How Economists Would Wage the War on Drugs

The monstrous cartels that run the narcotics business face the same dilemmas as ordinary firms—and have the same weaknesses

By Tom Wainwright, WSJ
Updated Feb. 19, 2016 11:16 a.m. ET

In April, the world’s governments will meet in New York for a special assembly at the United Nations to discuss how to solve the drug problem. Don’t hold your breath: Since the previous such gathering nearly two decades ago, the narcotics industry has done better than ever. The number of people using cannabis and cocaine has risen by half since 1998, while the number taking heroin and other opiates has tripled. Illegal drugs are now a $300 billion world-wide business, and the diplomats of the U.N. aren’t any closer to finding a way to stamp them out.

This failure has a simple reason: Governments continue to treat the drug problem as a battle to be fought, not a market to be tamed. The cartels that run the narcotics business are monstrous, but they face the same dilemmas as ordinary firms—and have the same weaknesses.

In El Salvador, the leader of one of the country’s two big gangs complained to me about the human-resources problems he faced given the high turnover of his employees. (Ironically, his main sources of recruitment were the very prisons that were supposed to reform young offenders.) In Mexican villages, drug cartels provide basic public services and even build churches—a cynical version of the “corporate social responsibility” that ordinary companies use to clean up their images. Mexico’s Zetas cartel expanded rapidly by co-opting local gangsters and taking a cut of their earnings; it now franchises its brand rather like McDonald’s and faces similar squabbles from franchisees over territorial encroachment. Meanwhile, in richer countries, street-corner dealers are being beaten on price and quality by “dark web” sites, much as ordinary shops are being undercut by Amazon.

(More here.)