Cocaine Economics and Banana Republics

Just a quick one today. Over the weekend the better half and myself have started watching HBO’s Boardwalk Empire, a show about gangsters set during prohibition.

I’m not entirely sure why but it got me thinking about the import and export of cocaine.

The idea that stuck in my mind the most came from a throwaway line in the book The White House Mess by Christopher Buckley, a satirical memoir set during a fictional presidency that in real life would have been Ronald Reagans second term in office. During the course of the book it is said that the Colombian president decides to base the Colombian economy on the price of cocaine in Miami Beach, rather than on any particular currency.

Putting aside the legal status of narcotics, this doesn’t sound like such a terrible idea. After all economies have been based on commodities values in the past (ie gold)but the ingenious thing about basing an economy on cocaine is that (again putting aside legality)one of the major things effecting demand is supply, and vice versa
And due to the addictive nature of the substance it creates it’s own circular flow of income.

Now that’s not to say that there wouldn’t be other issues that wouldn’t effect price, such as changing attitudes towards drugs, public awareness or god forbid the legalisation of the stuff, but as a basis for an economic ranking you could probably score pretty high with cocaine.

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