Tuesday, June 21, 2011

Is Mexico The Future?

I had intended to write a piece about Mexico's drug war entitled "Is Mexico the Future?", but it seems someone at the Guardian has beaten me to it:

Mexico's war is inextricable from everyday life. In Ciudad Juarez, the most murderous city in the world, street markets and malls remain open; Sarah Brightman sang a concert there recently. When I was back there last month, people had reappeared at night to eat dinner and socialise, out of devil-may-care recklessness and exhaustion with years of self-imposed curfew. Before, there had been an eerie quiet at night, now there is an even eerier semblance of normality – punctuated by gunfire.

On the surface, the combatants have the veneer of a cause: control of smuggling routes into the US. But even if this were the full explanation, the cause of drugs places Mexico's war firmly in our new postideological, postmoral, postpolitical world. The only causes are profits from the chemicals that get America and Europe high.

Mexico's war does not only belong to the postpolitical, postmoral world. It belongs to the world of belligerent hyper-materialism, in which the only ideology left – which the leaders of "legitimate" politics, business and banking preach by example – is greed. A very brave man called Mario Trevino lives in the city of Reynosa, which is in the grip of the Gulf cartel. He said of the killers and cartels: "They are revolting people who do what they do because they cannot be seen to wear the same label T-shirt as they wore last year, they must wear another brand, and more expensive." It can't be that banal, I objected, but he pleaded with me not to underestimate these considerations. The thing that eally makes Mexico's war a different war, and of our time, is that it is about, in the end, nothing.
Ciudad Juarez is all our futures. This is the inevitable war of capitalism gone mad

The author sees this a classic war of future capitalism, because the only goal is profit. He further sees similarities between the cartels' tactics and and corporations' tactical methods, including total disregard for the welfare of either employees or the wider social fabric.

I think he's right to point to the nihilistic philosophies that animate our time - the Ayn Rand libertarian credo of "every man for himself", and the crass materialism of modern economics which sees wealth as the only measure of well-being. As pat of their calculus, economists believe there is no such thing as society; rather we are merely atomized individuals seeking to maximize our own personal gain, nothing more. Rand herself would have been an enthusiastic supporter of the kind of ruthless capitalism that such cartels represent, if this excerpt from an excellent article about her in Slate is any guide:

...Her diaries from that time, while she worked as a receptionist and an extra, lay out the Nietzschean mentality that underpins all her later writings. The newspapers were filled for months with stories about serial killer called William Hickman, who kidnapped a 12-year-old girl called Marion Parker from her junior high school, raped her, and dismembered her body, which he sent mockingly to the police in pieces. Rand wrote great stretches of praise for him, saying he represented "the amazing picture of a man with no regard whatsoever for all that a society holds sacred, and with a consciousness all his own. A man who really stands alone, in action and in soul. … Other people do not exist for him, and he does not see why they should." She called him "a brilliant, unusual, exceptional boy," shimmering with "immense, explicit egotism." Rand had only one regret: "A strong man can eventually trample society under its feet. That boy [Hickman] was not strong enough."
How Ayn Rand Became an American Icon by Johann Hari (a must read).

Not much difference between Rand's Hickman and the drug assassins, is there? Far from being an aberration, Mexico's drug war is Rand's idealized capitalism, a war of all against all, where government is powerless to intervene on behalf of the 'weak' and only the strong survive. This has become the new guiding ideology for the elites. The era of big government is over, i.e. all you are entitled to is what you can claw from the impersonal market.

The author may be more on point than he realizes. In fact, the history of capitalism is full of such examples of brute force being used in economic competition, particularly against workers. In a sense, as capital takes over power from the state, weakening it and leading us into a new form of Feudalism, we may merely be heading back to where capitalism originally was in America:

American history is replete with examples of business groups and individual firms retaining vast armies of military and paramilitary forces for long periods of time. In the nineteenth century many railroads kept private armies. The Pennsylvania Coal and Iron Police ran their own Obrigkeitsstaat [authoritarian state] for decades. General Motors maintained the Black Legion; Ford sported a veritable Freikorps recruited by the notorious Henry Bennett; and any number of detective agencies, goon squads, “special consultants,” and wireta!ppers have also been active. . . . Force on such a scale potentially menaces competitors, buyers, and suppliers almost as much as it does workers.
Earth to Libertarians: Private Parties Have Coercive Power Too!

The above article goes on to point out that coercion is not always as brutal as the above examples, but exists nevertheless:

Some modern versions of coercion don’t involve actual harm, but credible threats. For instance, I know three different lawyers who have been suing banks who have gotten ugly warnings (and some follow-up action, like break ins and messages specifying where children were on specific days; one is spending $20,000 a month on bodyguards).

And pressure can be financial rather than physical. Recall the HB Gary plans against Glenn Greenwald. They clearly planned to destroy his professional reputation (not that that would be as easy as they thought) so he would have to choose “career over cause”. But in the US, where jobs are hard to come by and safety nets are frayed to non-existant, someone over 35 and/or with kids who is not independently wealthy or is self employed with a very solid franchise is economically vulnerable.

However, I see it as a quintessential capitalist war for an entirely different reason than the author. As governments everywhere adopt the gospel of 'austerity' due to bad debts, the vacuum will be filled by whatever institutions have the requisite money and organization, whether they are '"legal" or not (and they probably will not be). Violent crime is already surging in Athens. The amount of unemployed and unemployable people keeps piling up, and it's obvious that national governments will simply continue to ignore the problem as they have been, especially in the United States, where the ruling class benefits from high unemployment. If this continues, black market activities will be the only means for people to support themselves. The drug cartels do not discriminate based on your graduate degree, gaps in your resume, or your credit score. As people become useless to the ruling class as either workers or consumers, they become increasingly desperate. Dmitry Orlov made a similar point - he saw drug cartels as the natural successor to broken and bankrupt civic institutions. A strong government and the rule of law are intertwined; you cannot "drown government in a bathtub" and expect it to enforce laws. A similar point is made here:


Another reason it is the template for future wars is because it is stateless. As states fall apart due to bankruptcy, "wars" will be increasingly fought by non-state actors. In the past, this was assumed to be terrorists, but drug cartels fall into this category as well. Finally it takes place among a background of seeming normalcy. The combatants are civilians who go about their lives not knowing when or where violence will strike. These will all be features of the conflicts of the future. And they will be bloody - more people have died in this internal conflict within Mexico and the U.S. (34,612 and counting), then in some true 'hot' wars between nation-states.

This also ties into to the lawlessness at every level of the global economy. The rule of law no longer seems to apply to the elites. The bankers who wrecked the global economy with illegal scams and grifts go free, keep their ill-gotten gains, get bail-outs, and if the Republicans have their way, will get a nice tax cut as a cherry on the sundae. Even now, corporations are demanding a reduction in taxes down to five percent for repatriating all the funds they have hidden offshore. I wonder what would happen if you or I tried that - look the other way on all the hidden money I laundered, or else. Who's really in charge here? Here's economist Jeffrey Sachs:

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America’s biggest investment banks to settle charges of various securities violations.

There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.

Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major health-care company known as Columbia/HCA. The company was charged with defrauding the United States government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion.

The FBI’s investigation forced Scott out of his job. But, a decade after the company’s guilty pleas, Scott is back, this time as a “free-market” Republican politician.

When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street “fixer,” Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country’s oil fields – access worth billions of dollars. When Nigeria’s government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.

Impunity is widespread – indeed, most corporate crimes go un-noticed. The few that are noticed typically end with a slap on the wrist, with the company – meaning its shareholders – picking up a modest fine. The real culprits at the top of these companies rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.
The Global Economy's Corporate Crime Wave by Jeffrey Sachs

Lest you think these shenanigans are confined to paper-shuffling on Wall Street, consider this example reported by Reuters:

(Reuters) - Oil trading firm Arcadia Petroleum, sued by regulators last week for allegedly manipulating U.S. oil prices, used hardball tactics in Yemen to buy the country's oil exports at below market prices, until authorities revamped their sales process to break the trading house's "long-standing monopoly", according to a confidential State Department cable

The September 2009 cable says that an internal government shift in control over the country's valuable oil exports, meant to open up oil bidding to more international buyers, threatened Arcadia's sway over Yemen's exports.

It also put at risk an alliance between Arcadia and its "local agent" in Yemen, tribal leader Hamid al-Ahmar, the cable says. Arcadia, in an interview, denied the allegations in the cable, saying it did not employ al-Ahmar as an agent, although it did work with some of his companies in the oil trading business. The company said it always paid official market prices for Yemen's export oil.

What were some of those hardball tactics?

But the State Department cable, citing a highly-ranked government official, says al-Ahmar and Arcadia took this further and "scared away potentially more competitive bidders by threatening to kidnap their representatives."

On Wednesday, Reuters contacted the official cited in the cable, who repeated the allegation that Arcadia made kidnapping threats in Yemen. Neither the official nor the cable provided specific details of the alleged threats.

Exclusive: Arcadia may have rigged Yemen exports: cable

The article Naked Capitalism illustrates just how widespread violence is in "capitalist" Russia:

Let’s consider another example. A friend of mine opened the Dun & Bradstreet office in Moscow in the 1990s. That meant selling information in a country which was and is not big on transparency, making the initiative a risky proposition. She says she is the only person ever to have sued a Russian oil company, win in court, collect the money, and live to tell the tale. In her day in Russia, it cost $5000 to have someone killed, which was actually a lot in local terms. It was expensive because you had to murder three people to cover your tracks properly: the target, the assassin, and the person who made the arrangement to hire the killer. The last person was costly to eliminate, they were usually much higher caliber and hence more wary than the assassins.

Note there was no state power in this little murder ring: all were private contractors. Indeed, the sort of weak state that libertarians celebrate typically makes for fertile breeding grounds for all sorts of private goon squads stepping into a power vacuum. And thuggery works, witness the rarity of my friend’s evident insanity in pursuing an oil company deadbeat.

As one commenter to the original article put it:

...the more you deregulate the activities of capitalism, as in the Friedmanite doctrine, the more they come to resemble what we commonly define as "criminal" ways of organizing activity. Monopoly corporations, for example, start to use tactics against small competitors that resemble the intimidations of mafia pushers. A lack of consumer protection leads to fraudulent advertising and more defective and inferior products, which begin to resemble what is always being traded on the "black" market (e.g. illegal DVDs, copy-brands, etc.)

With enough deregulation, the boundary between the "free market" and the "black market" starts to fade. That seems to be one of the central premises of this article...

I think the above examples illustrate that point nicely. Mexico truly is a libertarian paradise. Everything is determined by open monetary exchanges, including the justice system - police expect bribes, and judges are bought and sold (*cough* Gabelman, Prosser *cough*). Social services are poor to nonexistent. Public schools are of low quality, and those who can afford to send their children to private schools, do so. Regulations are few and enforcement can be eliminated with bribes. There is endemic poverty and unemployment. Wages are low and unions nonexistent. Society is heavily class-stratified. Infrastructure is marginal, and preventable diseases common. Taxes are minimal, especially on the wealthy. Life expectancy is short, and health care is fee-for-service. Oh, and don't forget, the world's richest man lives there. As I said, libertarian paradise. Clearly this is the direction we are heading in the United States as workers are laid off and the social safety net is shredded. Can we not expect similar battles on our streets?

I think its important to emphasize that this is not just about drug prohibition, as so many other commentators said. It is about people being excluded from the legitimate avenues of economic activity through poverty and joblessness. If it were not drugs, some other black market would spring up - guns, copper wiring, explosives, etc. As more and more people become superfluous to globalized corporate capitalism, as governments become bankrupt and social safety nets are eliminated, and as the rule of law falls before the corruption of the money system, the Mexican drug war is truly a sign of things to come.

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