What Exactly Did that RAND Study Say About Cartels and Marijuana?

Oct 13, 2010

Cartels, Jon Walker, Paul Armentano, Pete Guither, Prop 19, Proposition 19, RAND

If you believe most headline writers, yesterday the RAND Corporation released a study that said ending marijuana prohibition in California would do little to take away profits from Mexican drug cartels. But if you take the time to actually read the study, you’ll learn that Mexican cartels make billions of dollars from exporting marijuana to the United States (not including profits from the marijuana they grow within our borders), that a statistic originally put forward by the U.S. drug czar’s office was based on little and “should not be taken seriously,” and that removing marijuana from the criminal market in California (just one state) would deprive the cartels several percentage points worth of their revenue.

In short, the report tells us what we already knew: the cartels make huge profits from illicit marijuana sales, the U.S. drug czar’s office is prone to spreading misinformation, and the passage of Prop 19 in California could be a first crucial step toward dealing a much larger blow to the cartels’ revenue.

Let’s address these points one at a time:

How much money do the cartels make from marijuana? RAND estimates the cartels make somewhere around $1.5 to $2 billion annually “from moving marijuana across the border into the United States and selling it to wholesalers.” But this estimate makes a serious omission: How much money are the cartels making from all the marijuana they grow within U.S. borders? “This [$2 billion] figure does not include revenue from [cartel] production and distribution in the United States,” the report says, “which is extremely difficult to estimate with current data.” That’s a huge lapse, especially considering that every year, the Campaign Against Marijuana Planting digs up literally millions of marijuana plants that authorities blame on illegal cartel growers. In order for RAND’s estimate to have any meaning, marijuana grown by the cartels in the U.S. needs to be taken into account.

What percentage of the cartels’ revenue comes from marijuana? It’s been widely stated by legalization opponents and advocates (including myself) that the cartels make 60 percent of their revenue from selling marijuana in the U.S. Our source for that statistic was none other than the White House Office of National Drug Control Policy. But now RAND says that number isn’t true:

The ubiquitous claim that 60 percent of Mexican [drug trafficking organizations’] export revenue come from U.S. marijuana consumption should not be taken seriously. No publicly available source verifies or explains this figure and subsequent analyses revealed great uncertainty about the estimate (GAO, 2007). Our analysis— though preliminary on this point—suggests that 15–26 percent is a more credible range of the share of drug export revenues attributable to [marijuana].

I have no way of confirming which of those estimates is closer to the truth. But either way, says NORML’s Paul Armentano, “someone is lying.”

So who should we believe? On the one hand we have the federal government, which consistently lies about marijuana to further their own agenda. On the other hand, we have RAND, which also isn’t above making its own specious claims to further their own agenda — which in this case seems to be opposing California’s Prop. 19.

And more importantly: so what? If the cartels make 15 to 26 percent of their revenue from marijuana, that is still a hugely significant sum, and it shouldn’t discredit the argument that legalizing marijuana would hurt the cartels (an argument made not just by advocates in the U.S., but also former Mexican president Vicente Fox and many others). According to RAND, it could deprive them up to a quarter of their profits.

Pete Guither does a nice job summing up the headache this causes:

The government comes out and says that 60% of the cartels’ income is from marijuana. Legalizers say that legalizing will hurt the cartels (true) and mention the government’s numbers. Rand comes out and says that the government was lying through its teeth, but they don’t really know for sure what the real numbers are, but probably lower, and therefore the legalizers’ argument for legalization is supposedly weakened. And yet they admit that the legalizers’ core argument is true (that legalization will hurt the cartels – see above). Then they word their press release in such a way that they know the newspapers will report it as a blow to Prop 19.

So how much of an impact could Prop 19 have on the cartels? RAND estimates that Prop 19’s passage could decrease cartel revenue by 2 to 4 percent. For a single state initiative, those numbers aren’t small potatoes.

We believe that legalizing marijuana in California would effectively eliminate Mexican DTOs’ revenues from supplying Mexican-grown marijuana to the California market. As we elaborate in this chapter, even with taxes, legally produced marijuana would likely cost no more than would illegal marijuana from Mexico and would cost less than half as much per unit of THC (Kilmer, Caulkins, Pacula, et al., 2010). Thus, the needs of the California market would be supplied by the new legal industry. While, in theory, some DTO employees might choose to work in the legal marijuana industry, they would not be able to generate unusual profits, nor be able to draw on talents that are particular to a criminal organization.

But somehow RAND portrays this negatively. Of course, legalizing marijuana in a single state wouldn’t completely wipe out the cartels. But what MPP and others advocate is that marijuana be taxed and regulated like alcohol nationwide. Passing Prop 19 would simply be the first step toward doing that. Jon Walker from Just Say Now gets it right:

No one has been claiming just the passage Prop 19 alone would eliminate all of the Mexican drug cartels’ marijuana profits across the whole country. Prop 19 is just the first big step toward a broader adoption of a more sensible marijuana policy that denies the cartels a huge source of funding.

And of course, until Prop 19 or some similar initiative is passed in an American state, this entire debate will remain abstract and hypothetical. It’s up to California voters to make it a reality on Nov. 2.