United States, surveys have shown that over half of the user's weekly income may come from the "victimless" crimes of selling to other users, prostitution, and gambling; most of the balance may come from the proceeds of acquisitive crimes, and only a small amount from crimes against the person (Marks 1974:70). As Eliott (1982:23) points out, the need to engage in criminal activity to finance a heavy heroin habit is, in itself, a deterrent to use, so that users may well be accomplished criminals before they start using heroin. Wardlaw's (1981:45) study of the criminal records of 1,314 randomly chosen Australian drug offenders led him to conclude that the tendency for the drug habit to cause the user to embark on a criminal career had been exaggerated. Dobinson and Ward (1985:48), in their study of 225 property offenders in NSW jails, found that, although 72% reported a first instance of property crime before the first use of heroin, only 42.6% reported that they progressed to "regular" crime before they became regular heroin users. They also found that as the rate of heroin consumption increased, so did the amounts spent on the drug and the amounts of money from property crime. Their findings agree with those of Brown and Silverman (1974), Silverman and Spruill (1977) and Parker and Newcombe (1987) that there is a broad relationship over time between the number of regular users - addicts - and the property-crime rate, and suggest that another of Brown and Silverman's findings - that there is a short-run positive correlation between increases in the price of heroin and increases in property crime - might also apply in NSW.

Fitzwarryne is reported as estimating that $386 million would be used to purchase "narcotics" (opiates) in Australia in 1984-85, comprising property theft of $278 million (74%), prostitution $82 million (22%), other illegal activities $24 million (6%), and legal income $2 million (0.5%) (Lawrence 1985). From his implicit assumption that thieves can realize 48% of the value of stolen property, we can calculate that theft to finance opiate purchases would have been responsible for almost a third (32.2%) of the $1,800 million worth of property stolen in 1984-85. Fitzwarryne estimated that the "narcotics industry" employed 310 people full time and 1,650 part time, not counting the 20,000 "heavy users" employed indirectly in raising the money for their next fix. He forecast a profit to the "industry" of $295 million, net of import costs, of the legal wages forgone by people employed in the "industry," and of "8 million to $10 million for bribing officials, such as police and customs officers" (Lawrence 1985).

As these estimates suggest, the consumption of heroin imposes significant costs on the rest of the community, including the involuntary redistribution of the addicts' incomes from acquisitive crimes, and the deadweight loss associated with the imperfect "fence" market. The community spends money to prevent crime and, later, to apprehend, try, punish and rehabilitate criminals. These "social costs" also include medical expenses, forgone productivity, and premature deaths of addicts. The National Information Service on Drug Abuse (1985) reported that in 1983 opiates were involved in 155 cases of accidental deaths and in 41 cases of suicide; the report estimated that 7,560 years of life were lost in 1983 due to deaths caused by opiates. Finally, the unquantifiable buy nonetheless real costs of fear and anxiety, avoidance of normal activity, and disruption of community life must not be ignored.

Other social costs are more sinister. Packer (1972) lists the existence of a profitable black market which leads to the consolidation of organized crime, undesirable police practices, including corruption (Kaplan 1983:97-98), the regressive burden on the poor who live in areas of high addiction, and the pressures on doctors who might legitimately want to prescribe these drugs. Several seminars at the Institute of Criminology, University of Sydney Law School, have focused on the existence of corruption in the criminal-justice systems of Australia (Stewart 1984; Cunliffe 1985; Staples 1985; Wardlaw 1986).

In the past three years the severity and ultimate extent of the AIDS epidemic has been seriously debated. The initial carriers of the HIV virus into Australia were likely male homosexuals and, so long as the disease was confined to this group, there was no implication for drug policy. But, the sharing of needles among intravenous drug users (IVDU) has become both a second mechanism of contagion and a means - via heterosexual drug users and prostitutes - of infecting the majority, heterosexual group. Unless urgent action is taken to reduce the transmission of the HIV virus among IVDU, AIDS experts predict a second wave of HIV infection in Australia (National Advisory Council on AIDS 1988).

Concerned for the health of both groups in society, AIDS specialists have argued for needle-exchange schemes, so that at least there is no need for users to share unsterile needles and perhaps the HIV virus. At one Sydney hospital 10% of exchanged needles show seropositive blood, compared with 1% twelve months earlier (National Advisory Council on AIDS 1988). Unfortunately, a group at risk both from homosexual contacts and from shared needles - male prisoners - has not been able to benefit from condoms or clean needles, due to intransigence on the part of prisoner guards. However, AIDS public health experts argue that the effect of needle-exchange schemes is limited, and that to reduce the AIDS risk "a pilot project should be established to evaluate the provision of injectable substances to IVDU in a single-use syringe in carefully selected cases" (National Advisory Council on AIDS 1988). This had led to negative responses from the leader writers, but unfortunately provides an additional argument in favor of relaxation of the heroin prohibition, as Elliott (1985) sadly foresaw. Moreover, illicit IVDUs, with AIDS are often in a poor state of health before IUV infection occurs and may have few social supports other than dependents who are also at risk of infection. These costs are very difficult to put into figures, but exacerbate the social costs of AIDS itself, conservatively estimated to be $22,218 million (Coe 1987).

As the Saulwick surveys (1985) showed, Australian views of the addict as a criminal rather than an ill. person - at least to the extent of preferring to increase the pressure of the criminal-justice system on him rather than to cure him or to attempt to reduce the social costs by providing free heroin - appear to be changing, perhaps in response to the AIDS epidemic. Since it has been clearly established that, taken in proper doses, heroin has few if any permanent physical or psychological effects (apart from addiction itself), some have argued that most addicts would function normally and lead every-day lives if given a steady supply of good-quality drugs of known concentrations. Street heroin is always adulterated, sometimes with dilutants harmful to the addict, and sickness can also be caused by careless injection of the drug (see references in Marks 1974).

Amy attempts at solving "the heroin problem" must be judged by their ability to deal with both aspects of the issue: that of the individual user and that of society. Moreover, the solutions' long-run consequences must also be considered.

It is not immediately obvious what the objectives of possible solutions should be. If the prohibition on heroin use were effective, there might still. exist other consequences, but it's unlikely that they would be seen as part of the "heroin problem." Sadly, the prohibition is not effective. Should we say that this lack of success is not evidence that the policy of prohibition was always doomed to failure, but rather that the policy has been applied insufficiently rigorously, and modify it accordingly, as described by Peyrot's fourth stage (Peyrot 1984)? This, after all, has been the response of several of the inquiries and royal commissions, the Williams report (1980) in particular. Should we see the lack of success of the prohibition, despite our best endeavors to date as a society, as evidence that the policy and perhaps even the aims underlying it need wholesale revision, as described by Peyrot's fifth stage? We intend to argue that the time is ripe for such a wholesale revision of goals and policies, of ends and means.

The framework we shall use is that of economic efficiency, in which costs and benefits are equated at the margin (Culyer 1973). We shall. argue that the social costs of "the insanely expensive and damaging" (Elliott 1982:43) policy of prohibition far outweigh the social benefits of the policy. We have listed possible costs to society above. The costs to the individual user are not so easily handled, but it can be argued that the attempted prohibition has severely increased these costs as well. They include ignorance of the purity and strength of the street heroin, the risk of apprehension and jail , A and the risk of infectious diseases from sharing needles. Recently, as predicted by Elliott (1985), AIDS has been spread by needle-sharing. To reduce the public health risks, governments have instituted needle-exchange schemes for civilians, but not yet for prisoners. This shows the way forward - with a supply of legal, low-cost heroin, these costs would largely disappear for the existing user. It is not clear how these costs to the individual users should be weighted in evaluating alternative policies.