Understanding the widespread ramifications of the drug market (EU Drug Markets Report)

Key issues — Part 1

Understanding the impact of drug markets and drivers of development

Drugs are big business, estimated to make up about one-fifth of global crime proceeds. In the EU they have been estimated to account for 0.1–0.6 % of the GDP (gross domestic product) of the nine Member States for which published data are available.

The EU retail drug market is estimated to be worth at least EUR 24 billion a year. The cannabis market is the largest, making up about 38 % of the total, followed by heroin (28 %) and cocaine (24 %). These estimates are based on limited data, with many gaps. Information about the economics of other aspects of the drug market is even more scanty.

The ramifications of the illicit drug market are wide ranging and go beyond the harms caused by drug use. They include:

  • involvement in other types of criminal activities and in terrorism;
  • impacts on legitimate businesses and the wider economy;
  • strain on and corruption of government institutions;
  • impacts on wider society.

Drug supply can usefully be viewed from a business perspective; consideration of features such as architecture, reputation and innovation, as well as risk minimisation and displacement, may identify new areas for law enforcement intervention.

Globalisation is a key driver for change and innovation in drug markets; organised crime groups (OCGs) rapidly exploit new opportunities for increasing profits and evading detection, while authorities often lack the commensurate flexibility to respond.

As with other consumer goods, the internet has had an important influence on the drug business, providing both open and hidden sales outlets, as well as opportunities to shorten the supply chain and for perceived anonymity for technology-savvy consumers on dark marketplaces, while reducing opportunities for law enforcement intervention.

Impact on the legal economy

The large amounts of cash generated by the drugs trade have to be legitimised in some way, and a portion needs to be sent overseas to pay suppliers.

Illegal money impacts on the legal economy as businesses and high-value assets are acquired to ‘launder’ cash. These ‘investments’ distort the true economy, leaving legitimate businesses and consumers at a competitive disadvantage.

The activities of criminals engaged in the drug market may have a direct impact on legitimate businesses, such as exposing companies to the risk of being associated with trade-based money laundering schemes, the theft of electricity or damage to rental properties used for drug production.

Wider criminal activity

Criminals, particularly OCGs, are adaptable, and hence there are many ways in which drug markets and those involved in them interact with other areas of illegal activity. These overlaps are not always recognised, so our knowledge of the extent of these interactions is limited and important intelligence and opportunities for action may be missed.

The interactions with other criminal activities can be viewed as being of three broad types:

  1. when those involved in drug supply engage in the trade of other illicit goods, for example, firearms or migrant smuggling;
  2. when drug supply is used as a means to a different end, as when it provides financing for other criminal activities or when drugs are used to control those being exploited;
  3. when other criminal activity is integral to the drug trafficking activity, for example when trafficked individuals are coerced into participation in drug production or trafficking; when corruption is used to facilitate trafficking; when profits are laundered; when cash is smuggled to pay for supplies; or when violence is used to maintain market position.


Internationally there is evidence of some links between OCGs involved in drug trafficking and terrorist organisations, which use these links to fund their terrorist activities. However, these relationships are largely functional in nature.

In Europe, terrorist activity is increasingly fragmented, mainly carried out by either small cells or even a ‘lone wolf’. Some of these terrorists may finance their activities through drug dealing or trafficking, but other sources of funding seem to be more common.

While some Member States have already addressed this issue, the functional separation and specialisation of those tackling terrorism and drugs can result in some links being overlooked.

Strain on and corruption of government institutions

Drug supply reduction activities account for the largest share of drug-related expenditure in most countries; budgets for public order and safety from which these activities are financed are under increasing pressure, adding to the strain on already tight resources.

The corruption of public officials in law enforcement and the judiciary, as well as those operating at the political level, facilitates the operation of the illegal market and exerts a corrosive effect, undermining the authority of governments. The corruption of professionals is also a common feature of how criminals avoid anti-money laundering regulations and manage to operate their illegal business within the licit economy.

Development and stability are adversely affected in transitional and developing drug-producing or transit countries, which are often targeted by criminals because of their weak governance structures. In such countries, where there may be few alternative options for legitimate income generation, drug policies need to be integrated with international development programmes.

Impacts on wider society

Drug dependence is particularly associated with the need to commit acquisitive crime, causing losses to individual victims and businesses.

Drug-related violence, including homicide, is present in some drug markets as an inherent component used to gain market dominance or for the resolution of disputes. As well as affecting individuals and families, such systemic violence contributes to feelings of insecurity within neighbourhoods, as does the operation of open drug markets.

Drug production generally involves the use of chemicals, many of which are harmful to the environment when the waste materials are dumped. This threatens both fragile ecosystems and the populations where laboratories are located, in the EU and in other drug-producing regions of the world. In addition, a range of other harms are associated with the cultivation of cannabis, coca and opium poppies, such as deforestation and erosion; these harms, although they largely affect countries outside Europe, may nevertheless have an indirect impact in the EU through migration, destabilisation and climate change.