Streetwise Professor

The New York Times and Bloomberg are freaking out at one of Trump’s opening salvos–his designation of Mexican cartels as terrorists. The gravamen of their arguments is that the cartels are so embedded in “legitimate” Mexican businesses that US businesses that deal with such companies could be subject to sanctions. And fearing that, Americans won’t do business with Mexicans:

Even more complicated, these criminal networks have extended their operations far beyond drug trafficking and human smuggling. They are now embedded in a wide swath of the legal economy, from avocado farming to the country’s billion-dollar tourism industry, making it hard to be absolutely sure that American companies are isolated from cartel activities.

Although though I doubt Bloomberg and the NYT would wise up even if beaten mercilessly with the clue bat, let me try to explain.

In brief: Uhm, what they whine about is exactly the point. The sprawling nature of the cartels is precisely why they pose such a serious threat.

The whole purpose of Trump’s action is to isolate American businesses from cartel-related activities. This serves several purposes.

First, and perhaps most important, to hold Mexico’s feet to the fire to get them to take more forceful action against the cartels. Even the Bloomberg oped acknowledges that Mexico’s actions against the cartels have been halting at best. Mexico obviously needs an incentive to get its mind right. We’ve tried the easy way for years, to little effect. So the hard way it is.

Second, to hurt the cartels financially to limit their capacity and incentive to harm the United States.

I should also note that the Executive Order designating the cartels as terrorist organizations will not just impact American businesses’ dealings with Mexican companies: it will impact American businesses’ dealings with American companies, and American companies directly. The cartels’ penetration of businesses is not limited to Mexico by any means: their tentacles spread wide in the United States.

And not just businesses. Law enforcement throughout the United States is also compromised.

The drug cartels have penetrated American commerce and law enforcement even more than the Mafia in its golden age. Do the NYT and Bloomberg regret the government’s war on the Mafia (waged with particular ferocity in the 1960s and 1970s) because of how it affected the GDP print?

Thus, contrary to the NYT and Bloomberg articles, this action does not discriminate unfairly against Mexico. It will likely have effects similar to RICO did at its introduction.

Even evaluated on narrowly economic terms, do the NYT and Bloomberg really believe that massive criminal organizations that supply massive quantities of fentanyl and other drugs resulting in tens of thousands of deaths and addictions per year are somehow additive to GDP? That the vicious violence that they commit is a price worth paying because of the economic benefits of cartel activity? Is human trafficking just a broken egg necessary to make a delicious economic omelet? Or maybe the NYT and Bloomberg believe it’s a positive benefit?

But OMG taking action against the cartels could reduce remittances to Mexico!

If money transfer companies like Western Union also stop transactions to Mexico over worries about properly vetting Mexican clients, it could affect the remittances the country relies on. That would be devastating for the Mexican economy, which received $63.3 billion in remittances in 2023, nearly 5 percent of the country’s gross domestic product.

Well, deporting millions of illegals will too! And again, this would serve to incentivize Mexico to get serious about getting the problem under control.

Both articles fret about the effects of direct military action by say Delta or the SEALs against the cartels in Mexico. I consider this problematic as well, but not for the reasons that media savants. They are fussed about a “massive violation of [Mexican] sovereignty.” Uhm–the cartels operating largely with impunity in Mexico are a massive violation of American sovereignty. Qualms about offending Mexico’s sensibilities about its sovereignty should not prevent us from defending ours.

I consider it beyond ironic that publications that are big boosters of aggressive sanctions against Russia and Russian businesses suddenly clutch their pearls about imposing sanctions on cartels (and hence indirectly-or maybe not so indirectly-the Mexican government). The logic of both is the same: both are methods short of war intended to compel countries operating against the interests of the United States to curb their depredations.

The NYT’s and Bloomberg’s special pleading on behalf of Mexico and its cartels raises questions. Like: Are they under cartel influence?

I say that only half in jest.