Drug cartels and big business have much in common

Narconomics is an exhilarating trip into the heart of the illegal narcotics industry, revealing that it operates much like a legitimate global corporation.

by Oliver Bennett
Last Updated: 01 Apr 2016

Last month, the Liberal Democrats advocated the legalisation of cannabis - the first major UK political party to do so. OK, the Lib Dems can probably afford to take some risky policy decisions, but an interesting note was struck by a stand-out statistic: that legal pot could generate a £1bn tax take.

So, could bringing the British drugs trade out of the twilight help the deficit? It's possible, and no longer necessarily 'blue-sky' thinking. For the legalisation of cannabis in a number of US states (including Colorado, Oregon and Washington) has seen a spike in investment as well as regional revenues. Tourism has grown, and some believe the cannabis industry has become a dotcom-type bubble. The sweetest side-effect of all is that this legal activity has (in part) constrained the murderous actions of the Mexican cartels – the Sinaloa, Los Zetas and several others – which still control a large part of the US illegal drug trade.

In what is one of the most exciting business books of the last few years, The Economist journalist Tom Wainwright has made an exhaustive investigation of how the illegal drugs trade mirrors orthodox business practice. 'The more I wrote about el narcotráfico, the more I came to realise what it most closely resembled: a global, highly organised business,' he writes, adding that Big Narco is huge: worth £300bn. Were it a country, it would be among the world's 40 largest economies. Far from just being a rogue trade, narco is quite formal. It has franchising, advertising, branding and buy-outs - not to mention shoot-outs. It has recruitment problems, competition, differing models and diversification - the cartels turned to crystal meth when cocaine began to go out of fashion in the US.

There's much to learn about coca production here. Perched in a City toilet, the punter might forget that his cocaine starts life as a cash crop: leaves are plucked, processed in labs and taken to market at a precipitous 30,000% mark-up. In Columbia, crop-pickers work with children on their backs for less than $2 a day, while in the Bolivian Andes, there's a Coca Growers' Union, coping with a race-to-the-bottom supply scenario that mirrors Wal-Mart. Cartels are like 'big box' retailers in their downward pressure on producer prices and - in another cracked mirror - shop around for the best offshore sites for processing and distribution. If Guatemala gets hot, Honduras wins the contract. Narconomics offers something missing in other business tomes: colourful reportage. Wainwright drives up the Andes with a fixer who calls himself Bin Laden and has the photograph to prove it.

Along this extraordinary supply chain we encounter the labour force that the illegal drug business attracts: tattooed, frightening, and drawn from the 'job centres' that are the prisons of weakly governed countries. Wainwright notes that 'straightforward ineptitude' has been the cause of many a drug chain's downfall. And of course, due to the need for secrecy - not to mention their tendency to be imprisoned and bumped off - attrition rates are huge.

Don't use your stock, goes the old dealer's law, and don't do the dirty work. One in four inbound cocaine mules to the UK is stopped, and the criminal labour force creates 'collective action' problems only resolved by the application of military-style hierarchies. Sometimes a certain chivalry can apply. Wainwright tells of one courier who screws up but is forgiven. Yet they use violence (like ISIS) as a kind of grisly marketing. Their version of CSR involves 'dishing out money to the poor' and 'building chapels'. Which means that cartel kingpins are seen as heroes, even Robin Hood types: a misapprehension they do little to dispel.

Wainwright heads to the internet with its Bitcoins and sites like Silk Road. On the 'dark web' he buys a crystal meth pipe with a representative who is 'far more helpful' than any Amazon representative. This clandestine trade probably deserves its own book but here segues well into the newly professionalised markets of Oregon and Colorado and a market that is changing fast, just like when Walt and Jesse start a proper lab in TV series Breaking Bad.

Now cartels complain that cannabis legalisation is hurting, as wholesale prices drop from $100 per kilo to $25. Could this be the nudge needed to get farmers growing tomatoes instead? As to how to beat the cartels, Wainwright urges changes to penal systems, focusing on demand rather than supply, and prioritising regulation over prohibition. Meanwhile, we should make the supply chain safer: 'The truth is that buying and taking illegal drugs probably won't kill you,' he chastens. 'But it may very well kill someone else.'

Narconomics: How to Run a Drug Cartel by Tom Wainwright is published by Ebury, £14.99

Follow Oliver Bennett on Twitter: @olibennett

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