International Business & Economy The allure of contraband

The allure of contraband




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For the Singapore government, the issue of contraband existing in Singapore is a tough problem to solve. Despite the country’s valiant attempts at solving this issue, contraband and the illegal black market cartels operating them appear to be almost impossible to extinguish. Why is it that such cartels, continue to exist despite the incrementally harsh penalties set by the State? It’s almost as if transacting such “dangerous” commodities held some magical allure for the perpetrators in question – the more effective the state’s hold on stopping such contraband, the more enticing it is to go into the field.

When confronted with  a difficult socio-political issue, most Singaporeans almost instinctively clamour for the government to intervene. The well-meaning state, with all its advances to protect the citizens from these “dangerous” commodities, have traditionally adopted the option of either:

  • Increasing the taxes on such commodities i.e. vice taxes(such as on alcohol, or on cigarettes) or
  • Banning the material entirely

If you would think of such a claim as a misrepresentation, the recent spate of accidents involving e-scooters and of the responses it elicited demonstrate this belief in action. The prolific nature of such incidents has prompted moderate Singaporeans and politicians alike to call for regulation pertaining to these vehicles. The more extreme holders of these views are the ones who ask for the total banning of such vehicles – all in the name of public safety.

Or take for instance the Worker Party’s insistence for the government to “reject” online betting applications, under the concern of public welfare. In their view, addictive behaviour and easy access to casino gaming is a slippery slope to financial ruin.

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But would banning something or artificially increasing its price actually lead to lesser usage? What actually happens when the government intervenes, and acts to forcefully limit these commodities or services?

Artificial Price Increase

Suppose if the government acted to impose a tax on the prices of carrots tomorrow morning; This artificial price increase would create a new demand for cheaper carrots, and would create a strong financial incentive for people to smuggle in un-taxed carrots, often to undercut the legal carrot sellers (who are forced to charge artificially high prices, because of this “carrot tax”).

Whatever motives the “carrot tax” was meant to accomplish, it would have had the unintended consequences of creating a black market in carrots. The government is practically creating economic incentives for people to break the law.

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In the case of alcohol and cigarettes, these black markets lead to other problems. For example, while legal sellers would not sell to minors for fear of bad reputation or losing their license, black market sellers have no qualms about such nitty-gritty details.

The intent of such “vice” taxes are often portrayed to discourage consumption of these substances – to help addicts reduce their consumption of such commodities, and hopefully quit their addiction. Since these taxes also significantly increase the prices of alcohol and cigarettes; addicts are hence not merely exposed to the harmful effects of these substances, they’re getting impoverished by these taxes as well.

Poverty usually makes it much harder for someone to quit an addiction (e.g. less money and less time to seek rehab). The vice taxes often end up achieving the opposite effects of their intentions; poverty-stricken people are statistically much more likely to be driven to gamble in order to get money to feed their addiction to such vices. They may be driven to commit crimes in order to get the money they need.

Despite such common-sense economics, the Singaporean government has not hesitated to impose forceful restrictions on alcohol and cigarettes. While acting with good intent, the overall losers in such policies are not the drug users, but the entirety of the citizens in Singapore.

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The higher the taxes involved, the more potential profit black marketeers obtain for gaming the system. What they acquire cheaply in their location can be sold for huge benefits in Singapore. The true leaders of such cartels, who do not hesitate to send mules to cross borders, are unscathed and are the ones who truly benefit the most from such price increases.

Total Ban

If the artificial increase of prices in an attempt to control usage of “vices” were not disastrous enough, a total ban of such items leads to even more cataclysmic results.

Prices are not arbitrary, but are directly related to the level of scarcity that the commodity has on the market. A total ban creates an artificial scarcity of such items – that means, the more coercively the government acts to enforce this stranglehold on these commodities, the more expensive they become; an inversely proportionate incentive for cartels to go into such areas.

But pure speculative talk is not sufficient – we must look into the annals of history to find an adequate example.

America tried this experiment back in the 1920’s with alcohol prohibition.

Contrary to popular belief, banning something did not make it go away – it simply drove it underground, where the harm was exacerbated. Where there is demand, there will be supply. Alcohol was still available, but now it was supplied by the black market, where there was no need for reputation nor of quality control. Alcohol-related deaths increased exponentially, due to adulterated alcohol from the black market.

Alcohol prohibition also led to a huge increase in organized crime and violence. Why? Because the entire alcohol economy was now shifted into the hands of criminals in the black market. Alcohol consumers now had no choice but to fund criminals. This led to the rise of crime bosses like Al Capone.

Illegalizing the production, distribution, and consumption of alcoholic beverages – all of which were corollaries to the amendment – did not curb the desire of Chicagoans for liquor or beer. This great demand for and simultaneous illegalization of alcohol opened up a new illegal market for the gangster to develop and monopolize. As Al Capone put it, “All I do is to supply a public demand … somebody had to throw some liquor on that thirst. Why not me?” (Sullivan, 111).

What about consumption? Did this strictly enforced ban not decrease overall consumption? Factually, alcohol prohibition also caused many people to drink more than they otherwise would. Why? Simply because people did not take the trouble to go to a speakeasy, present the password, and pay black-market prices, just to have one beer. After people went through all that trouble, they wanted to make it “worth it” – so they made sure to get really drunk.

And since the substance was banned, alcoholics cannot seek help for their problems for fear of incriminating themselves.

These very self-same economic principles apply to any or everything that may be demanded by the free market. You can replace alcohol with any contraband, and the results will remain the same – the variance is merely in degrees. The Ministry of Home Affairs appears to agree with this formulation pertaining to the legalization of online betting:

A complete ban on remote gambling drives demand and activities underground, and may create larger incentives for criminal syndicates to target Singapore,” said MHA. “The greater the extent of underground illegal activities, the greater the risk to law and order, and the greater the danger to individuals who might be involved in underground remote gambling.

Government intervention does not solve the problems of today’s times, be it of drugs, rampant gambling, tobacco or of environmentalism. Such issues are cultural issues and must be resolved via cultural means i.e. of knowledge and of education.

Desires cannot be curbed with a cudgel, and can only be defeated by the means of the rational faculty. Let’s deal with each other via the means of reason and empathy, not with threats of force. Let’s deal with each other with the full knowledge that force is the anti-thesis of the mind, and that if we want to make cultural change, it is a cultural revolution we need to adopt, not a political one.

About Davin02

Corporate copywriter by day, libertarian by night, Davin enjoys writing about topics pertaining to the moral culture of Singapore. He also likes to flaunt his artistic side, but that’s a story for another day.

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