Narconomics summary

It’s estimated that the US marijuana industry makes a whopping $40 billion each year. A total of $7 billion comes from the legal marijuana market, which is a fairly significant proportion. How does an economic arrangement like this benefit a government fighting a war on drugs?

Well, legalizing marijuana allows the government to weaken drug cartels and generate revenue while doing so, by becoming the cartels’ rival and through taxation, respectively.

We’ve learned about the relationships between governments and cartels, but how do cartels behave toward each other? Well, from an economic standpoint, there are two possible models: competition and collusion.

In Mexico, rivalry reigns as drug cartels compete violently with each other. Take the city of Juárez for example; the Juárez Cartel and the Sinaloa Cartel are now famous for their brutal and public acts of vengeance against one another, which include dumping decapitated bodies on roadsides or hanging corpses from signs along the highway.

Finding the right person for the job can be a headache for any business. But if you’re a drug cartel operating in total secrecy, you can’t just pop an ad in the newspaper or on LinkedIn when you need staff. So where do drug cartels find their new recruits?

Doing human resources for drug cartels means looking in alternative places, like prisons. Cartels target inmates knowing that it’ll be difficult for them to find normal jobs back on the outside. Joining a cartel is a way for inmates to make sure they have work once they’re released.

These days, we expect businesses to demonstrate social responsibility. Some invest in employee health care, while others lead campaigns to support charities. But in most cases, businesses don’t do these good things to be good; most of the time, it’s a strategic public relations ploy. They simply want to look good and boost their brands above competitors.

Interestingly enough, the same applies to drug cartels. Despite their unsavory line of business, cartels are known for trying to market themselves in a better light than their rivals. A common strategy is to decry the drug-related violence in their communities.

Ever wondered why certain consumer objects can be sold so cheaply? Low prices are usually the result of offshoring, when a company moves its production overseas to save money and boost profits. Cartels do exactly the same.

Corrupt governments in other countries offer a great opportunity for cartels to make some money. Loosely enforced laws and weak governmental institutions create an ideal environment for drug cartels.

What can drug cartels learn from the McDonald’s business model? Quite a lot, actually. Let’s take a look at how cartels use franchise models to make financial and political gains.

A franchise is a business model whereby companies allow other individuals to undertake specific commercial operations as agents of their brands and organizations. The benefits of franchising for cartels are twofold, allowing them to both expand their territory and secure a steady stream of revenue.

Ever heard of legal synthetic drugs? Yes, they exist, and they pose a major challenge to governments combating the drug industry.

Drugs can be created in such a way that they can be sold legally until they’re made illicit. Once a synthetic drug is made illegal, makers simply create a chemically altered version that’s technically a different legal drug.

Did you know that back in 1977, Coca-Cola made its first forays in the wine industry? It might sound like a strange business move, but all they were doing was diversifying – that is, expanding from their primary product to take on operations in another field to increase profit. Cartels use the same strategy.

Many cartels have expanded from their primary service, drug smuggling, to another field: people smuggling. Why? Simple. Cartels go where the money is. As such, many have diversified their business to include smuggling people across borders, and specifically the United States-Mexico border.