Domestic pot production best strategy to reduce cartel profits?

It appears the economic downturn is achieving public policy goals the federal government could otherwise never dream of accomplishing: Reducing illegal immigration and attacking the economic foundations of Mexican drug cartels.

Steep employment declines have dramatically reduced the number of illegal immigrants entering the United States looking for work. And now that nearly one in five (17%) Americans are un- or underemployed, it turns out thousands of them have begun growing and selling pot to those who still have jobs, cutting deeply into market share and profits of foreign drug cartels. Reports the Washington Post ("Cartels face an economic battle," Oct. 7):

Stiff competition from thousands of mom-and-pop marijuana farmers in the United States threatens the bottom line for powerful Mexican drug organizations in a way that decades of arrests and seizures have not, according to law enforcement officials and pot growers in the United States and Mexico.

Illicit pot production in the United States has been increasing steadily for decades. But recent changes in state laws that allow the use and cultivation of marijuana for medical purposes are giving U.S. growers a competitive advantage, challenging the traditional dominance of the Mexican traffickers, who once made brands such as Acapulco Gold the standard for quality.

Almost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications for Mexico's war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.

While the trafficking of cocaine, heroin and methamphetamine is the main focus of U.S. law enforcement, it is marijuana that has long provided most of the revenue for Mexican drug cartels. More than 60 percent of the cartels' revenue -- $8.6 billion out of $13.8 billion in 2006 -- came from U.S. marijuana sales, according to the White House Office of National Drug Control Policy.

Now, to stay competitive, Mexican traffickers are changing their business model to improve their product and streamline delivery. Well-organized Mexican cartels have also moved to increasingly cultivate marijuana on public lands in the United States, according to the National Drug Intelligence Center and local authorities. This strategy gives the Mexicans direct access to U.S. markets, avoids the risk of seizure at the border and reduces transportation costs.

Reacting to the Post story, Pete Guither sagely observes: "Give the cannabis consumer the choice between “Buy American” and “Mexican brick,” and there’s no doubt they’ll go American."

I had a conversation the other day with reporter Brandi Grissom (formerly of the El Paso Times and now with the soon-to-startup Texas Tribune) about the drug policy conference in El Paso she recently attended. She remarked that many experts at the event thought pot legalization would cripple the cartels and there was wide support for marijuana legalization among attendees (which is probably why the US drug czar and border czar backed out of coming at the last minute). But she also said there was near-universal acknowledgment that the US and certainly Texas politically isn't "ready" to take that leap, which is probably true. What would it take, she asked me, for Texas pols to reach the point where pot legalization might be a real political possibility instead of just the butt of nervous jokes?

I told her I didn't really know, pointing out that in the era of alcohol prohibition, it was public disgust with widespread violence (like the St. Valentine's Day Massacre) and police corruption. But if those factors were enough to change public opinion today, we'd already have legal pot.

This latest news, though, strikes me as potentially setting dynamics in place that provide an economic basis for marijuana legalization, with a California ballot initiative in either 2010 or 2012 as the likely spearpoint. If California legalizes marijuana, generates millions in new tax revenue, and the sky doesn't fall, I'd be surprised if other states don't follow suit (just as many states besides Nevada now allow casino gambling).

Alternatively, assuming marijuana remains illegal but Mexican producers must now manage large-scale marijuana grows within US borders to compete in the American market, it's only a matter of time before they begin to use violence to a) protect their grows and b) attack their economic competitors. At that point, when the cartel-generated body count in the US interior begins to expand, Pete's "Buy American" slogan may start to look pretty good.

Arguably the quickest most effective way to strangle Mexican drug cartel profits would be to legalize domestic US pot producers and allow them to serve a regulated adult market. In short order (just a few growing seasons) it would eliminate 60% of revenue for the biggest, most dangerous organized crime rings in the hemisphere, reduce US-side enforcement costs, generate a large new taxation stream, and contribute to political stability in Mexico.

Will we go that route? I'm not holding my breath. But the idea sure makes a lot of sense and the current economic downturn has created opportunities for changing policies that may have seemed immutable during times of plenty.