Saturday, August 29, 2009

Drug war runs on oceans of cash: A big fish swims free

I was amazed in 2007 when the Mexican police found more than $200 million in US currency linked to a drug cartel stacked up in the suburban Mexico City residece owned by a Chinese businessman living in New York, but I'm even more astonished to learn that American prosecutors don't want to pursue the case.

The cash was allegedly generated from selling raw materials to Mexican meth manufacturers, but the Dallas News speculated two years ago prosecution would be difficult because of the businessman's ties to high-level officials in the Mexican government.

Too often, it's hard not to feel like the big fish get off and the little fish get eaten when it comes to drug war prosecutions. In this case, it's possible the reasons have to do with some sort of official misconduct. AP reports that "In a hearing two months ago, the judge questioned whether the Justice Department has a pattern of mishandling evidence "

While the United States incarcerates hundreds of thousands of people on drug charges - tens of thousands in Texas - it's clear to me we're not really pursuing (at least successfully) the folks at the top of the food chain raking in the really big bucks from drug smuggling, as evidenced in this case.

How much are we talking about? In the big picture, $200 million was a drop in the bucket. I ran across some data this morning providing some big-picture estimates about the economic scope of the American black market in illicit drugs.

According to this source, cocaine sold in the United States has a 50-1 price markup compared to its origin countries, generating about $63 billion per year (American) in revenue for drug smugglers.

Amazingly, the market for drug enforcement is nearly as large as the market for drugs themselves. According to Harvard economist Jeffrey Miron estimated (pdf) last year that the United States spends $44.1 billion annually on drug enforcement at all levels - $30.3 billion of that is spent by state and local governments, he says, and another $13.8 billion by the feds.

By that count, Americans are spending more than $100 billion per year combined on drug demand and demand reduction. That's a massive sector of the economy dependent on the illegal drug trade. Of course, the folks making multi-billion dollar profits from drugs all live in the wealthiest neighborhoods like the one in Mexico City where they found all that cash. They don't usually get prosecuted, while the folks filling up prisons on drug charges typically come from poorest parts of town.


Anonymous said...

My experience with fishing tells me that little fish are easier to catch than big fish. I suspect that law enforcement has the same experience, and requires a lot less paperwork and time.

Anonymous said...

Even when we get a "big fish" it has little or no impact on the black market cartels directly effective. In 2007 Javier Francisco Arrellano Felix head of the Arrelano Felix cartel was captured when a fishing boat strayed into American waters. He is now in federal prison serving a life sentence. Other members of the family stepped up to fill his slot -- and business goes on.

Anonymous said...

This money case is one of many reasons why I was against our government making money available to Mexico thru the Merida Initiative.

Now I know why we sent it.

Anonymous said...

Prohibition laws on on a popular commodity are, in effect, a government subsidy to the industry supplying that commodity.

kaptnemo said...

$200M could be compared to a silent flatulence in the roaring DrugWar hurricane. And I'd be tempted to think that the $63B figure quoted was extremely conservative. Something was propping up the Big Banks that should have gone under months ago, and it isn't the taxpayer's dollars courtesy of the bailout. That came later, after the debacle.

Perhaps that is why there doesn't seem to be much enthusiasm in high places for such a prosecution. Might get too close to some bankster's boardroom...