How Legalized Pot Could Hurt Mexico’s Cartels

R.M. Schneiderman
Newsweek

So far, no modern country has ever legalized marijuana production—not even the Netherlands. Yet with heavy drug-related violence plaguing the U.S.-Mexican border, some analysts and policymakers now say that America should legalize weed in order to reduce the power of Mexico’s drug cartels.

Marijuana carries the least amount of overhead cost for many of the cartels and provides some of their cash flow for buying guns and influence. Estimates vary, but analysts say pot accounts for somewhere in the range of 20 to 50 percent of the cartels’ profits. But that could soon change with competition from El Norte: California has a proposition set for the November ballot—on which voters are roughly split—that would legalize the drug’s domestic production and sale. If the measure passes, says a recent analysis by the RAND Corporation, California could become a major supplier of the drug to the rest of the U.S. That, according to George W. Grayson, a professor of government at William & Mary, “would hurt the cartels badly.” RAND estimates that it could reduce the drug’s pretax price by more than 80 percent.

Of course, whether legalization has any real effect depends on the rate at which the drug is taxed. A tax rate of $50 per ounce, for example, would generally not make high-grade California cannabis cost-competitive with less potent Mexican imports. Yet a lower tax rate could significantly decrease the cartels’ market share. That wouldn’t put them out of business—they’d still be major players in the markets for cocaine, heroin, and meth—but it could reduce their power.