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Overview

Although we focus on the supply of drugs, it’s important to consider that drug cartels are like any other business. In fact, they have a lot in common with companies. They create human resource strategies, take social responsibility and build franchises. Therefore, as we try to formulate policies about the war on drugs, it helps to remember that drug cartels are businesses and should be treated accordingly.

The Mexican government estimates that between 2007 and 2014, more than 164,000 people died in the war against drug cartels. Despite their efforts to stop them, the cartels have grown in size and influence. They now sell not only drugs but also human trafficking services.

So how do cartels work? How have they been allowed to grow so large that they can be considered a problem for society? These questions will be answered in detail, as the author takes a look at drug cartels and their relationship with both the market and governments.

In this passage, you’ll learn how legalizing drugs could be a good thing for society; the cartels’ strategy of cutting down their supply to increase profits; and how some cartels recruit members.

Big Idea #1: The US government’s efforts to attack the drug industry are not effective.

In 1971, then-US President Richard Nixon declared a war on drugs. Drug incarceration rates have skyrocketed since that time. But the amount of drugs being produced and consumed globally has not decreased; in fact, there’s more money in the drug market right now than ever before. How is this possible?

The US government wants to curb drug use, so it’s attacking supply. For example, South American countries are a major source of drugs for the US. So, the US is entering agreements with those nations to spray pesticides on coca crops from low-flying planes. This will make it harder for drug dealers to flourish because they won’t have the supplies needed to meet demand.

It would seem that this approach would work, but it actually has a name. It’s called the balloon effect because when one part of a balloon is squeezed, air moves around inside but doesn’t go anywhere.

Just like air inside a balloon, cartels can move around. If one government cracks down on coca crops, cartels just pack up and move to another country. As a result, the problem keeps moving around but never really disappears.

The US government’s approach to the drug problem is not perfect. It attacks supply, but never deals with demand or the cartels themselves.

Cartels are groups of people who control the supply and demand of a product. They can be viewed as monopsonies, or single buyers. Cartels decide how much to pay farmers for their products, which they essentially have at their mercy. When the US government wages war on drugs, it does not go after the cartels; instead it targets impoverished farmers in third world countries because that’s where most drugs come from. However, when supplies decrease, consumers become okay with paying more for them since there is less available on the market than before. Therefore annual revenue will remain about the same or even increase if supply decreases.

Big Idea #2: Legalizing marijuana is one of the biggest threats to drug cartels.

It’s estimated that the US marijuana industry is worth $40 billion a year. About $7 billion of that comes from legal sales, which is a significant proportion. How does this economic arrangement benefit the government? Well, legalizing marijuana weakens drug cartels and generates revenue for the government by becoming its rival in business and through taxes on businesses.