Organized Crime

A former MBA student of the author’s who was the director of emergency medicine at a large urban hospital once said that he and his colleagues spent about 90 percent of their time treating the knife and gunshot wounds of drug gang members. His medical preparation for such a job included serving as a surgeon during wartime, which he said came in very handy. Such injuries dominate all such hospitals at tremendous expense. The incredible violence in America’s cities is a direct result of the government’s war on drugs and would end if the “war” was to end.

None of this should be surprising to anyone. In a free and legal market, any dispute between businesses, or buyers and sellers, can be settled through negotiation or, if need be, the courts. If a businessman believes he has been cheated or defrauded, then he can seek to have his property protected by the courts. He of course can also quit doing business with the suspect businessman, and urge everyone else he knows to do the same.

No such relatively civilized solution is available when government makes products or services illegal. A drug dealer cannot go to a judge and say, “Your Honor, I delivered one ton of cocaine to Mr. Smith here, and he refuses to pay me in full. I would like you to force him to live up to his end of our contract.” Instead, drug dealers—like booze peddlers during Prohibition—resort to the only effective means available to enforce their business agreements: violence.

There is an even more ominous dynamic at work here, however. Once violence becomes the means by which one succeeds in illegal markets, the enormous profits earned in those markets will attract competition from those elements of society who have a comparative advantage in violence and brutality. The most violent will rise to the top.

Drug gangs are simply business partnerships, but unlike normal business partnerships in legal markets, they have great latitude in destroying their competitors by violent means. In legal markets, competitors can only be “destroyed” by producing better and/or cheaper products than theirs. In illegal markets competitors are often simply murdered. Murder is used to create “barriers to entry” into the business, to borrow a phrase from economics.

The police are often “silent partners” in this murder and mayhem since existing drug gangsters can easily pay off the police and become “informants” and alert the police of any new entrants into their business. That way the police do their dirty work for them by arresting their competitors.

In legal markets a brand name that is established by years of good performance and/or low prices is a valuable asset that fuels profits. In illegal markets, a brand name is established by especially brutal acts of violence. The ability of drug gangs to intimidate their rivals is the only “brand name” that counts in such a business.

Worse yet, there are economies of scale, so to speak, to such violent behavior. If a drug gang is especially notorious in say, Los Angeles, that fact will make it easier for it to enter and dominate the illicit drug markets in Chicago, New York, Miami, and other cities.

The use of violence to create extraordinary monopoly profits in the illicit drug markets has also lured thousands of children into the business. They work as “spotters” of police or “runners” who deliver the drugs to the drug gang’s customers. In most states children under the age of 18 are usually placed on probation for drug-related crimes, and in some states a jail term cannot extend past age 17. Facing little or no negative consequences for their participation in the illegal drug trade, these children grow up to be some of the most hardened and violent criminals in American society.

Ending the war on drugs would cause a dramatic, unprecedented drop in violence in American cities. The healthcare costs associated with the war on drugs would plummet as well, and hospitals would be able to devote more resources to other kinds of medical care, an especially valuable benefit now that the baby boom generation is approaching retirement age and will be making more and more intensive use of healthcare. The only losers would be the myriad government bureaucracies that are funded by the war on drugs, and of course the drug gangsters themselves.