Monday, April 12, 2010

drug prescriptions

Most American politicians appear to have flunked basic economics.

One look at the drug policies of the United States could lead to only one conclusion: most of the country's politicians learned their economics in gym class.

If I own a farm, in competition with my neighboring farmers, growing tomatoes, I can usually increase my profits by doing one of two things.

First, I can lower my price and increase my profits by enlarging my market share.

Or, second, I can improve the quality of my tomatoes.  Perhaps, by switching to heirloom varieties.

Drug producers in Mexico are very much like my farm, example.  They produce and distribute a product that has low production costs, but a very high market price.  (In economic terms they garner about an 80% profit.) 

But they forgo basic economics by taking over their rivals' production lines.  War is simply a cost of doing business when the profits to be won are that large.

There is a huge demand from American noses and arms for Mexico's product.  For over twenty years, the American government believed (and apparently still believes) it can stop drug transactions through police and military action.

The internecine drug wars currently under way in Mexico (cleverly induced by President Calderón) and drug interdictions on both sides of the border have affected supply -- a bit. 

But look at that 80% profit figure.  There is a lot of price elasticity there.  And Americans continue to buy drugs even when the price increases.  Just as they did illegal booze during Prohibition and just as they do with over-taxed cigarettes.

Last month, the political poobahs of Mexico and the United States met to conjure up a mutual drug strategy -- to stop the deaths in Mexico and to stop the drugs being exported across the border.  But no such strategy exists.  Nor can it.

This is pure Hans Morgenthau.  If the competing national interests of the United States and Britain almost scuppered their cooperation during the Second World War, how can the two diametrically opposed national interests of Mexico and the United States possibly be resolved?

Stratfor report we discussed yesterday suggested four potential strategies: 1) accept the status quo, 2) reduce drug demand in the United States while keeping drugs illegal, 3) legalize drugs, and 4) send American troops into Mexico to do what Mexico has not done with the drug lords.

The options are oversimplified, but they are a good place to start.  And they each show the interest stress points of trying to cobble together a workable strategy.

Here is my take.

1.  M
aintaining the status quo, even with better-coordinated military aid and training from the United States, is not going to alter the economic equation.  As long as Americans crave drugs and Mexico tries to interfere with the export business, there will be violence.

2.  The second option has been tried and found wanting.  The United States has tried to reduce the demand for drugs in the United States through education, scare tactics, lies, and putting a large portion of the American citizenry behind bars for the possession or sale of illegal drugs. 

The states simply cannot afford to maintain that many people behind bars.  Whatever drives people to drugs, education and prosecution are not going to stop the drug trade.

3.  The most logical option (legalization) is also the most politically impossible -- even beyond improbable.  A president who has already alienated a large portion of the middle class electorate over health care is not going to upset the same voters by raising the specter that their little Muffin is going to become a meth-hag. 

Plenty of journals on the right and the left have reasonably argued in favor of legalization.  But politicians will touch this one right after they privatize Social Security and nationalize the sex industry. 

4.  And the worst option (American troops in Mexico) is far too bizarre (and real) to imagine.  Why not just call it Operation Polk-Pershing and print up posters of Los
Niños Héroes?  I cannot think of a course that would more quickly turn the drug cartels into popular folk heroes.

If the four options are bad, a waste of time, impossible, or terrifying, what is going to happen?

I suspect both governments will continue to muddle through with variants on the status quo.  At least that is what the news outlets are reporting. 

Mexico will do its best to put a fig leaf over its inability (or lack of desire) to stymie the drug exportation trade, and Americans will be satisfied that Mexico is being adequately faithful.  In the interim, many innocent people will die in a phony war on the border. 

"Phony" only because it has no real purpose.  "Real" because blood is being spilled.

If this administration gets desperate enough for electoral affection and decides to put American boots in Mexico, the sorrow of possibilities lost will long be reviewed by military historians.


Calypso said...

I don't see the United States sending soldiers into Mexico. Here they would never stand for that. The idea is ludicrous.

- Mexican Trailrunner said...

Steve, this is a very thoughtful and well-organized essay. I totally concur.
Coupled with the fact that in MX few companies are hiring young people or offering opportunities for income - except the cartels.
Good job, good writing.

Babs said...

I may be wrong, but I think very few "innocent" people have died at the hands of the drug cartels at the border. It appears just like the Mafia in the USA, they are executing each other for control. Hopefully.

1st Mate said...

I agree Option 3, the one with the most potential for success, is the most impossible to bring about. If they resort to Option 4, I guess that will mean you and I and the rest of us ex-pats will have to evacuate, or risk becoming hostages to an insane "police action." And what then? Will American boots have to trample all of Central and South America? Do we have that many boots?

Leah Flinn said...

Also, the status quo has created THOUSANDS of jobs (and entire departments) in the federal government...paid for by taxpayer dollars. What would these people DO if drugs were legalized? The federal government won't change the course it's been on because it benefits does the war on terror. How many laws, wars, fed. jobs and unconstitutional actions have been justified by it? In any normal legal market, the competition keeps the price down and the ruthless criminals see their profits decrease dramatically. As would need for federal enforcement. Although legalization makes sense to me, it will only happen when enough people understand, as you said, basic economics and the extent to which this war effects them. Then it may be politically possible - but how many legislators can you see voting to relinquish federal involvement in ANYTHING, let alone the drug trade? Again, too much is gained on both sides. The citizens are the losers.

Anonymous said...

I think marijuana may get legalized in California, only because the state with an economy about the size of France, is about to default, and the Governator will be looking for cost savings wherever he can find them. Ending the war on pot might be a good place to start, ceasing to spend millions on that specific drug enforcement and incarceration.

If Kaliforneeah is able to start seeing a tax boon from the pot trade, a number of other states may take notice. The administration will not have to lead in this case, just stay out of the way, which it already appears willing to do.


Anonymous said...

A couple of thoughts:

- Why would the United States put troops into Mexico?
I cannot think of any rational reason.

- There ARE countries that have absolutely no drug problems AT ALL but for some reason those countries do not enter into the conversation.

- Why is it that the United States seems to feel it must solve the problems in other countries?

- ALL industrialized countries have PUBLIC health care and it is very beneficial to drug treatment and prevention. Their solutions involve a certain amount of legalization in that "junkies" are given drugs while under treatment and dealing with their sickness therefore nullifying potential crime.

- European nations deal with drug issues and do quite well but they deal with ALL the social issues. (they are related)

Sorry for my mini rant Steve but this is how many people on this beautiful little planet feel. We also consider the Stratfo organization just myopic babble paid for to deliver information that will benefit economic interests fo the U.S..

Theresa in Mèrida said...

I couldn't have said it better myself. I do however think that legalization may worm it's way into being. California is setting a precedent. Historically, where California goes, so goes the nation. It didn't work out so well when the USA followed their lead and elected Reagan president, but maybe it will on this issue.
What I find interesting is that Mexico doesn't have a big drug problem itself. And will it change as illegals find their way home again?

Joe S. said...

What? Some countries have No Drugs, or No Drug related crimes??

Steve Cotton said...

Calypso -- I hope you are correct. But there is a lot of talk about sending advisers to work with the Mexican Army on their street operations.

Mexican Trailrunner -- Thanks. I would prefer that the young people would find different jobs. But it is what it is.
Babs -- Unfortunately, a number of women and school children have died in the cross fire of the border wars. It is inevitable. Where there are insurgencies, there are civilian deaths. Not to mention the reprisal deaths on the families of police and government officials.

1st Mate -- The United States does not have enough boots, will, or chutzpah to control its border, let alone ferret out well-entrenched drug lords. Especially if we decide to turn them into the 21st century versions of Pancho Villas.

Leah -- Good point about the entrenched bureaucracy north of the border. Maybe the national interests are closer than we thought -- but not what we thought they would be.

ANM -- Without congressional action, California cannot legalize marijuana. Assuming the federal government decides not to enforce the law (a decision for which many congressman will suffer a deadly fate in November), it would be a start. But the drug market will simply shift to other drugs. Of course, California will inevitably see marijuana as a tax cash cow and inflate the price to pre-legalization levels (or higher) and drive it all back underground again. Never underestimate the ability of politicians to take a good idea and turn it into a catastrophe.

Anonymous -- I think we can all ask what rational reason there was to put troops (or Peace Corps members or financial aid or whatever) into many places in this poor old world. Rationality is not a prerequisite for governmental action.

I am not certain which countries have NO drug problems. Some may have fewer than we do. There are some countries that execute drug users. But I doubt that was your point or your example.

As for the meddlesome nature of the United States in the affairs of others -- why do wives insist on telling husbands what to wear?

Feel free to rant.

Joe -- I was just as amazed. Perhaps on some other planet.