Is Decriminalization MAD?

By Dave Anderson:

I have been puzzled as to why the Mexican cartels have not begun to attack the Mexican government's cash flow.  The Mexican economy has five main sources of foreign currency; hydrocarbon exports, light manufacturing in the border zone, tourism, remittances and smuggling into the United States.  The cartels control the last source of hard currency, the middle three are correlated with the state of the US economy while hydrocarbon exports are over a third of the federal budget. 

Knock out that source of cash, and the Mexican government has a series of unfortunate problems.  It would either have to increase taxes on the rest of the population, reduce services and outlays, or go into deeper debt on tight international credit markets.  Increasing taxes makes the government value proposition weaker, reducing services and outlays makes the value proposition weaker as well, and bowing to either the United States, the IMF or international credit market demands for cash is a legitimacy reducer as well. 

I have been scratching my head hard as to why the Mexican oil export infrastructure is still up and functioning at normal capacity for over a year now.  About a month ago, I was having a few beers with a very intelligent friend who groks system disruption and we war-gamed this scenario out. 

The current situation of a slowly weakening and hollowing state is an acceptable outcome for the cartels.  A full-scale civil war or a fully mobilized government that can crush several of the participating cartels is a non-desirable outcome.  There is a significant collective action problem on the cartels as bringing about state financial collapse by attacking the oil infrastructure, or a society wide collapse by triggering a mass refugee crisis by pounding Mexico City's water and electrical infrastructure would be a net win for the cartels as a whole.  However it would bring about significant localized pain for some of the involved players. 

So an extreme quasi-nihilist destruction of the state is not a favorable outcome.  However sniping and restricting the freedom of action and possibility of the state is a desirable outcome.  Escalating too greatly though comes with a strategic risk to cartel cash flow.  What would happen to cartel cash flow if both the United States and Mexico engaged in wide-scale decriminalization of marijuana alone?  That would be a massively market disrupter as locally grown marijuana in the United States would be cheaper to grow and distribute than smuggled weed.  At that point the 20% to 30% cash flow reduction that a pipeline campaign would cost the Mexican government would be counterbalanced by the cartels losing their biggest money maker, marijuana production, smuggling and distribution.

Is decriminalization MAD? 

Comments

[John Ballard]

In other words, survival of the host is essential to survival of the parasite(s). And at some level the parasites understand.

[GreenDreams]

IF the US was interested in shutting down the global black market for drugs (and that is apparently a big IF), it easily within our power to do so. It's a disturbing question why we choose to incur all the social and economic costs to maintain global criminal enterprise through drug prohibition, which has never affected supply, demand or use.

[Zifnab]

But you have to understand that the cartels fuel the Mexican military and the military fuels the cartels. There is a symbiosis there. Also, the cartels have a history of pointing the military at upstart competition, so there is even some back scratching between the two.

On the US side of the border, the DEA's very existence is predicated on the marijuana trade. Cut that and you've made a great deal of a branch of law enforcement redundant. The US Bureaucracy needs marijuana too.

Legalizing marijuana on either side of the border would cut the legs out of all sorts of government and anti-government organizations. It would turn the entire drug war on it's ear and set a whole lot of businesses, unions, and individuals back financially.

Money, money, money. Lots of people profit from the black market, not just the marketeers.