Organized Crime And Pablo Escobar
Organized crime has been around for centuries, especially in the Western nations as the economies have become class-driven or class-focused. Organized crime can really be something that is out in the open or something that is underground and away from the naked eye. Many operations in the past have utilized the law in order to take advantage of various loopholes in regulations. In the U. S. , during the Prohibition Era mob bosses took control of the supply chain of alcohol. Feeding off the demand from the public, the mob ultimately was able to profit off the selling of alcohol with politicians turning a blind eye. However, one of the most prominent examples of organized crime is Pablo Escobar’s drug empire. Escobar ran an extremely efficient operation where monopolized the demand for cocaine and sold it overseas. Drug smuggling was a type of organized crime that ultimately opened Pandora’s Box to drugs coming into the U. S. from other countries in Central America. Escobar was able to launder money in order to enhance his sale of cocaine, and he was ultimately able to succeed in creating the world’s first major drug cartel. Escobar may not have known at the time, but his business of organized crime has, to this day, done the most damage to America than any war the country has been in. This paper will look closely at the background of how drug smugglers operate and launder money, and then it will look into the case study of Pablo Escobar.
Pablo Escobar full name is Pablo Emili Escobar Gaviria. He was born in the city of Rionegro in the year of 1949. He came from a normal family as his father worked as a farmer and mother as a School teacher. He was very optimistic as he wanted to rise accurately in achieving goals and he also discussed the same with his family and friends and also revealed his dream as a President of Colombia.
Escobar understood that what the things are required to grow in life. So, he paved way towards criminal way and started as a street thief at first and started stealing cars and expensive things etcetera. Later on, he moved into smuggling business. He was very start up but did the business very well, and during the Marlboro Wars, he was very much tactically smuggling cigarettes to in and around the city. During this time, Escobar became perhaps the most important drug lord worldwide, as his network was reaching places not just in America but in Europe and Asia. Escobar laundered money through ways that today would seem insane; moreover, he gave excess cash away to charity, buried money, and hid money in caves. Escobar was living a lavish lifestyle, and he did not need to worry about money anymore. Further, to Escobar, the drug cartel was more about power than money. The architecture of drug trafficking: network forms of organisation in the Colombian cocaine trade.
Cartels refers to the group of individuals, companies or businesses which tend to operate together to control the pricing of a product as well as maintaining the prices at a higher level by reducing the competition for more profits. Drug cartels are basically an illegal association of individuals which works as a regular cartel, but the products sold in these cartels are illegal. These cartels work illegally by producing illegal products such a cocaine and other drugs which are harmful yet very addictive and possess a huge demand and a market base in many countries. These products are in high demand that these cartels set the prices at a very high rate to maximize the profits as drugs have an inelastic demand and becomes a necessity for people. These drug cartels work as a normal cartel, but they are not completely same because the deal in illegal products, has to launder money as all the transactions are in cash which is also an illegal activity and they use violence in their day to day activities. These cartels have individuals who gives their produce to the cartel and in return gets their share but due to a lot of illegal activities and violence these cartels are very difficult to be considered as cartel in legitimate markets. Money laundering can be seen as the process by which the large amounts of money is created which is obtained from serious crimes such as terrorist activities, drug trafficking and showing it as if it is being collected from the lawful sources. There are mainly three steps in money laundering: placement, layering, and integration. Placement is the activity of introducing the dirty money in the financial system by using any method. Layering is done in order to conceal the source of that money by showing various complex transaction and integration is known as the process by which this money is received as a legal money. Apart from this, criminals also do money laundering by investing in some kind of businesses.
Colombia was dominating the cocaine business before Escobar was born; the country was very much in the business of smuggling drugs. The country dominated the global cocaine smuggling industry, and Escobar had connections in governments all through the world. Now Pablo thought to take control of the business and decided to kill Medellin and done as per his plan and later on he expanded the operations in a huge way. Further, Escobar killed his rivals or bribed them into leaving the business, which ultimately created a monopoly for Escobar. Under his guidance, large amount of cocaine pastes was purchased in Bolivia and Peru and brought to America. He started with a small group of individuals to a huge network of individuals around the country. He controlled 80% of business into the US, which yielded around 400 million dollars per week. And finally, in the year of 1982 he was elected as an alternate member of Colombia's Congress but because of corruption scandals he was forced to resign from his position. By realizing the fact, he left his dream through the use of terrorist activities, Escobar tried to control the politics of Colombia through a non-extradition clause in order to give more power to the cartels and to him. Due to bad opinion of public upon him, he became a criminal and realized that his family was in danger. Finally, he, surrendered by the Colombian Government was imprisoned in a luxury prison that was built for him that was called La Catedral. Escobar’s kids grew up with love to their father still, and his son even wrote a book trying to humanize his father.
Escobar used a lot of tactics that organizations utilize today, and he was ultimately able to create a stream of revenue that allowed him to gain an excess amount of cash. As stated before, these tactics made him so wealthy that he had to give the money away or hide it away in the ground to keep the authorities from tracking the stream of money. Anyways, Escobar was able to do this through monopolization of the service, this being the distribution of cocaine. Escobar was able to do this through product differentiation and weeding out his competitors, either through buying them off or killing them. Unlike organizations that could abide by the law, Escobar did not need to, and this made monopolizing the industry and building a global supply chain dictated by him only extremely easy. Second, Escobar was able to utilize corruption in a way that had not been seen before. Escobar bought out politicians, which ultimately made it easier for him to skirt the law and gain access than his competitors. Not only did he buy out, or bribe, politicians, but he was able to do this with the police as well, which gave him a ton of leverage since he was always above the law. Oftentimes, the police did Escobar’s bidding. So, through monopolization and bribery, Escobar was able to generate a huge cash flow that made him one of the world’s richest men.
A cartel is a group of producers who work together to protect their interests. The formation of cartel is due to the same conditions which give rise to oligopolistic market. Cartels are formed in a market where there are few producers and each producer have a significant share of the market. The organization of petroleum-exporting countries also known as OPEC is a best example of a cartel which is one of the biggest organized cartels in history of anything. People have criticized OPEC over manipulating oil prices, and they believe that OPEC is an organization that has committed crimes but gets away with it because it has an ultimately bribed governments. By working together OPEC members are able to behave like a monopolist. They can fix prices for petroleum products to avoid competition among its members. They also restrict output by setting oil production quotas & limits. OPEC members raise price together which reduces elasticity of demand for any single member. They also restrict output to create demand for the output. Since OPEC members determine their output & prices they will face a downward sloping market demand curve. Today, OPEC is definitely weakening, but it is still a force to be reckoned with. A lot of the practices that they do to generate a revenue can be compared to what Escobar did in order to generate revenue with his drug smuggling business.
In long run cartels it is difficult to survive. Because cartel members tend to cheat on their agreements to increase their share of market or profits. Since there is a built-in incentive for each member to cheat, nowadays OPEC is not able to earn monopoly profits.
