Undermining Mexico’s Dangerous Drug Cartels

We have included the opening summary, conclusion and author's highlights of this Cato Institute policy paper advocating the legalization of drugs. The link to the complete report in PDF format is listed below.

http://www.cato.org/pubs/pas/PA688.pdf

Wikipedia describes the Cato Institute as a libertarian think tank headquartered in Washington, D.C. whose stated mission is "to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace".

(This post is not an endorsement of the Cato Institute or the author's position on ending the prohibition against drugs. This is a complex issue with convincing arguments for and against.)

Executive Summary
Since President Felipe Calderón launched a military-led offensive against Mexico’s powerful drug cartels in December 2006, some 42,000 people have perished. The situation is so bad that the Mexican government’s authority in several portions of the country, especially along the border with the United States, is shaky, and
the growing turbulence creates concerns that Mexico is in danger of becoming a failed state. Although such fears are excessive at this point, even that dire scenario can no longer be ruled out.

U.S. political leaders and the American people also worry that Mexico’s corruption and violence is seeping across the border into the United States. That danger is still fairly limited, but the trend is ominous. Both the number and severity of incidents along the border are rising. Experts propose several strategies for dealing
with Mexico’s drug violence. One suggestion is to apply the model used earlier to defeat the Colombian drug cartels. But the victory in Colombia is not as complete as proponents contend, and the situation in Mexico is far less favorable to using that strategy. Another suggested approach is to try to restore Mexico’s status quo ante, in which the government largely looked the other way while drug traffickers sent their product to the United States. But too much has changed politically in Mexico for that approach, which would be only a temporary Band-Aid solution in any case.

The only lasting, effective strategy is to defund the Mexican drug cartels. Reducing their billions of dollars in revenue requires the United States, as the principal consumer market for illegal drugs, to abandon its failed prohibition policy. That move would eliminate the lucrative black-market premium and greatly reduce the financial resources the cartels have available to bribe officials or hire enforcers to kill competitors and law enforcement personnel and intimidate the Mexican people.

A refusal to abandon prohibition means that Mexico’s agony will likely worsen and pose a significant security problem for the United States.

Conclusion
The most feasible and effective strategy to counter the mounting turmoil in Mexico is to drastically reduce the potential revenue flows to the trafficking organizations. In other words, the United States could substantially defund the cartels through the full legalization (including manufacture and sale) of currently illegal drugs. If Washington abandoned the prohibition model, it is very likely that other countries in the international community would do the same. The United States exercises disproportionate influence on the issue of drug policy, as it does on so many other international issues.

If prohibition were rescinded, the profit margins for the drug trade would be similar to the margins for other legal commodities, and legitimate businesses would become the principal players. That is precisely what happened when the United States ended its quixotic crusade against alcohol in 1933. To help reverse the burgeoning tragedy of drug-related violence in Mexico, Washington must seriously consider adopting a similar course today with respect to currently illegal drugs.

Even taking the first step away from prohibition by legalizing marijuana, indisputably the mildest and least harmful of the illegal drugs, could cause problems for the Mexican cartels. Experts provide a wide range of estimates about how important the marijuana trade is to those organizations. The high-end estimate, from a former DEA official, is that marijuana accounts for approximately 55 percent of total revenues. Other experts dispute that figure. Edgardo Buscaglia, who was a research scholar at the conservative Hoover Institution until 2008, provides the low-end estimate, contending that the drug amounts to “less than 10 percent” of total revenues. Officials in both the U.S. and Mexican governments contend that it’s more like 20 to 30 percent.

Whatever the actual percentage, the marijuana business is financially important to the cartels. The Mexican marijuana trade is already under pressure from competitors in the United States. One study concluded that the annual harvest in California alone equaled or exceeded the entire national production in Mexico, and that output for the United States was more than twice that of Mexico. As sentiment for hard-line prohibition policies fades in the United States, and the likelihood of prosecution diminishes, one could expect domestic growers, both large and small, to become bolder about starting or expanding their businesses.

Legalizing pot would strike a blow against Mexican traffickers. It would be difficult for them to compete with American producers in the American market, given the difference in transportation distances and other factors. There would be little incentive for consumers to buy their product from unsavory Mexican criminal syndicates when legitimate domestic firms could offer the drug at a competitive price—and advertise how they are honest enterprises. Indeed, for many Americans, they could just grow their own supply—a cost advantage that the cartels could not hope to match.

It is increasingly apparent, in any case, that both the U.S. and Mexican governments need to make drastic changes in their efforts to combat Mexico’s drug cartels. George Grayson aptly summarizes the fatal flaw in the existing strategy. “It is extremely difficult—probably impossible—to eradicate the cartels. They or their offshoots will fight to hold on to an enterprise that yields Croesus-like fortunes from illegal substances craved by millions of consumers.”

Felipe Calderón’s military-led offensive is not just a futile, utopian crusade. That would be bad enough, but the reality is much worse. It is a futile, utopian crusade that has produced an array of ugly, bloody side effects. A different approach is needed. The most effective way is to greatly reduce the “Croesus-like” fortunes available to the cartels. And the only realistic way to do that is to bite the bullet and end the policy of drug prohibition, preferably in whole, but at least in part, starting with the legalization of marijuana.

A failure to move away from prohibition in the United States creates the risk that the already nasty corruption and violence next door in Mexico may get even worse. The danger grows that our southern neighbor could become, if not a full-blown failed state, at least a de-facto narco-state in which the leading drug cartels exercise parallel or dual political sovereignty with the government of Mexico. We may eventually encounter a situation—if we haven’t already—where the cartels are the real power in significant portions of the country. And we must worry that the disorder inside Mexico will spill over the border into the United States to a much greater extent than it has to this point.

The fire of drug-related violence is flaring to an alarming extent in Mexico. U.S. leaders need to take constructive action now, before that fire consumes our neighbor’s home and threatens our own. That means recognizing reality and ending the second failed prohibition crusade.

Author's highlights:

The victims in Mexico’s increasingly chaotic, violent drug war come from all walks of life, including police officers, soldiers, and elected officials.

The chaos is worst in the border cities, such as Tijuana and Ciudad Juárez, but that plague is spreading to previously quiet areas.

A number of business and political elites are so worried about the security environment that they have sent their loved ones out of the country.

The drug cartels might be targeting U.S. diplomatic and law enforcement figures, but ordinary Americans also are at risk when they travel or work in parts of Mexico.

Mexican domination of the drug trade in the United States carries the risk that turf battles in Mexico could become proxy wars in U.S. communities.

Combating traffickers in Mexico and other source countries is at best a brutally uphill struggle, and at worst a futile, utopian crusade.

The Mexican organizations are taking control of trafficking routes and gaining access to potential markets in portions of Sub-Saharan Africa and the Middle East, as well as in Europe.

At best, efforts at domestic demand reduction have achieved only modest results, and the supply-side campaign has been even less effective.

Drug warriors point to Colombia as a model of what can be done in Mexico. But the success story in Colombia is neither as simple, nor as complete, as they want us
to believe

The task facing the Calderón government and its allies in Washington is not merely to defeat two cartels, as was the challenge in Colombia, but to defeat multiple powerful organizations.

Prospects for a policy of accommodation, or “appeasement,” are dim, even if Calderón would countenance it—which seems very unlikely.

There is only one policy change that would have a meaningful beneficial impact: ending the prohibitionist strategy and legalizing currently illegal drugs.

The notion that usage rates of currently illegal drugs would rival those of alcohol and tobacco if prohibition were abandoned is shockingly simplistic.

Disenchantment with the drug war is growing within Mexico’s political elite.

Unless the possession, production, and sale of drugs is legalized, the black-market premium will still exist and law-abiding businesses will still stay away from the trade.

If Washington abandoned the prohibition model, it is very likely that other countries in the international community would do the same.