Connecting the Dots: Marijuana, the Cartels, and Economic Integration with Mexico

Co-Authored with Ami Carpenter, originally published as:“Marijuana Cartels and the Mafia” in the San Diego Union Tribune, 03 June 201

Speaking at the Kroc School of Peace Studies last September, Alan Bersin, President Barack Obama’s Commissioner of U.S. Customs and Border Protection, commended Mexican President Felipe Calderón on his “courageous” 4-year war against organized crime in his country and drew a parallel to the United States’ own struggle against the Mafia in the mid-20th century. He contended that recognizing organized crime as a significant challenge to the rule of law and taking bold action against it was what ultimately brought the Mafia under control – and would prove equally useful with Mexico’s drug cartels.

The parallels between Mexico’s cartels and the U.S. Mafia during the early 20th century are indeed striking – but not for the reason Bersin mentioned. The Mafia coalesced during a period of massive immigration to the U.S. In the late 19th century, Italians took the place of the Irish at the bottom of the immigrant socioeconomic ladder. Then, from 1920 to 1933, the prohibition of alcohol gave the Mafia an unprecedented opportunity to grow, reaping monopoly profits thanks to supply-side suppression. Far from a challenge to rule of law, the Mafia depended upon it to keep competition low.

A similar dynamic now operates with Mexican drug cartels: strong U.S. demand and restricted supply due to rigorous law enforcement make for massive profits. High-risk, high-reward opportunities attract ruthless types and incentivize brutality. As the price of marijuana has climbed, so has cartel violence. Civilian deaths in Mexico – doctors, journalists, students, embassy workers, police officers, children – total 22,700 since January 2007, according to the Kroc School’s Trans-border Institute. Add to the human toll the economic hit from precipitous declines in Mexican tourism. Costs to the U.S. include higher spending on border security and the drug war, lost sales tax revenue and increased gang violence in cities serving as trafficking hubs across the U.S.

Successful regulatory countermeasures would work with, not against, the market. International examples abound, with other violent conflicts fueled by “lootable” resources: diamonds in Sierra Leone, coltan in Congo, tin in Uganda , opium in Afghanistan. The Kimberly Process, an international regulatory scheme to prevent “blood diamonds” from entering global markets, raised awareness of, and thus demand for, “clean” diamonds. Congress’ recent Conflict Minerals Act (HR 4128), tightening international controls on coltan and tin extracted from conflict zones, may work because the commodities it seeks to regulate are legal in the first place. In Afghanistan, a recent proposal from Canada’s Senlis Council to promote local morphine production would turn poppy cultivation from a vehicle to fund warlords into a legal economic and truly democratic boon: the production process and revenue distribution is controlled by local villages and estimated to produce morphine at 45 percent of the average market price.

In November, Californians will vote on a ballot measure to legalize marijuana. The Public Policy Institute of California estimates voters evenly split on this issue. For both selfish and humanitarian reasons, they should vote yes. Legalizing marijuana will strip cartels of their oligopoly on marijuana production and distribution. True, Mexican cartels also traffic in cocaine, but though cocaine fetches a higher price on the street, the cartels do not control its production and are relegated to playing middleman between Colombian cartels and American consumers in that trade. The business the Mexican cartels do in marijuana is their workhorse revenue generator. Upon legalization, they will face a decision similar to the one the Mafia faced after prohibition’s repeal: get more heavily into narcotics, or transform into legitimate market actors.

Regulations must adapt to political realities of contemporary conflict. We have a successful national precedent. Given a combination of sticks and carrots, much of the U.S. Mafia went “legit,” getting into the legal industries like gambling. In the postwar boom years, Italian-Americans better integrated into the American economy; reasons for joining Mafia organizations dried up. Of course, the question of integrating Mexican and Mexican-American labor forces into the American and Mexican economies goes beyond marijuana legalization (and raises the specter of state enforcement of federal immigration law). So does the potential for Mexico’s continued economic development to curtail cartel recruitment. But the prospect of economic integration appears scarier when violence in Mexico has mushroomed to the point that our state universities are barred from taking fieldstrips across the border. Marijuana legalization is a good first step in dismantling the structural conditions for violence.


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Filed under Economics/ Economic Development, Politics/ Political Economy

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