Dollar vs. Dollar

Until recently, a fundamental reality has been missing from U.S. media coverage of the “drug wars” in Latin America.    Time and again, our headlines have pointed to the scary “other” — the corrupt Mexican police officer, the Colombian drug trafficker, the peasant farmer who ekes out a living growing a poisonous crop.

A case in point:   Mexican Drug Cartel Violence Spills Over, Alarming U.S.  (NY Times)

You don’t have to dig into the article, just take a look at the headline.  The scary violence of America’s next-door neighbor is suddenly threatening us.

In this telling, we Americans are the besieged victims — the people who are subjected to a flood of poison from violent smugglers and cartels.  But this approach only works if one ignores basic economics.  The narrative of “governments vs. traffickers” or “U.S. vs. foreign cartels” misses the point.

The drug war is best understood as a battle of dollar versus dollar — a bloody war between the dollars of U.S. taxpayers and the dollars of U.S. consumers.

In financial terms, you could describe our behavior as a form of economic schizophrenia.  Americans spend large sums of money to essentially pay a vast network of people to grow, process, defend, ship, smuggle, and deliver drugs across thousands of miles.  Simultaneously, Americans also spend a large sum of money paying another network of people to find, fight, arrest, and kill those who we hired to provide the drugs to begin with.

No one really likes to think of U.S. drug buyers as “consumers.”  To use that word is to seemingly legitimize drug consumption as a form of economic activity.  But all activities that involves trading currency for a product — and plenty of activities that don’t — are inherently economic in nature.  So when millions of Americans give billions of dollars in exchange for large quantities of illegal drugs, well, that’s a lot of commerce going on.

Not only that, but it is the commerce of a wealthy First World nation.  Sure, America is in a recession.  And sure, our economic outlook is glum.  But even as many Americans lose their jobs and their homes, it remains true that life for average Mexicans and others in developing nations is far less prosperous.

What this means is that American consumers’ dollars are very valuable in developing nations.  Just think of the vast number of Chinese factories making goods for American buyers.   In terms of economic incentives, the drug trade is no different.  The money earned by American workers and given to local drug dealers has massive buying power once converted into Mexican pesos and other currencies of poorer economies..

Those American pesos pay the salaries of drug traffickers, peasant growers, and corrupted government officials.  The pesos even come back into the American economy, as drug traffickers spend a portion of their profits buying weapons in the American market that they smuggle back into Mexico.  You could say that these U.S. funds flow from American consumers into a vast network of “employees” who make up the illicit drug supply chain.

On the other side of the equation is a massive flow of American tax dollars that are spent doing battle with the very people who provide the product Americans buy.  Some of those tax dollars go directly into U.S. military efforts at interdiction.  Others dollars fund anti-corruption and anti-drug units in Mexico and elsewhere.  Additional sums of money make their way south in the forms of military training and hardware.

When looked at in purely economic terms, the entire drug war is really just a battle between U.S. consumers of illicit drugs and U.S. taxpayers.  And to make things more darkly comic, there are many people who fit into both categories — people who both pay their taxes and spend a portion of their earnings on drugs.

U.S. headlines have finally begun addressing this reality, but only following U.S. Secretary of State Hillary Clinton’s recent blunt comments.   The underlying reality is that so long as the dollars keep flowing, the war for and against drugs will continue.  It is our money that finances both sides of this bloody battle.