- - Wednesday, April 27, 2016

ANALYSIS/OPINION:

NARCONOMICS: HOW TO RUN A DRUG CARTEL

By Tom Wainwright

Public Affairs, $26.99, 288 pages

”Narconomics” is the book that Sean Penn wanted to write. Tom Wainwright may not have interviewed Joaquin “El Chapo” Guzman, but he did talk to drug kingpins every bit as ruthless and intimidating in writing this book. Along the way, Mr. Wainwright also talked to cops, hitmen, national presidents and addicts. He is one of the luckiest journalists alive just to have survived his research. The work that he has produced argues his thesis that the drug industry is run on very similar lines to companies such as McDonald’s or Wal-Mart; he makes a convincing case. Mr. Wainwright is an investigative journalist who is an editor for the Economist magazine; he began this project while covering Mexico, Latin America and the U.S. border for that publication.

Mr. Wainwright argues that most successful drug cartels operate like Wal-Mart in that they have a virtual monopoly on the product at the source of supply. The farmers who produce the basic cocoa, poppies or marijuana have no choice but to sell to a single buyer in their respective areas. This helps to explain why drug prices remain relatively inelastic and why eradication efforts fail; there are always sellers someplace to sell at the buyer’s price.

Like Mc Donald’s, some cartels such as the Mexican Zetas have also found franchising to be an effective business model. This is a symbiotic relationship. The cartel finds a local criminal gang that wants to expand its business. That gang knows the local territory and has established relationships. The franchise gets the brand name of the major cartel and its protection against other cartels for a cut of the franchise profits. Like McDonald’s and Burger King, the cartel has to maintain quality control. The difference between quality control in the fast food franchise business and the drug trade is that a drug franchise that comes up short may find its members hanging from a highway overpass.

Like legitimate businesses, cartels often have human resource problems. They are not immune from incompetence and turnover. The El Salvador cartels solve their turnover problem by having their members tattooed from head to toe with distinctive gang markings. The Mexican gangs provide hats and T-shirts, which are less permanent; job hoppers among the soldiers and mules are likely to be found headless.

The author notes that cartels often use diplomacy to settle disputes that might otherwise result in bloody conflicts resulting in decreased profits. They sometimes act like monopolies that carve up territory among businesses to keep the peace. This is more often done in Central America than in Mexico. Shunning First World nations that fight monopolies with regulators and effective police, the cartels choose to set up their supply chains in nations with weak central governments and weak security forces. This is why the cartels are less effective in countries such as Panama and Costa Rica, but flourish in places like Guatemala. Mr. Wainwright explains that even relatively strong nations such as Mexico are prone to police corruption because there are so many layers of police. If the cartels fail to turn one force, they can always target another.

The author also notes that the cartels often use public relations techniques and resort to corporate social responsibility to attempt to win the “hearts and minds” of common people who might otherwise become informers or start citizen movements against the local cartel. However, some PR efforts are aimed at reminding the public of the price of going against the cartel.

According to Mr. Wainwright, the drug trade is not particularly dangerous at the source of the raw materials or in the user countries. The real violence occurs at the points of transit between supply and demand in border cities such as Juarez in Mexico, where murder eventually reached epic proportions. He might even applaud the “Great Wall of Trump” plan to build a wall with only one door.

Mr. Wainwright does not offer a comprehensive plan for solving the drug problem. Legalization may work with marijuana in driving out the cartel influence, but drugs such as heroin are too dangerous to make legal. The cartels are an entrepreneurial model. They are capable of branching into other lines when one becomes stagnant.

Despite the subtitle, this is not a “how to” book, nor does it offer a comprehensive solution to the drug problem. However, it presents in incisive look into a worldwide problem. Few Americans have escaped the corrosive influence of the drug trade on a family member or friend; this book explains the magnitude of the problem.

Gary Anderson is an adjunct professor at the George Washington University’s Elliott School of International Affairs.

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