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Neoliberal Economics and the War on Drugs

By Gus Leinbach

Government policy in the United States has long militarized efforts to end the drug trade, funding a “War on Drugs” that has seen countless abuses of police power in our communities, tens of thousands of imprisonments for petty offenses, and billions in military aid to allies in Latin America. Ignored, however, is how U.S. influence in the region has contributed to the growth of the drug industry and the influence of the very cartels we are attempting to fight. Neoliberal austerity policies and trade agreements have been especially problematic, destroying the livelihoods of millions and encouraging many to turn to the drug trade out of economic desperation.

Liberalization in Mexico began in the early 1980s, when the country’s sovereign debt reached a crisis level, threatening default and the loss of tens of billions of dollars for foreign banks. The IMF and World Bank stepped in to provide emergency loans to allow Mexico to repay its creditors, contingent on the acceptance of certain terms of “structural adjustment.” These adjustment policies included cuts in social welfare programs, privatizations of government services, and the opening of the country for additional foreign investment. This radical economic reorientation left 800,000 Mexicans unemployed over the course of the 1980s as the social safety was cut out from under them. Simultaneously, privatizations provided windfall profits to the country’s elites and slashed budgets ensured that foreign creditors received their expected payments.i

Structural adjustment’s impacts were only heightened by the establishment of the North American Free Trade Agreement (NAFTA) in 1994, which required the removal of agricultural price supports, subsidies, and import regulations and included provisions allowing for the sale of communally-held land.ii Similar conditions were not placed on the United States, which was able to continue subsidizing its agricultural industry. Cheaper U.S. foodstuffs flooded the Mexican market, driving 2.3 million Mexican farmers out of work, a number unmatched by the 500,000 to 600,000 jobs gained in the manufacturing sector.iii Without agricultural subsidies, those that remained on their farms found growing cannabis and poppies to be one of the few available sources of income. Meanwhile, the millions of impoverished migrants streaming into Mexico’s urban areas found work readily available in drug cartels, and by 2008 the drug trade was the country’s fifth-largest employer.iv Furthermore, the increased cross-border trade facilitated by NAFTA overwhelmed customs officials, making it even easier and cheaper to ship drugs across the U.S.-Mexico border.v Whether by slashing social programs for the poor, providing few economic alternatives to the drug trade, or by creating new avenues for drugs to cross the border, policies of neoliberal adjustment and free trade have been powerful forces in encouraging the international supply of drugs.

Analyzing this history makes clear the need to address the structural conditions behind the drug trade. It is common sense that widespread poverty and the loss of stable employment opportunities foster the growth of drug use and the drug trade, both in the U.S. and abroad. Yet while we have continued to fund police and military strategies that are at best ineffective and at worse exacerbate violence on both sides of the border, the United States has done nothing to change its own exploitative economic relationship with Mexico. If we are serious about addressing the international flow of drugs, then we must seek economic justice for the communities forced out of desperation into the trade. Particularly as the Trans-Pacific Partnership, which would broaden free trade around the Pacific Rim, enters final negotiations, it is critical to pay attention to how the policies pushed by government and corporate leaders contribute to the situation we are violently attempting to remedy.

i Carmen Boullosa and Mike Wallace, “How the Cartels Were Born,”

ii Boullosa and Wallace.

iii Julien Mercille, “Violent Narco-Cartels or US Hegemony? The political economy of the ‘war on drugs’ in Mexico,” Third World Quarterly, Vol. 32, No. 9 (2011), p. 1642.

iv Christy Thornton and Adam Goodman, “How the Mexican Drug Trade Thrives on Free Trade,”

v Jeff Fauz, “NAFTA and the Narcos: What You Won’t Hear at Obama’s Meeting in Mexico,”


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