Continuing my extended discussion of Robert Saviano’s fine book on the global cocaine business, ZeroZeroZero: Notes 6-10.

Part 1 is here. Notes 1-5 are: 1. Demand is insatiable… 2. Profit margins are eye-watering… 3. The cocaine industry works like a multi-national business… 4. But with added violence… 5. Cocaine is catnip for gangsters.

6. There’s an innovation race between traffickers and enforcement agencies

There are a thousand ways to ship cocaine, from human mules to light aircraft to container ships. There’s a ‘school’ in Curacao that trains mules: swallowing the cocaine isn’t easy, nor is passing yourself off as a tourist.

One of Saviano’s ‘cocaine interludes’ in the book consists of nothing but short descriptions of the ways in which cocaine has been found by customs officers, 37 in all. Between October 12 and October 19, 2012, cocaine was found: in sacks of chickpeas in the port of Gioia Tauro; in children’s party balloons in a port in Costa Rica; in cargos of frozen shrimp and bananas at the port of Hamburg and Vienna airport; and in sacks of sweet potatoes leaving the main airport in Surinam.

One anecdote that stands out. A Latin American cartel bought a Boeing 727-200 freight plane to fly drugs to west Africa for onward distribution. After it was landed in Mali and unloaded, they burnt it to remove all clues about the operation. Estimated cost of plane: $500,000-$1m. It could have been carrying 10 tonnes of cocaine.

7. Trying to stamp out cocaine has unintended consequences

#1. When the USA and Colombia embarked on ‘Plan Colombia‘ in 2000, its objectives were to end cocaine production, help campesinos move to the production of legal crops, and revive the economy. The execution of the ‘war on cocaine’ involves aggressive fumigation of cocaine producing areas, with toxic effects on the ecosystems.

The peasants therefore abandon these areas and start growing coca in more inaccessible areas–harder to reach and harder to police. The cocaine gangs help the peasants re-settle by investing in techniques to make the new coca fields more fertile. Since the book was written, Colombia’s share of world coca production has increased to 70%.

The other part of the plan–US military aid for Colombian army actions against drug trafficking, is moderately effective, but has the effect of moving distribution to Mexico, closer to the US border (and with devastating effects for Mexico).

#2. The US Drug Enforcement Agency has got better at identifying Mexican cartel leaders, and getting them arrested and extradited. The result: the fragmentation of some of the cartels into “micro-gangs”, which have more difficulty keeping control. To maintain control, they are more violent (and more spectacularly so), filming a lot of it and sharing it on the internet to intimidate.

These micro-cartels weren’t the first groups to use this kind of performative violence (that was Isis and its immediate predecessors) but they were fast followers.

#3. When the Guatemalan civil war ended, the Guatemalan government halved the size of the Kaibiles. The Kaibiles were the elite anti-insurgency troops that had also committed most of the worst atrocities during the civil war. Mexican drugs cartels quickly offered these disbanded troops similar work in Mexico, but on better wages.

8.The impact on the global financial system is significant

Where there is a lucrative illegal trade, there is money laundering. A number of banks have been fined huge sums for overlooking this. Between 2007 and 2008, HSBC’s US subsidiary, HBUS, received $7 billion in cash from HSBC Mexico, “sparking suspicions that part of this money might be from drugs sales in the United States”. HBUS later agreed to pay a fine of close to $2 bln.

And we know that HBUS was not the only bank laundering drugs money.

A study by Bogota university economists concluded that all but a tiny fraction (97.4%) of the narco-profits from Colombia were successfully washed through American and European banks through complex nested transactions.

What that means in terms of global numbers is opaque. They’re probably overstated by Saviano, who has a figure of several hundred billion dollars a year. The United Nations, probably conservatively, estimated in 2011 that annual world cocaine revenues were around $100 billion. The latest UNODC drugs report notes that both production of cocaine and seizures are at record highs. (For comparison: The world airline industry has current revenues of around $700 billion, but is much less profitable).

Not trivial

Anyway, these are not trivial numbers. It’s at least possible that the world’s banking systems were being kept afloat on a sea of cocaine money, certainly during the decade in which the recovered from the financial crisis. More specifically, as Saviano suggests, some banks may have survived bankruptcy during the financial crisis only because of the liquidity of cocaine money.

Even close up, the amounts are staggering. In her undercover role, infiltrating the brokerage operation of Pasquale Locatelli in the 1990s, ‘Maria’ finds herself asked to wash 1.4 billion lire into the Caribbean in the space of less than two months. When Locatelli is arrested, he is carrying a suitcase containing £130 million in cash.

That, of course, is without looking at the money that finds its way offshore from bribed politicians, judges, customs officials and police officers, and from those more directly involved in cocaine trafficking. When you look at these numbers you start to understand how it is that 10% of the world’s wealth is now hidden offshore. Of course, that’s not all the result of the cocaine trade. But cocaine has greased the wheels.

9. Everyone dies young

This is true of the cartels that organise the distribution, at all levels, from top to bottom. It’s true of the street sellers, some of whom are in street gangs that live outside of the law. It’s also true of users, since regular cocaine use weakens the arteries of the heart and makes a heart attack much more likely.

This was the most probable cause of death of a Mexican cartel boss who decided to have a full face transplant to better evade the attention of the authorities. He died under the anaesthetic because the anaesthetist didn’t realise how weak his heart was. The bodies of the three plastic surgeons involved were later found in barrels.

Others die as collateral damage. Part of Saviano’s style is to build up the picture by piling information up. Over the course of a couple of pages, for example, he lists eight separate but related incidents in Mexico in which a total of 126 people died, none of them pleasantly.

10. Legalise it

About half way through Zero Zero Zero I came to the conclusion that the only way to deal with the scale of the global problem represented by cocaine, and the vast external costs it generates, was to legalise it. I wasn’t sure if Saviano would come to the same conclusion, but he does.

Cocaine is a devastating, terrible, deadly enemy. There never seem to be enough arrests. Policies to fight it always seem to miss the mark. As terrible as it may seem, total legalization may be the only answer. (p.388)

It is always difficult advocating the legalisation of drugs, even under the cover of euphemisms such as “decriminalisation”. Even if it makes sense in policy terms, it is one of the taboos of political discourse, especially in the UK and the USA. Politicians find it easier to talk about fighting drugs, and cocaine is (unlike, say, ecstasy) a long way up the harm scale (pdf).

And certainly: if cocaine, then cannabis and ecstasy. Legalising cocaine and not legalising these widely used and less harmful drugs would be impossible to justify.

Nonetheless, it is worth working through the arguments for legalisation–this is my analysis, not Saviano’s, based on my reading of his book. These are mostly about bringing the external costs of the cocaine trade under control. This is my quick attempt to outline the systemic benefits of legalisation:

    The “war on drugs” is a political fiction. The global cocaine trade is a vast profitable global system
    It’s not a good idea to put large amounts of money into the hands of criminal gangs
    Enforcement activity to suppress it (as in Colombia) simply moves the trade elsewhere. This is true at local level as well
    Cocaine traffickers prey on failed states, and destabilise the public institutions of previously stable states
    Cocaine is malleable. When customs officials are effective, all that happens is that consumers pay more for a worse product
    It’s not a good idea to criminalise generally law abiding citizens (i.e. the end users) if you can manage their behaviour instead
    If cocaine were legal, governments could manage the market
    The quality of cocaine sold to users could be measured and managed, reducing health risks
    Mainstream legal distributors would be liable for the quality of the product sold to customers, and would likely push the market towards milder forms of the drug
    Second-order costs to health systems and judicial/prison systems would fall
    States would be able to communicate to users about risks, and use social suasion as well
    They could also take some of the surplus value in the industry as tax
    Legalisation would reduce the amount of dark money flowing around offshore–and make it easier to stamp out tax havens.

Will it happen? Well, it’s not completely outside of credibility. Drugs policy usually changes, first, when there are enough users–especially influential ones–who are fed up with being criminalised for what they regard as everyday behaviour. Second, when there’s no longer significant social disapproval of the thing that’s illegal. Third, when states see the attraction of the potential revenues from legalisation. And fourth, maybe: when the rhetoric of the present policy becomes sufficiently detached from its practice.

But don’t take my word for it. Read the book and draw your own conclusions.

Images via Wikimedia Commons. Top; US Coastguard Cutter Tahoma offloads seized bales of cocaine (public domain): Middle; Presidents George W. Bush and Alvaro Uribe, Bogota, 2007 (White House, public domain): Bottom; cocaine hydrochloride powder (DEA, public domain).