convergence

Global Scale and Impact of Illicit Trade
A simpler approach is to use gross domestic product (GDP) levels. The cost estimate of
$181 billion in 2002 (about $650 per capita) is roughly equivalent to 1.7 percent of GDP. As
the United States has a more severe drug abuse problem than most nations, we must use a different
percentage for other nations. The ONDCP report cites different studies that obtained
a cost estimate of 1.8 percent for the United Kingdom, 1.0 percent for Australia, 0.4 percent
for Germany, and 0.2 percent for Canada. If we take as a very rough approximation an average
worldwide cost outside the United States of 0.85 percent (the nonweighted average of these
four countries), and considering that worldwide GDP outside the United States was $48.5
trillion in 2011, the global cost of drug abuse outside the United States is estimated at $412
billion. The worldwide total cost is therefore estimated at $605 billion.
We may alternatively make the assumption that the national cost of drug abuse is proportional
to market size. UNODC’s World Drug Report 2005 made a regional breakdown
of the global illicit drug, and North America was estimated to account for 44 percent of the
world’s total drug sales at the retail level. Considering that the United States represents 85
percent of North America’s GDP, we make the rough approximation that it accounts for 85
percent of North America’s drug sales, and consequently for 37.4 percent of total worldwide
drug sales. Therefore, the worldwide economic cost of drugs would be $516 billion (that is,
$193 billion divided by 37.4 percent).
As UNODC numbers are more recent and come from a systematic study of worldwide
drug abuse, we will keep this estimate for the table. Using the ratio of 59.6 percent from the
ONDCP 2002 report for the crime-related, indirect impacts, the economic cost of drugs
is split into $308 billion that is crime-related, versus $208 billion that is not crime-related.
Counterfeiting
Many of the economic costs of counterfeiting are difficult to capture. Furthermore, we showed
that the current estimates of the global market in counterfeit goods are not reliable. Even if they
were, they do not measure the actual illegal market size and revenues of traffickers since counterfeits
can be sold at a considerably lower price than genuine goods. A study commissioned
by BASCAP (Business Action to Stop Counterfeiting and Piracy from the International
Chamber of Commerce) 43 attempts to measure the global social and economic impact of
counterfeiting and piracy. However, a fair fraction of the overall estimate builds on the OECD
estimate that we consider unreliable. In the absence of any valid number, a lower boundary
can be inferred from what companies and institutions pay to protect themselves from counterfeiting:
the market size is estimated in 2011 at approximately $15 billion in 2011 for security
printing 44 and $2 billion for brand protection devices, 45 for a total of $17 billion. While it is
obvious that counterfeiting imposes a much larger cost on society, the lack of reliable data and
studies makes it very difficult to derive an overall cost.
We may attempt to develop an estimate of the direct impacts of counterfeit medications.
Artesunate is the only affordable and effective medication that can cure parcifarum malaria, a
particularly deadly form of the disease found in Southeast Asia. A large survey in the region by
the WHO, Interpol (popular name of the International Criminal Police Organization), and a
coalition of scientists and health practitioners found that 49.9 percent of medications sold were
counterfeit and ineffective. 46 Such data can be used to estimate the number of people who may
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