Saturday, January 31, 2009
Risk Communication, Resilience, and the Wolf We Nurture
President Obama in his inaugural address squarely acknowledges that our country is facing significant challenges at home and abroad. These challenges, whether they are from the threat of terrorism or the current financial crisis, have brought hardships to many people from all walks of life. We have for a time been knocked down. Even so, the president asks now that we get back up, that we brush our discouragement off and that we help to chart a new course for America, and by our example the world. It is with hope and virtue, he says, that we can and will face what storms may come. In essence, he asks that we be resilient in the face of our current troubles and future adversity. This is no easy request. It will require a sea change in our communication about risk.
Terrorism and times of crisis more generally produce a feeling of vulnerability which is born of uncertainty and lack of perceived control. Following some tragic occurrence we may feel deeply uncertain about what the event signals for the future. We may also wonder what can be done to protect ourselves. Feelings of fear, anger and anxiety are a usual response. These emotions become problematic when they cause us to focus almost exclusively on some dire consequence. This myopia will often cause us to ignore relevant probabilities and alternative consequences. With such narrow focus we have limited capacity to reason very far into the future. Instead we opt for policies with quick and decisive returns at the expense of more enduring long-term benefits. With this mindset we fail to develop resilience in the face of threat.
We can however, engage in risk dialogue that addresses our uncertainties and lack of perceived control directly. There are good reasons to do this. Increased understanding and sense of control lessens the tendency to focus narrowly on a single dire consequence. As a result, we tend to explore more options during personal decisions and policy deliberations. Such dialogue however requires that we identify public misperceptions surrounding such threats and construct risk messages to address these perceptual gaps. This is not easy, especially at the level of the national media. As Bernard Finel points out, the public tends to pay attention to sound bites, not nuanced conversation. However, it is possible to engage the public in meaningful dialogue at the community level where trust is high and attention span is much longer. Camille Pecastaing proposes that we begin such risk communication in our high schools. Tim Sellnow points out that we really need to develop three types of risk messages: pre-crisis messages that encourage mitigation of the impacts of potential events, during-crisis messages that minimize the impacts of an on-going event, and post-crisis messages that help restore confidence after an event.
We can also complement our risk communications with regulatory policy and contracts. Howard Kunreuther suggests that we develop policies that enforce regulations surrounding certain risks so as to overcome our tendency to ignore probabilities that fall below our threshold of concern (e.g. a mortgage crisis). He also advises that long-term contracts be used to overcome our bent toward near-term solutions (e.g. reluctance to invest in mitigation efforts to prevent large impacts in the future).
In my lead essay I suggest that with this new administration we are offered a choice in how we will respond to the threats of the future. Along our present course fear and anger will unduly influence our judgment and chart our way. Following our better history, as President Obama puts it, we will allow compassion and deliberative action to plot our course. Said another way, Rev. Sharon Watkins, in her post-inaugural sermon at the National Cathedral, warns that during this time of crisis we may be led away from our ethical center. It is though there are two wolves struggling within us she remarks. The one represents anger, resentment and fear and the other compassion, hope, and truth (taken from Cherokee lore). As we know the wolf that wins is the one we feed. This insightful story echoes the need for deep dialogue surrounding the threats we face. Those risk messages that we chronically attend to and come to internalize determine our collective response. We would do well to consider which wolf we are nurturing.
Obama and Trade: An Alarm Sounds
by Jagdish Bhagwati
Jagdish Bhagwati is a university professor, economics and law, at Columbia and a member of the CTPS Advisory Board. His latest book is Termites in the Trading System: How Preferential Agreements Undermine Free Trade (Oxford, 2008).
In the Financial Times, I argued that, unlike with Hillary Clinton, there were several reasons why one could be optimistic that Barack Obama would follow a pro-trade policy despite “prudential” protectionist talk on the primaries circuit (“Obama’s free-trade credentials top Clinton’s”, March 3, 2008). But the US president-elect’s eloquent silence on trade issues – and his failure to balance his protectionist appointments with powerful trade proponents – require that we abandon these illusions and sound an alarm.
Consider Mr Obama’s support for the multilateral trading system. It must be admitted that the Doha round is on hold and Mr Obama could not move it forward even if he so desired. A principal problem is that its completion turns critically on the US making further reductions in its distorting agricultural subsidies. But the issue has become even more difficult with the collapse of commodity prices and hence increases in support payments. Besides, history shows that the freeing of trade is nearly impossible to achieve in times of macroeconomic crisis.
But Mr Obama (unlike Gordon Brown) missed the opportunity, provided by the Group of 20’s affirmation of trade’s importance, to affirm that he attaches the highest priority to closing the Doha round and will work on this urgent task throughout his first year.
More important, Mr Obama has missed the bus on preventing a slide back into protectionism. His pronouncements on the car bail-out disregard the lessons of the early 1930s when the Smoot-Hawley tariff was signed into law and a competitive raising of tariff barriers ensued. We learnt then that tariffs and trade restrictions could indeed increase our national income by diverting a given amount of insufficient world demand to our markets. But then others could do the same to divert our demand to their goods, so that the result was reduced trade and deepened depression. Far better to keep markets open and increase aggregate world demand. So, the architects of the General Agreement on Tariffs and Trade (merged in 1995 into the World Trade Organisation) built into it institutionalised obstacles to an outbreak of mutually harmful trade policies.
But what trade barriers did after 1930 can be done also by subsidies. So we now have strict rules on subsidies as well. Under a 1995 WTO agreement, export subsidies and “local content” requirements are prohibited as directly damaging to trade and all other subsidies that are specific to companies or industries are open to complaint; and this applies even when they are claimed to be environmentally friendly.
There is no doubt that a bail-out just of cars, and within that specifically of Detroit, would qualify for countervailing action and dispute settlement challenges. It is important therefore that Mr Obama declare unambiguously that any bail-out will be WTO-consistent, because every other country will otherwise be emboldened to follow suit. Mr Obama, who has properly denounced unilateralism, should also not be the president who undermines respect for the rule of law that the WTO embodies at the multilateral level.
If Mr Obama’s silences on multilateral trade are disturbing, should we be pleased by his strictures against bilateral free-trade agreements? On closer examination, though, this is not a vote for multilateralism but just the opposite. To understand this paradox, consider that labour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries is to raise their cost of production by forcing their standards up, claiming that competition with countries with lower standards is “unfair”. “Free but fair trade” becomes an exercise in insidious protectionism that few recognise as such.
This cynical tactic can work only when the US is engaged in negotiating FTAs, typically with weak countries. It does not work for the multilateral system where powerful, democratic countries such as India and Brazil reject such trade-unrelated demands. So, the “fair trade” lobbies, which Mr Obama continues to embrace, gravitate towards FTAs rather than the WTO. The Democrats’ opposition to occasional FTAs – including the latest one with Colombia – reflects, then, a recurring attempt at imposing yet more draconian demands on small countries rather than a preference for the multilateral trading system. If he is to embrace multilateralism and free trade forcefully, Mr Obama needs a stellar crew that will understand the protectionist nature of “fair trade” demands and dispel the unions’ baseless fear that trade with poor countries harms American workers’ wages.
Alas, his cabinet appointments include Mrs Clinton, whose trade scepticism is badly muddled at best, as secretary of state, and Hilda Solis, who reflects the anti-trade sentiments of the union federation, AFL-CIO, as labour secretary. His advisers include Robert Rubin, whose credibility on policy issues is undermined by Citigroup’s receipt of large bail-out funds, and Larry Summers, the brilliant former Treasury secretary whose recent FT columns on trade and wages suggest prudence in the current political environment. The US trade representative position was offered to Congressman Xavier Becerra, a trade sceptic at best, and has now gone to Mayor Ron Kirk with credentials only as a supporter of the North American Free Trade Agreement, hardly suggesting a forceful presence in support of the open, multilateral trading regime.
Global Crisis: How Far to Go?
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| Guns and Butter: The deepening US economic crisis threatens not only its prosperity at home, but ability to project power abroad Enlarge image | |
WASHINGTON: Contemporaries are often poor judges of historical events. People who saw a group of soldiers pushing around a man in rags before he was crucified could be excused for not realizing they were witnessing perhaps the most important event in human history. On the misty, cold morning of October 25, 1917, those who saw a few detachments of soldiers crossing the vast plazas of Petrograd did not recognize the beginning of the biggest revolution since the one in France. And when the Dow Jones Industrial Average fell 9 percent on October 24, 1929, few had heard of an Austrian citizen named Adolf Hitler.
Thus, today, too, nobody knows which way the financial crisis will go, with what force it will spill into the real sector – decline in output, higher unemployment – and finally, perhaps most importantly, to what outcomes it will lead in the political arena. But what certainly raises fear among ordinary people is that politicians and economists alike seem equally baffled, as if they were in the presence of a cyclone whose true origin or destination are unknown.
We cannot foretell the course of this cyclone nor its ultimate effects, and can only summarize its impact so far, broadly surmising the direction the world may be headed.
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In the speed with which this turmoil propagates itself, how it has spread from the United States to Asia to Russia and to Europe, it’s indeed the first worldwide crisis in the current era of globalization. It started in the citadel of global neoliberal capitalism, the United States, and even more centrally so, in Wall Street. The very heart of the system was discovered to be corrupt and mismanaged. Since globalization has been so successful in rapidly encompassing the entire globe into one single system, now the crisis likewise affects all. As the means of communications have become capable of real-time transmission of information, panic in any one place spreads quickly to the other end of the globe. All the advantages of financially-driven globalization – sophistication of the financial markets, speed and volume of transactions, with $3 trillion dollars on average traded every day, the geographical reach – have suddenly transmuted into disadvantages.
This crisis’s global effects differentiate it from earlier crises like the Asian 1997-98 crisis which spread only to Russia and Brazil or from the debt crisis of the early 1980s that affected the developing world. It’s different from the recessions of 1973-75 and 1979-81 because they did not propagate as fast and hardly affected China, India and the Soviet Union.
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So, how does the crisis affect the process of globalization? To see this, we ought first to recall the current makeup of globalization – a two-pronged process, resting on two pillars. On the one hand, globalization means an ever-tighter integration of markets for goods, capital and technology – and to a much less extent, labor – undergirded by an ideology best summarized in the Washington Consensus’ 10 precepts among which privatization, deregulation and generally a lesser role of governments were key. The first pillar provides incentives for and ideology of globalization.
But there’s also a second pillar which provides the muscle. Globalization is not underwritten solely by ideology and interests but also by the military might of the US. This part was made clear in the by-now infamous “Project for the New American Century,” developed in the 1990s by leading neoconservatives, which laid out the blueprint for American domination of the world, justifying it by the need to allow other nations to compete peacefully in matters of economics, but not in destructive nationalism. The invasion of Iraq was a logical consequence of this policy.
The crisis severely undermines both pillars. It sweeps the rug out from under neoliberal capitalism by making it painfully clear that the precepts dished out with abandon around the world – transparency, efficiency – were openly flouted even as they were preached. And with own wealth at stake, the ideology of self-regulating markets is easily forgotten, and recourse unabashedly made to state subsidies, so reviled only months earlier. It will be a long time before the cheerleaders of globalization can flaunt its textbook advantages with a straight face. Thus the massive bailout, done in the face of obvious reluctance of the public and taxpayers, the swelling real estate crisis born of financial mismanagement by “the best and the smartest,” severely undercut the first ideological pillar.
In the rest of the world, government interventionism will now be seen as more acceptable than at any time in the last quarter century. More countries will experiment with economic policies that do not fully follow the tenets of neoliberalism.
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The huge costs of the crisis, probably more than $1 trillion in the US alone – or some 7 percent of US gross domestic income—weaken the second pillar of globalization also. Not only is the US military already hopelessly stretched, involved in the wars that it can neither lose nor win, but the financial costs of these adventures are mounting. Add to that the costs of the bailout, likely recession and further reduction in tax receipts, and an already weakening dollar, and the financial costs of new American military-led globalization episodes become unsustainable.
It’s said that Soviet Communism collapsed because of the rebellion of nature: So long as it was cheap to exploit oil and gas, the show continued. The US-led globalization may come to a temporary halt for more prosaic reasons: indigestion and over-extension, both the common diseases of the empires, from Caesar’s Rome to Bush’s Washington.
Yet, even if the crisis is deeper than currently conventionally expected – a cumulative gross domestic income decline of several percentage points – it will still leave the US as, by far, the most powerful country in the world. In current dollar terms, American GDI per capita dwarfs by more than 20 times the Chinese. Were China to continue growing during the next three to five years at close to 10 percent per annum and the US to remain mired in recession, the gap would have declined only to 15 to 1. The US accounts for a quarter of world output, and that share is unlikely to change much. Finally, the US spends on military more than all the other countries combined. That too is unlikely to change. Thus, the relative setback to the second pillar of globalization must be seen in context.
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The crisis would likely, particularly under an Obama presidency, lead to a much more self-centered America that would try to limit its external commitments and get its own house in order first. Rather than fear such semi-isolationism, both the US and the world should welcome it. For the US is generally regarded, in global opinion polls, as both the country with the strongest “soft power” of attraction and the one that’s the gravest danger to world peace. An America that works more on its soft power – better education and health systems, stronger protection of the poorest and greater openness to multiculturalism – will be a better country to live in, attract more talent from abroad and create more goodwill in the world.
A US turn to semi-isolationism will make the world safer and more peaceful, sparing the globe unnecessary conflict, phony Crusades and blatant disregard of the United Nations. So rather than wringing our hands at this crisis, one should see it for what every crisis is – an opportunity for a new and better start.
Branko Milanovic is an associate scholar with the Carnegie Endowment for International Peace.
Economic Crisis Could Push Reform in China
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| Chance for a home run: Beijing could take advantage of the crisis to encourage private ownership and enterprise | |
NEW HAVEN: It was inevitable that given its high level of dependence on exports, China’s real economy would not escape the impact of the global slowdown. Indeed many manufacturing firms are shutting down, creating a serious employment challenge. But the crisis also opens up new opportunities that could enable China to emerge stronger from the crisis.
After 30 years of fast growth, China’s investment-driven and export-oriented development model, with exports accounting for 40 percent of GDP, had become increasingly difficult to sustain. Thus, even before the crisis deepened this fall, China looked to transform its growth model into one driven more by domestic consumption. China faces perhaps the biggest test since reforms began in 1978.
Now the crisis could provide the needed pressure for China to adopt fundamental reforms, otherwise politically infeasible, and get the economy on a healthy track for the long term. With the right policy steps, China can position itself to come out of this as a winner.
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A couple of immediate positives result from the financial crisis: First, prices of energy and most resources have been cut in half or more over the past three months. The large price cuts simply make the next round of China’s growth more affordable.
Second, China has about $2 trillion of foreign exchange reserves, of which roughly $600 billion is in US Treasuries, and about $400 billion in mortgage-backed securities and agency bonds that are now directly or indirectly back by the US government. These holdings have overall gained in value as a result of the flight to quality by investors of all types.
In contrast, other investment markets from equity to municipal bonds, corporate bonds, oil, timber, copper and even gold have all declined in price. Thus, the crisis has offered China a rare opportunity to re-allocate its reserves away from US Treasuries and into depressed securities and assets. According to a Chinese think-tank estimate, the most liquidity in foreign exchange reserves that China would need under a worst-case homegrown financial-crisis scenario is $700 billion or less. The rest of the $2 trillion reserves can be invested in equity, resources and other less liquid assets around the world, especially in resource-rich countries. Such a systematic portfolio re-allocation will help position China for long-term growth.
China’s GDP growth slowed to 9 percent during the third quarter. The hit on China from the global crisis is expected to be the worst during the first half of 2009. Its growth rate may even decline to 6 percent by mid-2009, before the pending economic stimulus efforts kick in. But, China has many policy options to rescue its economy.
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The Chinese government just announced a $586 billion stimulus plan for the next two years. The plan has 10 spending items, including construction/expansion projects of railways (more than $200 billion), highways, airports, city subways and nuclear power plants. It promises to invest more in the public health care system, education and subsidized housing and raise unemployment and other welfare benefits. Value-added taxes will be phased out, replaced by corporate income taxes more quickly than scheduled, all helping to smooth the impact of the crisis on China’s real economy.
This and other recent policy steps by China are just a start. If needed, China can further resort to its large fiscal surplus, unused debt capacity and even state-owned assets. For the first half of 2008, the national fiscal surplus is RMB 1.2 trillion, or $179 billion, equal to 4.2 percent of China’s GDP. Total national debt outstanding is about RMB 5 trillion, or $746 billion, 18 percent of GDP. On a relative scale, this is far below the typical national debt-to-GDP ratio of 60+ percent for developed countries. Therefore, China can do what it did during the 1997-1998 Asian financial crisis: raise capital through government bonds and invest in infrastructure and industrial projects.
However, while government investments can stimulate growth in the short term, its magic will be more limited this time than during the Asian financial crisis. After the last decade of high growth, China now has decent infrastructure and a serious overcapacity problem in industrial production. Its current investment-to-GDP ratio is already over 50 percent.
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For this reason, the just-announced stimulus plan focuses too much on infrastructure and not enough on boosting private consumption. Infrastructure investments will not create as many jobs in the long term. As a result, the multiplier effect from this plan will be lower than one may expect. China must look for other ways to stimulate domestic consumption, instead of relying on the tried-and-true trick of government investment.
For example, policymakers have debated sending tax rebates to mid- and low-income families, but resist due to operational unreadiness at relevant government agencies. Clearly, such rebates would produce faster and targeted results. Educational subsidies to low-income students should also be among future policy options, to reduce private saving pressure. To help transform its economic model, China’s stimulus efforts should target private consumption.
Still, such policy steps can only provide a short-term boost. More fundamentally, unless state- and collective-owned land and state assets are privatized, it’s hard to see how stimulus efforts can transform the investment- and export-oriented economic structure.
China’s private consumption has failed to grow, but not because Chinese consumers don’t like spending. Rather, it’s because most don’t own property and, even though both the economy and asset values have been growing fast, most households don’t feel any wealth effect. According to my compilation of official statistics, the Chinese government owns about three quarters of the country’s productive wealth. For most consumers, wages are their only source of income. And this single income source has grown at a pace far lower than GDP growth rate. Without more and spreading private ownership of assets, there’s not enough wealth effect to boost consumption and private savings pressure will necessarily remain high.
For the past 30 years, as the economy continued to benefit from globalization and stayed on the high-growth path, there was insufficient pressure for China to undertake privatization reforms by equally distributing the remaining state assets to its 1.3 billion citizens. Yes, privatization has taken place in China, but through selling shares of state-owned enterprises at a price. This means relatively few could buy and all proceeds went into the Ministry of Finance. Therefore, previous methods of privatization had little, if any, effect on domestic consumption.
This explains why China has had a strong desire to reduce its dependence on both investment and export for more than a decade, but only managed to see this dependence rise.
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The ongoing global crisis may provide new impetus for reform. In late October, the central government announced a land-reform policy to allow peasants to trade or mortgage land-use rights. In particular, the government will make efforts to organize land-use right markets and facilitate trading in such rights. While not outright land privatization, this reform is a major step in the right direction that can make peasants wealthier and unleash new consumption demand in the countryside.
Another possibility is putting the remaining state assets into national wealth funds and distributing the fund shares equally among Chinese citizens. After all, state assets belong to the people. Returning the ownership rights of these assets to the citizens at no cost is perfectly consistent with the very logic of state ownership. If this happens, the financial crisis– induced reforms could position China for another period of high growth. In this sense, the crisis can turn out to be a positive opportunity for China.
Zhiwu Chen is Professor of Finance at the School of Management at Yale University.
Even as U.S. officials concentrate on such troubling foreign-policy issues as the stalemated six-party talks regarding North Korea’s nuclear program, the increasing likelihood that Iran may join the ranks of nuclear powers and growing tensions in relations with Russia, a serious security problem is brewing much closer to home. Violence between drug-trafficking organizations and government authorities in Mexico has exploded in the past two years. The carnage is now so extensive that American tourists increasingly avoid Tijuana, Ciudad Juarez, Nuevo Laredo and other cities on the U.S.-Mexico border that used to be popular destinations. Worst of all, some of the chaos in Mexico is spilling over into America’s own southwestern states.
The drug trafficking problem in Mexico is not new. The country is a major source of heroin, marijuana and methamphetamine for the American market as well as the principal transit and distribution point for cocaine from South America. For years, people both inside and outside Mexico have worried that the country might descend into the maelstrom of corruption and violence that plagued the chief drug supplier in the western hemisphere, Colombia, from the early 1980s to the early years of this century. There are growing signs that the “Colombianization” of Mexico is now becoming a reality.
If Mexico goes down the same path that Colombia did, the consequences to the United States will be much more severe. Colombia is relatively far away, but Mexico shares a border with the United States and is closely linked to this country economically through the North American Free Trade Agreement. There is simply no way for Americans to regard the alarming trends in our next-door neighbor with indifference.
Washington has pressed Mexican governments for years to be more proactive against the drug-trafficking gangs. Since President Felipe Calderon took office in 2006, U.S. officials have gotten their wish. Calderon has even given the military a lead role in combating the traffickers, a step that previous presidents had declined to take. The principal outcome of his strategy, however, has been an even greater level of violence, with military personnel increasingly being targets. The military also has now been exposed to the temptation of financial corruption that has compromised Mexico’s police forces so thoroughly.
Even supposed victories in Mexico’s drug war prove to be mixed blessings at best. As Stratfor, a risk-assessment consulting organization, notes
inter-cartel violence tends to swing upward after U.S. or Mexican authorities manage to weaken or disrupt a given organization. At any point, if rival groups sense an organization might not be able to defend its turf, they will swoop in to battle not only the incumbent group, but also each other for control.
The turf battles have been ferocious. In 2005, slightly more than one thousand three hundred people perished in drug-related violence. By 2007, the yearly total had soared to 2,673. And it continues to get worse. By mid-August 2008, the carnage for that year already exceeded the number of fatalities in all of 2007. The State Department warned American travelers in May 2008 that battles between drug-trafficking gangs (and between those gangs and Mexican military and police) in portions of northern Mexico were so severe that they constituted “small unit combat operations.” Those battles included the use of machine guns and rocket-propelled grenades.
In addition to the extensive violence reminiscent of Colombia in the 1980s and 1990s, another Colombian pattern also is emerging in Mexico—the diversification of the drug gangs into kidnapping and other lucrative sources of revenue. Some reports suggest that the kidnapping problem in Mexico is now more severe than it is in Colombia, and even U.S. citizens have been victims.
U.S. officials concede that the drug-related violence in Mexico does not respect borders. According to John Walters, the director of the White House’s Office of National Drug Control Policy, “The killing of rival traffickers is already spilling across the border. Witnesses are being killed. We do not think the border is a shield.” A Dallas narcotics officer reaches a similar conclusion. “We’re seeing an alarming number of incidents involving the same type of violence that’s become all too common in Mexico, right here in Dallas. We’re seeing execution-style murders, burned bodies, and outright mayhem . . . . It’s like the battles being waged in Mexico for turf have reached Dallas.”
U.S. law enforcement officials along the border are increasingly the targets of violence. A Homeland Security Committee report notes that at one time, smugglers “would drop the drugs or abandon their vehicles when confronted by U.S. law enforcement.” That is no longer the case. “In today’s climate, U.S. Border Patrol agents are fired upon from across the river and troopers and sheriff’s deputies are subject to attacks with automatic weapons while the cartels retrieve their contraband.” Some of the attacks have come from Mexicans wearing military uniforms. It is not certain whether they are smugglers with stolen uniforms or if rogue elements of the Mexican military are attacking U.S. law enforcement personnel on behalf of traffickers.
U.S. policy seems to assume that if the Mexican government can eliminate the top drug lords, their organizations will fall apart, thereby greatly reducing the flow of illegal drugs to the United States. Washington has now backed up that policy with a lucrative aid package, the Merida Initiative, to help fund law enforcement reforms and other anti-drug efforts. In the summer of 2008, Congress approved the first installment ($400 million) of what is likely to be a multi-year, multi-billion dollar program modeled after Plan Colombia, the initiative that began in 2000 for Colombia and its Andean neighbors, and which has already cost $5 billion.
The belief that neutralizing Mexican drug kingpins will achieve a lasting reduction in drug trafficking is the same assumption that U.S. officials made with respect to the crackdown on the Medellin and Cali cartels in Colombia during the 1990s. Subsequent developments proved the assumption to be erroneous. The elimination of those two cartels merely decentralized the Colombian drug trade. Instead of two large organizations controlling the trade, today some three hundred much smaller, loosely organized groups do so.
More to the point, the arrests and killings of numerous top drug lords in both Colombia and Mexico over the years have not had a meaningful impact on the quantity of drugs entering the United States. Cutting off one head of the drug-smuggling Hydra merely results in more heads taking its place. Jorge Chabat, a Mexican security and drug-policy analyst notes: “For years, the U.S. told Mexico’s government, ‘The problem is that the narcos are still powerful because you don’t dismantle the gangs.’ Now they’re doing just that . . . and the narcos are more powerful than ever.”
Mexico can still avoid going down the path to chaos, but time is growing short. Washington had better pay far more attention to the problem than it has to this point, and U.S. officials need to come up with better answers than the ineffectual and discredited policies of the past. If Washington continues to pursue a prohibitionist strategy, which creates the enormous black-market profits in drug trafficking, violence and corruption will become a dominant and permanent feature of Mexican life. The illicit drug trade has already penetrated the country’s economy and society to an alarming degree.
U.S. officials need to ask whether they want to risk a chaotic, embryonic narco-state on America’s southern border. If they don’t want to deal with the turmoil such a development would create, the new administration will have to reconsider the prohibitionist strategy and do so quickly.
Ted Galen Carpenter, vice president for defense and foreign policy studies at the Cato Institute, is the author of eight books on international issues, including Smart Power: Toward a Prudent Foreign Policy for America (2008). He is also a contributing editor to The National Interest.
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