Two seemingly unconnected, but actually inextricably linked snippets of financial news appeared last week.
First, that the price of a lime has risen 300% in the last month in California. And second, that the labour participation rate for men between 25 and 54 in the US is staying stubbornly low at 88%. Back in 1964 it was 97%.
The link is the global war on drugs.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The price of limes has risen as a result of the changing behaviour of Mexico's drug cartels.The fall in the participation rate is connected to the fact that so many American men have been convicted one way and another of drug-related offences.
You can't participate in the labour force when you are in jail. And it is very hard to get a job when you leave jail.
The US locks up its people "at five times the UK rate and ten times that in Scandinavia. The result? "We have been generating people with criminal records pretty solidly for going on 30 years," John Schmitt an economist at the Centre for Economics and Policy Research in Washington told the FT last week.
Today, more than one in 15 American men has a criminal record (12 to 14 million people). So, even if the (clearly failing) war on drugs were cancelled tomorrow, "the share of the labour force with a criminal record will remain very high for a long time." The result being a total US employment rate that is 0.8-0.9 percentage points lower than it would be otherwise.
I keep meaning to write more on this, and I will soon. But I do think that it must be clear to pretty much everyone by now that the West's policies on drug use are hopelessly wrong that's why, as the FT puts it, "left and right in the US seem ready to think again on drugs policy", and why you can now "smoke pot, ski hot" in Colorado. And it isn't just a discussion taking off in the US.
Here, Nigel Farage (as is often the case) says what the others won't say clearly: "I personally think that the war on drugs was lost many, many years ago and that the lives of millions of people in Britain are being made miserable" by its effects.
It needs, he says, radical reform by which he means that at least some drugs should be legalised. But even if the others won't come out and say it quite so firmly, there are hints that the establishment is beginning to grasp the extent of the failure of policy so far.
Durham's chief constable noted that criminalising drugs does nothing but "put billions of pounds into the pockets of criminal gangs", and even Nick Clegg has said that "if you are anti drugs, you should be pro reform".
More on this coming, but anyone interested in the arguments for the legalisation and taxation of what is currently the most unregulated and also the most profitable business in the world should read Dr Max Rendall's book on the subject Legalise: The Only Way to Combat Drugs.
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
