Drugs (aust ) Ltd.
Friday September 12, 1986
"It is capitalism, pure, simple, unadulterated capitalism."
THE man speaking is in his mid-30s, with a 60s head of long brown hair, wearing the Kings Cross uniform of sneakers, jeans, T-shirt and bomber jacket. Since his teens he has been a user and street-dealer of marijuana, amphetamines, heroin and (lately) methadone.
"There are no rules and regulations, no taxes, no unions. It's straight supply and demand, and the profits . . . " - he throws his thin arms in the air - " . . . millions, billions, trillions, who knows?"
At street level, Australia's estimated 30,000 heroin addicts and 500,000-odd users of a dozen other illegal drugs know and care little of the industry they are supporting, apart from where to go to get their next deal and how to pay for it. They are the customers, and in this business the customer is nearly always wrong.
Surprisingly, no-one else seems to have much more than an educated guess about the extent of the industry. Two Royal Commissions have come up with varying estimates based on Customs drug seizures, police arrests, community polls and narcotics deaths, all fiddled with statistical conjuring tricks such as"indicator dilution".
If the industry is becoming increasingly organised, the basic data needed to understand and combat it are hopelessly disorganised. The NSW Police, for instance, can tell you how many drug charges they lay (23,000 last year), but not what quantities of drugs they seize. The Australian Federal Police can tell you all about seizures (100 kilos of heroin in 1984), but can't say how many people they locked up. Their spokesman did, however, caution against taking Customs figures at face value "because they weigh the string and the packaging too".
The most recent respectable estimate of the scale of the drug trade was in the Williams Royal Commission report, based on data all of eight years old. Since then, all the indicators point to a growth rate that would be breathtaking in any other business. Narcotics deaths have trebled. So have drug charges laid in NSW. Federal heroin seizures have increased six-fold.
Coupling this with other indicators (including a soon-to-be-released estimate by the NSW Drug and Alcohol Authority that there are 14,000 heroin addicts in this State alone), a bank economist calculated that the drug industry was showing a steady annual income growth rate of around 15 per cent.
And this at a time when law enforcement efforts are intensifying (the NSW Police drug squad has increased from 36 to more than 200) and most conventional businesses are suffering from the economic down-turn. Drugs(Aust) Ltd is immune from normal economic influences and manages to post new records for turnover and profit year after year . . . in spite of the fact that retail price levels have been forced up as much as 480 per cent over the past eight years.
Almost the entire turnover is profit, profit on a scale comparable only with freak industries like entertainment and fashion. In 1984-85 retail sales of the major products are estimated at: heroin $3.75 billion, marijuana $1.1 billion and "party lines" (cocaine, amphetamines mainly) $500 million.
This puts a value on the industry of $5.35 billion, which most experts said was a conservative estimate. In 20 years it has outstripped the liquor industry (1985 sales $4.8 billion) and is more than twice the size of the tobacco trade.
Imported drugs (mainly heroin, cocaine and manufactured forms of marijuana like hashish and oil) continue to hold their share of a continually expanding market. The importers and distributors have absorbed the increased costs into their staggering profit margins, and the street price of heroin has remained static for several years, although quality has fallen.
The local drug industry appears to have consolidated and become more professional in the face of this competition. The manufacture of amphetamines, once dominated by bikie gangs and the occasional rogue doctor, appears to be going through a boom, and marijuana farmers and distributors have responded to the challenge by increasing the quality of their output and doubling the retail price in the past two years.
The products
IN DOLLAR terms, the drugs market leader is clearly heroin, accounting for perhaps two thirds of all sales. Although it is imported, the bulk of the profits are shared by the importation and distribution syndicates in Australia and the mark-ups average 6,000 per cent.
It arrives at street-level in a variety of forms. Although prices have remained constant at $300 a "street gram" for the past four or five years, dealers have progressively reduced the quantity to around four-tenths of a gram, and the quality has dropped from a bench-mark of 20 per cent pure (the rest is usually a white powder like sucrose) to as low as 10 per cent.
The other form of heroin on the streets of Sydney is "rocks", which are identified by colour and have a reputation among consumers as being of a more reliable quality. According to the NSW Government Analyst, one sample taken of highly-prized "pink rocks" turned out to have been heroin dissolved in a solvent, baked and coloured with strawberry Quik as a marketing gimmick.
The heroin is dissolved (water for a powder, lemon juice for "rocks") and injected, although dealers who want to avoid detectable needle-punctures and first-time users sometimes try to smoke it. They soon graduate from this method, because it requires much greater amounts to get a "high".
The most commonly used illegal drug is marijuana, and there seems to be agreement that around 4 per cent of the adult population (about 500,000 people) uses it at least once a month.
But in the past 20 years the marijuana farmers have seen a dramatic upheaval. What was once a cottage industry expanded in the 1970s to huge farms in suitable areas like Griffith, producing often indifferent-quality marijuana by the truck-load. According to the police, these farms have mostly been "busted"and growers are concentrating in well-organised and guarded holdings of a few hectares in bush country such as the Green Triangle inland from Kempsey.
In response to this more intensive cultivation, new strains and better processing have resulted in a "super grass" taking over the market. It is called Sinsemilla (from a Spanish word meaning seedless) and, according to the Government Analyst, assays at 6 to 9 per cent of the active ingredient THC, which makes it more potent than some hashish. Producers of the inferior "leaf"marijuana have been almost pushed out of the market and forced to halve their prices.
There is no evidence that the manufactured forms of marijuana, hashish resin and hashish oil (the most concentrated of all, and usually applied to a cigarette by the drop) are being made in Australia. The main sources are the Golden Crescent countries from Pakistan through to Lebanon and Turkey.
Although State and Federal law enforcement agencies seized more than 10 tonnes of marijuana products last year, there is no evidence of a shortage - but marketers have pushed the street price as high as $240 an ounce.
The volatile end of the market is occupied by the so-called "party drugs", and fashions fluctuate wildly, as do prices. In the absence of regulation, most people have only the vaguest idea what they are buying.
Until recently, for example, most people who thought they were snorting cocaine were in fact getting procaine, a less effective drug unloaded from the American market. "Opium" has turned out to be a Vegemite-like substance obtained from boiling up poppy heads and containing almost none of the active ingredient. "Speed" could be any one of half a dozen different stimulant drugs with different effects and degrees of hazard.
According to the only academic studying cocaine usage, the market follows the media hype. "We've been bombarded with this shock-horror invasion of 'crack'?a type of smokable cocaine! but so far there's only been one seizure of it here," he said. "Crack is crap."
Although cocaine and amphetamines are usually sniffed, there is a trend -particularly in the western suburbs - towards injecting "speed", which, at a quarter of the prices, has become known as the poor man's cocaine.
This last group of drugs is the biggest growth area of the market, and there is some evidence that more organisation (and higher prices) are on the way. "In the old days you'd be at a party and someone would lay down some lines of coke on a mirror and off you'd go," one user said. "Today the same thing happens and he's standing there asking for $10 a snort . . . it's a rip-off."
The distribution
ONE OF the many unusual aspects of an industry that happens to be illegal is the method of distribution. From its source, the product may pass through six or more levels of distribution before it finishes up with the user.
At each level there are profits to be made that would be described as a rip-off by your average used car dealer. "The higher the risk the higher the profit," said one ex-heroin dealer. "How can you put a price on 10 years'jail?"
In fact, the risks of being caught, and losing a consignment worth millions, are not terribly high, although the penalties (especially if the courier is caught in Malaysia) can be drastic. A commonly used figure is that Customs and the Federal police intercept between 10 and 15 per cent of all imports, although various Royal Commissions have said that this may be overstating things.
Big seizures - in recent years several tonnes of marijuana and up to 10 kilograms of heroin have been intercepted - catch the headlines and indicate that there is an increasing level of big business organisation going into the import of drugs. Sea-drops of heroin in bags, interceptions of light planes and fishing boats and the discovery of drugs in shipping containers have become more common.
But the evidence is that most of the heroin is still imported amateur-hour fashion by couriers like Barlow and Chambers, who are known appropriately enough as "mules". What makes this possible is the high value-for-weight ratio of drugs, particularly heroin.
In 1978 a woman was intercepted at Perth airport with nearly a kilogram of heroin (worth about $1.5 million at today's street price) somehow concealed in her bra. At the same airport a man was noticed walking rather awkwardly off an international flight, and examination showed he had a quarter of a kilogram of cannabis (mari- juana) resin in his boots, which he had had to glue to his feet to stop them falling off. The world record for cannabis oil concealment is held by a man caught with a whole kilo wrapped in 23 condoms and inserted in his anus.
Once the drugs arrive they are delivered to the importer, that shadowy figure who is almost never seen in court. If it is a large importation he probably has a partner who comes up with part of the cash and is never seen by anyone.
From this point on the drug disappears into a network of thousands of full-time and part-time wholesalers, distributors and dealers who all carve themselves off a large piece of the tax-free action. If drugs were taxed at the same levels as liquor or petrol, it would go a large way towards balancing the national Budget.
The marketing
THE MARKETING of illicit drugs would be a chief executive's nightmare. How do you let people know about a product when you are not allowed to advertise or promote it - not even by sponsoring sporting events - when you have no fixed points of sale and no reliable sales force, since they either get addicted, get arrested, or both?
None of this appears to have harmed Drugs (Aust) Ltd in the marketplace. Said one user: "The users beat a path to your door - you don't have to go out looking for them. It's not true what they say about pushers forcing things on people. You walk through Darlinghurst and young kids - 14, 15, 16 years old -come up to you asking, 'You got a 75?' And they're not looking for trombones.
Retailing techniques vary. One woman bought heroin for more than 10 years from the same dealer, a pension-aged Turkish man who made annual trips to the Middle East to buy and who knocked on her door at 8.30 sharp every morning with a measured gram. Another woman's source of supply was a group of North Shore men in their early 20s who cruised around in Porches and on Kawasaki motorbikes. "It used to really piss me off," she said. "You could never get hold of them on a Saturday because they were all out playing Rugby."
Geographically, drug retailing has spread out from the traditional ghettos of Kings Cross and Darlinghurst. Users now go to Bondi for their heroin, to Kirribilli and Manly for cocaine and fancier drugs. The discos and coffee-shops of the western suburbs, particularly Mt Druitt, are crowded with young men with their pockets full of little folded paper sachets of "speed". (Recently, incidentally, the Drugs Offensive campaign brochures have been used for packaging "deals" because they are glossy, waterproof and cheaper than traditional wrapping like Playboy).
Distributors, like most people in the drug industry, have rather unusual expenses to offset their colossal profits. One former dealer put aside at least $2,000 a time for one of three Sydney lawyers who specialise in defending people on drug charges. "You get the Public Defender you're dead,"she said. "These guys know what they are doing. One of my friends has been charged six times in the past couple of years and she hasn't gone to jail yet."
Another expense mentioned is paying off police, with one particular Sydney constabulary named occasionally. There is also a high bad-debt ratio, with users failing to settle their bills - although most of the business is cash.
Discipline in the workforce is almost impossible to maintain, which partly explains why there are so many so frequently shifting strata. The failure rate among retailers is higher even than the restaurant business, mainly because the proprietors shoot up the profits.
At the lower levels of distribution there are some successful operators who have moved on and invested their profits in businesses like restaurants, bars, massage parlours, car dealerships and antique shops. At the higher levels there are more elaborate mechanisms for washing the money and more than a suspicion that a great deal of it is transferred out of Australia, either directly or through bogus "contra deals" on imported commodities.
The regulations
THE DRUG business operates free of conventional government regulation. It is a classic free-market economy, free of taxes, prices surveillance and consumer protection.
At all levels it has given caveat emptor (let the buyer beware) a whole new meaning. A "street gram" may be only 40 per cent of the heroin you thought you were paying for. It may be as little as 10 per cent pure (a recent spate of overdose deaths in Kings Cross was caused by the inadvertent sale of 40 per cent pure heroin). Adulteration is rampant, with substances like cement powder having been detected.
But the market has developed its own correction mechanisms. A dealer who loses his reputation is put out of business, sometimes permanently. Drug murders are not uncommon at boardroom level, and on the streets a favourite punishment is to beat, rape and shave the head of a debt defaulter - male or female.
The only real regulation hampering expansion is police enforcement, which appears to have increased in recent years, if arrest figures are anything to go by. But, as with other illegal industries like SP betting and casino operation, this is regarded as an acceptable risk by Drugs (Aust) Ltd, in view of the profits.
The market
THE DRUG market is tightly segmented. As beer drinkers don't suddenly switch to wine, a heroin user will not willingly switch to "speed" - although he or she may take them both.
Marijuana customers are the most numerous, probably because the drug is longer established and more socially acceptable. About 500,000 people use marijuana at least once a month, a figure that seems to be fairly constant. The market may be close to saturation, and its growth appears to be coming through price increases.
The heroin market appears to be still expanding on all fronts. Although it is claimed that respectable television executives shoot up at weekends, the market is generally young (18-28) and working class.
Analysts look for a one-gram-a-day habit in a regular user (about $2,100 a week), although surveys have turned up people with habits costing $8,000 a week. Price fluctuations appear to make little difference to levels of usage, as the bulk of the money ultimately comes from crime.
A typical former user: "To start off with I was getting money working in the massage parlours, and the man I was living with would go out at 9 in the morning to work, as he called it. He would do over four or five houses and take the videos, the telly, any cash and gold . . . then we got on to using a black light to read people's signatures and we used to take passbooks and rip off their bank accounts $500 at a time. Eventually it got to armed robberies and we got caught."
The "party drugs" appear to have a potential for expansion. Amphetamines are booming and new lines like MDA and MDMA (synthetic amphetamines and hallucinogens) are just beginning to make the sort of impact that LSD had before it went into a severe market decline several years ago. Cocaine, because of its price ($200 a gram) and image, appears unlikely to become commonplace unless large quantities are dumped because of the glut in the US.
Said one long-time recreational user: "In the old days you'd go to a party and sit around a bong and smoke if someone had something nice. It was absolutely unheard-of to charge someone for marijuana.
"Now the scene has changed. It's an industry. It's no fun any more . . . just a lot of criminals getting rich, and a lot of poor suckers down the bottom paying for it."
Continued Page 45
From Page 41
© 1986 
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