The Supply-Side Scourge

By THOMAS McCARROLL

The traffickers hid their stockpile where they hoped no one would want to look: inside 10-gal. drums of sodium hydroxide, a caustic powder. When narcotics agents discovered the cache last Friday night in a warehouse in Queens, N.Y., they had to call in hazardous-waste specialists to handle the material. Total amount seized: as much as 5 1/2 tons. Only five weeks earlier, police had broken open a $6 padlock on the door of a warehouse in suburban Los Angeles and discovered 21.4 tons of cocaine, the largest U.S. cache ever grabbed. All told, authorities estimate, they will have seized 85 tons of coke this year, a 55% increase over 1988.

In the glow of victory, narcotics officers congratulated one another on finally putting a dent in the drug-smuggling apparatus. But in recent weeks the vastly increased tonnage of captured cocaine has been generating some anxious rethinking about the scale of America's coke problem. Reason: since cocaine is essentially a commodity, its price follows the same basic rules of supply and demand that apply to wheat, soybeans and pork bellies. When supply is abundant, prices fall; when there is scarcity, prices rise. Ominously, the huge U.S. seizures in the past few months, along with the Colombian government's crackdown on the Medellin cartel, have done almost nothing to boost the price of the drug on either the wholesale or retail levels. Contends Glen Levant, the deputy police chief in Los Angeles: "Surely this must validate our belief that there is much, much more cocaine in the pipeline than anyone thought."

Federal officials have never been sure how much cocaine is consumed in the U.S., but the conventional estimate has been 100 tons annually. Since agents have captured nearly that much already this year and seizures are generally ^ considered to represent only a small proportion of total supply, cocaine use could be several times that volume. But speculation about a far bigger than expected U.S. cocaine trade is only one of the theories that attempt to explain the recent huge seizures and their failure to increase prices. Some experts contend that the Colombian government's campaign against the drug lords has prompted them to move huge stockpiles out of that country and warehouse them in Mexico and the U.S.

The new projections of the cocaine supply, which still amount to guesswork, nonetheless indicate that the Government's longtime effort at interdicting shipments has been largely ineffective. In fact, smugglers have become so efficient and so numerous that since 1981 the median national retail price of cocaine has declined from $115 a gram to $88.

Lately cocaine prices have increased in a few cities, but experts on both sides of the law see no close connection between enforcement efforts and price levels. In Miami, the main gateway for drug smuggling, the cost of a kilo has jumped 44% in the past two months, to as much as $23,000. But for the U.S. as a whole, which consumes three-fourths of the world's cocaine production, wholesale and retail prices have been stable.

One reason prices have become dangerously affordable is that smugglers have proved so flexible. When federal agents cracked down on shipments through South Florida, traffickers started routing shipments through the porous Mexican border. At the same time, the smuggling industry has plenty of competition. When Colombia's campaign against the Medellin cartel hampered that group's operations, the rival Cali-based group filled the vacuum.

In fact, the smuggling industry has been so effective that cocaine prices might have fallen further. But the entrepreneurial response among street-level dealers was to begin moving crack. The smokable, highly addictive form of the drug has increased demand and sales volume.

Even the strategy document issued by William Bennett, the director of national drug policy, concedes that interdiction is mainly a symbolic effort. Its lack of results underscores the need to intercept cocaine in other places. Specifically, the document recommends a stronger effort to cut cocaine off at both ends of the pipeline: the source of the abundant supply as well as the seemingly insatiable demand.

CHART: NOT AVAILABLE

CREDIT: TIME Chart by Cynthia Davis

CAPTION: DANGEROUSLY CHEAP -

With reporting by Jonathan Beaty/Los Angeles and Jay Peterzell/Washington