The evils of institutional racism in policing has dominated the news in recent days. Much of this appears implicitly attributed to attitudes. By contrast, we believe that black markets, which arise from the enforcement of prohibitions against proscribed goods and services, are the principal source of institutional racism. As undocumented migrant labor is also a black market, we think the topic is worth a closer look.
In all cases, black markets arise from a government attempting to prevent the voluntary sale and purchase of a proscribed good or service. Critically, black markets are businesses, not opportunistic crimes. They have all the characteristics of businesses, including human resources, organization, strategy, manufacturing, R&D, warehousing, transportation, distribution, finance and sales. And like ordinary businesses, black market companies have suppliers, customers and competitors. They are not at all like crimes of opportunity, say, robbing a liquor store.
Nevertheless, black market businesses differ from legitimate businesses in one key respect: they lack the state's protection of property rights. Indeed, the state is actively trying to shut them down. Black markets businesses like the illicit drug trade are therefore compelled to safeguard their own property rights. A drug dealer can't complain to the police that someone stole his cocaine stocks or sue an employee who failed to deliver a package or stole a mattress full of cash. All of these property protection services, which are externalized to the state in an ordinary business, must be internalized in a black market business.
The first order of business is the provision of security to protect the cash, inventory and assets of the firm. And that means men with guns. Economies of scale also matter, therefore black market businesses often require 'turf' where the security forces of a given black marketeer outnumber those of the proximate competitor. In Mexico at the US border, these are called 'plazas', the gateways to the US market. In essence, the lack of legal protection leads black marketeers to create personal security forces -- in effect, armies -- which dominate a specific geographic area. Put another way, prohibitions create local druglords like El Chapo or Pablo Escobar. These are not random events, but rather the deterministic outcome of business processes in an industry lacking formal legal protections. Prohibitions create gangs, mafias and drug cartels.
Corruption, intimidation and murder of police, politicians and the press are also business imperatives. As the government seeks to dismantle black market businesses, black marketeers must take every possible measure to preserve the franchise, and this includes paying off, intimidating and otherwise disposing of threats from the authorities or the public. Prohibition era gangster Al Capone once stated that he spent half his revenues on these activities. Doing so is intrinsic to the survival of the business.
And then there is the matter of human resources. Black marketeers cannot simply advertise for hit men or drug mules on Indeed.com. They cannot sign employment contracts with confidentiality, non-compete or ordinary termination or notice clauses. All potential employees are a source of risk to steal goods or money, or betray the employer to authorities or rival gangs. For this reason, gangs tend to be built around personal loyalties as a substitute for formal employment arrangements. These loyalties are first to family, and indeed, many mafia 'families' are quite literally that, at least at the top. (See the excellent movie, American Gangster, for example). Beyond this come friends from the neighborhood and then people of a similar ethnic background. Importantly, these people show more loyalty to the group than to the dominant society. So it was, for example, with Sicilian immigrants, who demonstrated allegiance to their narrow ethnic community rather than the wider society. As a result, the players in a black market very likely come from a minority group distinct from the dominant society. Moreover, that group will be characterized by poverty and a lack of education. Poverty matters because the relative cost/benefit ratio is more favorable on the lower economic rungs. The risk/reward ratio of drug dealing for a middle class accountant is not particularly compelling. By contrast, for a poor, young black man in the economic desert of the inner city, drug dealing may look more attractive. The risks are worth the reward under the circumstances.
A prohibition, therefore, can be used to predictably undermine minority communities. Such prohibitions will lead to black markets and consequent enforcement efforts. Black market businesses will almost certainly involve poor minorities with loyalties distinct from the majority society. These black markets will require security provided by men armed with guns -- gangs protecting 'turf' -- and this area will be ruled by a government within a government, where much effort is spent on undermining the official authorities like the police and elected officials. Such neighborhoods will be characterized by high levels of violence as various gangs seek to increase their territory. Gang territories will often devolve into 'no-go' zones for the general public and deter the establishment of conventional businesses, leading to urban blight.
Black markets do not explain all the ills of poor areas. Nevertheless, about two-thirds of the murders in Mexico, for example, can be linked to the war on drugs there. The US prohibition in alcohol in the 1920s appears to have led murder rates here to double. If you are concerned about inner city gangs and gun violence, bear in mind these are business imperatives for the drug market, which prohibitions will tend to drive into the poor, minority communities. Guns and gangs are not random manifestations. They serve an essential business purpose. Therefore, if you want to get rid of the guns and gangs, start by lifting the prohibition. Do that, and it will be easier to take away the guns and dissolve the gangs. In such an event, police may feel less threatened, and the risk of tragic encounters between minorities and the police should diminish. Ending prohibitions is the best single way to overcome institutional racism.
And indeed, we are seeing some positive early data. The electorate in Oregon has voted to decriminalize hard drugs. And of course, marijuana is being legalized state by state, and perhaps nationally as well in the coming year.
This is not to minimize the harm of certain prohibited goods, hard drugs in particular. A call for legalization is not a recommendation for unthinking laissez faire policies. Nevertheless, we need to be cognizant of the enormous costs of prohibitions, which are often far worse than the problems they ostensibly seek to solve.
So it is with the black market of illegal immigration. As with other historically prohibited items, it is time to legalize migrant labor. Doing so will end all the horrors of the migrant journey in short order. But it must be done in a fashion which protects US employment and wages and respects the societal considerations of the general public, including conservatives. We believe this can be achieved with a pool of one million H2-M visas over three years offered at a market rate. This is an attainable goal.
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I perceive a deep pessimism and lethargy in the policy world, that everything that could be known is known, and that policy must devolve into repeating the worn mantras of left or right. In truth, we don't know everything. We are not at the end of the future. Many new, interesting and constructive policy approaches are available to us. We just have to open our minds a bit to see that the world could be different tomorrow.