Addicts are good customers, often willing to pay almost any price to obtain the drugs upon which they have become dependent. As a result, drugs have long been some of the most valuable products on earth. Coffee is today the world's second most valuable legally traded international commodity, trailing only petroleum. A single company, Starbucks, sells more than $8 billion worth of coffee a year. Americans spend more than $50 billion every year on cigarettes, and more than $100 billion on alcohol. Illegal drugs have a smaller market than the "Big Three" legal drugs, but ounce by ounce they are even more precious. Cocaine is literally more valuable than gold, and by a wide margin: the drug has a street value of more than $100 a gram while the precious metal trades at less than $25. Marijuana is currently the United States' most valuable cash crop, with cultivators growing nearly $36 billion dollars worth of the illegal weed every year. (Corn, the nation's second most valuable agricultural commodity, is worth only $23 billion.)6
Drugs command such high prices that drugs are—and always have been—big business in the American economy.
In the early colonial period, the drug trade sustained both Virginia and New England, allowing these beleaguered settlements on the far margins of the British Empire to grow into thriving American societies.
Jamestown, Virginia—the first permanent English settlement in North America—was on the verge of collapse when John Rolfe planted its first tobacco crop in 1612. That fateful crop fetched a good price a year later back in London, generating new enthusiasm and financial backing for the Virginia colony. Soon Virginia's entire existence came to center on growing tobacco for export. Surveying Jamestown in 1617, Captain John Smith noted with some dismay that everything in the village was falling apart, but that every "spare place"—including the streets and marketplace—had been carefully planted with tobacco. By 1618, the Virginians produced 20,000 pounds of tobacco a year, and needed more workers to harvest the crop.7
In 1619, the overwhelmingly male population of Jamestown enthusiastically welcomed the arrival in port of an English ship carrying "young maids to make wives." The colonists used tobacco as currency to buy the women, happily paying the price of "one hundred and twenty pounds of the best leaf tobacco" for each girl.8 The arrival of women meant the arrival of sex, and the arrival of sex meant that Virginia's population could begin to sustain itself through natural reproduction.
In the same year that the Virginians used tobacco to buy themselves wives, they also introduced slavery to British North America by buying (in their words) "twenty negars" from a Dutch merchant vessel that called at port. For the next 240 years, slavery and tobacco would dominate Virginia society. Slave labor helped the Virginians to expand tobacco production rapidly, from 60,000 pounds in 1622, to 500,000 pounds in 1627, to 1.5 million pounds in 1630.9 Soon the early days of starvation at Jamestown were forgotten, as tobacco profits allowed Virginia planters to begin to take on the trappings of aristocracy.
While colonial Virginia devoted itself to the cultivation of one drug—tobacco—Colonial New England built its own economy around the manufacture of another—rum. Rum is liquor distilled from sugar (or molasses, itself a low-quality byproduct of the sugar refining process). Before the colonization of the Caribbean, both cane sugar and its distilled alcohol were virtually unknown in northern European countries like England. But once exposed to rum's intoxicating charms, Englishmen (and English colonists in the New World) quickly developed a taste for the drink initially known as "Kill-Devil." The earliest known reference to the strong drink in the English language came in 1651, when a visitor to the sugar colony of Barbados noted the island's inhabitants' love for "Rumbullion, alias Kill-Devil," which he described as a drink "made of sugar canes distilled, a hot, hellish and terrible liquor."10 The name "rumbullion"—which was an old Scots-Irish word meaning something like "tumultuous uproar"—eventually became, simply, "rum," and it quickly became the favorite drink of the British Empire. (In 1655, the Royal Navy began issuing its sailors a daily ration of half a pint of rum each, a tradition that lasted until 1970.)
Perhaps unduly influenced by The Scarlet Letter and H.L. Mencken's pithy definition of Puritanism as "the haunting fear that someone, somewhere, may be happy," we tend to imagine the Puritan settlers of colonial New England as an unerringly stern and foreboding lot. But New England's Puritans were happy to become both prodigious consumers and major producers of "Kill-Devil." In the 1650s, New Englanders opened dozens of distilleries, importing molasses from the West Indies for processing into over-strength rum. As early as 1661, the General Court of Massachusetts ruled that excess rum production in the colony had become a menace to society. But neither the General Court nor the Puritan ministers could stop the colonists' love affair with their "hot, hellish and terrible liquor." In 1686, the prominent Massachusetts preacher Increase Mather lamented the "unhappy thing that in later years a Kind of Drink called Rum has been common among us. They that are poor, and wicked too, can for a penny or two-pence make themselves drunk."11 Still rum consumption continued to rise. By 1770, New England was home to 143 separate distilleries, which produced nearly 5 million gallons of the liquor every year. That same year, the 1.7 million people who populated the thirteen colonies combined to drink down 7.5 million gallons of rum; that's more than four gallons each for every man, woman, and child in America.12
Such heavy demand for rum made the liquor the mainstay of the colonial New England economy. By the eve of the American Revolution, rum accounted for more than 80% of the region's exports. The rum trade drew New England merchants into the growing international marketplace that would soon give birth to modern capitalism. New England traders imported molasses from the West Indies, distilled it into strong rum, and then sold the liquor abroad—especially in Africa, where it could be traded for valuable cargoes of slaves. The slaves could then be sold again, at great profit, to the tobacco farmers of the American South or, more commonly, to the sugar planters of the West Indies—who would send back molasses, which would then be distilled into rum to start the cycle anew. This triangular trade in rum, slaves, and molasses turned Newport, Rhode Island, into the most important slave port in North America; by 1776, Rhode Islanders controlled 60-90% of the American slave trade.13 The transformation of the sleepy Puritan settlements of New England into the driving engine of a burgeoning American commercial empire simply cannot be explained without understanding the foundational role of the rum/slave trade.
Neither colonial Virginia nor the New England colonies were founded for the purpose of supplying the British Empire with drugs. But in both regions, settlers quickly found themselves organizing their societies and economies around the production and export of tobacco and rum, respectively. The rise of the American economy into the greatest generator of wealth in human history began with the seventeenth-century drug trade.
Later, as the American economy matured into the modern system of corporate capitalism in the late-nineteenth and early-twentieth centuries, drugs continued to play an important role.
After the Civil War, coffee led the way as branded, individually packaged products displaced bulk commodities in the American marketplace. In 1865, a Pittsburgh grocer named John Arbuckle took advantage of an exciting new technology—the paper bag—to develop the nation's first popular coffee brand. Arbuckle sold pre-roasted coffee beans in prepackaged one-pound sacks, under a colorful new label touting the brand, "Arbuckle's Ariosa Coffee." Before Ariosa, consumers had to buy green coffee beans in bulk from their local grocer, then roast the beans themselves at home. The convenience and relatively consistent flavor of Ariosa won converts from coast to coast, and the gold and red Ariosa label became a common sight from the teeming cities of the eastern seaboard to the lonely prairies of the western frontier. (A certain affection for the brand still exists in the West, where Ariosa continues to sell as "cowboy coffee" today.) Ariosa (and other brands that soon arose as competitors) helped to fuel a surge in American coffee consumption; in 1872 Harper's Magazine observed that "the proud son of the highest civilization can no longer live happily without coffee... The whole social life of many nations is based upon the insignificant bean; it is an essential element in the vast commerce of great nations."14
A similar process occurred in the tobacco industry. Prior to the 1870s, almost all American smokers bought their tobacco in loose-leaf form and smoked it in pipes. Then American tobacco manufacturers developed the technology for mass-production of standardized cigarettes, dramatically lowering the price of tobacco and changing forever the way most Americans smoked their nicotine. (In 1883 the New York Times inveighed against the country's new habit in a seemingly bizarre editorial: "The decadence of Spain began when the Spaniards adopted cigarettes and if this pernicious practice obtains among adult Americans the ruin of the Republic is close at hand."15) The Republic did not fall, but Americans' cigarette consumption skyrocketed from 42 million in 1875, to 500 million in 1880, to 2.2 billion in 1889, to 100 billion in 1920.16
Following the lead of Arbuckle's Ariosa Coffee, cigarette manufacturers sought to sell their standardized, mass-produced drug products through colorful brand names and evocative advertising. Lucky Strike, Pall Mall, and Camel became some of the most prominent brands in American business history, selling nicotine to an ever-growing number of consumers. By 1930, it seemed that just about everyone smoked; a History of Tobacco published that year concluded that "a glance at the statistics proves convincingly that the non-smokers are a feeble and ever dwindling minority. The hopeless nature of their struggle becomes plain when we remember that all countries, whatever their form of government, now encourage and facilitate the passion for smoking in every conceivable way."17 Less than a decade later, scientists published the first study linking smoking to lung cancer, and tobacco's march to world domination began to slow. Still, the rise of the American tobacco industry through the 1920s closely mirrored that of modern American capitalism as a whole.
Another drug-based product, Coca-Cola, became the iconic brand of the twentieth-century American economy. An Atlanta chemist named John Pemberton invented Coca-Cola in 1886 as a potentially useful medical tonic-the formula contained the stimulant drugs found in the South American coca leaf (the source of cocaine) and the African kola nut (a source of caffeine). Pemberton marketed his concoction as a patent medicine, a supposed cure-all for a variety of ailments. (Competitors in the patent-medicine market at the time included both cocaine and heroin, both sold over the counter by Bayer and other prominent pharmaceutical companies.) In the early days, Coca-Cola attained some local success in Georgia drugstores, but the product only really took off when the company stopped marketing Coke as a drug and rebranded the sweet formula as a tasty beverage. In 1895, Coca-Cola launched a new advertising campaign encouraging consumers to "Drink Coca-Cola, Delicious and Refreshing." Sold as refreshment rather than medicine, Coca-Cola would soon become the quintessential drink of the twentieth century, as American as apple pie. By the 1970s, Americans would drink more cola than coffee, and Coca-Cola would become one of America's most recognizable cultural and economic exports. International critics of the global domination of American culture even coined the term, "Coca-Colonization," to describe the worldwide penetration of American brands. Today Coke is available in more than 200 countries, and nearly three-quarters of the company's sales occur outside North America.
While Coca-Cola's success came from repositioning itself as a thirst-quencher rather than a medicine, the drink's very name reminds us that the product is and has always been a drug. The company dropped intoxicating cocaine from its famous secret formula long ago, but Coke rivals coffee as America's leading source of caffeine, and Coke is by far the largest source of that drug to be consumed by children. (One indication of the drug's significant contribution to Coke's success: the caffeine-free version of the soda accounts for a miniscule proportion of sales.)
In 1911, the U.S. government even tried to shut Coca-Cola down for violating the 1906 Pure Food and Drug Act. The government, led by Dr. Harvey Wiley—who considered caffeine to be a poison on par with strychnine—charged that the unnatural addition of caffeine extract to the Coca-Cola formula violated the Pure Food and Drug Act's ban on adulterated food products. In the end, the judge ruled against the government, making the world safe for Coca-Cola. Coke's recipe for success—selling a small dose of a popular drug, packaged in an enjoyable form, marketed with catchy advertising—proved to be an irresistible, world-changing formula.
Coke's formula has been mimicked, in a way, by two of the most successful drugs entrepreneurs of recent times: Howard Schultz of Starbucks Coffee, who hooked millions of Americans on Frappuccinos, and "Freeway" Ricky Ross of South Central Los Angeles, who hooked thousands of Americans on crack.
Starbucks revolutionized the way Americans drank coffee. For most of the second half of the twentieth century, the vast majority of Americans drank cheap, industrially-processed instant coffee, usually prepared by boiling it in a percolator. The coffee produced carried its caffeine kick but generally tasted awful. During the 1960s and 1970s, a few iconoclasts began selling whole coffee beans, which customers could grind and brew fresh at home to achieve a better flavor. Among those iconoclasts were Alfred Peet (who started Peet's Coffee in Berkeley, California) and the founders of what we now know as the Starbucks empire. Starbucks began as a small storefront in Seattle's Pike Place Market, selling whole beans (which, ironically, originally came from Peet's in Berkeley) in bulk to customers who wanted to brew their own strong coffee at home. It wasn't until 1984 that Starbucks began experimenting with the format so familiar today, opening a small espresso bar to sell ready-made espresso drinks inside the Seattle shop as an add-on to the primary business of selling whole beans. After 1987, when Howard Schultz took complete control of the company, Starbucks fully remade itself into the retail coffeehouse that has since conquered the world. Starbucks sold its coffee as a symbol of urbane sophistication, and a tasty one at that; the company's invention of sweet new coffee concoctions like the Caramel Macchiato and the milkshake-like Frappucino led some to quip that the company made its fortune not by selling coffee but by selling sugar, whipped cream, and chocolate. Like Coca-Cola, Starbucks found a wildly popular method of packaging America's most popular drug, caffeine, with a sweet taste and desirable image. From 1987 through 2006 the company enjoyed explosive growth, forever changing Americans' coffee-drinking experience.
Just as Howard Schultz and Starbucks transformed the way Americans take their coffee, a Los Angeles hustler named "Freeway" Ricky Ross transformed the way they take their cocaine. As cocaine rose in popularity in America during the 1970s, nearly all users took it in powder form, snorting the drug into their bloodstream via the nose. A few users, however, began experimenting with smoking the drug, which they found gave a more intense high. Smoking cocaine, however, required a complicated process of chemical adulteration to transform the powder into smokable "freebase." Making freebase was difficult and dangerous; the popular comedian Richard Pryor infamously set himself on fire while trying to cook up freebase in 1980.
Enter "Freeway" Ricky Ross, an illiterate, smalltime drug dealer from South Central Los Angeles. In 1980, Ross figured out how to cook up his supply of cocaine into large batches of a cheap, impure version of freebase. The drug could then be sold, ready to smoke, in small doses, saving customers the trouble and danger of cooking their own freebase out of powder. Ross called his product "Ready Rock," but today we know it better as crack. "Ready Rock" made "Freeway" Ricky Ross into one of America's richest drug dealers. By 1983, he had conquered Los Angeles and built distribution networks into dozens of other cities across the country. He was moving more than $1 million worth of cocaine every single day, netting between $100,000 and $200,000 in profit. Thanks in no small part to the street entrepreneurship of "Freeway" Ricky, America found itself beset with a crack cocaine epidemic18
If he had prospered in any other line of work, "Freeway" Ricky Ross might be seen as a hero of the American Dream, a self-made business success and entrepreneurial genius. But unlike Starbucks' Howard Schultz, Ricky Ross went into business on the wrong side of the law, and eventually Ross had to face the consequences. By 2006, Howard Schultz was worth more than $1 billion, while "Freeway" Ricky Ross was serving out a twenty-year jail sentence in federal prison. The starkly divergent fortunes of two of the country's most successful recent purveyors of popular drugs suggests that the biggest action in the American drug market remains in the sale of legal drugs.