Away from Cannabis Leniency

Away from Cannabis Leniency

Kim Moeller, Centre of Alcohol- and Drug Research, University of Aarhus, Denmark

Background and Objectives

In the past seven years, Denmark has moved away from thirty years of lenient cannabis policy. The leniency extended to users and in practice retail markets as well. In the context of the current international discussions on cannabis control policy, this makes for an interesting case study, inasmuch as Denmark is unique in moving away from leniency, towards stricter control, both in the written policy and in the implementation thereof. This paper is part of an impact study on the effects of this cannabis policy change and is inspired by the five areas of unintended consequences in the Commission on Narcotic Drugs (2008) Making drug control ‘fit for purpose’: Building on the UNGASS Decade. The following analysis focuses on the questions of crime displacement and black market organisational structure.

Timeline: legislation and police crackdowns

2001“Hashclublaw(s)”. Bill no. 471 of June 7. 2001, Bill no. 447 of June 7. Police were given access to administratively close down fixed storefront locations used as cannabis retail outlets.

2003“Law against Biker-crime and other organised crime”. Bill no. 436 of June 10. The purpose was to improve the police’s investigative capabilities by allowing the use of undercover agents in less serious drug cases. A reversed burden of proof in asset forfeiture from drug crimes was introduced.

9 month video surveillance of Pusher Street in Christiania begins.

2004Crackdown on Pusher Street March 16.

“Stricter Effort against Drugs”. Bill no. 445 of June 9. Up-penalized possession of cannabis, defined as amounts less than ten grams, from a warning to a fine of 75 Euros.

20056 months video surveillance of Lithuania’s Square and subsequent arrests of participants.

2007“Increased fine levels in drug cases”. Bill no. 526 of June 6. 2007. Possession fines were increased to 350 Euros.

Data and method

Two hypotheses are formulated using theories on law enforcement interaction with retail drug distribution (Curtis and Wendel 2000, 2007), drug market cost structure (Caulkins, Johnson, Taylor and Taylor 1999; Kleiman 1989), and crime displacement (Shephard and Blackley 2007).

The first hypothesis is tested using criminal- and police statistics. This data is publicly available.

The second hypothesis is tested using data from police surveillance, undercover investigation, and court transcripts of witness testimony, from the cases against participants in two street-level retail markets: Pusher Street in Christiania and Lithuania’s Square (LS). This data was acquisitioned from Copenhagen police.

Policy Displacement

The declared ambition of the change in Danish cannabis policy was to deter sellers and buyers at the retail level. This focus is obvious in the development in the relation between amounts of cannabis confiscated and number of confiscations, shown in figure 1.

Figure 1

While the amounts annually confiscated declined from 2.9 tonnes in 2000 to less than a ton in 2007, the number of confiscations doubled was between 2000 and 2006.

Shepard and Blackley (2007): The Impact of Marijuana Law Enforcement in an Economic Model of Crime suggests that:

“…drug enforcement may increase nondrug crime…The results suggest that marijuana arrests are associated with increases in homicides, burglaries, motor vehicle thefts, and larcenies along with subsequent increases in hard drug arrests.”

Hypothesis 1

The increased law enforcement focus on cannabis arrests between 2000 and 2008 has diverted police resources and indirectly lead to an increase in homicides, burglaries, motor vehicle thefts, larcenies, and hard drug arrests.

Analysis

Since 2000 there has been an absolute drop in most of the non-drug crimes examined, except for homicides/attempted homicides up 20 % from 213 in 2000 to 256 in 2008. All the other forms of crime examined are down, notably motor vehicle theft is down 35 %.

Figure 2

In the same time period there has been an overall drop in charges for penal code violations of 6.5 %. Is the decline in the above examined types of crime relatively smaller?

Figure 3 below illustrates that the combined level of examined crimes is stable.

Figure 3

Thus, figures 2 and 3 indicate that the increased enforcement of cannabis has not resulted in a crime displacement towards motor vehicle theft, larceny, and burglary. Perhaps the significant increase in homicides and attempted homicides is partly attributable to cannabis market conflicts, but that question remains speculative at present.

Hard drug arrests have not been included in the above figures because Danish crime statistics do not distinguish between the various drugs. Police drug confiscations are used as a proxy for hard drug arrests in figure 4 below.

Figure 4

The relative increase in number of confiscations of hard drugs between 2000 and 2007 was 73 %. Where figure 1 showed that the increase in number of cannabis confiscations was accompanied by a decline in the total amount, indicating a shift of enforcement focus from the wholesale to the retail level, this is not the case for amphetamine, heroin, and cocaine. Total amounts confiscated increased by 68 % from 2000 to 2007, as shown in figure 5 below.

Figure 5

Analysis and results

Judging by the proxies for hard drug arrests, figure 4 and 5, there has been a significant increase in both numbers and magnitude of confiscations of hard drugs. This increase has not been paralleled by an overall increase in burglaries, larcenies, motor vehicle theft, and homicides, contrary to what Shepard and Blackley (2007) found in their analysis. The declared intention of shifting enforcement focus towards retail level cannabis distribution without requiring further police resources has been implemented without an increase in the other categories of crimes examined above.

Hypothesis 1 is disconfirmed.

Black Market Cost Structure

The proclaimed intention of the move away from cannabis leniency was to make retail level distribution riskier, less overt and less profitable. To date there has been two court cases against distributors from retail markets in Copenhagen. The cannabis retail selling operations in Pusher Street and on Lithuania’s Square (LS) were identical in their “technical organisation”, with both being open street markets, but their “social organisation” differed (Curtis and Wendel 2000, 2007). Christiania has had more than thirty years of experience with cannabis distribution and a dominant market share (Møller, forthcoming). According to Kleiman (1989, 58) this should make the distribution more cost efficient than in the “in-experienced” high cost sector of a street market, such as LS.

Caulkins, Johnson, Taylor and Taylor (1999) described four types of sellers in NYC retail crack markets and the share of revenue they retained:

1. Entrepreneurs who own the drugs they sell retain the largest share (about 50 percent)
2. Independent consignment sellers retain less (about 25 percent)
3. Consignment sellers who operate within fixed locations or ‘spots’ retain still less (10 percent), and
4. Sellers who were paid hourly to sell from spots retained the smallest proportion (3 percent).

Firstly, do these ratios also apply to street level cannabis distribution in Copenhagen? And secondly, what are the differences in cost structure specifically the earnings of the seller?

Hypothesis 2

It is less profitable to be a seller in LS than Christiania because of the social organisation and higher expenses.

Pusher Street: Social Organisation

The social organization of Pusher Street was similar to a “socially bonded business” (Curtis and Wendel 2000, 133-6). The “extra economic social ties”, were based on the participant’s integration in the neighborhood via the circulation of profits and a set of formal conduct norms that prohibited the sale of hard drugs. The cannabis distribution was an accepted part of the community (Curtis and Wendel 2007, Møller 2008).

Analysis and results

Based on qualitative descriptions in the court transcripts, the seller’s role in Christiania is reminiscent of an “Entrepreneur” or an “Independent consignment seller”. Close ties between the wholesale distribution level and retail sales, makes the distinction between the two seller types in Christiania a matter of individual position in the hierarchy of selling locations.

The calculations (see Appendix 1 and 2) are based on the model introduced by Caulkins, Johnson, Taylor, and Taylor (1999).

The expenses of running a Booth in Christiania around the clock are estimated at somewhere between 8,196 – 15,396 kroners (Danish currency, about 1/7.5 of a Euro), depending on how many runners were employed and how big the hourly “tax” to the Hells Angels was (Kilderapport).

The expenses associated with selling in Christiania constituted a substantial share of the retail price at 13 % - 24 %, compared to 2.3 % in Caulkins et al (1999, 327). These expenses were borne by the sellers in Christiania, which means that the seller retains “only” 41 % - 52 % of the daily revenue. The Markup is defined as the “ratio of sales revenue to the amount the dealer paid to acquire the drugs”, i.e. excluding the expenses, was 3.5 in Christiania.

Compared to the results found by Caulkins et al (1999, 329-331) this puts the sellers in Christiania safely among the “Entrepreneurs” regarding the percentage of revenue retained. In practice their seller “type” resembled more of an independent “consignment seller” since most didn’t own the drugs they sold (Police evidence, IOUs). Compared to the consignment sellers NYC selling cannabis in Christiania was very lucrative.

Lithuania’s Square: Social Organisation

Everyday from 11 pm to 11 am, 15 people shared the duty of running a cannabis “spot” (Curtis and Wendel 207, 876). A Dealer, a runner, and two look-outs were working in conjunction with an “Administrator” based in nearby locale. In the calculations (Appendix 2) it is assumed that the Administrator bought the drugs on consignment from intermediate level wholesalers.

Analysis and results

The social organization of LS resembles a “corporate style” distribution with divisions between ownership, management, and labor (Curtis and Wendel 2000), i.e. the intermediate levels wholesalers, the Administrator and the group of sellers, lookouts, and runners.

Each day an amount of hash and 200 pre-rolled joints were delivered to the “spot”.

The labor roles were interchangeable, and everyone worked for an hourly salary.

The role of the seller in LS was not clear cut according to Caulkins et als (1999, 324) description. The most important characteristic is that the seller in LS was paid by the hour, similarly to the least independent and least profitable seller type no. 4: “Sellers who were paid hourly to sell from spots retained the smallest proportion (3 percent).” On the other hand, the social organisation of the crew and their link to management through the Administrator carries characteristics similar to type 3 sellers, who work on consignment, and retain 10 % on average.

The sellers in LS retained approximately between 8 % and 10 % (Appendix 2) of the daily net revenue. The difference is that the seller on LS worked for an hourly wage, and resembled more of a type 4 seller and therefore would be expected to retain a smaller share.

The known expenses resemble the level in Christiania at 13 % – 17 %, but there was no information on a “tax” for using the spot.

The markup was very steep at 5.4 – 6.8.

An explanation for the steep markup and profitability of the “spot” in LS is the low purchasing expenses of the joints. Most of the labourers on LS would also work 12 – 15 hours a week rolling joints, at an hourly salary of between 23 and 52 kroner. Had this not been the case the purchasing price of the 200 daily joints would double up to the level of purchasing price found in Christiania at 18 kroner a piece. Unfortunately the distribution of work for the individual labourers between selling at 200 kroner an hour and rolling joints at 23 to 52 kroner an hour is not known. The increase in purchasing price would actually increase the sellers retained share, were he not to participate in the joint rolling production. Since it appears from the court transcripts that all of the participants at the labour level took part in all the tasks, the above estimate of the seller retaining between 8 % and 10 % is too high.

A comment on expenses. Note that the hash content is suspiciously identical to the average of the joints sold on Pusher Street as measured by the Forensic Institute, but significantly lower than what the Administrator supplied for the purpose, 0.33 gram as opposed to 0.5 gram. The hourly salary for the people producing the joints was estimated at less than minimum wage, after taxes, in Denmark, which could indicate either a non-formal compensation for the low wages or a hidden expense in the form of cannabis use during the production.

Discussion

Despite of the obvious differences in time, place and drug, the characteristics of the technical and social organisation of the market and the relationship between the seller’s role in the distribution and his retained share was similar to those described by Caulkins, Johnson, Taylor and Taylor (1999), in both cases.

Hypothesis 2 is confirmed, with some qualifications listed below.

According to Kleiman’s (1989) Learning Curve Hybrid Theory, the sellers in Christiania will have low operating costs due to the social circumstances of its organisation as well as thirty years of experience in distributing cannabis. Conversely the market in LS won’t have these advantages and the seller’s role will be less profitable. In this light it seems improbable that the relative share of expenses to the daily turnover were lower in LS than in Christiania. Beyond the low purchasing price of the joints the lack of information on “tax” is a factor. In Christiania the pooling of expenses for lookouts was more cost efficient.

The sellers in Christiania retained a much larger share of – a much larger – revenue, due to working on consignment as opposed to being paid by the hour.

In both instances of the results of drug enforcement has been to harvest “the low-hanging fruit of the markets” (Curtis and Wendel 2007, 885). In neither case was anyone arrested from the wholesale level. The changing role of the Seller can perhaps be seen as a strategic move from the drug distributors to avoid further asset confiscations from sellers, by making sure that a majority of the profits go to the whole-sale level, which is protected from surveillance operations. This is unintentional but in accordance with the declared intentions of the policy shift, to make it riskier and less profitable to be a seller. It has become riskier in two ways, the increased level of enforcement and secondly the increases in associated penalties.

Whether it has become less profitable to be a seller is complicated by the provisions on reversed burden of proof in the bill on Organised Crime from 2003. In the short run it has become less profitable if you are selling in a corporate style distribution, rather than a socially bonded business. In the longer run it will primarily be a question of avoiding detection by law enforcement, which indicates that a prolonged law enforcement effort directed at the retail market will push distribution towards more hidden arrangements.

Whether cannabis distribution in Copenhagen has become less overt is open for discussion. On the one hand it is no longer as visible in Christiania, but on the other hand is has become more visible in the rest of the city (Københavns Kommunes rapport 2005). If police maintain the enforcement pressure on cannabis distribution in the coming years it could well be development towards more covert forms of selling, as describes by Curtis and Wendel (2007).

The declared ambition of the move away from leniency was to increase risks for street-level dealers and buyers, in that sense the intentions have been met, and a reversal (Asmussen 2007) is an appropriate description of the difference between the traditional Danish cannabis policy and the current one.

References

Asmussen, Vibeke og Jepsen, Jørgen (2007): Dansk narkotika-kontrolpolitik – aktuelt og historisk. I Pedersen, Jacob Sejer (red.): Ret og samfund 2007. [Danish Drug Controlpolicy – Current and Historical. In Pedersen, Jacob Sejer (Ed.): Law and Society 2007]

Caulkins, Jonathan P.; Johnson, Bruce; Taylor, Angela; Taylor, Lowell (1999). What Drug Dealers Tell Us About Their Costs of Doing Business. Journal of Drug Issues. 29 (2), 323-340.

Commission on Narcotic Drugs (2008) Making drug control ‘fit for purpose’: Building on the UNGASS Decade.E/CN.7/2008/CRP.17

Curtis, Ric; Wendel, Travis (2007). “You’re Always Training the Dog”: Strategic Interventions to Reconfigure Drug Markets. Journal of Drug Issues. 37 (4), 867-892.

Curtis, Ric; Wendel, Travis (2000). Toward the Development of a Typology of Illegal Drug Markets. In Natarajan and Hough (Eds). Illegal Drug Markets: From Research to Prevention Policy. Crime Prevention Studies, vol. 11. Monsey, NY: Criminal Justice Press.

Kleiman,Mark (1989). Marijuana – Costs of Abuse, Costs of Control. Greenwood Press, New York.

Københavns Kommune (2005). Spredning af hashmarkedet I København.[Copenagen Municipality (2005). Dispersal of the Cannabis Market in Copenhagen]

Københavns Politi (2004). Kilderapport [Copenhagen Police (2004). Undercover Police Report]

Møller, Kim (2008). Regulating Cannabis Markets in Copenhagen. In: Asmussen, Bjerre, and Houbourg (Eds.). Drug Policy. University if Aarhus Press.

Møller, Kim (forthcoming). Hvordan måler man mørketallet for en offerløs forbrydelse [How to Measure the Dark Figure of a Victimless Crime]. Aarhus University Press.

Shepard, Edward M.; Blackley, Paul R. (2007). The Impact of Marijuana Law Enforcement in an Economic Model of Crime. Journal of Drug Issues. 37 (2), 403-424

Appendix 1: Cost structure on Pusher Street

The data used is an estimated average, between all 41 booths, and are therefore subject to considerable individual variation.

Indsert photo.

All calculations are in the Danish currency Kroner, equivalent to 1/7.5 of a euro, and are based on an

The purchase prices are based on known quantities, i.e. a kilo and 380 joints, but the distribution “cycle” (Caulkins et al 1999, 328) is put at 24 hours to make the calculation of sellers percentage retained possible.

Quantity purchased1 kilo 380 (340-420) joints

Purchase price18.4 kr./gram

18 kr./joint

Avg. size of sale4.3 gram hash

2.3 joints (of 0.33 g each)

Selling price(midpoint)75 kr. hash

50 kr. joint

Number sales per purchase233 (hash)

165 joints

Dealer’s gross revenue75.000 (per kilo hash)

19.000 (per 380 joints)