Underground Drug Economy Generates Billions in Southern California

Experts estimate the underground drug economy in Southern California generates several billions of dollars. That's a small fraction of the region's economic activity; but in some neighborhoods, buying and selling illegal drugs makes a big impact. As part of KPCC's examination of the underground economy, Frank Stoltze looks at illicit drug sales.

Frank Stoltze: A young man leans against the kitchen sink in a friend's East L.A. apartment.

John: Well first it starts as a young thing. Ya know, you just try to make that money whichever way you can. And from there, it just takes off, you know.

Stoltze: 28-year-old John won't disclose his real name, how much he makes, or just how his business works. He followed his father into illegal drug dealing in what he calls one of L.A.'s ghettos, where about one in five of the men his age don't work full time.

John: It's hard. I mean, you're coming from the bottom, and it's hard to even get a job.

Stoltze: John says cops and competitors are a constant hassle. He regrets selling to addicts. But, he says, it's their choice to buy. He just fills demand. His business helped him fulfill a dream.

John: I remember when I was little, right, I swear to God, true story. I was a little kid, right? I remember I went up to my front yard, and I looked at my house, and I looked at the rest of the houses, and I said you know what, this is the ugliest fucking house in the fucking block. But, this is going to be the nicest fucking house on my fucking block someday.

Stoltze: Today, John is remodeling the house where he still lives with his mother, sister, nieces, and nephews.

Columbia University sociologist Sunir Vengatesh studies the illegal drug economy in the United States. He examined one poor Chicago neighborhood and found that four out of ten households participated in the drug economy, often as a last resort.

Sunir Vengatesh: You have a household in which a parent is struggling to make ends meet, pay the rent, and they don't have any choice but to permit somebody in that household who is dealing drugs to contribute drug money to general household affairs and the needs of the household. Ya know, they may just turn a blind eye.

Stoltze: At the same time, often violent neighborhood drug markets scare away businesses that might provide legitimate jobs.

It's impossible to estimate the size of the illegal drug economy. One study figured the national take at $60 billion. Vengatesh says Southern California, a population center and transportation hub, likely accounts for several billion of that.

Vengatesh: Poor communities just don't generate the amount of money that's in play. The money has to be coming from somewhere else. So, middle class folks, upper class folks, folks in any neighborhood are in some way contributing to this economy.

Stoltze: Crack and powder cocaine, heroin, and methamphetamines account for most of the spending, academic experts say, and black market pharmaceutical sales are growing fastest.

Outdoor drug markets like Skid Row in downtown Los Angeles are less common than they once were. LAPD Narcotics Detective Burt Feldtz says drug dealers increasingly use technology, like everyone else.

Burt Feldtz: Craigslist, I mean you're hearing it all the time: certain code words on there if you want cocaine, or methamphetamine. That's the wave, where things are going, and I think a lot more arrests are going to be made – all kinds of things being advertised on Craigslist.

Stoltze: Edward doesn't bother with Craigslist. He gets his supply from one of the more than 200 medical marijuana dispensaries in Southern California. They're veritable grocery stores for pot users.

Edward: It comes in pills, right, brownies, cupcakes, butter, everything. Teas, waters, lollipops, strips too for severely ill patients who cannot chew or cannot eat.
Stoltze: This is like those Listerine mint strips?
Edward: Yes, yes, yes. They have those with the THC on it, and it provides medicine for the patients.

Stoltze: Edward declines to give his real name. He's got a pot prescription for a bad back, but he buys for his friends too. He says it's easy to get prescriptions.

Edward: There are a lot of doctors who are, of course, turning out freakin' patients like freakin' pancakes, man, because you think about it, a 150 bucks, man, per prescription. These cats are lining up like freakin' rats. This is a big, big, big business.

Stoltze: The underground drug economy generates huge, above ground spending. The White House drug policy office estimates the cost of drug abuse five years ago was a $180 billion. That's three times the amount people spent buying drugs. That represents police and healthcare costs, as well as lost productivity at work. Some experts quibble over the dollar figure, but they agree that illegal drugs are big business.