[The antihero]

The Drug Trade’s High Stakes

To benchmark the amount at stake, assume that the total amount of drug trafficking is $40 billion, a frequently used figure, but hardly an exact one by any means. In 2007, Mexico exported about $210 billion worth of goods to the United States and imported about $136 billion from the United States. If the drug trade is $40 billion dollars, it represents about 25 percent of all exports to the United States. That in itself is huge, but what makes it more important is that while the $210 billion is divided among many businesses and individuals, the $40 billion is concentrated in the hands of a few, fairly tightly controlled cartels. Sinaloa and Gulf, currently the strongest, have vast resources at their disposal; a substantial part of the economy can be controlled through this money. This creates tremendous instability as other cartels vie for the top spot, with the state lacking the resources to control the situation and having its officials seduced and intimidated by the cartels.

We have seen failed states elsewhere. Colombia in the 1980s failed over the same issue — drug money. Lebanon failed in the 1970s and 1980s. The Democratic Republic of the Congo was a failed state.

Mexico’s potential failure is important for three reasons. First, Mexico is a huge country, with a population of more than 100 million. Second, it has a large economy — the 14th-largest in the world. And third, it shares an extended border with the world’s only global power, one that has assumed for most of the 20th century that its domination of North America and control of its borders is a foregone conclusion. If Mexico fails, there are serious geopolitical repercussions. This is not simply a criminal matter.

The amount of money accumulated in Mexico derives from smuggling operations in the United States. Drugs go one way, money another. But all the money doesn’t have to return to Mexico or to third-party countries. If Mexico fails, the leading cartels will compete in the United States, and that competition will extend to the source of the money as well. We have already seen cartel violence in the border areas of the United States, but this risk is not limited to that. The same process that we see under way in Mexico could extend to the United States; logic dictates that it would.

The current issue is control of the source of drugs and of the supply chain that delivers drugs to retail customers in the United States. The struggle for control of the source and the supply chain also will involve a struggle for control of markets. The process of intimidation of government and police officials, as well as bribing them, can take place in market towns such as Los Angeles or Chicago, as well as production centers or transshipment points.

Cartel Incentives for U.S. Expansion

That means there are economic incentives for the cartels to extend their operations into the United States. With those incentives comes intercartel competition, and with that competition comes pressure on U.S. local, state and, ultimately, federal government and police functions. Were that to happen, the global implications obviously would be stunning. Imagine an extreme case in which the Mexican scenario is acted out in the United States. The effect on the global system economically and politically would be astounding, since U.S. failure would see the world reshaping itself in startling ways.

Failure for the United States is much harder than for Mexico, however. The United States has a gross domestic product of about $14 trillion, while Mexico’s economy is about $900 billion. The impact of the cartels’ money is vastly greater in Mexico than in the United States, where it would be dwarfed by other pools of money with a powerful interest in maintaining U.S. stability. The idea of a failed American state is therefore far-fetched.

Less far-fetched is the extension of a Mexican failure into the borderlands of the United States. Street-level violence already has crossed the border. But a deeper, more-systemic corruption — particularly on the local level — could easily extend into the United States, along with paramilitary operations between cartels and between the Mexican government and cartels.

U.S. Secretary of Defense Robert Gates recently visited Mexico, and there are potential plans for U.S. aid in support of Mexican government operations. But if the Mexican government became paralyzed and couldn’t carry out these operations, the U.S. government would face a stark and unpleasant choice. It could attempt to protect the United States from the violence defensively by sealing off Mexico or controlling the area north of the border more effectively. Or, as it did in the early 20th century, the United States could adopt a forward defense by sending U.S. troops south of the border to fight the battle in Mexico.

There have been suggestions that the border be sealed. But Mexico is the United States’ third-largest customer, and the United States is Mexico’s largest customer. This was the case well before NAFTA, and has nothing to do with treaties and everything to do with economics and geography. Cutting that trade would have catastrophic effects on both sides of the border, and would guarantee the failure of the Mexican state. It isn’t going to happen.
The Impossibility of Sealing the Border

So long as vast quantities of goods flow across the border, the border cannot be sealed. Immigration might be limited by a wall, but the goods that cross the border do so at roads and bridges, and the sheer amount of goods crossing the border makes careful inspection impossible. The drugs will come across the border embedded in this trade as well as by other routes. So will gunmen from the cartel and anything else needed to take control of Los Angeles’ drug market.

A purely passive defense won’t work unless the economic cost of blockade is absorbed. The choices are a defensive posture to deal with the battle on American soil if it spills over, or an offensive posture to suppress the battle on the other side of the border. Bearing in mind that Mexico is not a small country and that counterinsurgency is not the United States’ strong suit, the latter is a dangerous game. But the first option isn’t likely to work either.

One way to deal with the problem would be ending the artificial price of drugs by legalizing them. This would rapidly lower the price of drugs and vastly reduce the money to be made in smuggling them. Nothing hurt the American cartels more than the repeal of Prohibition, and nothing helped them more than Prohibition itself. Nevertheless, from an objective point of view, drug legalization isn’t going to happen. There is no visible political coalition of substantial size advocating this solution. Therefore, U.S. drug policy will continue to raise the price of drugs artificially, effective interdiction will be impossible, and the Mexican cartels will prosper and make war on each other and on the Mexican state.

We are not yet at the worst-case scenario, and we may never get there. Mexican President Felipe Calderon, perhaps with assistance from the United States, may devise a strategy to immunize his government from intimidation and corruption and take the war home to the cartels. This is a serious possibility that should not be ruled out. Nevertheless, the events of last week raise the serious possibility of a failed state in Mexico. That should not be taken lightly, as it could change far more than Mexico.