Cartels and Fixed Pricing
Link: https://www.npr.org/2016/02/15/466491812/narconomics-how-the-drug-cartels-operate-like-wal-mart-and-mcdonalds
Source Commentary: the above article was sourced from NPR and is a short summary of a podcast featuring Tom Wainwright, the Mexico correspondent at the time of writing for The Economist.
With shows like Narcos first airing through the immensely popular Netflix in 2015 and its spinoff Narcos: Mexico being released just recently, many of us, myself included, are digitally thrust into massive criminal empires for the sake of entertainment. For those unfamiliar, both shows deal with the rise of two cartels: Pablo Escobar’s Medellín Cartel and Miguel Ángel Félix Gallardo’s Guadalajara Cartel, respectively. While the shows themselves are excellent, the definition of a cartel is what makes this interesting in the context of our course.
Google defines a cartel as “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition,” fittingly, its provided example is simply “the Colombian drug cartels.” Forming a cartel, as the aforementioned drug lords do, is a powerful way of creating a network; all of the various aspects and people involved in the process are linked together. In many cases, a cartel is the only “purchaser” of a product and effectively runs a monopsony. Tom Wainwright of The Economist compared a cartel’s buying power to that of Wal-Mart and McDonald’s in his 2015 podcast with NPR.
Much like Wal-Mart or McDonald’s, this monopsony affords the cartels the ability to fix the prices of their purchases, operating as a massively interconnected network. The first few episodes of Narcos: Mexico are almost entirely dedicated to this one idea of bringing Mexico’s 1980’s marijuana business under the control of a single organization. The rest is history; the model was proven quite effective, and despite the efforts of governments around our world at large, has not fallen. Is such power due to the drugs themselves and their value, or the strength of the network? I believe it is the latter.