“The Impact of Leadership Removal on Mexican Drug Trafficking Organizations”

That’s the title of a new article, now online at the Journal of Quantitative Criminology. Thanks to fellow grad students Cassy Dorff and Shahryar Minhas for their feedback. Thanks also to mentors at the University of Houston (Jim Granato, Ryan Kennedy) and Duke University (Michael D. Ward, Scott de Marchi, Guillermo Trejo) for thoughtful comments. The anonymous reviewers at JQC and elsewhere were also a big help.

Here is the abstract:

Objectives

Has the Mexican government’s policy of removing drug-trafficking organization (DTO) leaders reduced or increased violence? In the first 4 years of the Calderón administration, over 34,000 drug-related murders were committed. In response, the Mexican government captured or killed 25 DTO leaders. This study analyzes changes in violence (drug-related murders) that followed those leadership removals.

Methods

The analysis consists of cross-sectional time-series negative binomial modeling of 49 months of murder counts in 32 Mexican states (including the federal district).

Results

Leadership removals are generally followed by increases in drug-related murders. A DTO’s home state experiences more subsequent violence than the state where the leader was removed. Killing leaders is associated with more violence than capturing them. However, removing leaders for whom a $30m peso bounty was offered is associated with a smaller increase than other removals.

Conclusion

DTO leadership removals in Mexico were associated with an estimated 415 additional deaths during the first 4 years of the Calderón administration. Reforming Mexican law enforcement and improving career prospects for young men are more promising counter-narcotics strategies. Further research is needed to analyze how the rank of leaders mediates the effect of their removal.

I didn’t shell out $3,000 for open access, so the article is behind a paywall. If you’d like a draft of the manuscript just email me.

Mexico Update Following Joaquin Guzmán’s Capture

As you probably know by now, the Sinaloa cartel’s leader Joaquin Guzmán was captured in Mexico last Saturday. How will violence in Mexico shift following Guzman’s removal?

(Alfredo Estrella/AFP/Getty Images)

(Alfredo Estrella/AFP/Getty Images)

I take up this question in an article forthcoming in the Journal of Quantitative Criminology. According to that research (which used negative binomial modeling on a cross-sectional time series of Mexican states from 2006 to 2010), DTO leadership removals in Mexico are generally followed by increased violence. However, capturing leaders is associated with less violence than killing them. The removal of leaders for whom a 30 million peso bounty (the highest in my dataset, which generally identified high-level leaders) been offered is also associated with less violence. The reward for Guzmán’s capture was higher than any other contemporary DTO leader: 87 million pesos. Given that Guzmán was a top-level leader and was arrested rather than killed, I would not expect a significant uptick in violence (in the next 6 months) due to his removal. This follows President Pena Nieto’s goal of reducing DTO violence.

My paper was in progress for a while, so the data is a few years old. Fortunately Brian Phillips has also taken up this question using additional data and similar methods, and his results largely corroborate mine:

Many governments kill or capture leaders of violent groups, but research on consequences of this strategy shows mixed results. Additionally, most studies have focused on political groups such as terrorists, ignoring criminal organizations – even though they can represent serious threats to security. This paper presents an argument for how criminal groups differ from political groups, and uses the framework to explain how decapitation should affect criminal groups in particular. Decapitation should weaken organizations, producing a short-term decrease in violence in the target’s territory. However, as groups fragment and newer groups emerge to address market demands, violence is likely to increase in the longer term. Hypotheses are tested with original data on Mexican drug-trafficking organizations (DTOs), 2006-2012, and results generally support the argument. The kingpin strategy is associated with a reduction of violence in the short term, but an increase in violence in the longer term. The reduction in violence is only associated with leaders arrested, not those killed.

A draft of the full paper is here.

Organized Crime Roundup

I have been arguing for years that organized crime has an inherently political component. Certainly I am not alone, and researchers far superior to me have made the same point–for example, Charles Tilly and James Buchanan. However, mainstream political reporting seems to have been catching onto this over the past few months. I have rounded up a few of these posts that will be of interest to long-time readers. See also my working paper on violence following targeted leadership removals in Mexico.

Are Mexican Drug Lords the Next ‘Terrorist Targets’?” by Douglas Lucas. Lucas accurately describes the framing of drug lords as terrorists to be a form of “mission creep.”

Peter Andreas responds to Moisés Naim’s essay in “Measuring the Mafia-State Menace.” I was not aware of Andreas’s work until Daniel Solomon recently shared it on Twitter but now I have several of his books (including this one) on my reading list.

Although somewhat sensationalized, Christian Caryl also has a nice overview piece on global organized crime at Foreign Policy: “Mob Rule.” Some of the statistics there seem questionable but the overall point–that students of politics should pay attention to organized crime–is a valid and important one.

Finally, World Politics Review features an interview with Brian Phillips, who argues that targeting DTO leaders in Mexico has not reduced violence. This matches my own research on the topic.

How “The Wire” Explains Microsoft

I cannot speak to the accuracy of this since I do not know much about the internal workings of Microsoft, but as an analogy I found it fascinating. David Auerbach on how The Wire explains Microsoft:

What does Microsoft in the Ballmer era have in common with drug kingpin Avon Barksdale’s organization in The Wire? For years, both of them had the strongest package. They owned their territory, owned their market, owned their users. They were untouchable. Then times changed, bringing new competitors with new, intense products. Their own product went weak. But they couldn’t let go. “We got a weak product, and we holding on to prime real estate with no muscle,” Avon’s cerebral second-in-command, Stringer Bell, complains to him. For the Barksdale organization, the product was heroin and the real estate was the drug-ravaged Franklin Towers housing project. For Microsoft, the product is Windows and the real estate is the PC.

More here (some language NSFW).

Leadership Targeting and Perverse Incentives

Enrique Pena Nieto with supporters. Photograph: Daniel Aguilar/Getty Images

Enrique Pena Nieto with supporters. Photograph: Daniel Aguilar/Getty Images

If targeting of Drug Trafficking Organization (DTO) leaders in Mexico has contributed to high levels of violence, as I argue in a working paper, then why hasn’t the Mexican government stopped the policy? Under former president Felipe Calderon there were a number of possible answers, included the fact that his get-tough policy toward crime was a major part of his campaign strategy in 2006. But that does not explain why the policy has persisted under the new president.

When Enrique Pena Nieto won the 2012 election he promised that his crime fighting policy would aim to “reduce violence and above all protect the lives of all Mexicans.” The new administration acknowledges that leadership targeting led to increased violence, and a number of experts seem to agree. So why hasn’t the policy been changed?

The answer comes down to cold hard cash, and lots of it. US officials have been strongly supportive of DTO leadership targeting, echoing as it does the American policy of targeting terrorist leaders. And they have backed up that rhetoric with generous funding for Mexican security forces:

On Monday, Interior Minister Miguel Angel Osorio Chong said the strategy caused a fragmentation of criminal groups that had made them “more violent and much more dangerous,” as they branched out into homicide, extortion, robbery and kidnapping.

The next day, Jesus Murillo Karam, the new attorney general, said in a radio interview that the strategy was responsible for spawning 60 to 80 small and medium-sized organized crime groups.

But just because the strategy has taken some hits doesn’t mean it’s dead. And Peña Nieto, who took office Dec. 1, is unlikely to kill it….

Peña Nieto is also unlikely to jeopardize the generous security assistance provided by the United States, which helped design the kingpin strategy. The U.S. is intimately involved in carrying it out, providing intelligence on drug leaders’ whereabouts and spending millions to strengthen the Mexican security forces who act on that intelligence.

All of which probably explains why, shortly after the ministers’ criticism of kingpin, a top presidential advisor told The Times that the new government had no plans to abandon it.

“That will not stop at all,” said the advisor, who declined to be identified because he was not authorized to speak on the record.

One can appreciate the rock and hard place between which Pena Nieto finds himself. His party has been criticized for being in the pocket of the cartels, so he cannot afford to look weak. There are also the entrenched interests of the military and police to keep in mind–they have no interest in giving up power. Unfortunately for the tens of thousands of Mexicans who have lost their lives or loved ones to violence over the last seven years, their voice in the government has not kept his word.

Taxes, Moonshine, and State Building

moonshine_still_sugar_valley2I have to admit an ulterior motive behind Friday’s post. We discussed the Alchian-Allen theorem, which states that adding a fixed cost (usually but not necessarily for transportation) to the price of a good leads consumers to purchase more of the high quality good relative to the lower quality one. Although I hope that discussion was interesting enough in its own right it also serves as background for today. This post discusses the role of postbellum US internal revenue system, whose liquor tax collection efforts in the Mountain South constitute a slow but eventually successful state-building effort.

We have talked about state building before, and this post continues in that vein. The post-Civil War Mountain South was an extraordinarily difficult-to-govern region, both because of its geography and its population’s unwillingness to cooperate with the central government. (Regular readers will recall that these two characteristics are often correlated.) Our discussion will largely be based on the paper, “The Revenue: Federal Law Enforcement in the Mountain South, 1870-1900″ by Wilbur R. Miller (1989, JSTOR).

Here’s the connection with the Alchian-Allen theorem. Corn is a commodity, and the quality difference between any two cobs is negligible. However, distilling whiskey from corn both raises its value and makes it easier to transport. According to research from Cornell’s David Pimentel, “An acre of U.S. corn yields about 7,110 pounds of corn for processing into 328 gallons of ethanol.” That’s about 26.1 pounds of corn per gallon of pure alcohol.

Even if moonshine were only 100-proof (i.e. half alcohol), you have reduced the weight to be transported from 13 pounds of corn to around 8 pounds for a gallon of “mountain dew”–nearly a 40 percent reduction! Making higher proof could result in an over 60 percent weight reduction, drastically reducing transportation costs for Appalachian farmers. This also explains why bootleggers would try to achieve high alcohol contents for distribution and expect consumers to dilute the brew after it had been transported–it makes no sense to pay for shipping water content or other dilutions.

But all of these factors were in place long before the Union victory, so why did moonshining become more common afterward? The answer is taxes. From Miller’s article:

The beer tax, which remained low, was collected easily. There was some traffic in untaxed tobacco, but whiskey taxes were the most difficult to collect. Moonshining developed as soon as the excises were imposed, and so many distillers evaded whiskey taxes that in 1868 the commissioner of internal revenue requested reduction of the tax from $2.00 to fifty cents per gallon, thinking the lower excise would be easier to collect. Indeed, the lower rate resulted in increased revenues, but the government continued to lose potential revenue to moonshiners. (p. 197)

PE_BustinUpTheMoonshineStill_bw8x10_14bResistance to the taxes, even when they were reduced, had both an economic and a political logic:

Moonshiners argued that they could not afford to absorb a whiskey tax of ninety cents per gallon or to pass it on to their customers. They believed that economic survival depended on evading the tax, but illegal distilling exposed them to confiscation or destruction of their still or to imprisonment. Mountain dwellers resisted the tax. They believed that a man had a fundamental “right to do pretty much what he pleases,” arguing that “a farmer should have the same right to boil his corn into ‘sweet mash’ as to boil it into hominy.” (p. 200)

It did not help the government’s cause that revenue agents were often dishonest, responding to incentives of their own:

U.S. commissioners, who held preliminary hearings and issued warrants, and deputy marshals (often appointed as deputy revenue collectors), who served warrants and made arrests, received fees for each of their duties. Fee payment encouraged deputies to swear out warrants on doubtful testimony, leading to the arrest of innocent men. (p. 203)

Liquor taxes were serious business, though. The federal government carried a substantial amount of war debt and in 1895 the Supreme Court ruled that existing income taxes were unconstitutional, forcing the government to rely even more heavily on taxing goods like tobacco and whiskey:

The national government had developed a commitment to collecting taxes that it never had toward enforcing divil rights, because it was directly interested in the funds received. The whiskey tax became the largest domestic source of revenue. The excise on distilled spirits grew from 48 percent of all internal revenue in 1876 to 59 percent in 1982. (p. 214)

When Congress raised the whiskey tax to $1.10 (up from 90 cents) in response to the income tax decision, receipts immediately dropped and took five years to recover to their 1893 level. At the turn of the century states began to enact prohibition laws and made revenue collection and enforcement more difficult. Every “moonshine state” except Kentucky and Missouri was dry by 1916. Of course, this did not eliminate the moonshine business–it just made it that much more profitable.

For more on the topic of taxes, government control, and conflict, check out this working paper abstract from Anna Schultz, Nils Metternich, and Michael D. Ward (friends and colleagues, all). To follow up on the Alchian-Allen theorem and prohibition of various types see this post by azmytheconomics. If you want to know more about moonshiners in the 20th century, check out Last Call: The Rise and Fall of Prohibition by Dan Okrent and Bruce Yandle’s “Bootleggers and Baptists” theory (wikipdfpodcast).

More Unintended Consequences of Cigarette Taxes

Excise Taxes on Cigarettes, by State (from Wikipedia)

We have been talking about drug dealing this week, and today we turn our attention to the smuggling of a legal drug product: cigarettes. Differential state tax rates on cigarettes have unintended consequences, which we have discussed before. “Tobacco Road” used to refer to central North Carolina with its tobacco production and four universities with nationally competitive basketball teams. Now it is beginning to be used as a reference to I-95, which runs from some of the lowest-tax states for cigarettes (Virginia) to some of the highest (New York):

Because Virginia’s tobacco tax is the second-lowest in America, gangsters buy cigarettes there in bulk and sell them at enormous profit in New York and other high-tax states. At a minimum, they pocket a big chunk of the difference between what Virginia adds in tax—30 cents a packet—and the higher rates imposed elsewhere. New York’s tax, at $4.35 a packet, is the highest in the country.

The federal Bureau of Alcohol, Tobacco, Firearms and Explosives estimates that sales of illegal cigarettes cost government—local, state and federal—nearly $10 billion a year. For the smugglers, profits are better than those from cocaine, heroin, marijuana and guns, according to a report in September by the Virginia State Crime Commission. Moreover, the penalty for doing it—a maximum of five years in jail, under federal law—is considerably lighter than for selling drugs. If the smugglers were trafficking in heroin, they would face life in prison.

As tax rates continue to grow while remaining uneven across states, incentives for smuggling appear to be growing:

In New Jersey, where a packet of cigarettes carries a tax of $2.70, about 40% of all cigarettes are smuggled in from other states, according to the New Jersey Treasury Department. Maryland, Virginia’s neighbour to the north, reported a fourfold increase in seizures of illegal cigarettes between 2010 and 2012, though one official described the haul as the tip of the iceberg.

Anti-smoking activists love high cigarette taxes. But so do smugglers.

Further reading: Bruce Yandle’s “Bootleggers and Baptists” theory (wiki, pdf, podcast)

The Politics and Economics of Dealing Drugs, Part II

Planet Money interviews “Freeway” Rick Ross, a former high-level drug dealer in LA. This interview offers another perspective on the drug business from the one we saw on Monday.

The basics:

PM: How much of the cost of the drug that you were selling was because it was illegal?

Ross: Probably… maybe 1000 times. You can probably get a kilo of cocaine in Peru for around $300…. The price probably would drop dramatically [if it were legalized].

This is probably an overestimate, but the “risk premium” for drugs is certainly real.

The money:

PM: Not all of the money goes to crime and bribes and shady stuff…. There were other expenses. Like, a huge expense: bail bondsmen. Guys in his crew would get picked up by the cops, and he would need to make sure that they would stay loyal to him, so he would do whatever it took to get them out of jail. And of course the criminal justice system knew that he was a big time drug dealer, so they set these bond prices really high.

And another group of people who were profiting off the big time drug dealer: lawyers…. They came into play when he would have these “interesting” disputes with the cops.

Ross: They had raided a couple places and there were large amounts of money and no drugs. They would confiscate the money, and we would go to court, and the lawyers would get the money back.

The cops:

PM: And they couldn’t prove that it was drug money so you got it back?

Ross: Absolutely. And they [police] got frustrated with that, so they started… bringing their own drugs and they would plant drugs. And that makes it tougher to come to court and say, “Your honor, there was $400,000 in there and now it’s missing.” Because know it was two keys [kilograms] in there too.

The Politics and Economics of Dealing Drugs, Part I

Jeff Winkler interviews a small-time dealer for his perspective.

The basics:

How long have you been selling?
I started in 2006 and, like most other dealers, started by being a heavy user of the product. I realized that if I bought in bulk and sold some of it, then I could essentially smoke for free. I wasn’t making any money at first. It actually took up to this past year for me to begin seeing any kind of profit off of it. And it wasn’t until I curbed my own habit that I started to see that.

Is this like those rules you mentioned the other day?
That’s the Ten Crack Commandments, by Notorious BIG — “Don’t get high on your own supply.” That’s rule number … well, I can’t remember if that’s actually rule number one. But it should be number one.

The customers:

When dealing with “customers,” are you just always thinking in really economic terms then?
Very much so, actually. With most of my customers, once I get to wherever we’re meeting, it takes less than five minutes. I’m very economical when it comes to my transactions with my customers. At this point, there is one customer I will smoke with; a kid who I happen to see some qualities of myself. He seems to enjoy my company, and he’s also given me several clients. He’s actually given me my largest client and that’s about it. But he’s helped me out in other ways. So I’ll take the time.

And that’s sort of another thing. Occasionally, you have to play politics to groom people to get them to buy a little bit more. You sort of, like, … it’s mingling. You have to rub elbows a little bit. Or if someone is the type of customer that’s loyal and is going to buy frequently and they need that interaction, they need you to sort of engage them …

The money:

What do you buy with your drug profits?
Well, it depends on where I’m at in my life. If I just need money to survive on, then I’m using it to survive. If I need it for luxuries or commodities then I use it for that. It’s basically, like, I make the money, and I spend it almost as soon as I have it, which is not a good business practice. But I am militant enough that I can always have what I need to get more.

It sounds almost like you’re basically living paycheck-to-paycheck.
Yeah, essentially it is the same as living paycheck-to-paycheck, which is sort of a sad fact and kind of why I’m doing this in the first place, because you know what, paycheck-to-paycheck isn’t enough anymore. I know so many people who live paycheck-to-paycheck and they can’t afford any sort of luxury for themselves because of that. And this is a way I can afford small luxuries for myself.

Do Targeted Killings Work?

Micah Zenko at the Council on Foreign Relations rounds up answers from Daniel Byman (sometimes), Joshua Foust (maybe), Sarah Holewinski (probably not), Patrick Johnston (yes, if targeted selectively), and Pir Zubair Shah (probably, at least in Pakistan).

I have explored this question myself, as it pertained to Osama bin Laden (both before and after his death) and the removal of cartel leaders in Mexico. The latter question–whether leadership removals in Mexican drug-trafficking organizations leads to more or less violence–is the topic of one of my current working papers (somewhat outdated draft).