This paper draws on the emerging economic theory of organized crime to investigate the role organized criminal gangs play in outdoor illicit cannabis cultivation in New Zealand. Organized criminal groups are most likely to control illicit markets where there are cost advantages from larger-scale production, the need for specialized skills, capital equipment or large amounts of start-up capital, and visible targets for violence aimed at discouraging competition. Examination of the illicit production of cannabis suggests the productivity gains that could be achieved from larger-scale cannabis cultivation are undermined by the difficulties of monitoring crops, the vulnerability of crops to ground and aerial detection, and legal penalties based on size of crop. The effectiveness of violence in discouraging competition in cannabis cultivation is constrained by the difficulties of identifying rival cultivators and discovering the location of rivals' cannabis plots. Several reasons are put forward to explain why the New Zealand police nevertheless claim that cannabis cultivation in New Zealand is controlled by gangs.
KEY WORDS: Illicit cannabis cultivation, gangs, organized crime, violence, New Institutional Economics.
The illicit cultivation of cannabis is widespread in a number of rural regions in New Zealand, and there is known to be a large domestic black market for the drug (Walker et al., 1998; Yska, 1990; New Zealand Police Reports, 1991-1998). It has been estimated that in 1998 between 418,000 and 540,000 cannabis plants were illegally grown in the country (Wilkins et al., 2002a), with a wholesale black market value of $81-$105 million ($NZ) (Wilkins et al., 2002b). The New Zealand police believe competition between rival cannabis growers and the theft of cannabis crops have been motivations for violence in rural areas, including several murders, and that criminal gangs now dominate the cultivation of the drug (Te Runanga o te Rarawa, 1995; Abel and Casswell, 1993; National Drug Intelligence Bureau, 2001).
However, there has been no systematic research on cannabis cultivation or gangs in New Zealand to substantiate the police claims. As has been found elsewhere, it is extremely difficult to empirically verify the role criminal groups play in illicit drug markets (see Paoli, 2001; Brownstein et al., 2000; Goldstein et al., 1989; Weisheit, 1991). Criminal databases do not routinely include data on the affiliations of offenders or the motivations for violent offending (see Goldstein, 1989; Paoli, 2001; Lash, 2000; Spier, 2001). Both drug dealers and members of organized criminal groups are suspicious of mainstream society, and they are potentially dangerous to approach and study (see Goldstein, 1989; Payne, 1997; Andersen, 1979).
Reflecting in part the difficulties of conducting empirical research in this area, a small number of writers have drawn on economic theory to better understand the role organized criminal groups play in different illicit markets (see Schelling, 1967; Rottenberg, 1968; Rubin, 1973; Reuter, 1983; Caiden and Alexander, 1985; Kleiman, 1985; Fiorentini and Peltzman, 1995). The rationale for the economic approach is that many of the challenges faced by entrepreneurs and firms in the legal economy are also faced by criminals and organized crime groups operating in illegal markets-challenges such as how to outperform competitors, how to control employees, and how to identify profit opportunities (Haller, 1980). The central difference with criminal "firms" is that they must avoid detection by the authorities and cannot use the courts to enforce contracts (Rubin, 1973). Criminal firms can also use coercion to remove rival operators rather than pursuing legitimate market competition based on superior price or product quality (Reuter, 1983). By reducing competition in an illicit market, an organized crime group can gain greater market share and earn monopoly profits (Wilhite and Paul, 1994). …