Want to Weaken Mexican Drug Cartels? Legalize Marijuana.

“In the 40 years since U.S. President Richard Nixon declared a ‘war on drugs,’ the supply and use of drugs has not changed in any fundamental way.” David Luhnow of the Wall Street Journal writes. “The only difference: a taxpayer bill of more than $1 trillion.”

So what would be the best step to take to win an unwinnable war?

Growing numbers of Mexican and U.S. officials say—at least privately—that the biggest step in hurting the business operations of Mexican cartels would be simply to legalize their main product: marijuana. Long the world’s most popular illegal drug, marijuana accounts for more than half the revenues of Mexican cartels.

“Economically, there is no argument or solution other than legalization, at least of marijuana,” said the top Mexican official matter-of-factly. The official said such a move would likely shift marijuana production entirely to places like California, where the drug can be grown more efficiently and closer to consumers. “Mexico’s objective should be to make the U.S. self-sufficient in marijuana,” he added with a grin.

How US subsidies harm Mexico

Writing for Economix, Elisabeth Malkin points to a new paper that U.S. argues U.S. farm subsidies harm Mexican farmers:

A new paper from Timothy A. Wise at the  Global Development and Environment Institute at Tufts concludes that America’s generous subsidies allow farmers to sell their products to Mexico at below-market prices. The cost to Mexican farmers, he estimates, was $12.8 billion from 1997 to 2005. Corn farmers fared worst; American subsidies cost them $6.6 billion.

Despite protests by weathered farmers who periodically march down Mexico City’s main avenue, the government has not responded with tariffs.

Quite the contrary, under the North American Free Trade Agreement, the Mexican government quickly opened up to American agricultural imports to take advantage of lower food prices. Mexican agricultural subsidies — yes, Mexico also has them — have been channeled to favor large well-capitalized farmers, most critics agree, at the expense of peasant farmers.

Remember, those who generally argue for farm subsidies one day complain of global poverty the next. How easily they overlook the former’s role in the latter.

Why third generation immigrants earn less

The Economic Logic blog has posted on an interesting new study by Vincenzo Caponi which finds that third generation Mexican immigrants  (particularly males)to the US earn significantly lower wages than second generation Mexican immigrants.

The table below shows the evolutions of earnings across all generations. It reports results for men and women using two definitions: the standard definition and the stricter definition. The standard definition includes those with at least one parent born in Mexico while the stricter definition includes those who not only have at least one parent born in Mexico, but also consider themselves Mexican.

 

Economic Logic concludes the following:

The way I understand it is that there is selection in migration decisions: only those with higher than average abilities (not necessarily realized human capital) go. Their children inherit some of those traits, and thus have higher than average abilities and human capital. While the first generation was not able to fully exploit this, while the second does, wages go up. But abilities of the third generation continue regressing to the mean, and the selection effect erodes. This generation ends up with lower human capital than their parents and thus lower wages.

How Mexican Drug Homicides Are Good For Business

From yesterday’s Wall Street Journal:

The violence in Mexico has provided an unexpected economic boost to El Paso, a city of more than 600,000 residents at the westernmost tip of Texas. The unemployment rate here was 9.8% in September, equal to the national average but far lower than in other border towns such as Brownsville and McAllen.

Cindy Ramos-Davidson, chief executive of the El Paso Hispanic Chamber of Commerce, said her staff was swamped with requests from Juárez businesspeople wanting to settle in El Paso. They started more than 200 companies in the 12 months ended July 31, a 40% jump from the same period last year.

“It’s the largest migration of wealthy Mexican nationals [to El Paso] since the Mexican Revolution,” said Beto O’Rourke, an El Paso city councilman, referring to the decadelong rebellion that began in 1910. …

The number of murders in Juárez exploded in the spring of 2008 and grew to more than 300 a month by August and September 2009, the highest monthly levels in a particularlyviolent year.

HT: Noam Scheiber

Mexico’s troubled oil industry

The Economist asks, “How many Mexicans does it take to drill an oil well?”

The answer: “More than 140,000, and even then they’re not very good at it. For this, now acute, problem, blame the politicians.”

The author paints an ugly picture:

It is bad enough that Mexico’s economy is in deep recession, triggered by its close links to the ailing United States. To make matters worse, the country’s oil industry, its fiscal cash-cow for the past three decades, is declining swiftly (see chart). As recently as 2004 Cantarell, the country’s main offshore field, produced 2.1m barrels per day (b/d) of crude. Now its output is just 600,000 b/d. There are no obvious replacements: 23 of the 32 biggest fields are in decline. Barring big new finds, the world’s seventh-largest oil producer is forecast to become a net importer by 2017.

“There is no mystery behind the decline,” writes The Economist:

The constitution bans private investment in hydrocarbons. Ever since Lázaro Cárdenas expropriated foreign oil companies in 1938, the state oil monopoly has been seen by many politicians, especially from the formerly ruling Institutional Revolutionary Party (PRI) and its offshoots, as the untouchable bone marrow of Mexican sovereignty. To make matters worse, Pemex has been run more in the interests of its workers and their trade unions than of the Mexican people, its notional owners.

…Even if Mexico allowed private companies to explore for oil, they would have to invest $10 billion a year to halt the decline in output, reckons David Shields, who edits a specialist magazine on Mexican oil. Under today’s law, in which private firms can only act as service providers for Pemex, that investment would be much higher, he says.

If you eat rapidly, will your economy grow the same way?

According to data released by the Organization for Economic Cooperation and Development may indicate that the answer is yes. “The relationship is not perfect, but it is persistent,” The New York Times reports:

To no one’s surprise, France followed the most leisurely schedule of dining; those surveyed reported they spent an average of 135 minutes each day. The fastest eaters were in North America; the United States, Canada and Mexico were the only three nations to report fewer than 75 minutes a day devoted to eating and drinking.

As the accompanying chart shows, the 10 countries where people spend less than 100 minutes eating and drinking each day have, as a group, consistently shown higher economic growth than those that took more than 100 minutes to savor their daily repasts.

(Click to enlarge)

But of course, correlation does not prove causation:

There are cultural factors at work, and the picture could change if there were data from more countries. Certainly eating habits alone do not determine economic growth.

Even if there is a relationship, it is not obvious which is cause and which effect. Do people spend more time eating because they have less to do in economies that are not growing? Or do economies stumble because people are savoring a glass of wine when they should be working?

Top 5 Medical Tourism Destinations (U.S. at #5)

From Property Abroad (via Carpe Diem):

Medical tourism is where people travel abroad to receive medical treatments like cosmetic surgery, which they could not afford in their own country.

Those travelling abroad for such treatments usually come from developed countries, where treatments are very expensive. The UK and the US are two of the biggest markets. That said: wealthy people in countries with poor health sectors often travel to countries that offer better healthcare for major treatments.

When people travel abroad for medical treatments they have two main criteria: cost and quality of healthcare.

They are looking for a place that they can both get to and be treated in cheaply, but which has a top-class health sector so that they know they will be safe. Below are three destinations which meet the criteria for perfect medical tourism destinations, and as such are some of the most popular destinations with medical tourists.

Malaysia:

Malaysia was recently found to be the most popular medical tourism destination with the growing numbers of Asia’s wealthiest. They travel to Malaysia for major treatments because it has one of the best health services in, not only Asia, but the world.

Malaysia is also one of the most popular destinations with those travelling from English speaking destinations (US and UK). This is because, as an ex-British colony there is a high prevalence of English speakers in the health sector. Tourism from the two combines to make Malaysia one of the fastest growing medical tourism destinations, and well worth a property investment tailored to that market.

Costa Rica:

Costa Rica is massively popular with American medical tourists. Costa Rica disbanded the military in 1980 because of the safety and stability of the country. This makes people feel safe about visiting the country, but it also freed up billions of dollars to spend on education on healthcare.

For that reason Costa Rica now has one of the best, and most efficient health sectors in the world. Of the top destinations Costa Rica is also among the cheapest for procedures, which makes it very popular with medical tourists from around the world including the UK.

India:

India also benefits from cost effectiveness when it comes to medical tourism. People from around the world can afford surgeries and procedures in India that they would never be able to afford in the UK or even America. India is also an ex-British colony, and for that reason it has a developed, very efficient and safe health service, which again is a draw for medical tourists from abroad and within the region.

Brazil:

Brazil is fast growing into an economic giant, on the back of its massive production and agricultural sectors, and massive growth in the services sector fuelled in part by tourism growth. Though Brazil has been affected by the international downturn, it is a testament to its economic potential that its recession only lasted 2 quarters with growth resuming at 1.9% in Q2.

Over the years of economic growth, developing the infrastructure, including the health services has been a major priority of the government(s). The fact that it has been a success is testified to by FIFA choosing Brazil as host for the 2014 World Cup.

America:

Yes, that’s right. America is a medical tourism destination. In fact it is one of the longest-standing medical tourism destinations in the world. That’s right: Brits have been taking advantage of the dollar exchange rate and travelling to America to get their bits tucked in or pushed out since the 80s.

America’s health service is first-rate. Brits trust it because it is on a par with the UK (please don’t start a politics debate), and procedures are just over half the price they would be in the UK — used to be half the price before the Pound plummeted.

Extras:

Panama is also a popular destination with American medical tourists. Its economy grew by an average 10% every year for the last few years, and a lot of this increased revenue was invested in improving the infrastructure, including the health service. Now Panama has an excellent health service and — despite the dollarized economy — surgery is still cheaper than America.

Many Americans are also travelling to Mexico for cosmetic surgery on the cheap. While Mexico’s health service isn’t known for being world class, there are some decent surgeons and people are finding them through word of mouth. Of course there are some horror stories as well from Mexico, so don’t go unless you know.

Some Questions About the ‘War on Drugs’

In a letter appearing in yesterday’s Wall Street Journal, Robert Sharpe, a policy analyst for Common Sense for Drug Policy, writes:

The U.S. could learn from Mexico’s decriminalization of drugs.

The U.S. drug war is largely a war on marijuana smokers. There were 872,720 total marijuana arrests in 2007, almost 90% for simple possession. At a time when state and local governments are laying off police, firefighters and teachers, this country continues to spend scarce public resources criminalizing Americans who prefer marijuana to martinis.

The end result of this ongoing culture war is not necessarily lower rates of use. The U.S. has higher rates of marijuana use than the Netherlands, where marijuana is legally available. An admitted former pot smoker, President Obama has thus far maintained the status quo rather than pursue change. Would Barack Obama be in the White House if he had been convicted of a marijuana offense as a youth? Decriminalization is a long overdue step in the right direction.

Don Boudreaux poses a different question, “one that exposes the huge disconnect between most people’s live-and-let-live attitudes about drug use (or at least about the use of pot and cocaine) and the harsh penalties often imposed on users.”

Suppose Barack Obama (or Bill Clinton or George Bush) had admitted, say, to committing armed robbery – or even to picking pockets – while in college.  Whether convicted or not for such crimes, is it conceivable that the electorate would dismiss these past offenses as being nothing more than understandable youthful antics and conclude that he is, at bottom, a decent-enough chap worthy of the White House?  Of course not.

So why does government continue to waste vast quantities of resources hunting down and punishing people for drug use – actions that most of us obviously regard as being not especially heinous or harmful to society?

Argentina Legalizes Freedom

After Mexico’s decision to decriminalize small amounts of drugs last week, the Supreme Court of Argentina yesterday unanimously ruled to decriminalize the possession of drugs for personal consumption:

In an eight-page writ unveiled today, the Supreme Court said it is unconstitutional to punish marijuana consumers, if that action does not harm third parties. The decision would put an end to a long-term debate, in which users had claimed that the incumbent drug law violated privacy rights.

The ruling was in reference to Article 19 of the Argentine constitution:

The private actions of men which in no way offend public order or morality, nor injure a third party, are only reserved to God and are exempted from the authority of judges. No inhabitant of the Nation shall be obliged to perform what the law does not demand nor deprived of what it does not prohibit.

Mexico Legalizes Freedom

The Associated Press reports:

Mexico enacted a controversial law on Thursday decriminalizing possession of small amounts of marijuana, cocaine, heroin and other drugs while encouraging government-financed treatment for drug dependency free of charge.

The law sets out maximum “personal use” amounts for drugs, also including LSD and methamphetamine. People detained with those quantities will no longer face criminal prosecution; the law goes into effect on Friday.

Anyone caught with drug amounts under the personal-use limit will be encouraged to seek treatment, and for those caught a third time treatment is mandatory — although no penalties for noncompliance are specified.

Mexican authorities said the change only recognized the longstanding practice here of not prosecuting people caught with small amounts of drugs.

The maximum amount of marijuana considered to be for “personal use” under the new law is 5 grams — the equivalent of about four marijuana cigarettes. Other limits are half a gram of cocaine, 50 milligrams of heroin, 40 milligrams for methamphetamine and 0.015 milligrams of LSD.

President Felipe Calderón waited months before approving the law.