Who thought my Economics homework would be this interesting?…I quite enjoyed finding out this stuff so have put my notes below…they are rough notes so please excuse the terrible english in places…Its an attempt to show that Political propaganda (where politicians are taking credit or the decline in opium production) is really quite untrue…
Worldwide demand for Opium is 5000 ton per annum, given that Afghanistan produces 90% of the worlds Opium, to reach an equilibrium (supplying the same amount as is demanded) they should be producing only 4500 tonnes. However in 2008 they exceeded this by 1110 tonnes and in 2009 exceed by 1900 tonnes. Therefore the value of opium has decreased significantly, due to opium being plentiful, so therefore cheaper. This makes it a low profit investment for farmers so recently they have started to voluntarily grow wheat instead (which in 2009 is now worth 3 times as much because people such as the Chinese are eating more meat and wheat is needed to rear cattle).
Resurgence in Opium production would occur if opium dealers decided to control supply and caused an intentional shortage to heighten the value of opium, consequently making it appealing again to farmers. However this would be unfavourable for the opium dealers as then they would then have the stored surplus and the newly cultivated opium. More likely to cause a resurgence would be while farmers are cultivating wheat a natural shortage occurring in the opium market (obviously this present lower supply and constant demand will make the opium more scarce) eventually leading to a price increase (and a feasible means of living for farmers due to lower opportunity costing than wheat cultivation).
So out of 6900 tonnes of opium produced this year only 6% (414 tonnes) was officially removed from circulation. Proving that US and UK army’s are having almost inconsequential effects on opium trade…nature (having a good season) and basic economics has in fact lowered Opium production and made bad farmers turn good.
(4% burnt + 2% seized by Military)
People may not understand why we do not just burn all of the Opium, this is because it is now Afghanistan’s main source of income and to destroy it would be a fatal puncture in the heart of their economy. This is why it must be gradual. Without the income people would starve, possible crime increase etc etc.
|Cultivation (ha)||157, 000||123, 000||-22%|
Hectares used per ton
7.4 ha less required in 2009 to generate the same amount as 2008 due to good weather.
Earnings- Wheat production V Opium production
2003 27 times more than Opium
2007 10 times more than Opium
2009 3 times more than Opium
Below-Sgt Alex Green