Drug crime is a serious problem worldwide. The use, but also the abuse of legal and illegal psychoactive substances, is an integral part of our societies. Correspondingly lucrative, but also damaging, is the business that is done with legal and illegal drugs. In this essay, I will address the effects of illicit drug trafficking on economic performance. Since a global view would go far beyond the scope of this work, I will limit myself to the American continent, especially on Mexico's drug trafficking with the USA. Furthermore, I will mainly focus on the cocaine trade, as this drug has the greatest economic, evidence-based effects for the individual countries studied.
First of all I will briefly explain the reasons why drug crime, but also drug prohibition in general, is an economic problem. In the second part of this essay, I will introduce the US demand market and the associated supply markets (Mexico and other Central and South American countries). In this context I will use the analysis of two papers (one written by Robles et al. and one written by Holst et al.) to explain to what extent the activities of drug cartels have an effect on economic growth in Mexico. Finally, I will counter-examine the findings of these two studies and formulate my own conclusion from the results obtained.
Table of Contents
- Introduction
- 1. Drug Prohibition and Drug Crime as a General Economic Problem
- 2. Demand Market USA & Supply Market Central- and South America
- 3. Economic Impacts of Drug Cartels in Mexico
Objectives and Key Themes
This essay examines the economic effects of illicit drug trafficking, specifically the cocaine trade, on the American continent, focusing on the relationship between Mexico's drug trafficking and the USA. The objectives are to explore the economic consequences of drug prohibition, analyze the dynamics of the US demand market and the supply markets in Mexico and other Central and South American countries, and assess the impact of drug cartels on Mexico's economic growth.
- The economic consequences of drug prohibition and its impact on supply and demand.
- The dynamics of the US cocaine market and its connection to supply chains in Mexico and other Latin American countries.
- The economic impact of drug cartels on Mexico, including their influence on violence and economic activity.
- The role of drug cartels in corrupting the Mexican economy.
- The effectiveness of the "War on Drugs" in combating drug trafficking and its unintended consequences.
Chapter Summaries
1. Drug Prohibition and Drug Crime as a General Economic Problem: This chapter establishes that drug use is prevalent, and prohibition, rather than eliminating the problem, creates an economic one. The inelastic demand for drugs means that prohibition leads to higher prices, increased profits for drug trafficking organizations (DTOs), and the attraction of international criminal organizations. The chapter highlights the significant profit margins in the illegal drug trade, explaining how the state's policy of repression unintentionally fuels the drug market due to increased prices and profits for DTOs. The high cost of seizures at the end of the value chain is also discussed. The chapter concludes by emphasizing the self-perpetuating cycle of prohibition, repression, and increased DTO activity.
2. Demand Market USA & Supply Market Central- and South America: This chapter provides an overview of the US drug demand market, emphasizing its size and significance as the world's largest market, with Mexico acting as a key transit country for cocaine. It details the lucrative nature of drug trafficking for DTOs due to Mexico's proximity to both the US and cocaine-producing countries in South America. The chapter explores the complex supply chain, from coca leaf cultivation in countries like Colombia and Bolivia to the trafficking of cocaine into the US, highlighting the involvement of international smuggling organizations and armed groups. It also presents estimates of the value of the global cocaine trade and the proportion directed to the US.
3. Economic Impacts of Drug Cartels in Mexico: This chapter defines drug cartels and discusses their substantial economic power, particularly their role in the US cocaine market. It analyzes the rise of Mexican drug cartels, linking their growth to increased fragmentation, political competition, and anti-corruption reforms. The "War on Drugs" policy implemented by President Calderon is examined, along with its significant increase in the homicide rate. The chapter explores the factors contributing to the homicide rate increase, including successful crackdowns in Colombia, increased fragmentation of DTOs, and the increased use of police and military violence. The negative economic impact of this violence on Mexico's small and medium-sized enterprises (SMEs), which constitute a significant portion of its economy, is briefly introduced.
Keywords
Illicit drug trafficking, cocaine trade, economic growth, drug prohibition, Mexico, USA, drug cartels, DTOs, supply and demand, violence, "War on Drugs," economic impact, corruption, homicide rate.
Frequently Asked Questions: Economic Impacts of Illicit Drug Trafficking in the Americas
What is the main topic of this text?
This text examines the economic effects of illicit drug trafficking, specifically the cocaine trade, on the American continent, focusing on the relationship between Mexico's drug trafficking and the USA. It explores the economic consequences of drug prohibition, analyzes the dynamics of the US demand market and the supply markets in Mexico and other Central and South American countries, and assesses the impact of drug cartels on Mexico's economic growth.
What are the key themes explored in the text?
Key themes include the economic consequences of drug prohibition, the dynamics of the US cocaine market and its connection to supply chains in Latin America, the economic impact of drug cartels on Mexico (including violence and corruption), and the effectiveness (or lack thereof) of the "War on Drugs".
What are the main chapters and their respective focuses?
Chapter 1 examines drug prohibition as a general economic problem, highlighting how it creates higher prices, increased profits for drug trafficking organizations (DTOs), and attracts international criminal organizations. Chapter 2 analyzes the US demand market and the supply chains in Central and South America, detailing the lucrative nature of the cocaine trade and the complex routes involved. Chapter 3 focuses on the economic impacts of drug cartels in Mexico, including their role in the US cocaine market, the rise of Mexican cartels, the "War on Drugs" policy, and the resulting increase in violence and its economic consequences (particularly for SMEs).
What is the significance of drug prohibition in the context of this study?
The text argues that drug prohibition, rather than solving the problem, creates an economic one. The inelastic demand for drugs leads to higher prices and increased profits for DTOs, perpetuating a cycle of repression and increased criminal activity. The high cost of seizures at the end of the value chain is also a significant factor.
What is the role of Mexico in the cocaine trade?
Mexico plays a crucial role as a key transit country for cocaine moving from South American producing countries to the US market. Its geographic location and the lucrative nature of the trade have fueled the growth of powerful drug cartels.
What is the impact of drug cartels on Mexico's economy?
Drug cartels exert substantial economic power in Mexico. Their activities, along with the government's response ("War on Drugs"), have led to increased violence, negatively impacting Mexico's economic growth, particularly affecting small and medium-sized enterprises (SMEs).
What is the "War on Drugs" and its impact?
The "War on Drugs" policy, particularly as implemented by President Calderon, is examined. The text shows a significant increase in the homicide rate in Mexico as a consequence of this policy, partly due to increased fragmentation of DTOs and the increased use of police and military violence.
What are some key words associated with this study?
Key words include: illicit drug trafficking, cocaine trade, economic growth, drug prohibition, Mexico, USA, drug cartels, DTOs, supply and demand, violence, "War on Drugs," economic impact, corruption, homicide rate.
- Quote paper
- Johannes Grunwald (Author), 2020, The Effects of Illicit Drug Trafficking on Economic Growth in America, Munich, GRIN Verlag, https://www.grin.com/document/981094
