During my last flight, a girl from northern Mexico described to me the harsh realities of living in her city. People cannot walk freely on the streets as they may run into one of the already common shootouts related with the Mexican Drug War. Afraid of being targeted by local gang extortions, wealthy entrepreneurs have shut down their businesses and fled from the cities of northern Mexico. More than 20,000 deaths since December 2006 and economic problems are the results of this war with no winner but a clear looser: the Mexican society.

Although the Mexican drug war seems to have failed to weaken drug cartels it has succeeded in weakening civil liberties. Restrictions on drug supply have empowered criminal groups, and with inexhaustible economic resources they are taking control of different sectors of society. The current policy has also induced violent reactions from criminal organizations, instigating an ever stronger military reaction from the State. This eventually corners the civil population between two tyrannical forces: the drug cartels and a militarized State.

In order to diminish the consumption in the United States, the current strategy is focused on restraining Mexican drug production and trafficking across the border. Although the effect on consumption is not clear, the effect on drug prices is. Drug prices, as the prices in any market, are based on the supply-demand relationship reflecting the scarcity of the product—the more scarce the product the higher the price that consumers are willing to pay. Therefore, a government supply restriction distorts the market and rewards the few suppliers with tremendous profits.

Far from solving the problems of violence, this incentive structure has made it worse. Instead of weakening these criminal groups this policy has fostered their evolution to professional and well organized enterprises. In recent days, the Mexican Navy has detained groups of 30 or more gunmen with high power weapons. The restriction on drug trafficking has led to a more sophisticated modus operandi that demands cooperation among traffickers. Criminals have strong incentives to unite and profit from the division of labor and economies of scale. Given that the high payoff depends on being one of the few suppliers, cartels also have an incentive to fiercely protect their market. They threaten people’s liberty by seeking absolute dominion. For instance, cartels take away property and land from their legal owners to use them for drug production; these groups intimidate the local press with extortions and even assassinations, undermining the principles of free speech. This has gone to the point that the most influential newspaper in Ciudad Juarez has been humiliated into directly asking the cartels what should be published and should not.

Likewise, the tentacles of these organizations have reached the political arena. The recent assassination of one of the gubernatorial candidates in the northern state of Tamaulipas is a clear example. Cartels claim their territory and impose their will above any democratic institution. Even more scary, is the case of Julio Cesar Godoy Toscano, a politician found guilty of having links to the cartel “La Familia Michoacana.” His incarceration required an impeachment process due his legal status as a congressman. The current policy of restricting supply not only created this incentive structure but also has contributed to increase the cartels’ menace. The tightening of border surveillance by both the American and Mexican governments has induced cartels to broaden their scope to other illegal activities. Cartels have started kidnapping people in exchange for ransoms, extorting local entrepreneurs in exchange for protection against the cartel itself.

In order to contain the drug cartels growth the Mexican State has strengthened the military presence on trafficking routes. As a consequence, a constant state of war reigns in many northern Mexican cities and frictions between civilians and the military have increased to the point that people have changed their perception toward military operations. Before, Mexicans perceived the Army as a friendly institution that helped people in distress, usually in the aftermath of natural disasters. However, since the onset of the Mexican drug war the military has been accused of human rights violations and targeting civilians. A strong military evidently is an obstacle to achieve a free society as it can repeatedly intrude into people’ life. As containing the supply of drugs requires strong armed forces, the consequence of this has been an increased violence that has put civil society between two combatants: the drug cartels and the Mexican army.

The path to follow is far from simple. It is true that we should seek to weaken these criminal organizations. However, Mexican and US strategies mainly focused on the supply side will hardly succeed. The supply in Mexico is a consequence of US demand. This is why as long as demand in the north creates the incentive for new suppliers the current strategy will result in only more deaths.

If we want to achieve a free society we have to target not the drug cartels but the underlying incentives. On the demand side, we should create awareness about the addictive and destructive consequence of drug consumption. A free society flourishes with well informed and responsible people.

On the supply side, we need to think about a new incentive structure. The first step is to remove the government restrictions creating high profits for these criminal organizations. Instead of creating the second threat to liberty of military strength by trying to enforce a government prohibition, we should allow the law of supply and demand to freely operate. Although the drug legalization debate has already started in Mexico, the problem of violence will remain if reforms are made only on one side of the border. For that reason, drug legalization has to be made in both countries. ln recent years, the fist of both the Mexican and US governments have failed to tie down the indomitable horse of drug cartels.

Thus, it is time to hand the reins over to the more effective invisible hand of the free market.