Rich kids sniff, poor kids suffer

I have always been friends with loads of lawyers.

I have no idea why I am attracted to these people – perhaps it’s their natural charm and quick wittedness, or simply the fact they argue about bloody anything.

Colombia is no different and last week, after a dinner party, I was left drinking and debating with three Colombian friends; an engineer, a graphic designer and… a lawyer.

(Before you ask, no-one died – the Colombians cooked)

Inevitably, because there was still wine left, there was a heated debate. The general topic was the legalisation of drugs but, more specifically, the debate focused on money laundering and its impact on Colombia’s economy.

I argued, supported by the other two, that money laundering can effectively boost an economy – because it provides a Government with extra income through tax.

In England, it is no secret that gangsters clean their drugs profits by operating ‘legitimate’ businesses – such as dry cleaners and tanning salons. They run the cash through the books and invent fake sales to explain the profits.

Then, because no-one wants to end up like Al Capone, a smart drugs baron pays his taxes like a good boy – gaining a surprising moral high ground over your average tax-dodging, amenity-using, cash-in-hand leech.

Thus, I argued, money laundering can benefit an economy and alone, is not a compelling reason for legalisation.

“Rubbish,” my lawyer friend, Andres, said flatly.

“Money laundering inflates prices, which means ordinary people can’t afford goods. We have 60 per cent of our people living in poverty and drug traffickers are keeping them poor.”

Now, he’s a smart boy, so I tried. I really tried to get my head around his argument. But I couldn’t.

Surely, if gangsters charge silly prices in their ‘businesses’ then customers will go elsewhere? It’s not like gangsters need trade – they invent most of their customers anyway.

The argument reached stalemate.

“There’s only one way to settle it,” I declared, trying not to spill red wine on our new tablecloth.

“We’re going to have to ask an economist.”

Luckily, I happen to know just such a person and, the following week, I outlined both sides of the case.

“Your friend is absolutely right,” the economist said immediately, with no trace of sympathy.

“No,” I groaned. “How? I just don’t understand.”

“Let me explain,” he replied.

“The drug traffickers make their money in dollars, which they obviously can’t spend in Colombia.

“They have no interest in the tax-paying system you describe, because it’s far too risky.

“All they want to do, is change their dollars into pesos.”

Hmmph. Fair enough.

“So they use those dollars to buy goods in Colombia,” he continued.

“But because they are using the wrong currency they pay a far higher price than the goods are actually worth.

“The difference in price is the compensation – or the commission – for the fact they are paying in dollars.

“They can then sell the goods they have bought for pesos.”

I was indignant.

“But what about the poor vendor stuck with dollars?” I replied, fearing I already knew the answer.

“Well, some people are ignorant and they think it’s great – to receive more money than your goods are worth,” he said.

“But it’s also made very clear. If you won’t let me pay in dollars, then I’m going to kill you.

“Either way, this willingness to pay more money inflates the prices for everyone else.”

Colombians tend to be passionate about the drugs debate.

“We have all these trade agreements with the United States, where they threaten us about the need to cut the production of cocaine,” he continued.

“But they never seem to think about the guy in New York, the one actually taking the drug, who’s driving the demand.”

It was one of those guilty moments. I thought of all the people in London, Liverpool, Aberdeen, Somerset… merrily snorting line after line and insisting “it harms no-one”.

“So… people taking cocaine in the West really are helping to keep people poor in Colombia?” I grimaced.

“I’m afraid so,” he replied.