Radical Reform

New Zealand's Path to 21st Century Prosperity | Mitchell W. Palmer

Drug Policy

If you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. – Milton Friedman [1]

Drug laws are in a worldwide state of flux. Many nations and subnational jurisdictions have begun to reform their drug laws, mostly beginning with cannabis. However, New Zealand, normally a bastion of liberalization, is stuck in 1970s.


Drug liberalisation is a global trend for good reason: we are finally realizing that Nixon’s War on Drugs has been a failure. Many nations have made significant progress already: Portugal decriminalized all drugs in 2001 while states across the United States – including the largest, California - have begun to legalize cannabis for medical and recreational usage. New Zealand, on the other hand, lags behind.

It is true that our drug laws have less significant progress to make than those of other nations. We, for example, have cannabis scheduled under Class C of our Misuse of Drugs Act while the United States has it, nonsensically, listed in Schedule I of their Controlled Substances Act above substances like cocaine and amphetamines. But still, we can improve.

Why should Kiwis go to jail at all – even if it is only for 3 months – for taking a substance that has no lethal dosage like marijuana? Or one that is harmful only to themselves? This is an inefficient use of our expensive prison system which – according to Corrections data - costs over $110,000 per year, per prisoner (Hurley, 2018). It is also a massive waste of police resources. As Georgetown law professor Randy Barnett so laconically put it, “Every hour spent investigating a drug user or seller is an hour that could have been used to find a missing child.” (Barnett, 2009)

The criminalization of narcotics is an entirely counterproductive policy, which makes the state guilty – essentially – of culpable homicide. Here, I shall leave aside my analysis of the general problems with mass incarceration – which is entirely applicable here and can be found in the previous Crime and Justice chapter – and focus on the particular problems with and alternative approaches to drug prohibition.

As Friedman suggests above, the criminalization of drugs functions as government protection of the drug cartels and organized crime. The lack of legal dispute settlement means the only people who can compete in the drugs market are those with a propensity to look after their own interests, including violently if necessary. That drug dealers are not able to report crimes against them means competition, rather than being on price and quality, sometimes ends up as violent turf battles for control of certain selling territories. A Ministry of Health-commissioned study (McFadden Consultancy, 2016) found that organized crime proceeds from the sale of illicit drugs in New Zealand totalled $629 million in 2015, of which $70.4 million was reinvested into further criminal activity.

The prohibition of drugs also incentivises the creation of new, more potent narcotics – like the synthetic cannabinoids which are currently the subject of great public distress. As it is quite difficult to transport illicit drugs, because of enforcement actions, users wish to get as high as possible (and dealers wish to make as much money as possible) from the smallest possible package. Therefore, producers increase the potency of their drugs. Such high potency drugs are far more dangerous because overdosing requires only a small mistake in measuring quantities. This phenomenon is so predictable it has been called the Iron Law of Prohibition: “the harder the enforcement, the harder the drugs” (Cowan, 1986).

We saw this Iron Law play out during the United States’ alcohol Prohibition (Thornton, 1991). Many users switched from the beer and wine that were common before and after Prohibition to spirits, which were far easier to carry surreptitiously: Spirits jumped from accounting for approximately 40% of alcohol sales to almost 90% in the first year of Prohibition. This led to the entirely unintended consequence that per-capita alcohol consumption, as measured by equivalent quantities of pure alcohol, actually increased during Prohibition (Warburton, 1932), with all the social consequences that entails, and which Prohibitionists sought to combat. The same hard-f0r-soft substitution is occurring in New Zealand’s drug market.

Another sad consequence of drug prohibition is its effect on user safety. If a distillery created an impure alcohol mixture that threatened user safety, it would be prosecuted and held accountable. Even if it wasn’t legally punished, its patronage would fall dramatically as soon as this reality made the newspaper. Unfortunately, such impurities and false advertising are common in the illegal drugs market and consumers have no recourse to seek reparations – the Consumer Guarantees Act does not apply to narcotics; they cannot even warn others of the possible dangers of a supplier, for fear of retribution. These concerns are compounded by the reluctance of users and their friends to seek medical assistance when overdoses and other ill-effects of illicit drugs occur, because they are afraid of legal consequences.

Those who support the continued criminalization of drugs justify their position by highlighting harm done by drug users to others. If this reasoning were applied rationally and consistently, many other substances and products would be banned. Chief among them would surely be alcohol, managing the harmful use of which takes up 18% of the Police budget (Auckland Regional Public Health Service, 2010). There is zero mainstream support for a return to the flawed era of dry counties and Prohibition.

The Government’s new policy to devolve to Police, in law, the responsibility of using ‘discretion’ in deciding whether to prosecute drug crimes is a very poor answer. Discretion to prosecute already exists. The problems of the war of drugs remain. In addition, discretion without judicial oversight may simply amplify the discriminatory outcomes of drug prohibition. Of course, in New Zealand, police officers are overwhelmingly decent public servants. Like all, however, they are subject to unconscious biases, which may effect who they decide to prosecute. This is particularly true when police officers and prosecutors are overwhelmingly exposed to crime committed in certain neighbourhoods and by certain groups. This may breed discriminatory outcomes.

Alternatives to the Status Quo

In essence, a significant portion of the ill effects to both users and others in society caused by drugs are the direct effect of their prohibition and could disappear with a common-sense drug policy. So, where would we find one?

Switzerland, one of the most conservative countries in Europe, has adopted the least liberal system that I investigated. The Swiss model, however, is still more liberal than New Zealand’s approach. Their policy is summarised as ‘prevention, therapy, harm reduction, and prohibition’. It allows heroin to be used by approved providers in treatment and treats drugs primarily as a health issue. It has successfully achieved its goal of reducing harm from illicit drug usage. The country has cut both HIV infection rates from infected needle usage and overdose mortality in half and significantly reduced user criminality (Csete, 2010). The infamous ‘needle park’ in the centre of Zurich is a thing of the past.

The United States, the spiritual home of drug prohibition, has also experimented with liberalization, in individual states. To date, only cannabis has been the subject of significant reform, but many jurisdictions, including the most populous state, California, and the capital district, have fully legalized the drug. This legalization has been successful across the country, with no discernible change in consumption, teen usage in fact decreasing, increased taxation revenue, decreased correctional and law enforcement spending on drug issues and no discernible negative effects on crime, road safety and the economy (Dills, et al., 2016). Given it is marijuana, substantial health effects are probably unlikely.

The most radical example occurred in Portugal in 2001, where the small-scale possession of all drugs was decriminalized. They remained illegal, but the Portuguese government treated the possession of them as a public health matter and an administrative violation rather than a criminal matter. The reforms have been a resounding success. Lifetime prevalence rates of most drugs have decreased since the reforms as have drug-related mortality rates. Compared to the rest of Europe, Portugal in fact has lower cannabis and cocaine prevalence rates for both the overall and youth population (Greenwald, 2009).

Unfortunately, no country has adopted Milton Friedman’s preferred model of total legalization for every drug of all classes, so we cannot be sure of the practical outcomes of this. However, we can apply some rational analysis.

With the creation of a safer and legal market, one would expect to see expanded demand for the drugs, from curious individuals who are currently afraid of legal consequences. However, this would probably not be significant for the hard drugs: those who are not concerned about the possible addiction and overdose consequences are probably not significantly deterred by existing legal consequences.

We would also expect to see a significant fall in potency-increasing innovation, as the law enforcement avoidance incentive would no longer exist. However, whether we would see a reduction in potency itself (rather than its rate of increase) is less sure: Addictions may have already formed. However, in the Alcohol Prohibition example, spirit consumption did fall significantly (as a percentage of units consumed) after Prohibition ended to slightly above the previous rates (Thornton, 1991, p. 3).

It is also relative assured that, provided taxes and regulatory requirements imposed by government were not excessive, the legal and regulated market would displace illegal and criminal operators. This is because consumers wish to be assured of the quality and safety of their drugs, which they could be in the regulated market.

The Way Forward

We ought to adopt a legalized and regulated market for all drugs. This market should have strong age limits, prescription-only sale of the hardest drugs, the typical bans of advertising, and compulsory labelling requirements, including of safe dosages and ingredients. We should also divert significant funds from existing enforcement efforts into rehabilitation efforts. This would be a more liberal mix of the Portuguese, American and Swiss approaches, aiming to ensure consumer safety – with the realization that drug use is essentially unavoidable.

To begin, the Misuse of Drugs Act, and other related provisions in other legislation should be repealed and replaced by a new legislative framework, the Drugs Act.

This Act should create a licensing system for drug treatment centres. These centres would be private enterprises staffed by qualified doctors, nurses, psychiatrists and others and they would, in some cases, be subsidized by the Government. Such Accredited Drug Treatment Centres (ADTCs) would be granted special exemptions to the new rules regarding the dealing and growing of different drugs. Those wishing to start an ADTC would be required to meet good character requirements and submit to the Police details of how they intended to purchase and store the drugs. Employees would also be required to submit to background checks and harsh penalties would be imposed on both employees and centres who improperly distributed drugs.

In specific terms, however, let’s look at what this liberal approach would look like for various drugs.

For cannabis, I would propose full legalization. It would be essentially regulated like spirit alcohol: Dispensaries would be subject to licensing authority approval (and sales would only be permitted in dispensaries, not supermarkets, for instance), sales would be excise-taxed (though not to the excessive levels of tobacco, as discussed on p. 49), television advertising would be banned, smoking in protected environments would be illegal. Cannabis is relatively risk-free – suggesting that a hands-off approach will have very little public health cost. However, use by younger people is the greatest concern. However, the legal approach is the one which manages this risk better: Dealers don’t check ID, but dispensaries would, at risk of losing their license to trade and being fined significantly.

For synthetics, the scourge of modern New Zealand, the answer is more complicated. Like all products sold in New Zealand, if their use resulted in the death or serious harm of a user, the retailer and producer should be held both criminally and civilly liable, if it was a result of their negligence or malfeasance. The mislabelling of drugs too should be heavily punished. However, the particular controls placed on different synthetics should depend on their composition. Not all synthetics are alike. Those containing dangerous opioids, like fentanyl, should be illegal for sale without a prescription – the dangers of overdose are too high. Others could be legal, within the strict guidelines proposed. It is safer if they are subject to open regulation than back within the black market. All should be able to be tested. Police stations and other public facilities, where practicable, should be equipped to test for the most dangerous parts of synthetics, without exposing the tester to legal jeopardy. Immunity should be granted, as a matter of policy and in public, to users who report dealers of dangerous drugs.

For the highest profile drug, methamphetamine, and other hard drugs, the approach I propose is simple: Addicts should be helped off the drug, new recruits given no chance to start. Therefore, meth and the other most dangerous drugs should follow the Portuguese model of decriminalization whereby the possession of small amounts of these drugs without a or in excess of a drug treatment prescription would become a health issue rather than criminal offence. Those caught using such drugs without prescription for the first time would be required to submit to a treatment centre for an assessment. If they were found to be addicted, ADTCs could embark on a course of drug-replacement therapy and rehabilitation, while if they weren’t, they could be released with a warning. Records should be taken of people caught in possession of such hard drugs, but they should not be available as part of a criminal record check. Doing so might cause them to become or remain unemployed, feeding desperation, a well-known path into drug reliance. Dealing, producing and otherwise profiting by non-ADTCs from such hard drugs should remain a serious criminal offence. The endangerment of children with them should also remain a serious offence.

In general, drug policy should be determined by the harm profile of the drug. This should be determined by evidence, not politics. We should establish a Substance Policy Board, headed by an appropriate medical or scientific officer – perhaps, the Prime Minister’s Chief Scientific Advisor – to advise the Government on the medical and scientific evidence on controlled substances, including alcohol and tobacco. Police and Corrections should, of course, be included on such a board, as frontline agencies seeing most of the harm. No return, however, should be made to the inherently flawed policy of prohibition.

Overall, this plan should result in lower costs for the New Zealand taxpayer. It would reduce expenditure on incarceration and law enforcement for drug use and would reduce expenditure on the benefit dependence often caused by imprisonment. However, it would increase expenditure on drug and addiction treatment and on the enforcement of licensing requirements, but this should be more than balanced by the reduced expenditure on other areas and the taxes levied on soft drugs – i.e, marijuana and the like.

It should also result in better outcomes for drug users and would allow them to contribute to society in a more meaningful manner. This decriminalization and legalization model means users would avoid imprisonment and a criminal record allowing them to contribute to society in employment. Those addicted would be able to improve their health and lose their dependence through the treatment-based approach. This approach should also allow users of more harmful drugs to continue to provide for their families while undertaking treatment, lessening the load on the Child, Youth and Family system and improving outcomes for their children.


While the liberal extremist within me is offended at compulsory treatment and the continued illegality – if not criminalization - of a subset of drugs, it must be so in order to protect society and the vulnerable. I am not quite so brave as Milton Friedman. Society is entitled to intervene in such a case because addicts cannot be considered to be entirely rational, and neither can those about to start an addiction. This, however, should not weaken the case for widespread drug reform. Prohibition, as it did for alcohol, has done immeasurable damage.

Policy Recommendations

  1. End the prohibition of drugs
  2. Legalise and regulate, as with spirit alcohol, cannabis and other drugs with similar harm profiles
  3. Permit the testing of all drugs for dangerous components and grant immunity to users who report dangerous dealers
  4. Create a regulated sector of drug treatment centres, to which all those caught in possession of hard drugs will be referred.

[1] This quote comes from an excellent 1991 (far before mainstream opinion moved towards drug liberalization) interview of Professor Friedman where he proposes the full, uninhibited legalization of all drugs, from marijuana to methamphetamine – a more radical approach than mine.