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The cartels have a significant leg up on would-be legal operators; the cartels don't have to pay capital costs to create new production infrastructure. The cartels already have extant and significant distribution networks that new operations have to create from scratch. The cartels don't have to comply with the significant regulatory and tax burdens that legal operations have to comply with. This isn't to say that legal operations can't ever compete, just that it's not the lol capitalismzorz curbstomp that the legalization argument presumes.
Also, cartels already deal in legal products (just with a side of violence). Diesel fuel and avocados, are two significant examples. In fact, cartels need legitimate businesses in order to launder their drug proceeds and provide cover for the movement of product and purchase of materials for drug production/cultivation/processing.
TIL
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The cartels could be dealt with, a lot more violently if the US had the balls. Imagine an unending wave of cruise missiles and drone strike assassinations. What would be the point of being rich if you had to hide in squalor unable to enjoy your pools and villas.
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At the same time, the cartels' distribution networks are ... not super cost efficient. I expect they are paying (either directly, through inefficiency or through outright theft) at least 20-100x what WalMart is paying :-)
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Don't cartels also do a flourishing trade in pirated media, as well? The mafia did a flourishing business in selling untaxed cigarettes and gas in its heydey, too.
How much revenue or what percent of revenue = flourishing?
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